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The New York Times call Carl Mayer: "A populist crusader and ... a maverick lawyer." New York Times, October 15, 2004.

Thursday, November 02, 2006

UNTOUCHABLES FILE ETHICS COMPLAINT AGAINST MENENDEZ

Before the Senate Committee on Ethics


In the Matter of

ROBERT MENENDEZ,

UNITED STATES SENATOR

-----------------------------------------------------------


Report and Statement of Complaint

________________________________________



Petitioners by their attorneys report the following Report and Statement of Complaint to the Committee on Ethics:


1. ROBERT MENENDEZ is the appointed junior Senator from the State of New Jersey.
2. Senator Menendez was appointed by Governor Jon Corzine in January 2006 to fill Corzine’s vacant seat.
3. Senator Menendez is the 2006 democratic nominee for New Jersey’s senate seat at the November 2006 General Election.
4. This complaint is predicated on evidence of extensive and widespread violations of federal and state anti-corruption and campaign finance laws by Senator Menendez.
5. These acts and violations took place beginning in or about 1993 and have continued.
Introduction

6. Senator Menendez’ diversion of public and campaign funds to Kay LiCausi, with whom he is widely believed to have maintained an intimate relationship, a fact never denied by Menendez or LiCausi, give rise to a substantial question of fact as to violations of federal embezzlement, racketeering and campaign finance laws.
7. Beginning in January 2001, Menendez, while still a member of the House of Representatives, began a pattern of diverting public monies and campaign funds to employ LiCausi in a position for which she had no prior training or experience; such diversion began only after LiCausi reputedly commenced an intimate relationship with Menendez and set up a joint household in Hoboken, New Jersey. Beginning at such time, Menendez commenced a diversion of public and campaign funds to employ LiCausi first, as an aide in his district office, and later as a purported lobbyist for political committees controlled by Menendez. Menendez also secured lobbying contracts for LiCausi with private companies for whom he had sought federal grants or was expecting to do so.
8. These acts, as documented below, give rise to a high likelihood that Senator Menendez has committed a substantial number of civil and criminal violations of both federal and state laws, as set forth more full in this instant complaint.
9. Based upon the contents of this Complaint, complainants believe that this committee should impose a finding of discipline against the Junior Senator from New Jersey, including censure and/or expulsion from the Senate of the United States and a referral of these allegations to the Department of Justice.
The Senator’s Relationship with Ms. LiCausi and
his diversion of official funds to employ her.
10. From January 1998 through December 2001, LiCausi was a low level clerical employee at Menendez’ district congressional office. In her position as district scheduler she was paid a standard staff salary of $25,654 annually. LiCausi had no advanced education and no known special skills.
11. Beginning in December 2000, Menendez promoted LiCausi to the position of district director in his district congressional office at an annual salary that reached, after several raises, $80,000 within one-year, more than doubling her starting salary as a district scheduler.
12. Neither Menendez nor LiCausi have denied the existence of an intimate relationship nor denied that Menendez moved into LiCausi’s Hoboken apartment after he separated from his wife, Jane.
13. Aside from such relationship with then-Rep. Menendez, LiCausi is not known to have acquired any change in skills or experience that would justify her promotion and salary increase.
14. According to media reports, none of which have been denied by Menendez or LiCausi, beginning in or about January 2001 Menendez left his wife, moved out of his martial residence and began living with Kay LiCausi at an apartment in Hoboken, New Jersey. Following this move, Menendez again promoted LiCausi and more than doubled her salary to approximately $80,000, making LiCausi Menendez’ highest paid employee.
15. Aside from her relationship with Menendez, LiCausi is not known to have acquired any skills or experience that would justify this second substantial salary increase.
16. By means of these promotions and salary increases, Menendez used public monies as a gift to his presumptive intimate partner. Federal law prohibits the use of official funds for personal purposes, 18 U.S.C. 641 , et seq., and gifts have been held to be violations of section 641. See e.g., United States v. Rostenkowski, 59 F.3d 1291 (D.C. Circuit 1995). Menendez benefited from such use of official funds by diverting public monies to LiCausi at a time when he appears to have been engaged in an intimate relationship with her and was purportedly cohabiting with her thereby augmenting his household income from official funds used to pay her salary.
17. On July 17, 2005, the New York Times reported the widespread belief among elected officials and political consultants in Hudson County, Menendez’ home, that Menendez and LiCausi had been engaged in an intimate relationship. Menendez has refused to deny such reports, telling the New York Times “That’s strictly personal”. New York Times, July 17, 2006. Based on such statements by Menendez this Complaint necessarily assumes the truth of such assertions.
18. LiCausi’s salary in Menendez’ Congressional office more than doubled within one year of the commencement of her intimate relationship with Menendez.
19. LiCausi lacked sufficient skills or experience to justify such promotions and received such promotions because of her relationship with Menendez.

LiCausi and her newly-established lobbying company begin
receiving payments from Menendez’ PAC and his campaign committee
20. In Fall 2002, LiCausi resigned from Menendez’ district office but continued to receive payments through Menendez’ campaign and his leadership PAC.
21. Following her resignation from Menendez’ district office, LiCausi began receiving combined payments of $10,000 monthly from Menendez’ campaign and his New Millennium leadership PAC while she continued to cohabit with Menendez.
22. In 2003, New Millennium PAC paid LiCausi’s company, KL Strategies, Inc. $45,000 in “media consulting” fees. At the time, LiCausi did not appear to have any professional background that would justify such a retainer for “media consulting”.
23. Also in 2003 Menendez directed the DCCC (Democratic Congressional Campaign Committee) to pay LiCausi or her company $10,000 monthly in the period 2003 to 2004. LiCausi received $130,000 in payments from the DCCC.
24. During the 2003-2004 election cycle, Menendez’ campaign committee paid LiCausi’s company KL Strategies $61,493 in fundraising consulting fees.
25. These payments, nominally routed through KL Strategies, had the direct effect of enlarging LiCausi’s income at a time when she began cohabiting and presumably sharing household expenses with Menendez.
26. By diverting such monies to LiCausi at a time when he was engaged in an intimate relationship with her, Menendez appears to have misused official funds and campaign funds and by doing so while apparently cohabiting with her Menendez effectively increased and augmented his own household income by passing payments to LiCausi from Menendez’ controlled political committees.
Menendez begins to direct lobbying contracts to KL Strategies
27. After placing LiCausi on his committee payrolls and directing campaign consulting contracts to her, Menendez began directing private lobbying assignments to LiCausi.
28. These clients hired LiCausi’s company, KL Strategies, not because of any inherent lobbying skill or experience of LiCausi but as a means of continuing their relationship with Menendez. Individuals retaining LiCausi’s firm were close confidantes or fundraisers for Menendez and hired LiCausi because of their relationship with Menendez.
29. The New York Times reported on July 17, 2005 that these lobbying contracts between 2003 and 2004 exceeded $200,000. Menendez has acknowledged making such recommendations for lobbying contracts for LiCausi. See New York Times, July 17, 2005.
30. Liberty HealthCare System retained LiCausi as an apparent effort to gain favor with Menendez. As reported by the New York Times reporter Jeffrey Gettleman, Liberty’s president Jonathan Metsch is a longtime fundraiser for Menendez and at a ribbon cutting ceremony for the Jersey City Medical Center in 2004 “Dr. Metsch lavished the congressman with praise for his help in securing government-backed bonds”. NY Times, July 17, 2005. When interviewed as to LiCausi’s lobbying services for Liberty HealthCare, the hospital’s Chairman, James McLaughlin, told Gettleman “that he had never heard of her.” Id.
31. Similarly, Imperial Construction Group, a Hudson County management firm also appears to have retained LiCausi to curry favor with Menendez. Imperial paid LiCausi $22,500 in 2004. As with Liberty HealthCare, Imperial was unable to tell the New York Times what actual lobbying LiCausi performed. When asked why he hired LiCausi, Lou Fernandez, one of Imperial’s two co-founders, said "Bob's a great guy; that's all I got to say."
32. In all LiCausi listed 10 clients through 2004 with the New Jersey Election law Enforcement Commission and was paid by them a total of $143,500 but reported performing lobbying work for only three of them and that work appears to have been at a minimal level. Goldman Sachs, for example, confirmed that it had hired LiCausi as a lobbyist. When asked what work she did, a Goldman Sachs spokesperson said that she was “helpful in tracking legislation and arranging meetings.” New York Times, July 17, 2005.
33. One client of LiCausi’s, Liberty National, is an affiliate of Applied Development Company, a waterfront developer founded by Joseph Barry, a longtime Menendez ally who was convicted in 2004 on charges that he bribed a Hudson County Official in connection with a project in Hoboken. Barry was sentenced to a 25-month prison term. In addition to being retained by Barry’s firm, LiCausi occupied an office owned by Applied.

