S
. E.C

. C ondu ct in g I nvest

i ga ti o n of P o r t A uth o ri ty Pr o j ec t s - N YTime

s . co m
Page

I of2 

# r!btNtlUUork f!tbnts



# I htt p
: / / n yt i.m s/ ll< xQK tL N

. Y . I REGION

I NYT NOW 

# S.E.C. Conducting Investigation

of Port Authority Projects By MAlT FLEGENHEIMER JUNE

1 3,20 14 The Pmt A uthority of N e w Yo r k and N e w J e r se y s aid thi s w ee k th a t it is und e r inve
s ti ga tion b y the Securiti es and Exchan ge Commi ss ion , a d d in g to th e se ri es o f inquiri es th a t have b e en ord er ed s inc e th e lan e -clo
s in g s c a nd a l a t the G e or ge Washin

g t o n Bridge last ye ar . Th e di s closure cam e in a 2 28-pa
g e r e port on Thur

s d a y to potential buy ers of the a ge ncy' s bonds, in which the Port Authority said th e c o mmi ss ion wa s condu

c tin g "a parallel inv es ti ga tion in on e of th e matt ers u n d e r r evi ew " b y th e Manh
a tt a n di s trict attorn
e y , Cyrus R. Van ce Jr
. Th e inqui1 y by Mr. V a nc e's office

i s focu
s ed, at lea s t in p art, on the a ge nc y's handlin

g of ro a dway con s truction projects, including th e Pul as ki Skyway

a nd th e Bayonn

e and Goethals Brid ges, accordin

g to se v e ral p e opl e bri e f e d on th e m a tt e r who

s pok e o n the condition

o f a nonymity

b eca u s e th a t in ves t iga t io n i s continui ng
. About


### $ 1 billion in pl a nn e d Port Authority

s pendin
g was d i ve rted to th e Pulaski Sk y way proj e ct, c h a mpioned

b y th e administration

o f G o v . Chri
s Chri
s ti e of N ew J e r se y . The brid ge , co nn e cting New ar k and Jer s ey City,

i s operated

b y th e state

, not th e Port Authori ty . T w o o f th e peopl e s aid
t h e di s trict a tt o rn ey' s offic e h a d i ss u e d s ubpo
e n as to a numb
e r o f c on s truction co mpani es invol ve d in th e proj ec t s, as w e ll a s offi c i als a t the Port Authority. Th e n e w document, which The R e cord o f H a cken
s ack, N. J., r e port e d a bout on Thur

s d ay, a cknowled ge d th a t th e a g en cy h ad r e ceiv e d and was
r es pondin
g t o "s ev e r a l g r a nd jury

s ubpo
e n as" from th e o ffi ce of Mr. Van ce; th e United St a t es http :1 / www.
n _y ti me s .com

/ 20 1 4 t 0 6 / 14 / n y reg
i o n / sec-co ndu c t i ng-
i n ves ti gation-of

- p o rt:- authori

t y

- proj.

. . ..9 / 3 0 12 014S.E.C.ConductingInvestigationofPortAuthorityProjects-NYTimes.comattorneyinNewark,PaulJ.Fishman;andaninvestigativecommitteeoftheNewJerseyLegislature.TheS.E.C.declinedtocomment.AspokesmanforthePortAuthoritywouldnotconfirmthecontentofthecommission'sinvestigation,referringonlytotheagency'sstatementinthebonddocument.Page2of2ThecircumstancessurroundingtheclosingoflanesattheGeorgeWashingtonBridgeinSeptember-anapparentactofpoliticalretribution-havesubjectedboththeChristieadministrationandthePortAuthoritytoincreasedscrutiny.Aseriesofhigh-rankingofficialsattheagency,includingthechairman,DavidSamson,haveresignedintheaftermath.WilliamK.Rashbaumcontributedreporting.AversionofthisarticleappearsinprintonJune14,2014,onpageA21oftheNewYorkeditionwitl1theheadline:S.E.C.ConductingInvestigationofPortAuthorityProjects.©2014TheNewYorkTimesCompany--..Jlttp:LLwww.n'jtimes.

