Federal prosecutors in Manhattan unsealed bribery and extortion charges on Tuesday against 70 current and former employees of the New York City Housing Authority, a sweeping accusation of malfeasance in a troubled organization.
Damian Williams, the U.S. attorney for the Southern District of New York, said it was the largest number of federal bribery charges the Department of Justice had ever handed out in a single day.
In describing the scheme, Mr. Williams said dozens of employees, including superintendents and assistant superintendents, had taken more than $2 million in bribes from contractors seeking to do work at apartment buildings throughout the city’s five boroughs, from Stapleton Houses on Staten Island to Eastchester Gardens in the Bronx.
Prosecutors said that the scheme revealed Tuesday involved small-dollar repairs — amounting to under $10,000 — to things like windows and plumbing: deals that do not go through competitive bidding and are meant to quickly address problems in buildings.
More than $13 million in work, however, was wrongly handed out, prosecutors said, with defendants demanding payment to authorize work or to approve it after it was done. The accused employees usually received kickbacks of 10 to 20 percent of the contract value, prosecutors said, though sometimes the payments were higher.
All told, nearly 100 housing developments — nearly one-third of the authority’s properties — were touched by the scheme, Mr. Williams said, calling it “classic pay to play.”
“This culture of corruption at NYCHA ends today,” he said.
After dozens of arrests spanning several states in the early-morning hours, the legal proceedings on Tuesday gave a sense of the scope of the investigation. By midafternoon, several hearings were underway in six courtrooms across five floors of Federal District Court in Manhattan, attended by various agency representatives, defense and government lawyers, and defendants’ relatives. The defendants are due back in court in early March.
As the nation’s largest public housing authority, NYCHA receives more than $1 billion in federal funding. The agency is run by a board of seven people appointed by the mayor.
Lisa Bova-Hiatt, NYCHA’s chief executive, said in a statement that the accused employees had “put their greed first and violated the trust of our residents, their fellow NYCHA colleagues and all New Yorkers.”
She said the agency was working hard to improve conditions in public housing and had alerted investigators to the suspicious behavior behind some of the charges.
“We will not allow bad actors to disrupt or undermine our achievements,” she said.
New York’s public housing system, with more than 300,000 residents, was once a heralded source of homes for working-class people. But declining funding from the federal government over the decades has left the agency in need of an estimated $78 billion worth of repairs.
Tenants regularly lodge complaints about aging buildings, rodents, leaky pipes and broken elevators across NYCHA’s more than 300 developments. Still, in a city starved for affordable housing, a NYCHA apartment is coveted: Hundreds of thousands of people crowd waiting lists.
The agency is grasping for ways to improve the standard of living. A plan to shift some developments over to private management and to run others under a new public benefit corporation could unlock billions of dollars from a new stream of federal housing aid.
But in addition to financial problems and disrepair, the agency has routinely faced accusations of corruption and mismanagement. In 2017, investigators found that NYCHA had submitted false paperwork to the federal government saying it had conducted inspections of lead paint in apartments.
In 2019, as part of a settlement with federal prosecutors, the city accepted the appointment of a federal monitor to scrutinize NYCHA’s progress dealing with some of its most serious problems, including lead, mold and heating failures.
In a statement on Tuesday, the monitor, Bart M. Schwartz, said that the arrests “point to the need for continued systemic changes to NYCHA’s culture and for greater accountability, oversight and enforcement.”
“This is a step in the right direction reminding NYCHA’s employees and vendors that they cannot continue to take advantage of the residents,” he said.
In the buildings themselves, there seemed to be little surprise about the charges.
“That’s how housing works,” said Michael Jones, 37, a tenant in the Robert Fulton Houses in Chelsea, which was one of the developments named in the scheme on Tuesday. “It’s all about money. The people running it always want to get a kickback.”
Mr. Jones expressed concern about how the corruption may affect the buildings’ condition and the toll that could take on the tenants. “With the cost of living in New York now, and this neighborhood changing, we are increasingly at risk here,” he said.
Investors and news organizations have repeatedly noted the potential for malfeasance in relation to the small-dollar contracts, which are also known as “micro-purchasing.” In 2019, the news website The City investigated how low-level managers of developments had handed out $250 million in contracts to a small group of vendors.
In September 2021, nine contractors were indicted on bribery charges in connection with micro-purchasing schemes.
Margaret Garnett, the former commissioner of the city’s Department of Investigation, said at the time that micro-purchasing “has a laudable goal — to give development superintendents the flexibility to get small repairs made quickly, without a complex bidding and procurement process.”
But, she added, it is “highly vulnerable to fraud and corruption, as this investigation shows.”
In 476 pages of complaints, prosecutors outlined in painstaking detail the small-bore corruption, which, in one case, also involved destruction of evidence — deleted text messages — and making false statements to investigators. In another case, prosecutors said cash bribes from a developer were left in a drawer at a building rather than being handed directly to the defendant.
In yet another case, at the Vladeck Houses on Manhattan’s Lower East Side, an assistant superintendent was straightforward about his expectations, agreeing to award a contract with a special stipulation.
“You need to take care of me,” the assistant superintendent said, according to the complaint. Soon thereafter, the contractor paid him $1,000 in cash in the basement of one of the development’s buildings.
Jocelyn Strauber, the city’s investigations commissioner, said on Tuesday that her agency had suggested to NYCHA officials that they make reforms to the micro-purchasing process, noting that misconduct around these smaller repairs “drove up the cost of this type of work and diverted valuable public funds away from public housing and into the pockets of corrupt NYCHA staff.”
Indeed, Mr. Williams said that the practice of shaking down contractors had become “business as usual” at many NYCHA buildings and asked that contractors who had been extorted come forward. He also said that the work of rooting out corruption in the city’s public housing would continue.
“NYCHA residents deserve better,” Mr. Williams said, adding, “We are not done.”
Olivia Bensimon contributed reporting.
