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A Dark Portrait of Dr. Alain Kaloyeros?

A Dark Portrait of Dr. Alain Kaloyeros?

As many of you already know, the former President of SUNY Polytechnic Institute, Dr. Alain Kaloyeros, is now facing federal and state felony charges. However, what you may not know, unless you decided to sift through the nearly 100 pages of the two complaints combined, is just how dramatic and disturbing these charges are. Dr. Kaloyeros is facing one count of Wire Fraud Conspiracy, and three counts of Combination in Restraint of Trade Competition, in violation of General Business Law Section 340 and 341. This article will explain all of these allegations and the circumstances surrounding them in simpler terms. We at The Factory Times know that students do not have time to read through nearly a hundred pages of complaints, so the point of this article is to condense all of the information relating to Dr. Kaloyeros into something more readable for students. This information is important and we believe students should be able to learn about the situation without devoting an entire weekend to writing and understanding the complaints. All of the information presented is coming directly out of the Federal Complaint and the State complaints, which can both be found online in PDF form here (Federal) and here (State).

Cast of Characters for the Federal Complaint

The Federal complaint concerning Dr. Kaloyeros frequently mentions six other people who were directly involved in this scheme and who are also defendants in this case. These people are Todd Howe, Steven Aiello, Joseph Gerardi, Louis Ciminelli, Michael Laipple, and Kevin Schuler.

Todd Howe worked for former Governor Mario Cuomo and Governor Andrew Cuomo. He was also a consultant for The College of Nanoscale Science and Engineering (CNSE), the President and primary employee of a government relations and lobbying firm called the Government Relations Firm, and he was also extremely close with Governor Cuomo. Steven Aiello and Joseph Gerardi are, respectively, the President and Executive Vice President & Legal Counsel to the Syracuse real-estate firm COR Development Company, LLC. Louis Ciminelli, Michael Laipple, and Kevin Schuler are, respectively, the Chairman & CEO, President of the Infrastructure Division, and Senior Vice President of LPCiminelli, a constructions and development firm based in Buffalo. From about 2013 to about 2015, these men, and others known and unknown, are alleged to have “...willfully, and knowingly conspired, confederated, and agreed to commit wire fraud in violation of Section 1343 of Title 18, United States Code.”

RFPs and Bid-rigging: Definitions

To explain this massive amount of information in the shortest way possible requires a few definitions that many of us probably aren’t familiar with. The first of this would be Requests for Proposals, or RFPs. An RFP “...is a document used to solicit competition by informing potential vendors of the functional, technical, and contractual requirements sought by a company for a project.” In other words, an RFP is basically a list of qualifications or other requirements that companies use to find other companies who are interested in taking on projects. The next term that requires a definition is bid-rigging. Bid-rigging when an RFP is secretly tailored toward a specific company, even though the process is portrayed as fair, open, and competitive.

Fort Schuyler

Now that definitions are out of the way, time to tell the story. Dr. Kaloyeros was the President of SUNY Poly, the top earner at The Research Foundation for The State University of New York, and a member of the Board of Directors for Fort Schuyler Management Company. Fort Schuyler is a private, not-for-profit corporation that was created by and is affiliated with SUNY Poly, that “...facilitates research and economic development opportunities in support of New York’s emerging nanotechnology and semiconductor clusters.” Basically, Fort Schuyler is a company that is in charge of many state-funded development projects that are supposed to help revitalize upstate New York’s economy. Companies are chosen by Fort Schuyler for these projects by use of RFPs.

According to the federal complaint, Howe, acting as a “consultant” for CNSE and on the behalf of Dr. Kaloyeros, communicated with the men mentioned above, and in the process, allegedly accepted bribes from the companies that were called “consultancy” payments, in order to ensure that they were awarded very lucrative State-funded development projects from Fort Schuyler, a company where Dr. Kaloyeros had a very large influence over. Todd Howe received payments totaling about $385,000 from COR Development Company. Howe also received about $100,000 a year from LPCiminelli beginning in 2013. Howe, in turn, along with Dr. Kaloyeros, allegedly defrauded Fort Schuyler and secretly rigged the bids for some of these large development projects so that the only certain companies would fit the bids. In the federal complaint, these companies would be COR Development and LPCiminelli. However, they represented to Fort Schuyler that the bidding process was fair, open, and competitive. Howe and Dr. Kaloyeros allegedly did this through a series of emails sent between Howe and the men from COR Development. Howe and Dr. Kaloyeros also allegedly did this with LPCiminelli through emails between Howe, Dr. Kaloyeros, and the men from LPCiminelli.

Syracuse Bid-rigging in Action

Aiello and Gerardi allegedly emailed Howe a list of qualifications and experience that the company had, which in turn would assist Howe and Dr. Kaloyeros in rigging the RFP for the Syracuse based project. According to the federal complaint, Howe responded to this email with “this works. Let me hand deliver to dr k. You guys should not email this to anyone but me. All good.” Dr. K was a nickname used for Dr. Kaloyeros throughout many of these emails. According to the federal complaint, after receiving the list of qualifications, Howe emailed Dr. Kaloyeros, saying “I have ‘vitals’ for Buffalo and Syracuse friends.” Howe later explained and admitted in an interview that “friends” was a direct reference to Aiello, Gerardi, Ciminelli, Laipple, and Schuler, and that “vitals” referred to the information that these men gave Howe in order to tailor the RFPs in their favor. According to the federal complaint, this is evidence in the emails that bid-rigging was taking place. This evidence allegedly continues in other emails, most explicitly in an email Howe forwarded to Aiello and Gerardi that contained a draft of the Syracuse RFP. In this email, Howe also allegedly said “FYI---they are fine tuning now, but expect to release to public this week… what do you think? Keep confidential pls.” Some language used in the RFPs was nearly identical to the language used in the qualifications list sent to Howe, so much so that Aiello sent Howe a scanned version of the Syracuse RFP draft with Gerardi’s handwritten notes, saying that some things were “too telegraphed?? I would leave out these specific programs.”

Buffalo Bid-rigging in Action

The same sort of stuff occurred with the Buffalo RFP as well. Allegedly, Laipple sent an email to Howe listing seven bullet points that were used to draft the Buffalo RFP. Laipple also asked Howe “If the RFQ included something about MWBE promotion and compliance, that would be helpful.” MWBE stands for “Minority and Women Business Enterprises. The LPCiminelli website explicitly states “LPCiminelli is committed to proactively supporting Minority and Women-Owned Business Enterprise in the construction industry.” In response to this, Dr. Kaloyeros emailed Howe, saying “these are not unique to LPCiminelli. We need more definite specs, like minimum X years in Y, Z number of projects in high tech, etc, etc.” According to the federal complaint and interviews conducted with Howe, when Dr. Kaloyeros said“...minimum X years in Y,” he meant a minimum number of years of experience in a specific area that LPCiminelli had experience in, so Howe and Dr. Kaloyeros could further tailor the Buffalo RFP to LPCiminelli. Dr. Kaloyeros also sent an email to Louis Ciminelli’s Gmail that said “Draft of relevant sections from RFP enclosed. obviously, we need to replace Syracuse with Buffalo and fine tune the developer requirements to fit. hopefully, this should give you a sense of where we’re going with this. thoughts?” and Dr. Kaloyeros attached a draft of the Syracuse RFP. It is important to note that in the Developer Requirement section of the Syracuse RFP draft, “Over 15 years of proven experience” was included. Four days later, Schuler sent Dr. Kaloyeros an email saying “...I am sending along three attachments that I hope will meet your request for information.” and the attachments included a two-page document called “Company Profile” which stated the LPCiminelli had “over 50 years of experience.”

When the Buffalo RFP became publicly available, it contained, under “Developer Requirements,” “Bidder is required to comply with equal opportunities for minorities and women pursuant to section 312 of the New York Executive Law. This includes the achievement of at least 23% Women and Minority Owned Business Enterprise participation (WMBE). Accordingly, it is expected that DEVELOPER be able to demonstrate a track record in WMBE participation.” It also listed under the “Developer Requirements” that the Buffalo RFP was looking for “a local DEVELOPER in the Greater Buffalo area” with “Over 50 years of proven experience.” which is a line taken directly out of the Company Profile that Dr. Kaloyeros received from LPCiminelli. About a month later, an email from the Director of Procurement for the Research Foundation was eventually sent out stating that the 50 years of proven experience was a typographical error, and that it was supposed to say 15 years of proven experience. However, according to the federal complaint, interviews with executives of CNSE and their related entities confirmed that Dr. Kaloyeros closely edited the language of RFPs before publication. The federal complaint states that this likely wasn’t a typographical error and instead was probably done purposefully by Dr. Kaloyeros because of the Company Profile sent to him by LPCiminelli.

The Fruits of Labor

Fort Schuyler did end up awarding the Syracuse and Buffalo contracts to COR Development Company and LPCiminelli, respectively. COR Development received 15 million dollars to construct the Film Hub 90 million dollars to build a manufacturing plant in Syracuse. LPCiminelli received approximately 225 million dollars for the Buffalo Project, and around 2014 that contract was expanded to be worth approximately 750 million dollars.

Cast of Characters for the State Complaint

The state complaint concerning Dr. Kaloyeros also frequently mentions one other person who was directly involved in this scheme and who is also a defendant in this case. This person is Joseph Nicolla.

Joseph Nicolla is the President and Founder of Columbia Development Companies, an Albany-based real estate development company. In Nicolla’s biography on the Columbia Development Companies website, the biography states Nicolla is “...considered one of the most knowledgeable and well-respected leaders in the development industry.” Nicolla is now facing one Count of Combination in Restraint of Trade and Competition in violation of General Business Law sections 340 and 341, and Dr. Kaloyeros is facing three counts of the same offence.

Count one for Dr. Kaloyeros involves bid-rigging for a student housing project that was supposed to be used by the Albany campus of SUNY Poly. Count two involves bid-rigging for a $50,000,000 state-funded loan for a company named Contractor-1 in the complaint. This loan was also supposed to be used by SUNY Poly. Count three involves bid-rigging for architectural and design services for buildings that were also supposed to be used by SUNY Poly from a company named Architect-1 in the complaint.

Fuller Road Management Corporation

Fuller Road Management Corporation is a not-for-profit corporation affiliated with SUNY Poly that develops, constructs, owns, and leases the facilities at the Albany campus. Similar to Fort Schuyler, Fuller Road disperses state-funded projects and lends facilities to companies that are supposed to help advance education goals and research conducted at SUNY Poly. Similar to Fort Schuyler, Fuller Road disperses these projects through the use of RFPs. Just like the Fort Schuyler incidents described earlier, Dr. Kaloyeros once again allegedly used his power and influence and his seat on the FRMC RFP Review Committee to tailor RPFs in favor of specific companies, most notably, Columbia Development Companies.

Columbia Development Companies

The first scheme involved bidding for a student housing project. Dr. Kaloyeros and Nicolla allegedly exchanged emails in which they discussed other companies who were interested in the development project for student housing on Loughlin Street, Albany. Dr. Kaloyeros allegedly forwarded an email to Nicolla that contained a solicitation from another development company that was directly competing with Columbia Development Companies. According to the state complaint, this is information that Dr. Kaloyeros should not have shared with Nicolla, given the circumstances. Dr. Kaloyeros also forwarded an email to Nicolla, which can be found in the state complaint, that allegedly outlined the RFP for the housing project, in February, approximately a month before the RFP went public, thus allegedly informing Nicolla of the qualifications being looked for in the RFP before the RFP was publicly released. Witnesses have stated that Dr. Kaloyeros controls the conduct of the RFP process for major SUNY Poly building projects, including the student housing project in question.

Although twenty companies showed interest in the RFP, only Columbia Development Corporations submitted a bid. An interview conducted with an executive from another major construction company in Albany revealed that although the company had shown interest in the project, his firm did not submit a bid “...because the RFP as geared toward one company. He went on to explain that the one company in question was Columbia.” Times Union began to question the incident, and according to the state complaint, Dr. Kaloyeros literally emailed Nicolla a one-paragraph response to the reporter, to whom Nicolla sent the response, verbatim.

Contractor-1

The second scheme involved giving favorable consideration for future purportedly competitive bid projects to Contractor-1 based on a $50,000,000 loan Contractor-1 gave FRMC for construction of the NanoFab West building in Albany. According to the state complaint, a construction firm called Developer-1 in the complaint was awarded an RFP for the first stage of building the NFW building. Dr. Kaloyeros allegedly met with the executive from this company and urged him to “have some skin in the game,” which the executive took to mean that Dr. Kaloyeros wanted the developer to provide its own financing for the NFW building.

Within two weeks of the scheduled commencement meeting for the representatives of FRMC and the team for Developer-1, the project coordinator for FRMC requested that a company called Architect-1 be added to the team, allegedly by request of Dr. Kaloyeros. The Developer-1 executive accepted, and both the president of Architect-1 and a partner in Architect-2 attended the meeting. According the state complaint, the project coordinator has stated that the President of Architect-1 called Dr. Kaloyeros and demanded that Architect-2 be thrown out of the meeting and off of the project. Dr. Kaloyeros then called the project coordinator and demanded that Architect-2 leave the meeting. Accordingly, the project manager told Developer-1 that he must fire Architect-, and so he did, feeling as if he had little to no choice to comply.

