On Nov. 21, the federal Securities and Exchange Commission (SEC) charged the town and former Supervisor John Venditto with “defrauding investors in the town’s municipal securities offerings by hiding the existence and potential financial impact of side deals with a businessman who owned and operated restaurants and concession stands at several town facilities.”
The concessionaire in question, Harendra Singh, is at the heart of another federal indictment that also involves Venditto, as well as outgoing Nassau County Executive Ed Mangano and his wife Linda. Both Mangano and Venditto are accused of allegedly using their influence to enable Singh to get loans to make capital improvements at concessions he operated at the town-owned golf course and Tappen and Tobay beaches. Such municipal guarantees of private debts violate the New York State Constitution, though the state has not taken any legal action on the matter.
The same day as the SEC unveiled its charges, the U.S. Attorney’s Office for the Eastern District of New York “filed a superseding indictment that included securities fraud charges against Venditto.”
Singh was indicted in September 2015 and shortly thereafter the SEC contacted Oyster Bay requesting information about the loan guarantees.
The October 2016 indictment in the Eastern District alleges that between January 2010 and February 2015, Mangano, Venditto and others “engaged in a scheme to receive bribes and kickbacks from a businessman and restaurateur.” He was identified in the indictment as “Co-Conspirator #1,” but all evidence indicates that he is Singh. In exchange, the feds asserted, Mangano and Venditto performed “official actions” to benefit Singh. According to a press release, “In connection with these schemes, Mangano and Venditto are each charged with conspiring to commit federal program bribery and honest services wire fraud and related substantive counts, and Mangano is charged with extortion under color of official right.”
Both officials, along with Linda Mangano, have pleaded not guilty to the charges and are awaiting trial, expected to begin in January.
The recent SEC complaint echoes the charges from the 2016 indictment, alleging that Mangano and Venditto received bribes to assist Singh in obtaining the town’s guarantee of four loans totaling approximately $20 million.
Singh defaulted on two of the loans, and in July 2016, PHL Variable Insurance Company initiated a lawsuit against Oyster Bay to reclaim the moneys. This past May, U.S. District Judge Sandra Feuerstein ruled that the town is not liable for the loans. Two other lawsuits against the town are pending, seeking approximately $12 million in unpaid loans from Singh.
In its lawsuit, PHL stated it was assured of the town’s loan guarantee based on documentation provided by the Harris Beach law firm of Uniondale and former Oyster Bay Deputy Town Attorney Frederick Mei, who resigned in August 2015. A few weeks before his resignation, Thomas Sabellico, a special counsel to the town, had written a letter to the PHL loan broker, calling the agreements “null and void…because, among other reasons, they each purport to make the town a guarantor of the loan, which violates Article VIII, §1 of the New York State Constitution, and neither was authorized by a Town Board resolution, as required under New York State Town Law §64(6).”
The town has sued both the law firm and Mei to recover the costs of the lawsuits.
The SEC also alleges that the town and Venditto deliberately concealed the guarantees and financial risks “when they should have been disclosed in connection with the town’s 26 securities offerings from August 2010 to December 2015…this information was material to current and prospective investors due to the potential impact on the town’s finances.”
According to Sanjay Wadhwa, senior associate director of the SEC’s New York Regional Office, “Investors were deprived of information they needed to understand the town’s true financial condition as they made investment decisions.”
In July, the SEC warned Oyster Bay that it would seek to impose monetary penalties over what it claimed were misleading statements in the town’s prospectuses about the loans, as well as the town’s implying that Venditto and former Town Attorney Leonard Genova had been unaware of the guarantees. In its “Continuing Disclosure Statement” to the SEC dated June 30, 2017, the town noted that the “SEC staff indicated that the action could seek various forms of relief against the town, including an injunction against future violations of the securities laws, monetary penalties, and the imposition of additional controls over the town’s disclosure practices. No penalty amount was proposed.”
“The town does not comment on pending litigation, especially that involving the prior administration,” Town Attorney Joseph Nocella said.
At the Nov. 14 Oyster Bay Town Board meeting, the board passed a resolution to pay an outstanding invoice from the New York City law firm of Paul, Weiss, Rifkind, Wharton & Garrison. The firm had been hired in April 2015 to represent the town as it expected potential litigation in the Singh matter. It provided legal services until November, 2016. Chief Deputy Town Attorney Frank Scalera said he and Nocella negotiated with the firm to reduce the initial $846,000 invoice down to $678,000 at the direction of Supervisor Joseph Saladino.
In July, the town board voted to hire Morvillo Abramowitz Grand Iason & Anello of New York City at $832.50 an hour to defend it against the SEC’s charges. Oyster Bay has already paid the NYC firm of Quinn Emanuel Urquhart & Sullivan more than $1.6 million to represent it in the Singh lawsuits.