For City Official and Developer, Close Ties Mean Close Scrutiny
By CHARLES V. BAGLI, NY TIMES, November 19, 2004

Daniel L. Doctoroff, the city's deputy mayor for economic development, has been a friend of the city's largest developer, Stephen J. Ross, since 1997. They are former business partners, each having owned a piece of the New York Islanders. And Mr. Ross took over a loan Mr. Doctoroff had made to the city's Olympic bid committee, relieving Mr. Doctoroff of a conflict that could have jeopardized his move into public service.

So it might not have been surprising that when Mr. Doctoroff joined the Bloomberg administration in 2002, he often turned to Mr. Ross for real estate advice on big projects, like the development potential of the Bronx Terminal Market and retailing at the World Trade Center site, just as he had sought help in 2001 with the financing plan for a proposed Olympic Village in Queens.

And when Mr. Doctoroff needed help selling his ambitious plans for building an Olympic stadium and redeveloping the West Side to the powerful Real Estate Board of New York, Mr. Ross led a spirited defense of the plan, winning over key board members who had raised questions.

But when the Bloomberg administration was disappointed by progress at the South Street Seaport in Lower Manhattan, it agreed to a plan in which Mr. Ross's company, Related Companies, would assume control of the Seaport and substantially redevelop the area, without using a competitive bidding process. The company also won a lease to redevelop the Bronx Terminal Market without competition, one of only two projects outside Lower Manhattan for which the city is recommending the use of tax-free Liberty Bonds, which are meant to help rebuild New York after the attack on the World Trade Center.

Mayor Michael R. Bloomberg's press secretary, Edward Skyler, said that the city's dealings with Mr. Ross were in the best interest of New York, and that there was no evidence his company got preferential treatment. There have been no suggestions of financial impropriety.

But the relationship between Mr. Doctoroff and Mr. Ross illustrates the problem that can result when former business executives move into high-ranking government roles. The knowledge and relationships gained in the business world can often be of great benefit to the city, saving the taxpayers money and producing significant new projects. But they can also lead to charges of favoritism and raise questions of conflicts of interest.

Mr. Ross and Mr. Doctoroff are already quite wealthy, and Related's work on city projects pales in comparison to its private portfolio: building the $1.8 billion Time Warner Center complex at Columbus Circle; acquiring the $150 million, blocklong Manhattan Plaza complex near Times Square; constructing a squadron of residential towers; and proposing a Nascar race track and shopping mall on Staten Island.

When Mr. Doctoroff took office, he voluntarily announced that because Mr. Ross had taken responsibility for his loan to the city's Olympic committee, he would not engage in negotiations with Mr. Ross or with Related, where Mr. Ross is the chief executive. But both men now acknowledge that they have had several business conversations. For example, Mr. Doctoroff said he had suggested to the city's planning team last year that it talk to Related on a "pro bono" basis about an alternative to the original underground mall concept at the trade center site.

The relationship between the two men has been the subject of much behind-the-scenes debate and discussion in political and real estate circles. The loudest grumbling, unsurprisingly, comes from Related's competitors, some of whom are openly wondering whether Mr. Doctoroff and Mr. Ross share such similar visions of major projects that other voices go unheard.

"There are always reasonable explanations for what's going on, but when you look at the pattern of behavior between the city and Related, one suspects that there is more going on than pure public policy considerations," said Richard Lipsky, a lobbyist for some of Related's competitors who clashed with Mr. Doctoroff and Related over a project in Harlem. "In my experience, Related has a favored-nation status."

Critics say the city should have invited competitive bids rather than simply handing over to Mr. Ross's company the Bronx Terminal Market, a residential and retail project at the Gateway site in southeast Brooklyn, and, if the deal is completed, the South Street Seaport.

"Steve Ross is a big, reputable, and successful developer," said Robert Yaro, president of the Regional Plan Association, who has occasionally tangled with Mr. Doctoroff. "All major development decisions end up on Dan's office; he's not a guy who delegates a lot. Given their past personal and business relationships, it's vitally important that these transactions be above board, and whenever possible, subject to competitive bidding."

One councilman, Hiram Monserrate, a Democrat from Queens, said the City Council should look into their relationship.

Some of Related's competitors have grumbled that Mr. Ross's company often gets special treatment, as when the city backed Related's request for $44 million in Liberty Bonds for a small development project in Bronxchester in the South Bronx.

Although it is impossible to put a price tag on what the various city-related projects could mean for Related, some of the projects have the potential to be quite lucrative if developed in full.

Mr. Doctoroff and Mr. Ross vehemently denied any suggestion that their friendship led to special treatment for Related. In several cases, they said, Related or its partners had begun city projects well before the administration came into office in 2002 and won new contracts to continue that work. Mr. Doctoroff said that he has not been in any direct negotiations with Mr. Ross or Related and that he is not a member of the group that reviews Liberty Bond applications, although the people who do review them report to him.

It is hard, they said, for a developer as busy as Mr. Ross to avoid contact with city officials. Mr. Ross, one of the most active developers both before and after Mr. Bloomberg took office, attributes much of the complaining by other developers to sour grapes in a competitive field.

"We're the most aggressive guys in the city," Mr. Ross said. "We like complicated projects."

Mr. Skyler said any allegation of favoritism was a "baseless smear," adding that Mr. Doctoroff has never been involved in any decision to select Related as a developer on a city project.

"Does that mean Doctoroff or his staff never spoke to anyone at the company in the last three years?" he said in a written response to questions. "Does that mean that he has refused to be properly informed of any city project in which Related might be involved? No - he is the deputy mayor for economic development and rebuilding. It would have been absurd, counterproductive and detrimental to the city for him or his staff, or agencies that report to him to take such an extreme course of action."