34. Some of LiCausi’s work appears to be “make work”. George D. Warrington, the executive director of New Jersey Transit, told the New York Times that his staff learned of her through her work for Menendez and that she was hired in December 2004 for $3,000 a month to do community outreach. It is unclear just what “community outreach” refers to and why New Jersey Transit needed to perform such work.
35. Other work appears to be part of an implied quid pro quo for favors from Menendez in which clients hire LiCausi in exchange for official action by Menendez.
36. For example, the Mills Corporation, one of the developers of the billion-dollar Xanadu entertainment and shopping complex in New Jersey’s Meadowlands, hired LiCausi for $7,500 per month. Part of the plans for Xanadu call for construction of a light rail transportation line to bring consumers from New York and the New Jersey transit trunk lines to the Xanadu complex. At the time LiCausi was hired by Mills Corporation, Menendez sat on the House Transportation and Infrastructure Committee that must approve federal financing for the light rail line. Another client of LiCausi’s, Union County, New Jersey, was seeking federal highway transportation funds from Menendez’ House Committee at the time she was hired. The New York Times reported that LiCausi had lobbied Menendez in connection with such hoped-for grants.
37. As noted above, Liberty HealthCare’s Chairman James McLaughlin was unaware even of LiCausi’s existence though his company had “hired” her as a lobbyist. Liberty HealthCare had also received large federal grants through Menendez’ sponsorship before hiring LiCausi.