# Main Justice» SRC Joins 

# Manhattan DA

t o 

# Probe C lui sl i e's Diversion of Port Authority

. .. Page
1 of 

# 5 -Main Justice- http:/ /www

.mainjustice.com

# SEC Joins Manhattan DA to Probe Christie's Diversion of Port Authority Funds Posted By Li sa Brennan_ On April 

# 25, 2014 @ 

# 11 :46 am **In~**



# I Comments Disabl
e d Th e Secur

i ties and Exchange Commission has joined with th e Manhattan District Attorney's office to investigate possible misuse of Port Author-ity of New York and N e w Jersey fund s by Gov. Chr

i s Christie 

## and his allies,

p eop le close to th e matter said. Two SEC Enforcement Division lawyers
in the New York regi ona

l office
a re examining the manner by which the Christie adm ini s tration apparently steam roll ed the agency's top in -house co uns e l into creating

a legal jus tification

in 

# 2011 allowing the New Jersey governor to grab $ 1.8 billion of Port Authority tax-exempt bonds to
f ix the aging Pu laski Skyway [IJ 

## br idge and other neglected sta te ro adways

. By re -ro uting the Port Authority funds to loca

l New Jersey roadway rep a
i rs , Christie, who took office in 

# 2010, was ab

l e to keep a campaign promise not to raise taxes. Th e diversion of funds allowed him to avoid raising gasoline
ta xes to refill th e depleted coffers of the state's tr a nsportation trust fund

l

21 . 

## New Jersey Gov. Chr

i s C hri stie But the jus tification for the di vers ion l3lmay have constituted fraud

. The SEC's ru

l elOb

# S, issu ed pursuant to the Securities Exc hang e Act, authorizes the age n cy to in vestiga te fraud In the secur iti es markets, In cl uding

I n the offering of t ax - exempt bonds. Simi lar law s app ly in New York state. With the federal securities regulator now Involved
in the probe, the tally o f known investiga tion s in to the Christie administration

is five. 

# Lincoln and Holland Tunnel Switcheroos Under th e Port Authority's 

# 1921 charter, the bi -s tate agency
Is not

l egally authorized
to build or repair access roads to the Holl and Tunnel

- one of tw o tunnels th at co nn ect northern

N e w Jersey to Manh attan und er the Hud son R iver. The Holl and Tunnel was c onstructed before

t h e Port Authority was create
d and

t hu s

i s n 't e ligible to b enefi

t from it s funds. 

## It

I s the Lincoln Tu nnel for which the Port Authority

is

l egally authorized
to maintain access road s. 

# But the P ul aski Skyway

- 

# a f o ur - l ane causeway op e ned in 

# 1932 that

i s 

# htt p:/ /W\V\V .1na


# i nju s t i ce .co m /20 **4/84/~5/ sec-**  **jo**


# i n s-ma nhattan

- d a-te- prob e-clu:i-st

i es- di ¥et:s

i ... 

# 412812014 **~**

### Main Justice» SEC Joins Manlwttan DA to Probe Clu·istie's Diversion of Port Authority... Page 2 of 5 curre ntly unde rgo ing a $1 billion Port Authority-funded repai r- feeds into the Holland Tunnel. For that reason, the Port Authority'

s assistant general counsel,

In a 2011 memo obtained

1 

### ' 1J 

### by The Record,

a northern New Jersey newspaper, found that the Pulaski Skyway did not s t atutorily qualify as an access route under the agency'

s jurisdiction. But a t the Chr ist ie administration's

in s
i stenc e, and with the sta te' s transportation trust fund about to collapse, the New Jer sey governor's Port Aut h ority point men pressed top agency

l awyers 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 presse
d the in - house Port Authority l awye

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

l aw firm, Wo

l ff & 

### Samson

1 5 1 

### P C, and met d aily with Baroni to carry ou t Sa mson's orders and report back to h im. Manhattan D.A. Cyrus Vance Jr.' s pr e viously reported subpoena to the Port Author ity l

6 

### l indicated he possessed particular knowledge
of Samson's

in struct ions to O'Rei

ll y. Vance is b e lieved to be probing potential conflicts of Interest between Samson
's role as Port Authority chairman and his law firm's clients. O'Re illy was a liaison between Baroni and Samson.
It was Baroni who communicated directly with top Port Authority

l awyers about th e funds diversion. Baroni prodded the top Port Authority lawyers

i n g
r oup e-mails to find a way to make the funds diversion happen. "It's evident to say, but we got ta f i gure this out/' Baroni wrote at one point, according to The Record. Days later, Po r t Authority Gene

r al Counsel Dar

· rell Buchbinder finally ag r eed

- after five month
s of resistance

- to fund repairs to t he Pulaski and other roadways

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

a nd inv esto

r law suits. "The lo ose
r the s t atutory construction means the greater the ris k 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 au thori zed by legislation in both New Jersey and New Yo rk, as required. Christie never soughtbistate

l egislat iv e Pulaski Skyway approva

l.

# Main Justice» SRC Joins Manhattan DA to Probe C hri stie's Diversion of Port AL1U1ority

... 

