A law firm that Mayor de Blasio owes $300,000 in unpaid legal fees to last fall won a zoning loophole for one of its developer clients after lobbying two of the mayor’s top aides, a Daily News investigation has found.
Kramer Levin Naftalis & Frankel pressed Deputy Mayor Alicia Glen and Marisa Lago, the mayor’s appointee as City Planning Commission chairwoman, to halt rezoning that would have killed a residential tower being built on the East Side by the law firm’s client, developer Jonathan Kalikow.
Days afterward, City Planning Commission Vice Chairman Kenneth Knuckles – who was kept on by de Blasio as a mayoral appointee – suggested that Kalikow’s tower be exempt from the zoning change. That suggestion – later adopted by the entire commission — ultimately kept the tower project from being shut down.
The exemption, which created a grandfather clause in the rezoning specifically for Kalikow’s 700-foot luxury condo tower on E. 58th St., took neighbors who oppose the tower by surprise. It even raised concerns from two nonmayoral appointees on the commission.
At issue is why Kramer Levin lobbied the mayor’s office and his appointees when de Blasio owes the firm a six-figure sum and has yet to publicly divulge how or when he’ll pay it back. On Saturday, the mayor’s office confirmed that there is no written time line for repayment of the non-city-related representation and as of last week Kramer Levin had not asked him for a dime.
This situation creates the appearance of a conflict of interest, said Michael Hiller, a lawyer representing the East River Fifties Alliance, the neighborhood group opposing Kalikow’s tower. Hiller argues the firm should be disqualified from representing Kalikow in the zoning dispute going forward.
“A law firm which has both an attorney-client relationship with the mayor and leverage over him due to his substantial unpaid legal fees creates an irreconcilable conflict of interest,” Hiller told The News.
That perceived conflict remains intact as Kramer Levin continues to represent Kalikow on his project, now pressing the case for the developer before the city Board of Standards and Appeals.
In an April 6 letter to the board, Fatima Afia, a lawyer with Hiller’s firm, wrote it was “our understanding that the mayor has the ability to influence decisions of the board and of course change its composition.”
Afia argued that “continued work by (Kramer Levin) with respect to the developer’s application in this matter would create the appearance of impropriety, insofar as the mayor – by reason of his substantial debt to (Kramer Levin) – may feel beholden to his lawyers to rule in their favor.”
The board did not respond to Hiller’s request to disqualify Kramer Levin.
Kalikow’s tower project is set to be considered by the agency Tuesday.
De Blasio retained Kramer Levin in the spring of 2016 to represent him personally in state and federal probes of his fund-raising tactics. The probes by the Manhattan U.S. attorney and district attorney ended in early 2017 with no criminal charges, but with prosecutors finding the mayor had violated the spirit of campaign finance laws and intervened on behalf of some of his deep-pocketed donors.
The total bill came to about $2.6 million, but de Blasio has said he will “let” the taxpayers pick up about $2.3 million of that for Kramer Levin’s representation of him regarding matters that concern city business. That leaves $300,000 for the firm’s handling of noncity business matters.
Meanwhile, the firm continues to lobby the mayor’s office and top de Blasio appointees on behalf of more than two dozen clients, mostly developers seeking zoning changes and tax breaks, records show.
One of those clients was Kalikow. Last year he paid Kramer Levin $178,000 to lobby City Hall and fight a zoning change proposed by neighbors who wanted to halt construction of a 700-foot luxury apartment tower he’s building near Sutton Place.
The neighbors proposed drastically limiting the height and density of any new buildings constructed within a small section east of First Ave. The neighbors were clear that, if enacted, the zoning change would stop Kalikow’s tower. Last fall, Kramer Levin began pressing City Hall and some of the mayoral appointees on the planning commission to kill the rezoning, according to lobbying records and letters released in response to a News inquiry.
In Oct. 25 letters to Glen and Lago, Kramer Levin lawyer Gary Tarnoff argued that the East River Fifties Alliance proposal was illegal spot zoning crafted specifically to kill Kalikow’s project and only his project. The rezoning, Tarnoff stated, would reduce Kalikow’s project from 261,000 square feet to 160,000 square feet, making it economically untenable. In those letters, there’s no reference to the grandfather clause, but at a commission review session on the matter a few days later, Knuckles brought up the possibility of a grandfather clause that would exempt Kalikow’s building from the zoning change.
“That was the first time that the topic of grandfathering was being considered,” said Bob Shepler, a retired financial adviser who co-leads the East River Fifties Alliance.
“It really came out of the blue.”
Shepler notes that the neighborhood was surprised at the loophole for Kalikow, in part because the nonpolitical Department of Planning staff had approved of the East River Fifties Alliance’s zoning proposal without such a clause.“It certainly seemed like there was a lack of transparency,” he said. “Clearly this was not (the Department of City Planning). This was something coming out of the commission.”
Jane Meyer, a spokeswoman for de Blasio, confirmed that the mayor’s office was involved in the rezoning discussion, stating, “Throughout the process, the administration worked to ensure concerns raised by the community were considered.”
But she insisted, “City Hall did not direct the planning commission to grandfather the tower.”
Asked if there were any communications with the mayoral appointees on the planning commission, Meyer responded, “We don’t believe there was any.”
In a Nov. 13 letter to Knuckles, Kramer Levin’s Tarnoff made clear that Kalikow would support insertion of the grandfather clause, writing, “We heard the commission’s discussion on this point and we think it is worth noting that grandfathering would allow our project to continue uninterrupted without the loss of a substantial number of jobs for at least a temporary period of several months.”
Two days later, the planning commission as a whole approved the East River Fifties Alliance rezoning with the clause exempting Kalikow’s tower. During the meeting, two nonmayoral appointees who voted for it expressed reservations about the clause.
Michelle de la Cruz, appointed by the public advocate, said she was against the exemption but voted “yes” because she was in favor of the rezoning. And the Manhattan borough president’s appointee, Anne Hayes Levin, said she hoped the clause would be eliminated by another city board.
Building records show concrete was poured at the site in the days after the commission’s vote through Nov. 30. Then on Dec. 1, all work stopped at the site, when the City Council passed its own version of the rezoning, this time removing the grandfather clause.
By then, Councilman Ben Kallos argues, the damage was done. He says the delay allowed Kalikow to build enough of the tower’s foundation to claim the building as substantially completed – the trigger for approval of the entire building by the Board of Standards and Appeals.
“Without this bogus clause, this rezoning could have been done weeks earlier and the community wouldn’t be facing an appeal to a rightfully won rezoning,” said Kallos (D-Manhattan), who opposes Kalikow’s tower.
Kramer Levin is also representing two other major developers who are currently seeking City Hall approval for huge residential towers in lower Manhattan to be built on city-owned land. In the last year, the firm has lobbied several members of the City Planning Commission. Both projects are pending.
On Friday, The News asked de Blasio press secretary Eric Phillips if the Office of the Mayor has a policy regarding Kramer Levin lobbying mayoral aides and appointees.
The mayor’s spokeswoman, Meyer, responded, “The mayor and administration officials don’t give special treatment to anyone. Administration officials don’t care about whether some member of some firm they are dealing with is involved with some campaign. It doesn’t enter into the equation.”
Kramer Levin’s Tarnoff did not return calls seeking comment on the rezoning and the special clause for his client.
A spokeswoman for the planning commission, Melissa Grace, said, “Grandfathering is far from unusual and both the planning commission and City Council invoke the rule when a zoning change undermines substantial investments already made under as-of-right regulations. New York City’s rules are clear and shouldn’t be changed midgame.”
