S.E.C. Conducting Investigation of Port Authority 

Projects 

By MAlT FLEGENHEIMER JUNE 13,2014 

The Pmt Authority of New York and New Jersey said this week that it is under 

investigation by the Securities and Exchange Commission, adding to the series of 

inquiries that have been ordered since the lane-closing scandal at the George 

Washington Bridge last year. 

The disclosure came in a 228-page report on Thursday to potential buyers of 

the agency's bonds, in which the Port Authority said the commission was 

conducting "a parallel investigation in one of the matters under review" by the 

Manhattan district attorney, Cyrus R. Vance Jr. 

The inqui1y by Mr. Vance's office is focused, at least in part, on the agency's 

handling of roadway construction projects, including the Pulaski Skyway and the 

Bayonne and Goethals Bridges, according to several people briefed on the matter 

who spoke on the condition of anonymity because that investigation is continuing. 

About $1 billion in planned Port Authority spending was diverted to the 

Pulaski Skyway project, championed by the administration of Gov. Chris Christie 

of New Jersey. The bridge, connecting Newark and Jersey City, is operated by the 

state, not the Port Authority. 

Two of the people said the district attorney's office had issued subpoenas to a 

number of construction companies involved in the projects, as well as officials at 

the Port Authority. 

The new document, which The Record of Hackensack, N.J., reported about on 

Thursday, acknowledged that the agency had received and was responding to 

"several grand jury subpoenas" from the office of Mr. Vance; the United States 

http :1 /www.n_yti mes.com/20 14t06/ 14/nyregion/sec-conducting-investigation-of-port:-authority -proj... ..9 /3 012014 
Bridge in September- an apparent act of political retribution -have subjected 

both the Christie administration and the Port Authority to increased scrutiny. A 

series of high-ranking officials at the agency, including the chairman, David 

Samson, have resigned in the aftermath. 

William K. Rashbaum contributed reporting. 

A version of this article appears in print on June 14, 2014, on page A21 of the New York edition witl1 the 

headline: S.E.C. Conducting Investigation of Port Authority Projects. 

© 2014 The New York Times Company 

--..Jlttp :LLwww.n'jtimes. 

The Securities and Exchange Commission has joined with the Manhattan District 

Attorney's office to investigate possible misuse of Port Author-ity of New York and New 

Jersey funds by Gov. Chris Christie and his allies, people close to the matter said. 

Two SEC Enforcement Division lawyers in the New York regional office are examining 

the manner by which the Christie administration apparently steamrolled the agency's 

top in-house counsel into creating a legal justification in 2011 allowing the New Jersey 

governor to grab $1.8 billion of Port Authority tax-exempt bonds to fix the 

aging Pulaski Skyway [IJ bridge and other neglected state roadways. 

By re-routing the Port Authority funds to local New Jersey roadway repairs, Christie, 

who took office in 2010, was able to keep a campaign promise not to raise taxes. The 

diversion of funds allowed him to avoid raising gasoline taxes to refill the depleted 

coffers of the state's transportation trust fund l21 . 

New Jersey Gov. Chris Christie 

But the justification for the diversion l3lmay 

have constituted fraud . The SEC's rule lObS, issued pursuant to the Securities 

Exchange Act, authorizes the agency to 

investigate fraud In the securities markets, 

Including In the offering of tax-exempt 

bonds. Similar laws apply in New York 

state. 

With the federal securities regulator now 

Involved in the probe, the tally of known 

investigations into the Christie 

administration is five. 

Lincoln and Holland Tunnel 

Switcheroos 

Under the Port Authority's 1921 charter, the 

bi-state agency Is not legally authorized to 

build or repair access roads to the Holland 

Tunnel - one of two tunnels that connect 

northern New Jersey to Manhattan under 

the Hudson River. The Holland Tunnel was 

constructed before the Port Authority was 

created and thus isn't eligible to benefit from its funds. 

