Yana Paskova for The New York Times
NY TIMES
Signs of a sprawling municipal investigation in New York City have emerged in a seemingly random fashion over the last week. Four senior police officials were abruptly transferred or put on modified duty. A Manhattan restaurateur was arrested and charged with operating a Ponzi scheme. Among his investors were two men who had raised money for Mayor Bill de Blasio, and one of the men was also a generous campaign donor.
What ties these developments together — and others unfolding behind the scenes — is a long-running and wide-ranging federal investigation that has come to focus on possible corruption involving Mr. de Blasio’s campaign fund-raising, the first major inquiry of its kind during the mayor’s two-year tenure.
A federal grand jury in Manhattan has begun hearing evidence in the case, according to several people briefed on the matter. The inquiry has come to focus on the two fund-raisers: Jona Rechnitz, who raised money for Mr. de Blasio’s campaign and was also a donor to both the campaign and to a nonprofit group that supported the mayor’s agenda; and Jeremy Reichberg, who held a fund-raiser for that nonprofit.
Federal wiretaps in the case have captured their conversations, two of the people said, without elaborating on the substance of the discussions.
Both Mr. Rechnitz and Mr. Reichberg served on a committee that planned Mr. de Blasio’s 2014 inaugural celebration. Mr. Rechnitz owns a real estate development and management firm that controls several buildings in Brooklyn and Manhattan. Mr. Reichberg operates a consulting company, but the precise nature of its business is unclear.
Two of the people briefed on the matter suggested that investigators were trying to determine whether Mr. Rechnitz and Mr. Reichberg benefited from some type of favorable municipal action, or the promise of some action, in exchange for their donations, their fund-raising or some other gesture. But the precise allegations under scrutiny by federal prosecutors in Manhattan and agents of the Federal Bureau of Investigation are unclear. The two people, like others interviewed for this article, spoke on the condition of anonymity because they were not authorized to talk about the case publicly.
Neither man has been charged with a crime.
To date, there has been no suggestion that Mr. de Blasio was involved in any improprieties, and it remains unclear whether the prosecutors and F.B.I. agents working on the case have developed evidence, conclusive or otherwise, of the kind of quid pro quo necessary to prove most corruption crimes in federal court. Speaking to reporters on Sunday, Mr. de Blasio said no one in his administration had been contacted by investigators, and he described his relationship with the two businessmen as cursory.
A lawyer for Mr. Rechnitz, Marc S. Harris, said last week that his client had broken no laws and that he had not been notified that he was the subject of any inquiry. Mr. Reichberg could not be reached for comment.
The investigation brings into sharp relief a central distinction between Mr. de Blasio’s administration and that of his predecessor, Michael R. Bloomberg: Mr. Bloomberg’s enormous personal wealth freed him from the traditional politician’s burden of raising money for re-election campaigns, and essentially gave him independence from those seeking favorable treatment from City Hall.
Mr. de Blasio’s administration, on the other hand, has come under consistent criticism from good-government groups and political opponents who have denounced his relationship with a network of consultants and lobbyists who are close to the mayor and represent clients with business before the city.
The investigation began in late 2013. In recent months, agents and prosecutors investigating Mr. Rechnitz and Mr. Reichberg learned that they were both also in close contact with roughly a score of high-ranking police officials, and may have lavished gifts upon them, some of the people said. This tangential discovery led the police commissioner, William J. Bratton, to reassign four senior police officials to desk duty last week. Two were stripped of their guns and badges and two others were transferred to less prestigious posts, a rare public rebuke.
Investigators also learned that Mr. Rechnitz and Mr. Reichberg had been investors in the alleged Ponzi scheme, two of the people said. This led to the arrest of the restaurateur, Hamlet Peralta, who owned the now-closed Hudson River Cafe in Harlem. Mr. Peralta is accused of misappropriating more than $12 million from investors.
 |
| Hamlet Peralta in 2008. Credit Mark Von Holden/WireImage, via Getty Images |
The origins of the investigation had little to do with campaign finance.
Instead, it was prompted by the discovery of a flurry of large financial transactions through a small Harlem liquor store, a law enforcement official said. The federal authorities began working to trace the funds, which they suspected might be linked to a narcotics or money laundering operation.