The “Pass Through” of Head Start grants from
North Hudson Community Action Corp. to Menendez
38. Separately and with no apparent relation to LiCausi, Menendez appears to have diverted hundreds of thousand dollars in Head Start grants to himself from the North Hudson Community Action Corp. (North Hudson), a New Jersey Head Start agency.
39. During a ten-year period from approximately 1993 to 2003, Menendez lobbied for and obtained two Head Start grants for North Hudson in the amount of $181,080, and $573,849. Menendez also obtained for North Hudson a $1 million grant for its health centers and $1.17 million to help expand the health centers. New York Times, July 17, 2005.
40. During this same period, North Hudson entered into an arrangement to lease office space owned by Menendez at a small three story building in Union City, New Jersey.
41. North Hudson paid Menendez $353,400 for rent over this same 10-year period, thereby using Head Start grants to supplement Menendez’ Congressional salary by $35,000 annually, an unauthorized and illegal salary increase of 25 per cent above Menendez’ congressional salary using restricted federal funds intended for the education and medical care of young children.
42. Thus, out of approximately $3 million in government grants obtained by Menendez, North Hudson paid Menendez an effective “commission” in the form of office rent equal to more than 10 per cent of the total grants.
43. Menendez used the office lease arrangement with North Hudson to pass through to himself $353,400 in government grants intended for early childhood education.
Monies passed through to LiCausi were routed to Menendez’ political allies
44. Prior to 2000 when she became an intimate of Menendez, LiCausi’s sole political donation recorded on the New Jersey Election Law Enforcement Commission records was a single $50.00 contribution to Mary Bono a state legislative candidate.
45. Beginning in 2003, when LiCausi began receiving large payments from Menendez-controlled political committees, LiCausi became one of the largest individual political donors in the state giving, for example, a total of 11,000 in a single nine month period (April 2003 to January 2004) to the Hudson County Democratic Committee, a donation far beyond that which would ordinarily be supported by her annual income and one that is unusual even for political insiders in New Jersey.
46. In the 2004 federal election cycle LiCaiusi gave a total of $17,000 to candidates for federal office, again a gross departure from her pre-Menendez level of giving and one that is inconsistent with givers at her income level.
47. LiCausi was enabled to give such large political donations solely by means of the large transfers she received from Menendez’ political committees that began in 2003.
48. Consequently, it would appear that through such transfers Menendez facilitated an unusual level of giving by LiCausi that she could not have accomplished based on her own means prior to her promotions by Menendez.
49. Your complainants believe that there exists a substantial issue of fact as to whether Menendez has used LiCausi as a means of directing political contributions that would otherwise have been beyond her financial ability and that represent a gross departure from her prior standards of giving before she began receiving transfers from Menendez.
Menendez’ pattern of associating with convicted criminals
50. Senator Menendez has received political contributions from admitted federal felons and associated with these known felons.
51. Of most concern to the Committee should be Menendez’s association with United Gunite Corporation. That company and its principal officers -- Gerry Free and Steven W. Carroll of Irvington, NJ – pled guilty in federal court to multiple crimes, including bribery, embezzlement and violations of the federal Hobbs Act.
52. Despite this, Menendez continues to hold onto contributions made by admitted federal felons. Steven W. Carroll contributed $1,000 to Menendez’s campaign on March 23, 1999. The consistent pattern in the state has been that Carroll and Free gave both legal and illegal contributions to politicians throughout the state of New Jersey (Many, like the Mayor of Irvington and Paterson, were sent to jail for their involvement with United Gunite.). Of concern to the Committee should be Senator Menendez’s association with these convicted felons.
53. Carroll of United Gunite -- a New Jersey- based national construction firm -- admitted he routinely authorized payoffs to public officials throughout the State, saying corruption is so widespread that companies are forced to offer bribes to get work. "If you don't pay, the work isn't going to come," said Carroll's lawyer, Avraham Moskowitz in entering a guilty plea for Carroll. Carroll's admissions came during a hearing in Newark before U.S. District Judge William Bassler. The Gunite president provided a detailed account of payoffs and gifts to officials in Paterson, where the company has done millions of dollars in sewer repair work. A statement issued by Carroll and Moskowitz said, " Unfortunately, due to the corrupt political environment…United Gunite felt compelled to make ill-advised payments and give ill-advised gifts to government officials in order to maintain its ability to do business…". Most of these criminal activities involving Gunite took place within Hudson County – the home county of Senator Menendez who rules as the county’s “Boss”. The Committee should rightly ask what United Gunite and its principals expected in return for contributions to Bob Menendez.
54. The Committee should also be concerned that Bob Menendez associated with John Lynch, another New Jersey political “Boss” who contributed to Mendez’s campaign and who recently pled guilty to federal crimes and is awaiting sentence.
55. According to an analysis by the Star-Ledger newspaper, Menendez has received $150,000 since 1987 from 18 donors who either had been convicted of a felony before they made the donations, or were convicted later.
56. In 2003, in yet another example of Menendez’ association with known criminals, he sold his Union City building (the same building for which he received improper rent from North Hudson Community Action Corp.) to Lourdes Lopez who had earlier pled guilty to embezzling funds from Union City while Menendez was Mayor. Menendez later denied recognizing Lopez at the time he sold the property although his congressional campaign had repeatedly used Lopez’ Union City restaurant for catering services and Menendez had repeatedly met her at the restaurant.
57. In another example of his association with convicted felons, Menendez obtained lobbying work for LiCausi from Joseph Barry, the founder of Applied Development Corp., who was convicted in 2004 of paying off Hudson County officials. Not only did Menendez direct that Applied hire LiCausi, but LiCausi’s office was located in Applied’s property in Union City. Barry was convicted and sentenced to 24 months in federal prison. Menendez has never denied news media reports that he directed such lobbying contracts.

