Multi- Million Dollar Lawsuit Charges Former Suffolk County Government Official And Developer With Scheme To Defraud County
Attorney General Spitzer today filed a lawsuit against the former Director of Suffolk County's Division of Real Estate and one of the county's largest real estate developers for their role in manipulating millions of dollars worth of real estate transactions and auctions with Suffolk County.
The suit charges that Allan Grecco, in his capacity as a county official, used his position to benefit developer Robert Toussie, who funneled business to Grecco's private company, Peerless Abstract. The suit charges that Grecco used his position to benefit Toussie in two ways. In September 2000, Grecco engineered the county's purchase of the 40-acre Chandler Estate in Mount Sinai from Toussie for $5 million. The deal occurred even though separate land appraisals obtained by New York State, Suffolk County and the Town of Brookhaven determined that the fair market value of the estate was about half the price the county paid Toussie.
Grecco also demonstrated a pattern of favoring the developer by allowing him to delay closing on properties he had bid on at county real estate auctions. By deferring the closings - often for as long as two years or more - Toussie was able to delay paying the full price for properties and real estate taxes. For example, unlike other purchasers, Toussie was able to wait until October 2000 to close on 12 properties he bought at the county's May 1998 auction—a period of well over two years. For the 5 county auctions held from May 1997 to May 1999, Toussie closed within one year following the auction date only 17 percent of the time. In contrast, closings on properties purchased by others took place within one year 89 percent of the time.
"It is critical to convey to the taxpayers of Suffolk County and all New Yorkers that the use public office as a vehicle for private enrichment will not be tolerated," Spitzer said. "The taxpayers were victimized by these acts of self-dealing and favoritism. The remedies we are seeking in this lawsuit will ensure that county taxpayers are made whole and to punish those who abuse the public trust."
The Attorney General is seeking to recover all losses to Suffolk County from the alleged scheme, including the amount the county paid for the Chandler Estate above its fair market value. It also seeks to recover losses from Toussie's delayed closings on properties bought at auction, punitive damages and the return of Grecco's salary from 1997 through 2001.
Spitzer's suit charges that shortly after Grecco became Deputy Director of the Real Estate Division in 1997, Toussie amended his standard home sale contract to steer business to Grecco's private title search firm. Soon after, most Suffolk purchasers of Toussie homes were buying title insurance and related services from Grecco's company. In one year alone, Grecco received at least $87,000 in business under this arrangement.
On several occasions, Peerless sold title insurance for homes built on land Toussie had bought from Suffolk County at auctions overseen by Grecco. Thus, Grecco supervised the sale of the land to Toussie and then had his private company do the title work on the same property when Toussie re-sold it.
The suit alleges that by carrying on this private business relationship while securing favorable treatment for Toussie on county land deals, Grecco breached his fiduciary duties as a county employee and violated state conflict-of-interest laws. The suit also alleges that Toussie illegally encouraged and assisted Grecco's breaches of his official duties and encouraged Grecco's illegal conflict of interest. In addition to Toussie and Grecco, the suit names as defendants two Toussie-owned companies, Chandler Property Inc. and Rod Staten Corporation.
The Attorney General brought this action under the State's "Tweed Law," which allows the Attorney General to recover government funds that have been wrongfully obtained by private parties. Today's suit is one of the first brought in modern times under the statute, which was enacted to deal with 19th Century political corruption in New York City.
The case is being handled by Mark Peters, Assistant Attorney General in Charge of the Public Integrity Unit, and Assistant Attorneys General Dylan Smith and Brian Stettin and Investigators William Cullen, Ed Elie and Milton Branch.