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State probing NYO projects, officials for fund use
NYO Subpoena Case
Document
Mahoning County Court of Common Pleas Case No. 2015-CV-3100 against the Ohio Auditor of State, David Yost. Plaintiffs Erie Terminal Place, Us Campus Suites, Wick Properties, and Dominic Marchionda, filed a complaint regarding a subpoena issued for an unknown investigation.
EDITOR'S NOTE — Updated to correct that Iris Torres Guglucello was law director and a member of the board of control in 2009. Also, the fire station at 145 Madison Ave. is still in operation.
By DAVID SKOLNICK
skolnick@vindy.com
YOUNGSTOWN
State and Mahoning County authorities are investigating the legality of more than $2 million given by the city from its water and wastewater funds to three projects from companies operated by developer Dominic J. Marchionda.
Also, a source with knowledge of the investigation said city officials are being investigated as part of this probe, but declined to disclose their names.
Thursday’s seizure of records at Marchionda’s NYO Property Group offices in downtown Youngstown and at his Poland home was led by the Ohio Auditor’s Office with assistance from the Ohio Attorney General’s Office, the Mahoning County prosecutor and county sheriff’s department.
John F. McCaffrey, Marchionda’s attorney, confirmed that at the request of the state auditor’s office, his client was putting together documents related to water and wastewater funds given by the city for the development of the Flats at Wick student housing, a property near the Youngstown State University campus, as well as Erie Terminal Place and Wick Tower. The latter two are apartment buildings. All are NYO subsidiaries.
The city gave $1.2 million in water and wastewater funds to U.S. Campus Suites LLC, an NYO subsidiary, in 2009 for the Flats at Wick student housing project. Then, Marchionda’s company paid $1 million to the city for the fire station at 145 Madison Ave. for the project, netting the company $200,000.
Two sources with knowledge of the investigation said the Flats project is the main focus of the probe with law enforcement questioning how the city legally could give $1.2 million in water and wastewater funds and then be paid $1 million to its general fund, saying it sounds like money laundering.
On June 24, 2009, council voted 7-0 to provide Marchionda’s company with $1.2 million from the water and wastewater funds. During the same vote, council agreed to accept $1 million from the company into the general fund.
The members of council at the time were Annie Gillam, D-1st; DeMaine Kitchen, D-2nd; Jamael Tito Brown, D-3rd; Carol Rimedio-Righetti, D-4th; Paul Drennen, D-5th; Janet Tarpley, D-6th; and John R. Swierz, D-7th.
On Nov. 19, 2009, the board of control – then consisting of Jay Williams as mayor, David Bozanich as finance director (a position he still holds), and Iris Torres Guglucello as law director – voted to accept the $1 million from U.S. Campus Suites LLC into the general fund from the sale of the fire station and grant the company the $1.2 million from the water and wastewater funds. At the time, the city’s general fund was projected to end the year with a deficit, but avoided doing so, in part, because of the fire station funds.
The city gave Erie Terminal Place, another NYO subsidiary, $350,000 in water and wastewater funds in 2011 for its Erie Terminal Place apartment project, and then $220,000 two years later for improvement work at that downtown property.
Also, $500,000 in those funds went to Wick Properties LLC, also an NYO subsidiary, in 2015 for the apartment/extended-stay Wick Tower that opened in November of that year.
A Mahoning County grand jury recently issued a subpoena to Marchionda seeking corporate records, McCaffrey said. On behalf of Marchionda, McCaffrey said he asked state officials March 8 that the subpoenas be put in the names of the various corporations that operate the properties as that was the appropriate way to seek the information.
That request wasn’t honored, and when agents executed search warrants, several of the documents in question were on a table at the NYO office, McCaffrey said.
He couldn’t say what documents were seized as agents didn’t provide a copy of the search warrants.
“This came as a real surprise because we were cooperating with the attorney general and the investigation,” McCaffrey said. “We were pulling the records.”
Agents, assisted by a sheriff’s detective and a deputy, arrived just after 9 a.m. Thursday at NYO Property Group’s downtown office at the First National Bank building, 1 W. Federal St., and filled up several boxes with documents. Agents on scene were busy filling bags and marking them with evidence stickers. The offices seemed almost deserted except for the activity related to the warrant. Three employees left about 12:15 p.m.
In Poland, law-enforcement officials took documents from Marchionda’s home. A sheriff’s office vehicle was parked outside the home that’s on Via Attilio, a cul-de-sac in the Tuscany development. Several unmarked black vehicles were parked in the driveway.
Beth Gianforcaro, a state auditor’s office spokeswoman, declined to comment about the “ongoing investigation.”
Dan Tierney, an AG spokesman, confirmed his office was involved in the seizure but deferred comment to the auditor’s office as it’s the lead agency on this investigation.
Mahoning County Prosecutor Paul J. Gains only confirmed that his office and the sheriff’s department were assisting with the investigation.
Youngstown Mayor John A. McNally said Thursday he met a month ago with representatives from the auditor’s and attorney general’s offices to “let me know what they perceived to be a loss of city funding before I came into office.” McNally was in office only for the Wick project.
On Jan. 6, 2016, The Vindicator exclusively reported that the state auditor had subpoenaed city water and wastewater grant records from Marchionda related to the three projects. Marchionda had filed a civil case against the state auditor seeking to quash subpoenas for the records.
A Nov. 16, 2015, subpoena from Robert F. Smith, deputy chief legal counsel of the state auditor’s public integrity assurance team, sought from Marchionda “any and all supporting documentation for the [three] listed projects.”
In a Dec. 31 court motion seeking to dismiss Marchionda’s requests, Renata Y. Staff, an assistant Ohio attorney general, wrote: “The auditor is seeking ‘invoices from all contractors supporting the expenditures of all the grant monies awarded by the city of Youngstown,” and “the auditor’s subpoenas seek to ascertain whether public funds provided to the subpoenaed entities were lawfully spent.”
Staff also wrote: “The auditor carefully limited its subpoenas to records demonstrating whether plaintiffs complied with grant agreements. The city of Youngstown did not give plaintiff corporations spending money to do with as they pleased; grants come with conditions, and the auditor subpoenaed documents showing plaintiffs complied with those conditions.”
Marchionda had the case dismissed Feb. 11, 2016, in what appeared to be an agreement to turn over the documents. But the records apparently were not given to the auditor’s office.
In December, the city agreed to lend $2,750,000 to Youngstown Stambaugh Hotel LLC, an NYO subsidiary, with $750,000 of it forgiven and the remainder borrowed without interest under certain conditions for a $35.4 million, 130-bed DoubleTree by Hilton hotel being built at the vacant Stambaugh Building, 44 E. Federal St.
“Hopefully, this doesn’t [adversely impact] other developments he’s involved in,” McCaffrey said. “It would be a real shame. I have no idea if it will.”
NYO Property Group is one of downtown’s major landlords, owning occupied structures including the Metropolitan Savings & Loan and Realty Tower in addition to Wick Tower, the Flats at Wick and Erie Terminal Place. The company also owns vacant buildings including Stambaugh, the Harshman Building, 16 Wick, the Legal Arts Building and the St. Vincent de Paul Building.