A huge controversy is swirling around New York City’s decision to lift a deed restriction and allow the conversion of a lower east side nursing home to luxury condos in return for a $16 million fee.  It’s been a major embarrassment for the city, and Mayor de Blasio says he is furious that the deal was allowed to happen.

What’s the connection to Aurora Capital’s proposed massive Gansevoort Development project?  High-priced lobbyist James Capalino worked for both seller and buyer in the nursing home transaction; James Capalino is also working for Aurora Capital to push their Gansevoort plan through City Hall.  Additionally, Aurora hopes to lift or amend a restrictive declaration on the Gansevoort property which prohibits office use.

The news first broke in the March 26th  Daily News, which wrote:

A powerful lobbyist steered $50,000 in donations to Mayor de Blasio after pressing the city for a deed change that allows one of his clients to turn a building restricted for use as a nursing home into luxury condos.

Since October lobbyist James Capalino has collected $40,000 in checks for de Blasio’s 2017 re-election bid and personally wrote a $10,000 check in May to Campaign for One New York, the non-profit de Blasio uses to promote his causes.

Capalino represented both the original seller of the nursing home at 45 Rivington St. on the Lower East Side and the developer who will turn it into luxury condos.

On Friday the city said they were misled by a middleman in the transaction…

On March 30th, the Daily News editorialized:

Come 2014 and advances in AIDS care, the building’s owner hired lobbyist and de Blasio fundraiser James Capalino to press the city Department of Citywide Administrative Services to lift the use restrictions to pave the way for a sale…

…last May, Allure quietly agreed to sell it for $116 million to the the Slate Property Group, a condo developer also on Capalino’s client roll. The deal was contingent on getting the city to rescind restriction on the property’s use…

It could be coincidental that Capalino delivered $45,000 in campaign contributions for de Blasio’s reelection after securing that all-important $72 million signature.

Could be.

Also on March 30th, the New York Times picked up the story:

For an administration claiming to be bent on curbing gentrification, and a hands-on mayor who often demands rigorous multisignature memos for making big decisions, questions remain about how the former nursing home, known as Rivington House, came to be unprotected by the city and then sold for a steep profit. Questions have also arisen about the role of the city’s leading lobbyist, James F. Capalino, who, at different points, came to represent the initial seller and final purchaser of the property…

In seeking to secure the deed change, Village Care had a powerful ally in its corner: Mr. Capalino, a fund-raiser for Mr. de Blasio whose firm earned a record $12.9 million lobbying City Hall in 2015.

Mr. Capalino had been hired in 2013 through October 2014 to push for changes to the Rivington House deed. Village Care had bought the building from the city in 1992 with the permanent restriction on its use, and had cared for patients with H.I.V. and AIDS…

In April 2015, before Allure’s sale of the building, Mr. Capalino began representing Slate Acquisition, the developer that would buy the property from Allure Group, though its contract did not cover lobbying related to 45 Rivington Street.

In a subsequent interview with The Lo-Down, James Capalino denied any role in the fiasco, stating that his contract with Village Care was terminated before any deal was reached with the city, and that his contract with Slate Acquisition did not include any work on the nursing home deal.  But Capalino then went on to make this astonishing statement about his role as a lobbyist:

If there are people out there, however misguided, who are prepared to insinuate that my raising money for a mayor who I have supported since he became a candidate, that it represents some question about my personal integrity or the integrity of my firm, it’s just not worth it. (As a) result of less than highly professional journalism over the course of the past week, I have been subject to grossly inaccurate and grossly unfair representations about the conduct of my firm and what our intentions were. If it’s necessary to create basically a Chinese wall between our role as lobbyists and my Constitutional right to raise money for a public official, I guess I might have to consider doing that.

It might not be obvious to Jim Capalino, but, yes, erecting a “chinese wall” between his attempts to influence city government and his donations of  tens of thousands of dollars to Mayor de Blasio would be a very good idea indeed.  Of course, doing so might also make some of those donations rather pointless and simultaneously reduce his much-vaunted influence.

City Comptroller Scott Stringer, NY State Attorney General Eric Schneiderman (read the Wall Street Journal report), and now US Attorney Preet Bharara (read the Gothamist report) have all opened investigations into the sale of the nursing home and the  lifting of the deed restriction.