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Mayor's Pal Investigated for Alleged Misuse of Money From City Contracts

By James Fanelli | March 28, 2016 7:42am
 Yitzchok
Yitzchok "Isaac" Leshinsky (inset) has been a longtime friend of Mayor Bill de Blasio. Leshinsky and the nonprofit he created are currently being investigated by the state Attorney General's Office and the city Department of Investigation.
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Linkedin/Isaac Leshinsky

MIDWOOD — A longtime friend and campaign donor of Mayor Bill de Blasio who ran a nonprofit that amassed more than $260 million in city contracts to house the homeless is under investigation over loans and compensation given to him and companies he ran, DNAinfo New York has learned.

Since January, state Attorney General Eric Schneiderman’s Office and the city Department of Investigation have been looking into Yitzchok Leshinsky and Housing Bridge, the nonprofit he founded in 2006, according to sources.

Leshinsky, 43, who also goes by Isaac, was the CEO of Housing Bridge from its start until February 2015, when he resigned after the Mayor’s Office of Contract Services grilled the nonprofit over financial irregularities.

From 2010 to his resignation, Leshinsky’s annual salary from Housing Bridge — which is also known as Housing Partners of New York — rose from $300,000 to $375,000, tax filings and the nonprofit's board meeting minutes show.

During that time, Housing Bridge also gave more than $5 million in loans and consulting fees to Leshinsky, his real estate firm and two job-training companies he and his wife ran, the tax filings show.

THE PROBE

The state AG’s probe focuses on the conflict of interest in the nonprofit providing loans and advance payments to the job-training businesses and Leshinsky, according to sources.

State law requires a nonprofit to fully disclose any conflicts of interest when it conducts business with an insider. Before agreeing to the transaction, a nonprofit board must consider alternatives and document why it chose the insider.

Leshinsky's job-training businesses, Bridge Community Center LLC and Bridge to Employment LLC, received nearly $1.5 million in compensation even before they provided any services, according to tax filings. Some of the loans to Bridge to Employment were even used to launch the company. Bridge to Employment's address is also adjacent to Housing Bridge's main office in Midwood.

Meanwhile, Leshinsky's real estate firm, Parkland Estates, collected at least $525,000 in consulting fees from Housing Bridge, the tax filings show. The nonprofit also loaned Parkland $464,329.

Leshinsky himself received nearly $840,000 in loans from Housing Bridge, according to the filings.

An audit commissioned by Housing Bridge's board after Leshinsky's resignation showed that he owed the nonprofit $3 million. Leshinsky has said in legal documents that he has paid back the debt.

Just a decade old, Housing Bridge has secured more than $260 million worth of contracts with the city’s Department of Homeless Services to provide transitional housing and social services to more than 1,000 families in Queens, The Bronx and Brooklyn. More than $60 million in contracts were signed after de Blasio became mayor.

Even after the Mayor's Office of Contract Services learned of the financial irregularities at Housing Bridge, the nonprofit continued to pick up contracts with Homeless Services, including two that began in July.

Minutes from a Sept. 17, 2015, meeting of Housing Bridge's board members show that Lucille McEwen, a deputy commissioner at Homeless Services, had told them at one point that the agency planned on holding off on new contracts with the nonprofit due to its financial problems.

But she later changed her mind after Housing Bridge convinced her of the good work it had done, according to the board minutes. 

LONGTIME FRIENDS

The relationship between Leshinsky and de Blasio goes back at least a decade.

Hank Sheinkopf, a spokesman for Housing Bridge, told the news website New York World in 2014 that Leshinsky and de Blasio “had been friends for a long period of time.”

City records show that Leshinsky and his wife, Michelle, have donated $19,475 to de Blasio campaigns since 2007. Leshinsky also bundled an additional $2,500 in contributions as an intermediary to de Blasio’s mayoral run. And, after winning the mayoral election, de Blasio appointed Leshinsky to his inaugural committee.

The New York World story documented how Leshinsky broke campaign finance rules by directly contributing $2,500 to de Blasio's mayoral campaign. People who do business with the city can only give up to $500 to a candidate.

The de Blasio campaign has not refunded the over-contributions, according to campaign finance records.

Before starting Housing Bridge, Leshinsky was a real estate agent who helped homeless families find apartments. He lives in a Midwood home he bought for $975,000 in 2014, property records show.

In his resignation letter to Housing Bridge's board, Leshinsky said his reason for stepping down as the CEO was because his wife was battling cancer and he needed to care for their five young children.

Earlier this month, he filed a petition in Brooklyn Supreme Court demanding that Housing Bridge cover his legal fees connected to the state and city investigations.

Leshinsky also said in the petition that he paid back his $3 million debt by transferring his for-profit company Bridge to Employment to Housing Bridge. Housing Bridge has reorganized the company as a nonprofit called Bridge to Employment of New York Inc.

The minutes from the Housing Bridge's Sept. 17, 2015, board meeting indeed show that members approved an independent valuation firm's $3 million appraisal of Leshinsky's Bridge to Employment.

However, Housing Bridge disputes Leshinsky's claim that he has settled his debt with the nonprofit.

Records also show that Housing Bridge submitted an insurance claim last month for a loss of $3 million that blames Leshinsky and his affiliated companies.

Leshinsky did not respond to a request for comment.

'RECOVER ANY AND ALL TAXPAYER DOLLARS'

Dept. of Homeless Services spokeswoman Nicole Cueto said her agency and the Mayor's Office of Contracts have worked with Housing Bridge and its former leadership for the past two years to review any conflicts of interest. She said after the review, the city established new protections that make the organization's spending more transparent.

“Every effort will be made to recover any and all taxpayer dollars per the city’s agreement with Housing Partners, while being careful not to interfere with ongoing investigations,” Cueto said. “The city acted swiftly and decisively because such misuse of city funding must not be tolerated.”

NEW LEADERSHIP

Some of Housing Bridge's staff and board members feel the nonprofit remains in a bad situation under its new leadership, according to sources.

After Leshinsky resigned as CEO, Housing Bridge's board replaced him with Judah Septimus, a Brooklyn lawyer and accountant who had previously been hired as counsel for Leshinsky's private firms and later for Housing Bridge to advise them on the state's nonprofit laws.

In his court petition, