Crystal Run did raise a red flag

ALBANY, N.Y. _ In a meeting with the Times Union editorial board three weeks ago, Gov. Andrew M. Cuomo emphatically and repeatedly stated that Crystal Run Healthcare, a growing Hudson Valley company, had never warned his campaign of potential problems with its $400,000 in donations.

Moreover, the governor said that if the company had done so, Crystal Run would have effectively "admitted to a crime."

But on Tuesday, in response to the Times Union's questions about Cuomo's statement, his campaign acknowledged that what the governor said that day was not accurate: Crystal Run had indeed approached the campaign with concerns about its donations.

"Since the editorial board meeting, the governor has been informed that Crystal Run's counsel had been in contact with the campaign's outside counsel," campaign spokeswoman Abbey Collins said in an emailed statement.

The FBI and the U.S. attorney's office in Manhattan have been investigating whether a two-day flurry of 10 separate $25,000 checks from Crystal Run officials to Cuomo in October 2013 were actually reimbursed by the company through bonuses.

If that occurred, it could violate state election law, which bars the circumvention of donation limits through the use of so-called "straw donors."

Collins said Crystal Run's counsel _ whom she did not name _ asked the campaign to reallocate individual contributions given in 2013 and 2015 "to a broad array of partners to 'reflect the partnership's intent,'" Collins said, quoting from the counsel's letter.

Presumably, such a reallocation would source the donations to the company and not the individuals.

"As there was no basis for such a change in the campaign filing and _ given the publicly reported investigation _ no such reallocation was made," Collins said.

Indeed, Cuomo's campaign filing still lists the 10 $25,000 donations as coming from individuals, not from the company. In 2015, the lone donation from a Crystal Run principal is $50,000 from its CEO, Hal Teitelbaum.

All the Crystal Run donations have now been set aside by the campaign and will be donated if wrongdoing is found, the campaign said.

"No admission of guilt was ever made to our campaign by Crystal Run's counsel, who conveyed there was 'no intentional misconduct,' and, to date, the campaign has never been contacted by law enforcement," Collins said. "Until the publicly reported matter is resolved, the funds will be segregated."

Collins did not respond to several follow-up questions, such as when the campaign was contacted by Crystal Run's counsel, why the campaign had waited to take the action and who at the campaign was aware of the outreach.

A Crystal Run spokesman declined to comment.

Beginning in late July, the Times Union had repeatedly asked Collins whether Crystal Run had approached the campaign about donation issues. She consistently declined to answer.

On Sept. 4, Cuomo made his unequivocal statement to the Times Union editorial board that Crystal Run had not approached his campaign. Collins, who was sitting next to him, did not attempt to correct him.

In the three weeks since then, no one from Cuomo's campaign corrected the governor's inaccurate statement _ until Tuesday, after Collins was advised that the Times Union was preparing a story questioning his account.

"When the governor was in the editorial board he had only a cursory knowledge of the Crystal Run issue and had never been briefed on the matter," Collins said Tuesday.

She declined to explain when he had been briefed, or why Cuomo _ a well-known micromanager _ had not been apprised of the company's letter earlier despite a steady stream of news stories about the controversy surrounding Crystal Run's donations.

Collins, despite having been asked about the matter for several weeks before the meeting, claimed on Tuesday that she, like Cuomo, was not "notified of the issue" until after the governor had offered his statement. She declined to say who had informed her.

Those issues had been raised long before Cuomo made his statement to the editorial board.

The governor's campaign has for months ignored calls from political opponents, including Republican gubernatorial nominee Marc Molinaro, to return Crystal Run's money.

In July, U.S. Rep. Sean Patrick Maloney, D-Cold Spring, acknowledged to the Times Union that he had given away more than $35,000 in donations from Crystal Run after the company approached his campaign. Maloney donated the money to the U.S. Treasury.

In a public statement on July 30 _ responding to a Times Union story on the topic _ Cuomo's Democratic primary opponent, Cynthia Nixon, slammed the governor for not answering questions about Crystal Run.

"When Congressman Maloney was told that the donations he accepted from Crystal Run were potentially illegal, he returned them," Nixon said. "When Gov. Cuomo was asked about the same improper donations, he refused to respond. This is not leadership. This is corruption. Cuomo must return the money now."

"There's an investigation," Collins said in response at the time. "Of course we will return the money if there's any wrongdoing."

At the editorial board meeting _ where Cuomo answered Crystal Run-related questions for about 10 minutes _ the governor was emphatic that his campaign had not been approached.

He even suggested that Crystal Run officials had not approached Maloney's campaign, either.

"How much do you want to bet the Crystal Run people never called Maloney and said that?" Cuomo said.

Cuomo suggested it was implausible that Crystal Run had approached Maloney. "Well, then, they admitted to a crime _ which is sort of incredible for me to believe, as a former prosecutor and attorney general," Cuomo said.

Later that day, Maloney's campaign backed up its earlier statements by producing an April letter from an outside counsel for Crystal Run, David Frulla of the firm Kelley Drye, to an attorney for Maloney's campaign detailing problems with the donations.

Crystal Run acknowledged the donations to Maloney were "incorrectly attributed" in campaign filings, Maloney's campaign told the Times Union in July.

Collins suggested on Tuesday that the discussion with the Times Union editorial board had centered on "hypothetical scenarios."

The discussion, however, was rather specific.

"Did the (Cuomo) campaign get a call from Crystal Run saying there might be a problem with some of these donations?" asked the Times Union's senior editor for news, Casey Seiler.

"No," Cuomo responded. "Because that would be an admission of liability."

"The campaign did not get any kind of call?" Seiler said.

"No, because you're having someone admit to a crime," Cuomo said.

The Crystal Run investigation has drawn accusations of pay-to-play conduct against an administration still reeling from the upstate development scandal, which only last week saw Cuomo's former top aide Joe Percoco sentenced to six years in federal prison for trading cash for official favors. The firms at the center of that case were also generous Cuomo donors.

In 2016, Crystal Run landed $25.4 million in state grants for projects it was already building without taxpayer subsidies.

Cuomo maintains that the prodigious campaign giving of Crystal Run and other donors _ totaling $49 million for his current re-election bid _ has never affected state policy decisions.

On Tuesday, Cuomo's campaign reported having $11.6 million on hand.

cbragg(at)timesunion.com - 518-454-5619