Bruno case shows issues getting promised funds

PHOTOGRAPHER: Stephen Williams

John Marszalek was on the witness stand at Joe Bruno’s fraud trial for only a few minutes, and his testimony didn’t make most news accounts.

But the Polish immigrant touched directly on one of the subtle themes of the trial testimony — how difficult getting the state to make good on financial promises can be.

Marszalek’s Rochester-based company, Aviation Learning, was awarded a $250,000 equity investment by the state Small Business Technology Fund in 2003, announced at a press conference with then-Gov. George Pataki and Bruno.

But Marszalek, who was called to testify by Bruno’s defense, said he declined the funding.

“I made personal decision,” Marszalek said in his heavily accented English. “The way New York did business made me decide not to accept. They were too bureaucratic, too controlling.”

Indeed, the month-long trial of Bruno, the former state Senate majority leader and a very public promoter of upstate economic development, has shed an unflattering light on the state’s follow-through on major funding announcements.

The jury is weighing whether Bruno is guilty of eight felony fraud charges. They will resume deliberations Monday after a Thanksgiving break.

In three weeks of testimony that ended on Nov. 20, federal prosecutors sought to show Bruno used his political influence to steer state money to companies owned by his friends, some of whom were paying him as much as $20,000 per month as a business consultant. With no evidence Bruno directly accepted payoffs for official actions, prosecutors highlighted state grants that went to companies owned by people who were paying Bruno.

Evident Technologies of Troy and Aviation Learning were topics of that testimony, but neither received all of the funding promised publicly.

Evident Technologies, a promising high-tech company, was partially owned by Bruno friend Jared Abbruzzese, who provided it $250,000 in startup money in 2000.

Evident was awarded $1.5 million in state Senate Majority Initiative money in 2002, in another announcement by Pataki and Bruno.

“We all were thinking that’s money in the bank,” testified Clinton Ballinger, Evident’s CEO.

But in the end, Evident only received $500,000 — in two payments of $250,000 — and the reason it didn’t get the rest of the money remains unexplained.

Even Abbruzzese was unable to free up the remaining money, despite setting up a meeting with Bruno at the state Capitol in late 2003, a meeting that Bruno at the last minute was unable to attend.

The testimony of Marszalek and Ballinger was part of a defense strategy that showed that even Bruno — one of the three most powerful men in state government — didn’t always have the power to move the state bureaucracy.

Bruno himself did not testify during the trial and declined to answer specific questions about testimony.

Marszalek, whose company developed training programs for high-performance aircraft maintenance, had been recommended to Bruno by Leonard Fassler, another Bruno friend. At the time, in 2002-03, Fassler was paying Bruno $20,000 a month to consult with his businesses.

When the $250,000 state investment in Aviation Learning was announced by Pataki and Bruno in February 2003, Bruno was quoted in a press release as saying such investments make New York “more economically competitive.” In the same statement, Marszalek was quoted as praising Pataki’s “strong commitment to supporting small high technology businesses.”

But attorneys stipulated in court that there is no paper record at all on Aviation Learning in the files of Empire State Development, the state’s economic development agency.

Marszalek testified that he never heard anything from Bruno.

Evident Technologies caught Pataki’s eye in 2001 with its development of a “quantum-dot” technology, which had the potential to detect anthrax and other poisons in the air, a topic that had a lot of official interest in the months after the Sept. 11 terrorist attacks.

The $1.5 million for Evident was to come from what is called Senate Majority Initiative funds — money that Bruno, as leader of the Senate majority from 1994 to 2008, then controlled.

Money channels

From the outside, majority initiatives look very much like the “member items” that are exclusively controlled by state legislators and fund everything from local Little Leagues to paving health care center parking lots. But majority initiative money is different in that it has to go through a state agency, following the agency’s funding rules, and grant checks are sent only as reimbursement after the recipient has spent its own money.

“A member item is vastly different than a majority initiative that goes through [Empire State Development],” said William Dreyer, one of Bruno’s lawyers.

There’s lots of paperwork involved, and some applicants don’t follow through, acknowledged David Catalfamo, a former high-level Pataki administration economic development and communications official.

Catalfamo said Bruno’s written backing was essential for Evident Technologies’ funding. “Without that, we wouldn’t even be able to initiate it,” Catalfamo testified.

It’s majority initiative funding that has paid for high-profile Bruno-backed local economic development projects like development of the Luther Forest Technology Campus in Malta.

Dreyer sought to show the jury the thousands of member items and initiative forms Bruno submitted over the years, in an effort to demonstrate that prosecutors singled out just a few, but U.S. District Court Judge Gary L. Sharpe disallowed the tactic.

That Evident Technologies only received one-third of what it was promised angered Abbruzzese, according to testimony.

Abbruzzese testified that as far back as 1999, he’d been “pounding on” Pataki about the lack of state money for small upstate startup companies. Abbruzzese, who lives in Loudonville, hosted at least one fundraiser for Pataki at his home, he said.

Abbruzzese’s early investment gave him about 20 percent of Evident’s ownership. He was looking at his role in helping it secure the state funding as a way to increase that share.

Strictly business

In return for helping, Abbruzzese sought and was given stock purchase warrants that could be exercised when the state money was actually received.

“I don’t do something for nothing when I’m in business,” Abbruzzese said in court.

He expected to exercise the stock warrants as the $1.5 million came in payments of $500,000 a year. He stormed out of the Capitol meeting when Bruno was unable to attend and Bruno’s staff was unable to make promises about the funding.

It was two months after that, on a private jet ride back from a golf holiday in Florida, that Bruno approached Abbruzzese about paying him for business consulting — they settled on $20,000 per month.

Bruno in 2005 successfully got $2.5 million in state money allocated to help renovate John Paine Hall at Russell Sage College in Troy into a high-tech business incubator, the first at a women’s college. Evident moved into that building — in the heart of Bruno’s Senate district — in 2006 and remains there today.

“It has been a highly successful project for Russell Sage, the city of Troy and the faculty and students,” testified former Russell Sage President Jeanne Neff.

That there’s a wide gap between the major public announcement and the delivery of state money isn’t a surprise to Saratoga County officials, who struggled with various state bureaucracies after Bruno in 2006 promised $30 million toward construction of the new county water system — an essential component in the effort to bring the Advanced Micro Devices-Global Foundries computer chip plant to Luther Forest.

It actually turned out to be three promises of roughly $10 million each from the Environmental Facilities Corp., Empire State Development and the state Dormitory Authority. Each required its own extensive follow-through to be sure contract conditions were met.

County Water Authority Chairman John E. Lawler has repeatedly said the process was far more difficult than county officials had been led to believe, though all of the money was eventually obtained.