Tuesday, December 14, 2010

Outgoing Bronx state Sen. Pedro Espada and son indicted on six federal counts of embezzlement, theft

BY John Marzulli

Tuesday, December 14th 2010, 5:09 PM

State Senate Majority Leader Pedro Espada, Jr.
Simmons for News
State Senate Majority Leader Pedro Espada, Jr.

Disgraced Bronx pol Pedro Espada Jr. and his son lived high on the hog stealing taxpayer money, a federal indicatment charges.

The recently defeated State Senator and his son, Pedro G. Espada, were hit in Brooklyn federal court Tuesday with five counts of embezzling $500,000 in government funds and one count of conspiracy.

"Pedro Espada and his son spent years secretly siphoning money from healthcare clinics in order to fund Espada's lavish lifestyle," said Attorney General, and soon-to-be New York State governor Andrew Cuomo.

"Taxpayer funds meant for the sick and poor were instead used for Broadway shows, fancy meals, and other opulent personal expenses of Pedro Espada."

Espada is charged with billing over $100,000 to a corporate credit card for his Soundview Health Clinic for mind-boggling personal expenses, including $20,000 spent at a Mamaroneck sushi restaurant and $14,000 in tickets for shows like "Mamma Mia" and "Jersey Boys."

He also used funds from a related janitorial company to pay for pony rides and a petting zoo at a relatives birthday party, the feds say, and he tried to use $49,000 as a down payment for a Bentley.

The pol's son, Pedro G. Espada, 36, is charged with illegally rigging bidding processes to assure Soundview was given inflated contracts

The pair are expected to surrender to the FBI Wednesday morning and appear in Brooklyn federal court later in the day. If convicted, they face up to 55 years in prison.

The elder Espada,56, has long been dogged by charges of unethical use of money from Soundview - a government-funded HMO that he turned into a political machine.

Cuomo sued Espada and his son in civil court earlier this year for allegedly using $14 million in Soundview funds for personal and political purposes.

That suit sparked a federal investigation.

Following Cuomo's earlier lawsuit, Espada staunchly denied the charges, claiming they were politically motivated.

Espada angered much of the state Democratic party when he joined Republicans in a short-lived coup in the senate in 2009 that briefly upended Democratic rule.

In the fallout, Espada ended up as Senate majority leader.

The Bronx Democrat is set to leave office on Jan. 2 to be replaced by Gustavo Rivera, who soundly beat him at the polls in November.

The son, Pedro G. Espada, 36, a former State assemblyman, raised a storm of criticism in 2009 when he landed a $120,000-a-year Senate deputy job that was widely viewed as blatant political patronage.

He quit when the hiring made headlines.



Indictment: Nonprofit paid for ghostwriter, pony rides

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Andrew Cuomo really is looking to wrap up business before he heads to the second floor: The governor-elect and the feds have indicted Senate Majority Leader Pedro Espada for stealing from the Bronx health clinics he started and still operates.

Espada & Son were both charged with five counts of embezzlement and one count of conspiracy, carrying jail terms of 10 years apiece and five years, respectively.

Update: If you’ve ever asked yourself, “Mother of Mercy, what will it take to get the Senate Democrats to boot Pedro Espada Jr. from the post of majority leader?,” we now learn that the correct answer is “Get indicted by the U.S. Attorney.” The statement from Senate Democratic spokesman Austin Shafran:

“In light of Senator Pedro Espada’s indictment, he has been removed as Majority Leader and Chair of the Senate Housing Committee effective immediately.”

UpdateX2: See the indictment below — thanks to the NYT for posting it to Scribd.

Perhaps the most delightful/horrifying portion of the indictment lists the alleged “overt acts” of Espada using funds from his healthcare nonprofits for, well, things such organizations don’t usually need. Such as:

  • Legal fees related to Espada’s violation of election laws
  • An after-school tutor for an unnamed relative
  • Air-conditioning repairs at his Mamaroneck (as opposed to the Bronx) home
  • A ghostwriter for a personal book project
  • Catering, videotaping, a petting zoo and pony rides (pony rides!) at a family member’s June 2006 birthday party

The cherry on top: The indictment states that in October 2006 Espada attempted to use a Soundview check for $46,000 as a downpayment for an auto at Bentley of Long Island, but the sale didn’t go through (wait for it) because (here it comes) “Espada’s financing application was rejected.” In the wake of that no doubt embarrassing episode, a few months later Espada used Soundview funds to pay a credit-repair service to improve his personal credit score.

Espada Indictment

The release from the AG’s office and the U.S. Attorney:

Attorney General Andrew M. Cuomo and United States Attorney Loretta E. Lynch today announced a six-count
federal indictment against Senate Majority Leader Pedro Espada, Jr. and
his son Pedro Gautier Espada (“Gautier”) for stealing in excess of
half a million dollars from Bronx clinics. This action is the result of
a joint investigation by the Attorney General’s Office, the United
State Attorney’s Office for the Eastern District of New York, the
Federal Bureau of Investigation and the Internal Revenue Service.