It Is the Lincoln Tunnel for which the Port Authority is legally authorized to maintain 

access roads. But the Pulaski Skyway - a four-lane causeway opened in 1932 that is 

http:/ /W\V\V .1na injustice .com/20 4/84/~5/sec-jo i ns-manhattan-da-te-probe-clu:i-sties-di¥et:si ... 412812014~ 
fund about to collapse, the New Jersey governor

s Port Authority point men pressed 

top agency lawyers to do an about-face: Re-brand the skyway an access road to the 

Lincoln Tunnel. 

Port Authority Chairman David Samson, his assistant Patrick O'Reilly and Port 

Authority deputy executive director Bill Baroni pressed the in-house Port Authority 

lawyers to come up with a workable solution. O'Reilly joined the bi-state agency from 

Samson's law firm, Wolff & Samson 151 PC, and met daily with Baroni to carry out 

Samson's orders and report back to him. 

Manhattan D.A. Cyrus Vance Jr.'s previously reported subpoena to the Port Authority 

l6l indicated he possessed particular knowledge of Samson's instructions to O'Rei lly. 

Vance is believed to be probing potential conflicts of Interest between Samson's role 

as Port Authority chairman and his law firm's clients. 

O'Reilly was a liaison between Baroni and Samson. It was Baroni who communicated 

directly with top Port Authority lawyers about the funds diversion. 

Baroni prodded the top Port Authority lawyers in group e-mails to find a way to make 

the funds diversion happen. "It's evident to say, but we gotta figure this out/' Baroni 

wrote at one point, according to The Record. Days later, Port Authority General 

Counsel Dar·rell Buchbinder finally agreed - after five months of resistance - to 

fund repairs to the Pulaski and other roadways. 

Still, Port Authority lawyers continued to worry. One warned that they'd opened the 

door to bondholder and investor lawsuits. 

"The looser the 

statutory construction 

means the greater the 

risk of a successful 

challenge by the 

bondholders and the 

investors," assistant 

general counsel 

Carlene Mcintyre 

wrote, according to The 

Record. She noted the 

projects were not 

authorized by legislation 

in both New Jersey and 

New York, as required. 

Christie never sought bistate legislative Pulaski Skyway 

approval. 
lawyers and then-New Jersey Attorney General Jeff Chiesa, currently at Wolff & 

Samson [SJ after stints as Christie's chief counsel, state AG and interim successor to 

U.S. Sen. Frank Lautenberg (D-NJ), who died in June. 

Until the SEC and the fvianhattan D.A. began scrutinizing the use of Port Authority 

bonds to fund repairs to the Pulaski and other roadways, Chiesa had managed to keep 

his head under investigators' radar. He has been at Christie's side since 1988, when 

they both workecl as associates at the Cranford, N.J., law firm Dughi, Hewit & 

Palatucci. He followed Christie into the U.S. Attorney's Office in 2002, and into the 

governor's office as chief counsel in 2010, and as state AG two years later. 

The Lincoln Tunnel designation has been added to the official statements the Port 

Authority Issues to bondholders, as it appears to generate proceeds that help repay 

the bonds. A $1 billion bond issue in January refers to the Pulaski repair and other 

road projects as Lincoln Tunnel investments; yet the New Jersey road repair projects 

generate no direct revenue of their own. 

SEC's New York office opened the probe 

People familiar with the SEC and Manhattan D.A.'s probes say investigators are 

focused on Pulaski funding as well as the Regional Bank Projects the Port Authority 

has proposed in its new capital budget. 

Celeste Chase, assistant director of the SEC's New York office, and Osman Nawaz, 

litigation chief in the New York office, are handling the SEC's side of the joint probe. 

Nawaz declined to confirm or deny the investigation in a telephone call Thursday. 

The agency, as an issuer of debt securities, Is subject to the anti-fraud provisions of 

securities rule lOb-S, as well as the requirements of the Municipal Securities 

Rulemaking Board P l. 