This strand of the investigation, however, led them to focus on Norman Seabrook, the head of the union that represents city correction officers, and his close friend, Philip Banks III, then the highest-ranking uniformed official in the Police Department. Precisely how is unclear.
One part of the investigation remains focused on Mr. Seabrook and Mr. Banks, who were both friendly with Mr. Rechnitz and Mr. Reichberg, and whether Mr. Seabrook enriched himself through the union’s funds, some of the people briefed on the matter have said.
 |
| rom left, Jeremiah Reichberg; Philip Banks III, formerly the third-highest ranking chief in the New York Police Department; and Jona S. Rechnitz. Baruch Ezagui |
Here’s the lowlight reel from Mayor de Blasio’s terrible, horrible, no good, very bad week — one that suggests still worse weeks to come:
It started with a front-page report Tuesday that he’d quietly pulled money from the final stage of a huge, vital tunnel project spanning decades and costing billions to finish bringing a new water supply to Brooklyn and Queens.
De Blasio eventually said he was committed to going full speed ahead to complete the project, blamed his own administration for “not (doing) a good job of explaining something” while insisting, not very credibly, that had always been his plan.
Then came days and days of ugly stories about the FBI and U.S. Attorney Preet Bharara questioning top cops about allegedly taking diamonds, free overseas trips and other favors from a pair of cop buffs and big de Blasio backers — one from Borough Park, a neighborhood the mayor used to represent on the City Council.
Despite multiple chiefs being interviewed by the feds, Police Commissioner Bill Bratton shrugged that “we don’t believe this to be deep, systematic corruption” and suggested the probe was really a Bloomberg-Kelly-era issue.
But the feds have been questioning those top cops mostly about the two reported bribers, who were both named to his 73-member inauguration committee. As mayor, de Blasio attended a dinner in Borough Park with one of the men, Jeremy Reichberg, that raised $35,000 for de Blasio’s now-closing outside money operation, the Campaign for One New York. The other man, Jona Rechnitz, who heads a Manhattan-based real-estate investment firm, donated $50,000 to the Campaign. Friday evening, Marcia Kramer reported on CBS that Bharara’s probe was now focusing on the mayor’s fund-raising operations.
 |
| The property, 45 Rivington St., was converted into luxury housing after a deed change was issued by the city. |
Then there’s Rivington House, the Lower East Side nursing home for AIDS patients that’s being flipped into luxury condos thanks to a special dispensation provided by the de Blasio administration to lift a compact that ensured the facility would have a community use.
Read that last sentence again: This is about the most horrific, hypocritical tale of two cities imaginable in de Blasio’s New York. Again, a wired de Blasio ally is involved, and somehow the city not only lifted the deed restriction but valued the property so minimally that a $16 million payment allowed for its $116 million sale. That’s a nine-figure flip, courtesy of City Hall.
Word came out this week that state Attorney General Eric Schneiderman is now probing the deal, as are city Controller Scott Stringer and the mayor’s own Department of Investigation led by Mark Peters, who was previously candidate de Blasio’s treasurer.
Here, sounding painfully like post-Bridgegate Chris Christie, de Blasio agrees this was terrible and laments that he never heard about it from the members of his own administration. Despite letters sent to him by community leaders warning beforehand of just this. Despite his deserved reputation for micro-management. And despite his own relationship with the lobbyist who has represented both the original seller and the current developer and who has bundled $40,000 for de Blasio’s reelection bid and also given $10,000 to the Campaign for One New York.
I don’t know where all this will lead. I do know that when prosecutors get involved, things can take sharp, surprising turns. The cop probe, for instance, reportedly began as a look at long-time correction officers union boss and frequent de Blasio foil Norman Seabrook.
Since day one, the most immediate question with this mayor has been if he could hold to his progressive true north while cobbling together the cash and alliances needed to get there. Over two years of missteps and unforced errors — of late-night calls to get politically wired preachers out of arrests and botched schemes to ban carriage horses and boot Uber that would have benefited big donors, of a drip drip drip of stories about shadowy money and influence — I’ve thought the answer was yes, so long as there were items like pre-k, police reform, a real housing plan and a renewed focus on the “other” New York on the other side of the ledger.
After this week, I’m losing faith that de Blasio’s horse trading is paying off for the city.