Menendez’ pattern of lobbying referrals to LiCausi gives rise
to an implied quid pro quo under federal racketeering law.
58. Menendez appears to have arranged for at least $200,000 in lobbying contracts, many of which appear to have been arranged solely in consequence of the clients’ relationships with Menendez not because of any good faith or arms length business need. New York Times, July 17, 2006. These monies were directed to LiCausi at a time when she appears to have been in an intimate relationship and apparently cohabiting with Menendez and effectively augmented and increased Menendez’ and LiCausi’s household income, as well as constituting a gift to LiCausi. In cases noted above, these “lobbying” contracts appear to embrace the implied understanding that the lobbying contracts were necessary for continued positive relations between the client and Menendez. As admitted by Lou Fernandez, when asked why his Imperial Construction hired LiCausi, "Bob's a great guy; that's all I got to say." See para. 31, supra. As a further example, Menendez directed a lobbying contract for LiCausi from Mills Development at a time when it need Menendez’ assistance on the House Transportation committee for light rail funding for the Xanadu project. See para. 36, supra. Union County also retained LiCausi at a time when the County was seeking federal highway funds. See para. 36, supra. Menendez took more than $350,000 in “rent” from the North Hudson Community Action Corp during a ten-year period when Menendez repeatedly sought federal grants for the agency. See paras. 38-43, supra.
59. To sustain a prima facie charge of racketeering, federal law, as applied in both the District of New Jersey and the United States at large, requires only proof of an “implied understanding” that money is given in exchange for official action. United States v. Antico, 275 F.3d 245 (Third Circuit, 2001). Outside of the limited class of cases involving campaign contributions to candidates, no proof is required of an express agreement that official action is to be given in exchange for money to maintain a charge of bribery, conspiracy or racketeering under the federal Hobbs Act, 18 U.S.C. 1951, and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S. C. 1961, et seq.
60. Prosecutions are approved in the Third Circuit (that includes New Jersey) based upon an “implicit quid pro quo requirement.” See United States v. Antico, 275 F.3d 245 (Third Circuit, 2001). Under the decision in Antico, which is premised upon identical holdings of the Supreme Court, no express agreement need be proved. Antico requires only an “implied understanding” that money is given in exchange for official acts.
61. Rejecting any requirement that an express agreement be proved to establish a quid pro quo, the Third Circuit in Antico stated:
“We echo the Supreme Court's satisfaction with an implicit quid pro quo requirement. In United States v. Bradley, 173 F.3d 225 (3d Cir. 1999), we considered the question of whether, in a non-campaign contribution Hobbs Act extortion case, an express agreement must be shown. Relying on Justice Kennedy's concurrence in Evans, we agreed that " 'the official and the payor need not state the quid pro quo in express terms, for otherwise the law's effect could be frustrated by knowing winks and nods.' " Bradley, 173 F.3d at 231 (citing Evans, 504 U.S. at 274) [emphasis added]. United States v. Antico, 275 F.3d 245.
62. Under Antico, a prosecution for racketeering or bribery will be sustained
“if the public official understands that he is expected, as a result of the payment, to exercise particular kinds of influence or to do certain things connected with his office as specific opportunities arise.” United States v. Antico, 275 F.3d 245, [emphasis added].
63. The continued pattern of repeated lobbying contracts by Menendez allies and entities that received grants through Menendez with large payments to Menendez’ intimate partner who had no lobbying experience and no special skills and who has been unable to document any substantive lobbying work, gives rise to a question of fact as to whether Menendez engineered said lobbying contracts as part of a pattern of implied agreements for continued favored action in his official capacity.
