Evidence mounting of shady dealings by Sen Espada and his companies, court papers claim

By Kenneth Lovett
Daily News Albany Bureau Chief

Thursday, January 14th 2010, 9:37 AM

Smith for News

Senate Majority Leader Pedro Espada Jr., pictured speaking on the steps of City Hall, is under increasing pressure to come clean about alleged financial irregularities involving his companies

ALBANY - Attorney General Andrew Cuomo's office has found "extensive evidence" of potentially illegal and improper actions by embattled Sen. Pedro Espada Jr. and the companies he controls, court papers show.

Portions of a potential legal case against Espada were outlined for the first time Wednesday in a bombshell filing, asking a judge to compel Espada to cooperate with a subpoena.

In papers filed in Manhattan Supreme Court, Cuomo's office charged that Espada has not complied with a subpoena issued Aug. 25 to a management company he created and controls, Soundview Management Enterprises.

The for-profit company was created in late 2007 and hired early the next year for $33,000-a-month to provide janitorial services to Soundview HealthCare Network, which Espada also created.

According to the papers, Cuomo's office has been investigating Soundview's parent company, Comprehensive Community Development Corp., for nine months.

Espada, in a statement released by his office, dismissed the filing as "an Andrew Cuomo witch-hunt driven by his political ambitions."

But Cuomo's office in the filing says it has found "extensive evidence of potential violations" of the state not-for-profit corporation law by Soundview Healthcare and a number of its officers, including Espada, who is its president and CEO.

The contract between the senator's health care network and the management company "allowed Mr. Espada to effectively siphon off and otherwise divert money from Soundview (health centers) for Mr. Espada's own personal and political benefit," the papers say.

Documents obtained by Cuomo's office show that "significant portions" of the funds paid by Soundview to the management company went toward paying Espada's campaign expenses.

Such expenses included printing, campaign office rent, and personnel costs.

The papers allege that Soundview, either directly or indirectly through Espada's management company, paid expenses related to the senator's campaign and paid workers who were dispatched to work on the campaign - all in direct violation of not-for-profit laws.

The contract between Soundview and Espada's management company is also "improper," Cuomo's office alleges.

Espada's management company was paid $400,000 per year to provide maintenance services to Soundview, even though board minutes show no valid reason for the awarding of the contract, according to the court filing.

Before the contract was awarded, maintenance services were provided by Soundview itself.

Further, Cuomo's office is investigating potential labor law violations at Espada's management company, including a scheme to boost company profits at the expense of the employees.

Possible tax liability issues concerning Espada and his companies are also part of the probe, according to the paperwork.

Espada, though, claims he has turned over "tens of thousands of documents that were requested."

Calling himself the state's highest ranking Hispanic elected official, Espada injected ethnicity into the fight by accusing Cuomo of using him "as his personal political pinata."

"I will not be distracted by this," he said, citing a litany of legislative priorities that include ethics reform.

The Daily News last week reported that Cuomo stepped up his probe of Espada by issuing a new subpoena to the state Senate.

Cuomo's office is seeking a broad range of materials related to the Soundview Health Care Network and Espada's legislative member items, three sources said.

The subpoena, served to the secretary of the Senate's office, asks for information about Espada's financial disclosure forms and Senate expenses, the sources said.

It seeks all mobile communications like e-mails, text messages and cell phone records for Espada and his staff.

Investigators are believed to be probing how Espada operates Soundview, how the network is funded, and whether he mixed Senate expenses with his Soundview role.

There are also questions about whether Espada omitted information from financial disclosure forms filed with the state.

Espada last year gave $1.77 million in taxpayer money he controlled to the New Bronx Chamber of Commerce.

The organization asked for just $50,000 and ultimately rejected Espada's taxpayer-funded gift.

The gift came after Senate Democrats rejected Espada's bid for $2 million for two non-profits linked to Soundview, Green Eco. Energy Inc. and Bronx Human services Council Inc.