Albany

Hal Teitelbaum needed quick action from New York's government: the approval of an application allowing one of New York's fastest-growing health care companies, Crystal Run, to keep expanding.

In the fall of 2011, Crystal Run's CEO was facing what's often a lengthy, bureaucratic process. His path, however, smoothed out considerably after the CEO wrote a $25,000 check — drawn from Crystal Run's corporate funds — to Gov. Andrew Cuomo's re-election campaign. Teitelbaum soon had a direct line to one of New York's most powerful people, top Cuomo aide Joe Percoco, who according to emails obtained by the Times Union quickly helped solve the problem.

It was the first of several favorable interactions Crystal Run would have with the Cuomo administration, and the first of the company's many campaign donations to the governor.

Following a series of Times Union articles last year raising questions about that relationship, the Manhattan U.S. Attorney's Office and FBI are now investigating Crystal Run. A federal grand jury issued subpoenas seeking testimony from Crystal Run employees earlier this year, sources said.

One issue at hand is the means by which Crystal Run officials have given $400,000 in campaign contributions to Cuomo. There is also the question of what, if anything, Crystal Run has gotten in return. Interviews and emails obtained by the Times Union raise provide details on both fronts.

The bonuses factor

The Times Union has learned that the ongoing criminal investigation is examining whether Crystal Run officials were reimbursed by company bonuses for a flurry of $25,000 donations they made to Cuomo's campaign in 2013.

A civil lawsuit filed last December by six Crystal Run doctors, which the company quickly settled, made reference to that type of use of company funds.

If that kind of transaction did occur, it would raise serious legal questions: New York election law requires political donations to be given in the "true name" of a donor so that campaign donation limits can't be circumvented through the use of so-called "straw donors."

A Crystal Run spokesman, Loren Riegelhaupt, declined to comment on whether Crystal Run had reimbursed employees for their donations to Cuomo. He also declined to discuss whether such a tactic would be legal.

"As we said then and as we believe now, Crystal Run Healthcare is always eager to work with any state or federal leaders who seek to advance initiatives and concepts to help assure a sustainable health care system for all New Yorkers," Riegelhaupt said in a statement. "We fervently believe in creating a cost-effective, value-based approach to health care that promotes quality of life and economic development within New York, and we proudly stand by that. Any accusation that Crystal Run engaged in a pay-to-play effort, or any other illegal or unethical conduct, to obtain state grants is absolutely false."

Other donations

In May, U.S. Rep. Sean Patrick Maloney gave away more than $35,000 in donations to his congressional campaign from Crystal Run executives, doctors or their spouses. Instead of returning the money to the company officials, however, the Hudson Valley Democrat donated it to the U.S. Treasury.

Like New York state law, federal election law prohibits giving donations through straw donors. Occasionally, such donations have resulted in prosecutions on the state and federal level.

Although smaller in amount, the Crystal Run gifts to Maloney — who is currently seeking the Democratic nomination for state attorney general without abandoning his congressional re-election effort — bear some striking resemblances to those given to Cuomo.

Over a two-day period in October 2013, Crystal Run officials, doctors or their spouses gave Cuomo 10 donations of $25,000 apiece. The donations came during a Cuomo fundraiser, though the governor's campaign has repeatedly refused to discuss its location and details such as whether it was an exclusive Crystal Run event.

Of the 10 Crystal Run donors to Cuomo, seven had not made a donation in a New York election in at least a decade.

Similarly, several of Maloney's donors had never given before in federal elections, but in the fall of 2015 gave the congressman exactly $500 apiece. Maloney transferred not only those Crystal Run donations to the U.S. Treasury, but also gifts he'd gotten from Teitelbaum and his wife as well as the company's chief operating officer, Michelle Koury. (The two women were among Cuomo's spate of $25,000 donors in October 2013.)

According to Maloney's office, Crystal Run officials told the congressman's office that the donations had been "incorrectly attributed."

Maloney's spokeswoman did not have further information about what, exactly, that phrase meant.

"When we heard there might be a problem from Crystal Run, we voluntarily gave the money to the Treasury Department rather than keep any questionable donations," she said.

A Cuomo campaign spokeswoman, Abbey Collins, refused to answer questions about whether Crystal Run had similarly approached the Cuomo campaign concerning problematic donations.

"If any wrongdoing is established, contributions will be donated," Collins said in a brief statement.

There are also the questions of what Crystal Run has gotten from the Cuomo administration.

The emails obtained by the Times Union are from 2011 and 2012, and center around communications between Teitelbaum and Percoco, a close Cuomo aide and friend who at the time was serving as the newly installed governor's executive deputy secretary.

In March 2018, Percoco, who had left the Cuomo administration two years earlier, was convicted of taking more than $300,000 in bribes from two development firms seeking state favors. Crystal Run was not a part the Percoco case, and none of its officials have been charged with wrongdoing. Nor has Cuomo.

Turnaround time

The emails obtained by the Times Union do seem to show how a wealthy individual can gain quick access to the top tier of Cuomo decision-makers.

On Oct. 21, 2011 — four days after the initial $25,000 check from Crystal Run to the Cuomo campaign — the governor held an evening campaign fundraiser in Orange County, where Crystal Run is based, according to Cuomo's public schedule. The schedule does not state other details of the event, but Cuomo's campaign finance report notes that Donna Applegate, the wife of Orange County affordable housing developer Jonah Mandelbaum, a day later reported incurring $4,000 in costs for a Cuomo event, suggesting that couple threw the campaign gathering for Cuomo.