64. Several of LiCausi’s “clients” had received substantial federal grants through Menendez’ intervention prior to or contemporaneous with their hiring of LiCausi, including Liberty HealthCare, or had made direct payments to Menendez as part of a continued practice of obtaining grants, i.e., North Hudson Community Action Corp. Others appear to have pending matters before Menendez’ Congressional committee at the time they retained LiCausi, such as Mills Development’s Xanadu project and Union County. Imperial Construction frankly admitted it hired LiCausi because of Menendez: “Bob’s a great guy. That’s all I got to say”. Para. 36, supra.
65. This pattern gives rise to a clear and decisive question as to whether Menendez has engaged in a pattern of racketeering activity consisting of illegal diversions of public and campaign funds to his intimate, his referral of lobbying contracts to LiCausi as part of an implied understanding of continued favorable official action by Menendez and his outright diversion of Head Start monies from an agency for which he had obtained federal early childhood education funds.
66. At minimum this disturbing pattern of contracts and diversion of funds to LiCausi from businesses that recently received grants through Menendez or that expected to do so, his taking of payments from North Hudson Community Action Corp. and his association with known felons, give rise to a severe and substantial question of Menendez’ fitness to continue in legislative office and whether he has created the appearance of ethical conflicts and impropriety. These issues require investigation and discipline by the Senate and referral to the Justice Department for investigation pursuant to the Hobbs Act, 18 U.S.C. 1951, and the Racketeer Influenced and Corrupt Organizations Act., 18 U.S. C. 1961, et seq.
Basis for Investigation and Discipline.
67. By repeatedly referring lobbying contracts to LiCausi from certain commercial entities for which he had performed legislative services or expected to do so, Menendez has engaged in a pattern of activity that gives rise to an implied understanding that he accepted monies in the form of employment for LiCausi in exchange for continued favorable political and legislative treatment, in violation of the federal Hobbs Act, 18 U.S.C. 1951, and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S. C. 1961, et seq.
68. The use of North Hudson Community Action Corp. grants for payment to Menendez during a period when Menendez was actively lobbying for North Hudson Menendez gives rise to an implied understanding that Menendez accepted monies from North Hudson in exchange for continued favor political and legislative treatment, in violation of the federal Hobbs Act, 18 U.S.C. 1951, and the Racketeer Influenced and Corrupt Organizations Act, 18 U.S. C. 1961, et seq.
69. By promoting and rewarding LiCausi with massive salary raises for a position for which she had no experience or known skills at a time when he was initiating and fomenting an intimate relationship, Menendez appears to have used official and campaign funds for personal purposes in violation of 18 U.S.C. 641, et seq. The use of official funds and restricted campaign funds to make gifts to another person has been found to be a violation of section 641. See e.g., United States v. Rostenkowski, 59 F.3d 1291 (D.C. Circuit 1995).
70. By rewarding his intimate associate through promotion and pay raises without disclosure of said relationship to the House of Representatives, Menendez would appear to have concealed a material fact of the basis for the promotion and salary increases in violation of the False Reporting Act, 18 U.S.C. 1001, et seq.
71. By demanding and receiving Head Start and other appropriated federal funds from the North Hudson Community Action Corp. as “rent” for his Union City office space, Menendez would appear to have converted official funds to his own use in violation of 18 U.S.C. 641, et seq.
72. Accordingly, there is a substantive and indisputable basis for investigation and discipline of Senator Menendez by this body and for referral of these matters to the United States Department of Justice.


WHEREFORE, it is respectfully requested that the Committee accept this report of Complaint and act thereon and investigate and impose discipline on the Junior Senator from New Jersey.
WHEREFORE, it is respectfully requested that the Committee refer these matters to the criminal division of the Department of Justice.
Respectfully submitted,


___________________________
Carl J. Mayer, Complainant


___________________________
Bruce I. Afran, Complainant


Princeton, New Jersey
October 25, 2006

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