Analysts testify about doing business with troubled Town of Oyster Bay
John Venditto arrives at the federal courthouse in Central Islip on Wednesday. Credit: James Carbone
This story was reported by Nicole Fuller, Robert E. Kessler, Bridget Murphy, Emily Ngo and Andrew Smith. It was written by Ngo.
An investment analyst who worked with the Town of Oyster Bay but, like other outside advisers, said he was kept out of the loop about the town-guaranteed loans for restaurateur Harendra Singh testified Wednesday that he bought securities amid the town’s weakened financial state when it offered taxpayer-funded incentives.
Patrick Strollo of the Pittsburgh-based Federated Investors said he had intended to stay away from Oyster Bay after S&P Global Ratings again downgraded the town in 2013, but was drawn back when he was offered securities insurance and a higher interest rate.
Asked who paid for the insurance, Strollo answered: “The taxpayers of Oyster Bay.”
Asked who paid for the hiked-up interest, Strollo again said: “The taxpayers of Oyster Bay.”
Strollo and a series of other financial professionals took the stand Wednesday in the federal corruption trial of former Oyster Bay Town Supervisor John Venditto, former Nassau County Executive Edward Mangano and his wife, Linda.
The trial is in its ninth week.
Also Wednesday, jurors for the first time heard the voice of Venditto in the court proceeding when prosecutors entered as evidence an October 2016 video of him presiding over a town board meeting.
In it, Venditto is heard saying that board members are answerable for all that goes on in Oyster Bay but that they rely on the judgment of those who work for them.
He also says they are responsible for potential acts of negligence by employees but not acts by “a concessionaire or a vendor” that may be criminal.
He was making an apparent reference to Singh, who that same month pleaded guilty in secret to bribing Venditto and Edward Mangano in exchange for lifelines to his businesses, including more than $20 million in town-guaranteed loans.
“We are the government,” Venditto says. “And everything that happens here, whether we like it or not, we are answerable for.”
He adds, though: “We can’t anticipate that a concessionaire or a vendor with the town is going to go off and commit certain acts that may or may not turn out to be criminal in nature.”
Prosecutors on Tuesday had won a ruling by Judge Joan M. Azrack that the video could be admitted as evidence of Venditto’s state of mind, maintaining that in essence it showed him saying “the buck stops with him” in context with the loan guarantees.
Venditto’s defense attorney, Marc Agnifilo of Manhattan, however, said the video actually helps Venditto.
“I think my client looked outstanding, statesmanlike and handsome. I think what you saw in the video was a strong confident leader of a fairly large town government, who, while very much in charge is also relying on the other people in the town, explicitly the town attorney,” Agnifilo told Newsday on Wednesday.
Venditto, 68, of North Massapequa, and Edward Mangano, 56, of Bethpage, face charges that include conspiracy to commit federal program bribery and honest-services wire fraud, securities fraud for Venditto and extortion for Mangano.
Linda Mangano, 54, of Bethpage, is charged with conspiracy to obstruct justice, obstruction of justice and making false statements to the FBI.
The three have pleaded not guilty.
Singh pleaded guilty to bribing Venditto with free meals and free limousine services and bribing Edward Mangano with free meals, free vacations and a no-show job for his wife paying $450,000, among other perks.
Singh said that, in exchange, he received county contracts and the more than $20 million in Oyster Bay-backed loans that are at the heart of prosecutors’ case.
Agnifilo has sought to argue that former town attorney Leonard Genova was much closer to the Singh case than Venditto. Genova, who has immunity, testified earlier in the trial.
Earlier Wednesday, Strollo said that had he known that town officials were alleged to be taking bribes from Singh, he would not have made any deal.
“Because it sounds like illegal behavior,” Strollo said. “We try to avoid those kind of situations on behalf of our clients.”
Also Wednesday, William Schramm, a municipal credit analyst for Logan Circle Partners, testified that the Town of Oyster Bay in its 2014 official statement made no disclosure about a potential liability of $20 million related to third-party debt.
James Lyman, director of municipal bond research at Manhattan-based Neuberger Berman, then testified that the town should have alerted his firm to an acceleration clause, which required the town to pay the entire loan within 60 days of a default. Lyman said it’s “very material” because it’s “not likely” that the town would have $20 million in cash on hand.
Under questioning by Agnifilo, Venditto’s defense attorney, Strollo conceded that he didn’t know if prosecutors’ claims about the town’s behavior and what officials knew were true or false. He agreed that, though the town is vulnerable to being sued by investors, there is no litigation right now.
Schramm, answering Agnifilo’s questions, said he had no independent knowledge of whether the town was on the hook to pay that $20 million and said he wasn’t aware that the town hadn’t “paid a dime” and hadn’t been ordered to do so.
Agnifilo asked another witness, Victor Medeiros, a bond analyst at S&P, if he knew Oyster Bay hadn’t paid anything in regard to indirect loan guarantees. Medeiros said he wasn’t aware of that information.
Medeiros told Assistant U.S. Attorney Catherine Mirabile that he was aware, however, that Oyster Bay had paid millions in litigation fees.
Earlier in his testimony, Medeiros had recounted an April 2016 “due diligence” call with Oyster Bay officials who included Venditto and Genova.
The call included “a conversation about the concessionaire agreements,” Medeiros said, adding that he remembered officials had maintained they were “not liable” and he was sure there was a mention of a “rogue loan.”
Venditto made the “rogue loan” remark, Medeiros said.
After the call, S&P downgraded the town two notches from a BBB to a BB+ — a non-investment grade rating.
Earlier Wednesday, Strollo had testified he was on a conference call in January 2016 with town officials and other investors, when town officials mentioned a “rogue employee” being responsible for the town backing loans to Singh.
It was an apparent reference to then-deputy town attorney Frederick Mei, who has pleaded guilty to taking bribes from Singh and testified earlier in the trial.
“I remember hearing that and being pretty shocked,” Strollo said, adding that after the call, he and his colleagues decided they were done with Oyster Bay.
“We determined there were significant liabilities,” he said. “We were no longer interested in purchasing offerings from Oyster Bay.”
Nicole Fuller is Newsday's senior criminal justice reporter. She began working at Newsday in 2012 and previously covered local government.
