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The questions surrounding the controversial nonprofit co-founded by state Sen. Malcolm Smith (D-St. Albans) have put the elected official and several of his associates in the crosshairs of federal investigators who are looking into the organization and a possible conflict of interest in the Aqueduct Race Track bid.
Peter Kiernan, counsel to Gov. David Paterson, said last Thursday that Manhattan federal prosecutors subpoenaed the state Lottery Division about Springfield Gardens-based nonprofit New Direction Local Development Corp., which has come under fire recently over its questionable spending practices and lack of accountability.
The U.S. attorney’s office in Brooklyn subpoenaed records of New Direction’s accountant, James Lee, the New York Post reported.
Neither the Manhattan nor federal prosecutor would comment.
Paterson’s office said last Thursday that it was not aware of any federal probe into Aqueduct Entertainment Group despite reports that federal prosecutors subpoenaed AEG records.
New Direction, founded in 2001 by Smith and U.S. Rep. Gregory Meeks (D-Jamaica), had raked in hundreds of thousands of dollars in donations from elected officials and local groups to give to charity, including Hurricane Katrina relief, but tax records show New Direction distributed little of those funds to relief organizations.
Several people who were associated with the nonprofit, which listed its net assets as roughly $55,000 in its 2008 tax filing, are linked to AEG. The nonprofit is reportedly close to shutting down, the Post said.
Both Smith and Meeks have strong ties to the Rev. Floyd Flake, who is a partner in the AEG consortium and their political mentor.
The New York Post reported that Smith’s office and some of his associates have also been subpoenaed as part of the probe with federal investigators interested in 10 years’ worth of funding that Smith secured for New Direction.
One of the strongest links between New Direction and Flake, the politically powerful minister from southeast Queens who has an 0.6 percent stake in AEG, is Edwin Reed, Flake’s former congressional chief of staff and chief executive officer of Flake’s development firm, the Greater Allen AME Community Development Corp.
Reed served at one point as New Direction’s treasurer and told the Post he could not recall what happened to the missing funds.
A spokesman for the state Inspector General’s office confirmed he is looking into AEG but would not say whether the probe is being conducted in conjunction with federal prosecutors as has been reported.
Flake met with Paterson just days after the bid, but the governor insisted Flake had nothing to do with his much-delayed decision. Flake had indicated he was open to throwing his support behind state Attorney General Andrew Cuomo, who is considering a run against Paterson in the upcoming Democratic primary.
Flake said the Aqueduct deal will survive any public review in an op-ed in the Southeast Queens Press.
“On its own, the merits of Aqueduct can and will stand up to tests of public and financial scrutiny,” he said.
One of New Direction’s earliest board members was the wife of former AEG investor Darryl Greene. Greene was a business partner with Smith in a real estate firm and pleaded guilty in 1999 to stealing public funds. He eventually left New Direction’s board and withdrew from the AEG winning bid earlier this month. Smith’s wife, Michelle, was also a New Direction board member at one point.
Another of Smith’s former staffers, Claude Stuart, is listed as New Direction’s director. He was fired from his job as a Queens prosecutor for misleading a judge, according to the Post.
Following his time in the Queens DA’s office, he was hired by Smith as a member of his staff and placed on the board of New Direction, the paper said.
One of the people subpoenaed is Joan Flowers, a southeast Queens political operative who was a New Direction board member and is now Smith’s current attorney, according to the Post. She works out of a law office that has the same address as New Direction — 219-10 S. Conduit Ave.
Flowers, who served as Paterson’s campaign treasurer and as a consultant to both Meeks and Smith, was mulling a run for City Councilman Leroy Comrie’s (D-St. Albans) seat before term limits were extended in 2009 Although she has not donated to Smith’s campaign since 2000, Smith has given her more than $40,000 in expenditures for consulting and fund-raising work, campaign finance records show.
Flowers’ phone number, the same as the one for New Direction, was disconnected and she had not responded to an e-mail request for comment as of press time Tuesday.
The Democrat was the treasurer of Paterson’s campaign for lieutenant governor, which also shared the same address as New Direction and her law office.
During her time as a board member, New Direction was involved in two large charity drives that have come under scrutiny.
In 2004, International Airport Centers, an Illinois-based air cargo development group with an office at John F. Kennedy International Airport, donated $250,000 to New Direction, which was going to distribute the money to local civics and organizations. In its tax filing that year, New Direction said it gave out roughly $80,000 in grants, according to the Post.
In 2005, New Direction started a Hurricane Katrina relief effort, known as New Yorkers Organized to Assist Hurricane Families, and collected at least $150,000 from groups and individuals, including Meeks. But in its tax filing that year, it reported it gave approximately $1,300 in hurricane relief, the Post said.
Reach reporter Ivan Pereira by e-mail at firstname.lastname@example.org or by phone at 718-260-4546.
©2010 Community Newspaper Group
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