Mandelbaum, a Republican whose projects have often been picked for tax incentives by the Cuomo administration and prior governors, had previously thrown a Cuomo campaign fundraiser at the couple's home in 2010, the year he won his first term.

In addition, Teitelbaum's emails state that he was introduced to Percoco by Mandelbaum. The timing suggests that the introduction occurred at the Cuomo campaign fundraiser just after Teitelbaum cut the $25,000 donation.

Cuomo's campaign, Percoco's attorney and Teitelbaum did not provide more information about the 2011 event, however, and Applegate could not recall the exact details.

In any case, Teitelbaum sometime in late 2011 told Percoco about his "certificate of need" application issue, which pertained to the opening of a Crystal Run ambulatory surgery center in Middletown, Orange County. In New York, the certificate of need process — which can involve a comment period and lengthy department review — regulates the growth of the health care industry, which in some places exceeds consumer demand.

The emails state that Percoco set up a meeting between Teitelbaum and a top Department of Health official, Jim Introne, that occurred about a month after the Cuomo fundraiser.

After the meeting, Teitelbaum wrote to Percoco that it had "led to significant streamlining of processes."

"I genuinely believe that resolution of the issue addressed with Mr. Introne is in the best interests of the citizens of New York, as well as in those of Crystal Run," Teitelbaum wrote to Percoco in December 2011. "Thanks again for your assistance."

Notably, neither Teitelbaum nor anyone at Crystal Run has registered as a lobbyist in New York.

That's despite Crystal Run employees having attended a number of meetings with New York government officials about regulations and contracts, and Teitelbaum having sent emails asking state officials for government action.

If the well-paid Crystal Run employees spent more than $5,000 worth of their time in a year on lobbying, they would need to register, according to David Grandeau, the state's former top lobbying official.

In another June 2012 email obtained by the Times Union, Teitelbaum politely told Percoco of other Crystal Run priorities that could benefit from subsidies by New York government.

While never actually saying that Crystal Run needed state money for its private projects — the doctor-owned firm is by all accounts thriving — Teitelbaum did say that new building would be "significantly facilitated" by state funding and would create hundreds of new jobs.

"I am writing to ask your advice regarding a project that I believe is in the best interests of New York and the State's continued recovery from the recession of the last few years," Teitelbaum wrote to Percoco. "As you may recall, we were introduced by Jonah Mandelbaum this past year, and you were most helpful .... "

For one, Teitelbaum wanted to make sure that the state would provide a $4.2 million incentive package.

According to meeting minutes for Empire State Development, New York's economic development arm, Crystal Run asked the authority in July 2012 for financial assistance in order to avoid a threatened move of the company's back-office operations to North Carolina. Just a month later, the company accepted the state's $4.2 million proposal to subsidize a 60,000-square-foot facility that would house the company's back-office operations in Orange County.

Teitelbaum also told Percoco of a planned major health care facility Crystal Run wanted to build in the town of Monroe, Orange County. The CEO said he wanted to obtain state funding through Cuomo's Regional Economic Development Council process.

"I would appreciate your advising me who, if anyone, I should speak with at the State level to assure that these projects ... receive appropriate consideration," he wrote to the Cuomo aide.

Percoco forwarded the Teitelbaum email to Aimee Vargas, a Cuomo administration official at Empire State Development.

Vargas responded that she had met with Teitelbaum and other Crystal Run executives, and had also been in touch with Brandon Stabler of Albany-based Columbia Development, which was building the facility for Crystal Run. Columbia is another major Cuomo campaign donor.

ESD officials had "hope" the Crystal Run project would get state funding, Vargas told Percoco.

Four years later, and through a different funding process, Crystal Run would indeed be awarded state money to build a much smaller, but similar, project to the one Teitelbaum had broached to Percoco in 2012. To some observers, the grant was extraordinary: The company was awarded $12.3 million by the Department of Health in March 2016 for the Monroe Integrated Medical Office Building, even though the project had already broken ground six months earlier and was well on its way to completion without any state money.

On the same day in March 2016, the Department of Health awarded Crystal Run an additional $13.1 million to build the Rockland Integrated Medical Office Building in West Nyack. That project had also broken ground about six months before the state award.

The Department of Health received 396 applications and made 63 awards totaling $547 million for the Capital Restructuring and Financing Program projects, which competed against one another to benefit projects outside New York City.

From those applicants, the winners were all nonprofit organizations — with one exception: Crystal Run.

The Cuomo administration says the Department of Health awarded the capital money for health care projects in the exact order of the agency's scoring. Whether a project was being built without taxpayer subsidy was not part of the criteria.

"Members of the administration routinely meet with those seeking to expand and create jobs in New York and — as has been stated multiple times — state assistance provided for this project went through the same process that every other project goes through at each of the relevant state agencies," said Cuomo government spokesman Rich Azzopardi. "These emails show nothing more than a regional representative conveying information about a regionally significant project. There is no link between state action and a donation of any size and any suggestion otherwise is counter to the facts."

The federal probe into Crystal Run has become an issue in this year's race for governor, with both Cuomo's Democratic primary opponent, Cynthia Nixon, and his Republican challenger, Marc Molinaro, holding it up as a prime example of alleged "pay-to-play" fundraising that has helped Cuomo amass a $30 million campaign war chest.

Brendan J. Lyons and Casey Seiler contributed reporting. cbragg@timesunion.com • 518-454-5303