# Page 3 of 5 But the Port Authority's Board of Commissioners unanimously voted anyway, without public discu ssio n, to provide the $ 1 .8 billion to New Jersey's transpo

r tation

t ru st fund. Samson, who res ign ed March 28 in the thick of

i nvestigations into his various potential conf

l icts of

i nterest involving clients of his law firm, sa

i d the road repair projects were "v ital to ensure acce ss to p orts, a irports and tunnels." The Pu laski project's Lincoln Tunnel design
a tion was memoria

l ized in a May 2012 Port Authority -Depa rtment of Transportation pact, signed by in-hou se Port Authority lawyers and then-New Jersey Attorney Genera

l Jeff Chiesa, 

## cur rently at Wolff & 

## Samson [SJ 

## after stint s as Chri s tie's chief co unsel, state AG and interim successor
to U. S. Sen. Frank Lautenberg 

## (D-N J ), who d

i ed in June. Until the SEC and the fvianhattan D.A. began scrutinizi

n g th e use of Port Authority bonds to fund repairs to the Pulaski and othe

r roadways, Chiesa had m ana ged to keep his head und er investigators' radar. He has been at Christ

i e's side since 1988, when they both workecl as associates
at the Cranford, N.J., law firm Dughi, Hewit
& 

## Pa

l atucci.
H e followed Ch ristie into the U.S. Attorney'

s Office in 2002, and into the governor's office as chief counsel

i n 2010, and as state AG two yea

r s later. The Lincoln Tunnel designation has been adde d to the official statements the Port Au th ority Issues to bondholders,

as it appears

t o generate proceeds that help repay the bonds.
A $1 billion bond

i ss u e in January refer s to the Pulaski repair and other road project

s as Lincoln Tunnel investments; yet the New
J ersey road repair proje
c ts 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 Pu

l ask

i funding as well as
t h e Regional Bank Projects the Port Authority has proposed
in

i t s new capita

l budget. Celeste Chase

, 

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

## l itigation chief in the N ew York office, are h and lin g the SEC's side of the joint probe. N a waz declin
e d to confirm or deny the investigation

i n a telephone
ca ll Thursday. The agency, as an

i ss uer of debt secur iti es, Is subject to the anti-fraud provisions
of securit

i es rule lOb

- S, as well as the

r eq uir emen

t s of the Municipal Securities Rulemaking Board
P l. 

## If the SEC find s the Port Authority's statements saying the road repairs are "legally authorized
as a Lincoln Tun n el project" to be untru e, the agency's in-house

l awyers will have m ade misstatements

of mat e rial fact in their Bond Of f er ing documents. The same

i ss ues wou

l d arise in Regiona

l Bani< project

s that have no direct connection to the agency's authorizing

l egis

l ation

. The SEC's Inv estigation

is right up the enforcement division's alley as it ramps up investigations into materia lly misleading information and fraud in tax -exe mpt securities markets. And because

s uch conduct violates N.Y. secur it ies laws, it mad e sense for two offices to combine forces. 

## If SEC inve s tigator
s f i nd the state road

r e p a

i rs w e r e mischaract

e rl zed in bond offer i.n g document

s as "Lincoln Tunnel Access Improvement
s" to make the projects appear as 

# htt p://wwwmai

n j n s li. ee com/20

I 4/04/2 5Lse

- ·

4/ 2 8/2014

4Main Ju s t ice» SEC
J oins Manhattan

D A to Probe Cl1 ri st i e's Diversion of Port A u tho ri ty... Pa g e 4 of 5 tho u gh they'

r e legally perm itted, it wo ul d constitute

a knowing,

i ntentional, materia

l m isstateme nt in v io lation of f edera

l state and securi

t i es

l aws and co nstit ute

f raud. Such

f r au d would
a

l so mean

t hat the bonds iss u ed and outstanding for fixing

s t ate r oads would

n o l o nger be tax exe mp t, opening

a n othe

r whole can of

i l legal worms, accordi ng to a s ourc e familiar with such inves
ti gations. 'Devastating blow' to commuters Th e mon e y for rep a iring th e Pulask

i orig in a ll y h ad been set as ide

f o r a new commute

r train tunnel under the Hu dson R
i ver, kn o w n as Access to the Re gion's Core, or ARC. But soon afte

r Christie

b ecame governor,

h e k ill ed the $8.7 billion publ ic works project to free up money to fix the Pu

l ask

i Skyway. Transportation Secre

t ary R a y LaHood pleaded with Christie not to abandon the state

federal

- Port Authority project,
w hi c h had been in the wo
r ks fo r a decade and would h ave cut a t le as t 45 minutes each way off o f workers' daily commu tes

