Arthur Kill Correctional Facil

A view of the entrance to the former Arthur Kill Correctional Facility in February 2014. (Advance file photo)

CITY HALL -- The sale of the old Arthur Kill prison site to Broadway Stages was rejected by the state comptroller's office because of the company's ties to investigations into Mayor Bill de Blasio's political fundraising.

The office of State Comptroller Thomas DiNapoli returned the sale contract to state agencies unapproved for "lingering vendor responsibility issues" and questions over the public's investment in the land deal.

The $7 million sale price may be as much as $45 million below market value.

Charlotte Davis, the comptroller's director of contracts, detailed reasons for rejecting the sale in a letter to Frank Pallante of the state Office of General Services on Dec. 21, 2016.

"As discussed," Davis wrote, "Broadway Stages and its owner and president, Gina Argento, appear to be involved parties in State and Federal investigations into campaign contributions to New York City Mayor Bill de Blasio."

While the state can resubmit the contract, the rejection further stalls plans for a new production studio at the closed Arthur Kill Correctional Facility in Charleston.

Three years after the state selected Broadway Stages to develop the land, concerns have been raised over political contributions, tax issues, business integrity and the property's value.

Exactly when the new studio will open is still unclear.

'UNFORTUNATE PERIOD'

Under the stalled deal, the Office of General Services would convey the 69-acre property to Empire State Development, a state agency known as ESD.

Staten Island Stages, an assignee of Broadway Stages that's also run by Gina Argento, would then buy the land from ESD for $7 million. Broadway Stages would invest another $20 million to erect five sound stages there.

The comptroller's office and the state attorney general must review and approve the transfer documents before any sale can be finalized. The attorney general's office reviewed the contract and sent it to the state comptroller's office last August.

The Dec. 21 rejection letter from the comptroller's office was provided to the Advance in response to a Freedom of Information Law request about the sale.

The comptroller's office declined to comment further.

"ESD and OGS are continuing efforts to move this project forward, which will bring a world-class film and television studio and over 1,000 jobs to Staten Island," ESD spokeswoman Amy Varghese said.

Broadway Stages spokesman Warren Cohn said the contract will be resubmitted for approval and the outlying issues will be addressed "so that we can move beyond this unfortunate period."

"The Argentos have committed no wrongdoing, but have remained steadfast to their beliefs in giving back to their environment, their State and their City," Cohn said.

ARE ISSUES 'CURABLE'?

The state is eager to push the sale through.

Thomas Pohl, deputy counsel in the Office of General Services, wrote to the comptroller's office last week to talk about "issues listed in the pre-Christmas letter."

"There is a push by Empire State Development to have OGS submit the file again. OGS would like to get a read on the various items and whether items are 'curable,'" Pohl emailed on Jan. 30, records show.

Davis responded on Jan. 31 to say that the comptroller's office couldn't make any determination unless the issues are addressed in writing.

'LINGERING' CONCERNS

The state deliberately postponed the sale last fall.

The Office of General Services asked for the contract back in October before the comptroller's office could finishing reviewing the transfer documents, including a "vendor responsibility" form filled out by Broadway Stages.

Such forms are required before a state contract can be awarded so public dollars go to honest companies.

They revealed Argento owns another company, Luna Lighting, that was recently faulted by the Business Integrity Commission for "lack of good character, honesty and integrity." The state had also acknowledged "some minor tax issues."

Broadway Stages provided the state additional tax records and information about Luna Lighting in November.

The sale documents were then resubmitted to the comptroller's office on Nov. 29.

The contract was rejected less than a month later because of "lingering vendor responsibility issues" related to the federal investigations that have entwined Broadway Stages and de Blasio.

DE BLASIO PROBES HINDER SALE

Donations from Broadway Stages are being eyed as part of a wide-ranging investigation into the political nonprofit de Blasio created in 2014, called the Campaign for One New York.

Broadway Stages and Argento were among the first to donate to the nonprofit, contributing $25,000 each in January 2014. She also bundled some $100,000 to de Blasio's 2013 run for mayor.

The de Blasio administration has faced numerous federal and state investigations over the last year, though the mayor and his inner circle have not been accused of any wrongdoing. A de Blasio campaign spokesman declined to comment.

Records of political campaign contributions made by Argento were among the documents reviewed by the comptroller's office.

Cohn said the remaining issues with the contract don't have anything to do with Broadway Stages or political donations made by the Argento family.

"This issue is not about them, but it is about distinct matters that are beyond anything the Argentos have any sway with," Cohn said.

CONTRADICTIONS

The first "vendor responsibility" form completed by Broadway Stages and Argento in February 2016 didn't mention their involvement in the investigations or the company's ties to Luna Lighting, records show.

Follow-up "responsibility" forms submitted to the comptroller's office in November and provided to the Advance were partially redacted to protect attorney-client privilege and private tax information.

Roughly 50 pages were blacked out. The other 20 pages show the Office of General Services deemed Staten Island Stages and Broadway Stages "responsible" on Nov. 29 before resubmitting the forms to the comptroller's office for review.

According to the comptroller's office, the follow-up forms addressed tax issues and Luna Lighting. But they didn't include an assessment of Argento's role in the de Blasio investigations from the Office of General Services.

Davis wrote in the rejection that the comptroller's office instead got "somewhat contradictory documentation" from Broadway Stages.

The revised forms included "yes" responses to questions about government investigations and fines, but noted those answers weren't related to the probes into campaign contributions.

The most recent questionnaires, filed out on Nov. 2, 2016, also stated that Broadway Stages and Argento haven't been contacted by the U.S. attorney or any other government agency.

But in a Nov. 21 letter, Argento stated that she was asked to provide copies of donation checks to the U.S. Attorney's office, according to Davis' letter. Argento also claimed she was contacted by the state's Joint Commission on Public Ethics and told neither she nor Broadway Stages were under investigation.

"The submission of the two vendor responsibility questionnaires with errors and omissions could possibly be viewed as an attempt to deceive State officials responsible for contract oversight," Davis wrote in the rejection letter.

'A LACK OF SAFEGUARDS'

The comptroller's office was also concerned about whether the sale is a good deal for taxpayers.

"The State's two appraisals value the site at $20 million to $52 million and $40 million to $48 million yet the sale price ESD has agreed to accept from Broadway Stages is $7 million based on the appraisals provided by ESD," Davis wrote, noting the disparity in appraisal values was not addressed by the state.

ESD would sell the land on the condition that Broadway Stages makes certain investments there. But the state would have to seek judicial relief in order to regain the property if those conditions aren't met.

Davis wrote, "there is a lack of safeguards that the promised redevelopment will take place."

The new studio is expected to generate 1,311 permanent jobs and $4.3 million in state and city tax revenue during construction, plus $115 million more the seven years after opening.

Borough President James Oddo said he strongly supports the project because it can help turn the West Shore into a "jobs coast."

"These are important jobs for Staten Islanders, and there is a multiplier effect that takes place in areas surrounding such studios," Oddo said in a statement. "Our focus will continue to be on the land use issues as we try to make this potential economic engine a reality."

If the contract were resubmitted, Davis wrote that the comptroller's office would require the state to address the integrity issues raised and provide an update on the investigations.

Davis wrote the comptroller's office wants "clarification as to how Broadway Stages and their president have the integrity to warrant the award of taxpayer dollars and evidence of Broadway Stages financial capacity to ensure that the facility promised will be built as intended."

Cohn said Broadway Stages is trying to invest in Staten Island communities.

"This setback has not jaded them, and it will not," he said.