Attorney General Cuomo And U.s. Attorney Lynch Announce Indictment Of Senate Majority Leader Pedro Espada

NEW YORK, N.Y. (December 14, 2010) – Attorney General Andrew M. Cuomo and United States Attorney Loretta E. Lynch today announced a six-count federal indictment against Senate Majority Leader Pedro Espada, Jr. and his son Pedro Gautier Espada (“Gautier”) for stealing in excess of half a  million dollars from Bronx clinics. This action is the result of a joint investigation by the Attorney General’s Office, the United State Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation and the Internal Revenue Service. 

The indictment charges that Espada and his son embezzled money from Comprehensive Community Development Corporation (“Soundview”), a federally-funded healthcare not-for-profit.  The Espadas were charged with five counts of embezzlement and one count of conspiracy.  If convicted, they face up to 10 years’ imprisonment on each of the embezzlement counts and 5 years’ imprisonment for conspiracy, as well as a fine of $250,000 on each count of conviction.  The indictment is being brought by the United State Attorney’s Office for the Eastern District of New York

“As alleged, Pedro Espada and his son spent years secretly siphoning money from healthcare clinics in order to fund Espada’s lavish lifestyle,” said Attorney General Cuomo. “Taxpayer funds meant for the sick and poor were instead used for Broadway shows, fancy meals, and other opulent personal expenses of Pedro Espada.  Elected officials are supposed to serve the people not themselves, and this indictment should send a strong message: In New York, no one is above the law.”

“The indictment alleges that funds that could have been, and should have been, applied to purchase medical equipment and hire personnel to enhance health care services for an under-served population were diverted by the defendants for their personal use and to benefit friends and family members,” stated United States Attorney Lynch.  “In these difficult economic times, the charged crimes are all the more reprehensible.”

The indictment was sparked  by Cuomo’s investigation into Espada’s violations of the laws governing not-for-profits.  Based on this investigation, the Attorney General’s office referred a criminal investigation to the United State Attorney’s Office for the Eastern District of New York. Cuomo’s lead prosecutor was then designated a Special Assistant United States Attorney to help run the investigation. On April 21, 2010, the Attorney General’s office, the Federal Bureau of Investigation, and the Internal Revenue Service executed a search warrant at Soundview’s offices and commenced a criminal investigation into Espada’s misappropriation of Soundview’s funds for personal use. 

Attorney General Cuomo thanked U.S. Attorney Lynch and her prosecutors for all of their help, hard work and cooperation on this matter.

DETAILS OF THE INDICTMENT

Today’s indictment by a federal grand jury charges that, since 2005, Espada and his son knowingly and willfully conspired to steal and stole money from Soundview, a network of health care clinics located in the Bronx.  This amount reflects monies that Espada and his son spent for their personal gain but claimed as business expenses.  The Espadas allegedly diverted funds for their personal use and for the benefit of family members and friends. 

The various schemes allegedly executed by the Espadas include:

• Pedro Espada caused Soundview to pay charges for his personal expenses through the Soundview corporate American Express card.  Those charges included more than $100,000 in personal meals for Pedro Espada and his family members, window treatments for Pedro Espada’s home, and tickets to Broadway shows and sporting events.


• Espada and Gautier used a for-profit janitorial company – Community Expansion Development Corporation (“CEDC”) – to divert funds from Soundview and then spent the funds on personal use and political expenses, including the rent for Espada’s campaign headquarters, campaign materials, pony rides and a petting zoo for a family member’s birthday party, and a $49,000 check Espada attempted to use as a down payment on a Bentley automobile.  


• Espada and Gautier diverted rental payments owed to Soundview to two different entities – CEDC and another for-profit janitorial company known as Soundview Management Enterprises and used these funds to pay personal expenses for themselves and family members.


• Gautier rigged the awarding of a Soundview janitorial services contract by providing false contract requirements to other bidders, ensuring that Soundview Management Enterprises was awarded the contract at an inflated price, which enriched himself and Pedro Espada.

Soundview was founded by Pedro Espada Jr. with the purpose of providing healthcare to the people of the South Bronx.  It is a not-for-profit that receives a vast majority of its funding from the State and Federal Government.

The investigation is ongoing.  The charges against the defendants are merely accusations and the defendants are presumed innocent until and unless proven guilty.

BACKGROUND

In April 2010, Attorney General Cuomo filed a lawsuit filed against Espada for diverting Soundview’s charitable assets and using the money for himself, his family, his friends, and his political operation.  Nineteen current and former officers and directors of Soundview were also named in the lawsuit.  The lawsuit alleged that in the past five years, Espada siphoned more than $14 million out of Soundview, including an unconditionally guaranteed severance package worth an estimated $9 million that was put into a contract signed in 2005.  The lawsuit seeks to permanently remove Espada and current CFO Kenneth Brennan as officers of Soundview and, similarly, to remove all of Soundview’s directors from the Board.  The lawsuit also seeks restitution from Espada.

Also in April 2010, Attorney General Cuomo filed a separate lawsuit against Senator Pedro Espada, Jr. and Gautier, for violating labor laws by creating a sham job training program that cheated workers and shortchanged State coffers. The lawsuit alleged that Senator Espada created a personally owned, for-profit management company, Soundview Management Enterprises LLC (Espada Management), as a vehicle to siphon money from Soundview, the Bronx-based not-for-profit where Espada is founder and CEO.  The money flowed from Soundview to Espada Management, run by Gautier, by means of a contractual arrangement that called for Espada Management to supply janitors for the Soundview medical clinics.

These civil investigations into Senator Espada and Soundview are ongoing.

This case is being prosecuted by Assistant United States Attorneys Colleen Kavanagh, Ilene Jaroslaw, and Todd Kaminsky, and Special Assistant United States Attorney Mitra Hormozi.

Attachment:

• Espada_Indictment
  

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