Then, in May of 2011, nearly half a year after the meeting and before the conclusion of the first stage of the NFW project, Developer-1 was taken off the project allegedly at Dr. Kaloyeros’ request. Contractor-1 was then named developer for the project. FRMC and Contractor-1 then executed a Notice to Proceed, which would memorialize their contract. The NTP started that it was awarded “as a result of the competitive process.” In the NTP, Contractor-1 also agreed to lend $50,000,000 to FRMC to cover early construction costs for the project. This was something that Developer-1 refused to do. The second stage of the NFW project was then awarded to Contractor-1, based on their losing submission to the original RFP. The Loan Term Sheet that Dr. Kaloyeros was allegedly the primary author of, explicitly states “In return for the above [$50,00,000] loan term OWNER [FRMC] agrees” to “award the construction of the NFW building and associated infrastructure to CONTRACTOR [Contractor-1].” The state complaint states that this, along with evidence presented so far, is “…probable cause to believe that FRMC, which is a state-related and state-controlled entity under the direct influence of KALOYEROS, improperly agreed to provide favorable consideration for future purportedly competitively bid projects to a private company (Contractor-1) in exchange for a $50,000,000 loan on a previous project.”

Architect-1

The third scheme involved establishing a relationship with a company that insured the company “…would perform design and architectural work on FRMC projects in restraint of trade.” The company in this instance is called Architect-1 in the state complaint. According to the state complaint, Architect-1 was paying an initial rent of $30 per square foot for office space in FRMC and SUNY Poly’s ZEN Building, which “was roughly twice the amount of what a typical office building would cost for the Capital District” according to the executive for Developer-1, mentioned earlier. It is stated that the high cost of construction created the need for high rental rates in the state complaint, and it is alleged that this “appears to have led a strong push by KALOYEROS for FRMC contractors to rent space in the ZEN Building.”

According to the state complaint, the FRMC project coordinator said that Dr. Kaloyeros controls nearly every important aspect with regard to major negotiations at FRMC. It was also noted by a former executive that Dr. Kaloyeros would “…often unilaterally overrule the recommendation by the majority of the committee and select a favored company.” A former employee of Architect-1 allegedly overheard Dr. Kaloyeros say, in regards to Arhcitect-1’s pending lease with the ZEN Building, that Dr. Kaloyeros “…takes care of his partners.” Another former employee of Architect-1 stated that he heard Dr. Kaloyeros say, in front of two other witnesses, that “…he could write an RFP in such a way that only one company could win it.” According to the state complaint, the two other witnesses were each able to confirm the “…sum and substance of Dr. Kaloyeros’ boast.”

Finally, one of the most significant pieces of evidence, according to the state complaint, is a portion of the lease that was signed by the Arcitect-1 President for the ZEN Building office space. In essence, the state complaint states that FRMC is “…formalizing its intent to ‘generate and grant’ increased business to Architect-1, in exchange for an increase in rent Architect-1 would pay FRMC.” This mean that if these allegations are true, this agreement would be putting Architect-1 at a competitive advantage in receiving work on public projects.  

Dr. Kaloyeros’ Personal Financial Gain

While the allegations themselves are quite incredible in their own right, what’s even more incredible, and frankly, disturbing, is the financial gain that Dr. Kaloyeros may have acquired from this if the allegations are proven to be true.

Dr. Kaloyeros received $490,000 as his salary from SUNY Poly for the year 2015. He also received $500,000 in bonuses from the Research Foundation of the State of New York for the years 2010-2015. According to the state complaint, at least a portion of the $500,000 he received from the Research Foundation may have came from a $3,000,000 research grant given to SUNY Poly by the Contractor-1 named in the state complaint, perhaps in exchange for Dr. Kaloyeros’ alleged involvement in an illegal restraint of trade that would assist Contractor-1 in receiving future consideration on publicly bid contracts.

What’s Next?

While these are allegations and as of writing this, Dr. Kaloyeros has not be convicted for any of the four charges against him, the evidence is there. It paints a dark portrait of Dr. Kaloyeros and of SUNY Poly as a whole. How will this event affect the way SUNY Poly appears in the eyes of others? While we watch this trial plays out, it will be very interesting to see the result and how or if it will affect upstate New York’s economy and SUNY Poly.

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