NY Assembly Speaker Silver Charged in $6 Million Graft Scheme

Sheldon Silver, the powerful Speaker of the New York Assembly, was arrested Thursday and charged in a sweeping federal complaint accusing him of a decade-long scheme to use his influence and taxpayer dollars to enrich himself with millions of dollars in ill-gotten legal referral fees.

The 70-year old Silver has represented a neighborhood on the lower east side of Manhattan since 1976, and has served as assembly speaker since 1994.  This made him one of the three most powerful politicians in the state.  Together with the governor and the senate majority leader, Silver had the ability to craft state budgets, and had huge influence over how taxpayer dollars were spent.

A 35-page single-spaced criminal complaint accuses Silver of honest services mail and wire fraud (18 U.S.C. §§ 1341, 1343, 1346), extortion under color of official right (18 U.S.C. § 1951), and conspiracy to commit these crimes.

New York legislators are permitted to hold outside jobs, provided that their work does not conflict with any official matters before them.  In 2002, Silver joined a law firm, Weitz & Luxemberg, that specialized in personal injury, in particular representing victims of asbestos exposure who had contracted the deadly cancer mesothelioma.

According to the complaint, Silver soon began enriching himself by secretly funneling $500,000 in taxpayer dollars to a cancer research institute founded by a doctor seeking a cure for mesothelioma.  In exchange, the doctor would provide Silver with the names of mesothelioma patients who wanted to hire a lawyer. Silver would then pass these referrals on to his law firm, which would ultimately reward Silver a with a share of its contingency fees once the cases settled.  According to the complaint, Silver pocketed nearly $3.3 million in these asbestos referral fees between 2006 and 2014, on top of the annual $120,000 salary paid by the firm.  Silver allegedly did no work on these cases and his role was limited to referring the cases.

The complaint did not identify the doctor, but press reports have identified him as Robert N. Traub, director of the Columbia University Mesothelioma Center.  Dr. Traub has reportedly been granted immunity in exchange for agreeing to cooperate with prosecutors.

Silver allegedly concealed these payments by not reporting them accurately on financial disclosure forms, and by repeatedly misleading the public by claiming that the payments came from part-time work as a personal injury lawyer.  In truth, he collected no fees for representing personal injury clients.

Silver is also charged with influencing two major real estate developers to hire a two-lawyer firm, later identified as Goldberg & Iryami, to handle their applications for property tax reductions.  For years the law allegedly firm kicked back a percentage of their contingent fees for these clients to Silver to the tune of approximately $700,000.  Silver did not disclose that his developer “clients” had business before the state, or that he was receiving a share of the firm’s contingent fees.

Silver’s arrest exploded like an IED in New York politics, and the shock waves may reach to the governor’s mansion.  In July 2013, Governor Andrew Cuomo appointed the Moreland Commission, which was tasked with probing “systemic corruption and the appearance of such corruption in state government.”  Silver and other state politicians sabotaged the Commission’s work in every way they could and refused to comply with subpoenas it issued.  In March 2014, Cuomo abruptly disbanded the Commission, ostensibly as part of budget negotiations and in exchange for the state legislature agreeing to changes in campaign finance reporting and bribery laws.  Silver and his staff were in that smoke-filled room.  Was Cuomo trying to protect Silver and other power brokers, who were afraid that the Moreland Commission was on their scent?

The Commission’s investigation was not wasted, because the FBI took possession of its files and folded them into their probe of Silver and others.  More details will certainly emerge in upcoming weeks, and according to Manhattan United States Attorney Preet Bharara, whose office brought the case, additional corruption cases are in the works.  “You should stay tuned,” he told reporters.

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