The indictment charges that Espada and his son embezzled money from
Comprehensive Community Development Corporation (“Soundview”), a
federally-funded healthcare not-for-profit. The Espadas were charged
with five counts of embezzlement and one count of conspiracy. If
convicted, they face up to 10 years’ imprisonment on each of the
embezzlement counts and 5 years’ imprisonment for conspiracy, as well
as a fine of $250,000 on each count of conviction. The indictment is
being brought by the United State Attorney’s Office for the Eastern
District of New York

“As alleged, Pedro Espada and his son spent years secretly siphoning
money from healthcare clinics in order to fund Espada’s lavish
lifestyle,” said Attorney General Cuomo. “Taxpayer funds meant for
the sick and poor were instead used for Broadway shows, fancy meals, and
other opulent personal expenses of Pedro Espada. Elected officials are
supposed to serve the people not themselves, and this indictment should
send a strong message: In New York, no one is above the law.”

“The indictment alleges that funds that could have been, and should
have been, applied to purchase medical equipment and hire personnel to
enhance health care services for an under-served population were
diverted by the defendants for their personal use and to benefit friends
and family members,” stated United States Attorney Lynch. “In these
difficult economic times, the charged crimes are all the more

The indictment was sparked by Cuomo’s investigation into Espada’s
violations of the laws governing not-for-profits. Based on this
investigation, the Attorney General’s office referred a criminal
investigation to the United State Attorney’s Office for the Eastern
District of New York. Cuomo’s lead prosecutor was then designated a
Special Assistant United States Attorney to help run the investigation.
On April 21, 2010, the Attorney General’s office, the Federal Bureau
of Investigation, and the Internal Revenue Service executed a search
warrant at Soundview’s offices and commenced a criminal investigation
into Espada’s misappropriation of Soundview’s funds for personal

Attorney General Cuomo thanked U.S. Attorney Lynch and her prosecutors
for all of their help, hard work and cooperation on this matter.


Today’s indictment by a federal grand jury charges that, since 2005,
Espada and his son knowingly and willfully conspired to steal and stole
money from Soundview, a network of health care clinics located in the
Bronx. This amount reflects monies that Espada and his son spent for
their personal gain but claimed as business expenses. The Espadas
allegedly diverted funds for their personal use and for the benefit of
family members and friends.

The various schemes allegedly executed by the Espadas include:

● Pedro Espada caused Soundview to pay charges for his personal
expenses through the Soundview corporate American Express card. Those
charges included more than $100,000 in personal meals for Pedro Espada
and his family members, window treatments for Pedro Espada’s home, and
tickets to Broadway shows and sporting events.

● Espada and Gautier used a for-profit janitorial company –
Community Expansion Development Corporation (“CEDC”) – to divert
funds from Soundview and then spent the funds on personal use and
political expenses, including the rent for Espada’s campaign
headquarters, campaign materials, pony rides and a petting zoo for a
family member’s birthday party, and a $49,000 check Espada attempted
to use as a down payment on a Bentley automobile.

● Espada and Gautier diverted rental payments owed to Soundview to
two different entities – CEDC and another for-profit janitorial
company known as Soundview Management Enterprises and used these funds
to pay personal expenses for themselves and family members.

● Gautier rigged the awarding of a Soundview janitorial services
contract by providing false contract requirements to other bidders,
ensuring that Soundview Management Enterprises was awarded the contract
at an inflated price, which enriched himself and Pedro Espada.

Soundview was founded by Pedro Espada Jr. with the purpose of providing
healthcare to the people of the South Bronx. It is a not-for-profit
that receives a vast majority of its funding from the State and Federal

The investigation is ongoing. The charges against the defendants are
merely accusations and the defendants are presumed innocent until and
unless proven guilty.


In April 2010, Attorney General Cuomo filed a lawsuit filed against
Espada for diverting Soundview’s charitable assets and using the money
for himself, his family, his friends, and his political operation.
Nineteen current and former officers and directors of Soundview were
also named in the lawsuit. The lawsuit alleged that in the past five
years, Espada siphoned more than $14 million out of Soundview, including
an unconditionally guaranteed severance package worth an estimated $9
million that was put into a contract signed in 2005. The lawsuit seeks
to permanently remove Espada and current CFO Kenneth Brennan as officers
of Soundview and, similarly, to remove all of Soundview’s directors
from the Board. The lawsuit also seeks restitution from Espada.

Also in April 2010, Attorney General Cuomo filed a separate lawsuit
against Senator Pedro Espada, Jr. and Gautier, for violating labor laws
by creating a sham job training program that cheated workers and
shortchanged State coffers. The lawsuit alleged that Senator Espada
created a personally owned, for-profit management company, Soundview
Management Enterprises LLC (Espada Management), as a vehicle to siphon
money from Soundview, the Bronx-based not-for-profit where Espada is
founder and CEO. The money flowed from Soundview to Espada Management,
run by Gautier, by means of a contractual arrangement that called for
Espada Management to supply janitors for the Soundview medical clinics.

These civil investigations into Senator Espada and Soundview are

This case is being prosecuted by Assistant United States Attorneys
Colleen Kavanagh, Ilene Jaroslaw, and Todd Kaminsky, and Special
Assistant United States Attorney Mitra Hormozi.

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