Mr. Ross and Mr. Doctoroff are both tall, lean and driven men who see New York as a vibrant city where major new projects are possible and who believe that winning the Olympics could transform a great deal about the city. Although both men grew up in suburban Detroit, Mr. Ross said, he did not meet Mr. Doctoroff, then an investment banker, until 1997. They joined with two other investors that year to buy a professional hockey team, the Islanders, for $195 million. Mr. Doctoroff and Mr. Ross each took a 5 percent stake in the team, but the group lost an estimated $40 million and sold the team in 2000 for $187.5 million.

Nevertheless, Mr. Doctoroff and Mr. Ross developed a fast friendship. "We hit it off," Mr. Ross said in a 2002 interview. "We've become very close."

Mr. Ross, 64, adopted Mr. Doctoroff's passionate quest for the 2012 Olympics, which both men see as an opportunity to enhance the city's image and to revitalize the West Side of Manhattan. The developer became a prominent fund-raiser for the Olympic bid committee formed by Mr. Doctoroff and worked with city planners on the conceptual design for the Olympic Village in Queens.

In December 2001, while Mr. Bloomberg was mayor-elect, he tapped Mr. Doctoroff to be deputy mayor for economic development. As a result, Mr. Doctoroff stepped down as chairman of NYC2012. But to avoid a conflict, he needed the committee to repay $3.2 million of the $4 million in personal funds he had poured into NYC2012 before he joined the administration. Mr. Ross said Jay Kriegel, executive director of NYC2012, asked him to guarantee the loan from M&T Bank.

The city's Conflicts of Interest Board ruled that there was no prohibition on contact between Mr. Doctoroff and Related, but Mr. Doctoroff said he would go beyond the ruling.

"I set a standard that far exceeded what the conflicts of interest law required of me - that I would not get involved in the selection of Related as developer, or negotiate with them," Mr. Doctoroff said.

But Mr. Ross said the two men did speak. "He would call me from time to time shortly after he came into office to ask my opinion," Mr. Ross explained, "but he didn't tell me the details."

Mr. Doctoroff no longer calls for advice, he added.

"He's a friend," Mr. Ross said in an interview at his office on Madison Avenue, "but I don't talk to him about business."

One of the first things Mr. Doctoroff asked about was the city-owned Bronx Terminal Market near Yankee Stadium, so dilapidated that the city had wrestled in and out of court with the tenant, David Buntzman, for nearly 20 years. Another trial date was pending in the spring of 2002 when, as part of settlement discussions, Mr. Doctoroff asked Mr. Ross to assess the desirability of the site for development, Mr. Doctoroff said.

A year later, Related agreed to buy out Mr. Buntzman and develop the site into a shopping mall and waterfront park. In exchange, the company will pay $42.5 million. Mr. Doctoroff immediately called Richard Ravitch, the mediator in the talks between the city and Mr. Buntzman, and said he was recusing himself from the talks, Mr. Ravitch said.

But critics like Assemblyman Adriano Espaillat of Manhattan asked why the city had not solicited competing bids through a process known as a request for proposals, or R.F.P, to ensure that it got the best deal.

"There should be an open and competitive selection process," Mr. Espaillat said.

Mr. Doctoroff said the city could not interfere in what was essentially a private transaction because Mr. Buntzman's lease did not expire until 2052. "We can't R.F.P. a lease that we don't control," he said.

The city was not without clout in the talks. Executives from the city's Economic Development Corporation, which is under Mr. Doctoroff's control, played important roles in the three-way negotiations with Related and Mr. Buntzman, and they had veto power over the deal, according to people on all sides of the talks.

At the same time, the city agreed to a series of concessions important to the deal, including several land swaps and support for Related's request for $80 million in Liberty Bonds. At one point, Mr. Doctoroff said, he urged his team to take a stronger stance in negotiations with Related. But, he said, under the lease, the city could not unreasonably withhold approval of the deal.

Related is now trying to work out a deal at the South Street Seaport, an important tourist destination but a money loser for its operator, the Rouse Company. Mr. Doctoroff and the Bloomberg administration have worked since the World Trade Center attacks to enliven the area and create a residential corridor along Fulton Street.

At the same time, the city had also been looking for a home for Cirque du Soleil, the Canadian circus company, and had introduced the company to several developers, including Related. Mr. Ross said he immediately thought the circus company would be appropriate for the Seaport, and began discussions with Rouse.

Mr. Ross said he reached a tentative leasing agreement with Rouse and began negotiating with city officials in June 2003 about major changes of the Seaport, demolishing the pavilion, and building a permanent home for Cirque du Soleil. The deal has not been completed and may fall apart.

Earlier this year, Mr. Doctoroff told officials at the Lower Manhattan Development Corporation that he would seek $60 million in federal money for infrastructure related to the project.

Mr. Skyler said Mr. Doctoroff was not involved in the negotiations, and did not advocate the use of federal funds for the Seaport until after the city's project team determined that it was necessary. Those team members, however, report to Mr. Doctoroff.

Mr. Ross, however, said he did have one meeting with Mr. Doctoroff when "Cirque wanted to make sure the city was committed to the deal."

"It's the greatest thing in the world for the city," Mr. Ross said. "You have to make a statement downtown or you're going to lose all those corporations."

Some executives involved with rebuilding Lower Manhattan questioned why the city would not request proposals from other developers, given the major change in direction at the seaport. In all likelihood, they say, Related would have won, because it had an attractive tenant like Cirque.