If the SEC finds the Port Authority's statements saying the road repairs are "legally 

authorized as a Lincoln Tunnel project" to be untrue, the agency's in-house lawyers 

will have made misstatements of material fact in their Bond Offering documents. 

The same issues would arise in Regional Bani< projects that have no direct connection 

to the agency's authorizing legislation. 

The SEC's Investigation is right up the enforcement division's alley as it ramps up 

investigations into materially misleading information and fraud in tax-exempt 

securities markets. And because such conduct violates N.Y. securities laws, it made 

sense for two offices to combine forces. 

If SEC investigators find the state road repairs were mischaracterlzed in bond offeri.ng 

documents as "Lincoln Tunnel Access Improvements" to make the projects appear as 

http://wwwmainj nsli.ee com/20 I 4/04/25Lse -· 4/28/2014 

4 
The money for repairing the Pulaski originally had been set aside for a new commuter 

train tunnel under the Hudson River, known as Access to the Region's Core, or 

ARC. But soon after Christie became governor, he killed the $8.7 billion publ ic works 

project to free up money to fix the Pu laski Skyway. 

Transportation Secretary Ray LaHood pleaded with Christie not to abandon the statefederal-Port Authority project, which had been in the works for a decade and would 

have cut at least 45 minutes each way off of workers' daily commutes. When Christie 

refused to reconsider, LaHood called his decision [OJ a "devastating blow to thousands 

of workers, millions of commuters and the state's economic future." 

I n January 2011, Christie publ icly announced that the Pulaski Skyway repairs were a 

done deal; the Port Authority, he said, would fill the state transportation coffers with 

enough money to fi x the Pulaski and related roadways. 

In fact, the Port Authority lawyers were still balking, and did not give In until March 

30, 2011. 

Investigations swirling 

The SEC, which has civi l law enforcement authority, has worked j ointly with the 

Manhattan D.A. 's office on hundreds of probes, including the high-profile prosecution 

of executives at the bankrupt law firm Dewey & LeBoeuf. 

In an April 3 letter £91, New Jersey Democratic state Sen. Raymond Lesnial< called for 

an Investigation of the use of the Port Authority's tax-exempt bonds to fund state road 

projects. His letter to officials at the SEC and Internal Revenue Service questioned 

whether the agency made misstatements or misled bondholders and investors who 

may not have known bonds were funn eled into state projects. Lesniak said Christie 

must "obey the law regardless" of his reasons for trying to circumvent it. In this case, 

he said, it appears the Port Authority "misused the securities marketplace." 

I n addition to the SEC and Manhattan D.A., the New Jersey U.S. Attorney's office is 

taking a broad look at possible public corruption in the Christie administration, 

sparked by the outcry over the closing of four access lanes to the George Washington 

Bridge at Fort Lee, N.J, in September. New Jersey U.S. Attorney Paul Fishman 

recently invited the Port Authority commissioners to meet with prosecutors to share 

information. 

The Public Corruption Unit of the Southern District of New York U.S. Attorney's office 

Is assisting (lOJits New Jersey counterparts in examining potential conflicts of interest 

involving Samson, the former Port Authority chairman. 

=========== == Jli =-£ ·is ~ .. == ======== ___j 
Fishman has also subpoenaed the state legislative committee for its documents 

related to Bridgegate, The Wall Street Journal reported [UJ. 

RELATED POSTS: 

o Prosecutors Subpoena Port Authority in Bridgegate Probe 112 1 

• Manhattan DA's Probe Focusing on Role of David Samson's Port Authority 

Assistant [61 

• Fishman Subpoenas Samson's Records in Chris Christie Bridgegate Probe 1131 

• Manhattan U.S. Attorney's Public Corruption Unit Cooperating with NJ on 

Christie-rel ated Probe llOJ 

• NJ/NY Port Authority Chairman Hires Chertoff IHJ 

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