. When Chris tie r e fu sed to
r econsider,
La H ood ca lled his d ec

i s ion [OJ a

" d evastating blow to thou sands of workers, millions of comm ut ers and th e s tate 's econo m ic future." I n J a nuary 2011, Christie publ

i cly a nnounc ed th a t the Pulaski
S kyway repai rs were a done deal; the Port Authority,

h e sa id, would fill the st ate

t r an spor tation co ffer s w

i t h e no u gh money to fi x the Pu lask

i and related roadways. In fa c t, the Port Authority lawyers
w e re s till balkin g, a nd did not give In until March 30
, 2011. Investigations swirling The SEC, which has c
i vi
l law enforcement
au thor ity, has worked

j oin tl y w ith the Manhattan

D

. A . 's office on hundreds of probes, including the high

- profile pro secution of exec utive s at the bankrupt law firm Dewey & LeBoeuf

. In a n April 3 lett er £ 91 , N ew J e r se y D e mo c r a tic state Sen. Raymond Lesnial< ca ll ed
f or a n In ves tigati on of the use of th e Port Autho

r it y

' s tax-exempt bon d s to f und s t ate road projects.
Hi s

l et t er to off

i c
i a
l s a
t th e SEC and Int erna

l Revenue Serv ic e questioned whe th er the age ncy made m iss tatemen ts or misl e d b on dh olders
a nd in vesto rs who m a y not have known bonds were funn e
l e d into s t ate projects . L es n iak s aid Christie mu s t "ob e y th e

l a w regardl ess
" of hi s r easo
n s for try ing to circ um ven

t it. In th is case

, h e said, it appears the Port Authority "mi s u se d the securit

i es marketp

l ace.

" I n add ition to the S EC and Manhattan D.A., the N e w J ersey U. S . A ttorn ey's off

i ce

i s t a king a broad loo k a
t possib

l e public corrupt ion in th e Chr

i stie admin istrati on, spa rk ed by the out cry over the closing of four access

l anes to the George Washington Bridge at Fo rt L ee, N.J, in Sep

t e m be r . N ew J ersey U. S. Attorney Paul Fishman recently
in vi ted th e Port Authority co mmi ssi o ners to meet with prosecutors
to sha

r e i n f or m a tion. Th e Publi c Cor
r uption Un

i t of the So u t h e rn Di s t r i ct of Ne w Yor k U .S . Att orney's off

i ce I s ass

i s ting (lOJits N ew Jersey co unt e rpart s

i n exa m

i ni ng pote nti a l con flict s of

i nterest i n vo lv ing Sa m so n, t h e f or m er Port Authority cha

i rman

. 

# ===========

**==**

**Jli**
**=-£**

**·is**

**~** . . 

# == **======== ___j** Main Ju stice» SEC
J o in s Manhatt

a n D!\. to Probe Chr

i s ti e's Di ve r s ion of Port A u t h or i ty ... Page 5 of 5 Finally,

t he state

l egislature

is con du ct

i ng

i ts own inv est ig ation of Br

i d gega

t e and other matters of contr oversy involv in g the gove rnor; on Mo nday, th e legisla

t u r e subpoenae

d four wi t nesses to testify. Ordered to appear:

l on gt ime Christ

i e s p okesman Michael Drewnial<

; Port Authori ty Exec uti ve Dire c tor Patrick Foye; Po rt Au th orit y Co mm iss ioner William Schuber; and Christina Renna,

a fan ner liaison with the now-defunc

t Office of Legi slat

i ve a nd In tergovern

m e nt al Af fai r s and assis

t ant

t o the governor's former deputy

c hi ef of staff Bridget Kelly

. Schube

r and Renna are to ap p ea r· on May 6; Foy e and Dr e wni a k on May 13. Fishma n h as also subpoena ed the sta te

l eg

i sla tive committee

fo r its documents re

l a t e d to Bridgegate,
Th e Wall Stree

t Journal reported [UJ

. RELATED POSTS

: o Prosecuto

r s Subpoen

a Port Aut h ori t y in Bridgegate
Pr obe 112 1 • Man ha tt an DA's P r obe Fo c using on Role of Da v id Samson's Port Authority Assistan

t [

6 1 • Fishman Subpoena

s Samson's Reco rd s in Chris Chris

t ie Br

i dgegate Pr obe

1 131 • M a nhattan

U

. S . Attorney's

P ub li c Corrup tion Unit Coo p erating wi th NJ on Chr istie- rel ated Prob e llOJ • NJ/NY Port Authority

C hairm
a n Hi res Cher toff IHJ Articl e printed from M a in Justic
e : http:/ jwww.mainjustice.com URL to articl e : http://www.mainjustice.com/2014/04/25/sec-joins

-manhattanda - to - probe-christies-diversion

- of - port -a uthority-funds/ Co pyrigh t© 2009-20 14 WDC M ed

i a LL C . All rights

r eserved. ht tp://www.
m a it\iu st i ce
. com/20 14/04/25/sec-j

oi n s-ma tlh attan-cla

- to - p ro be-christies-diversi...
4/28 /2 0 l 4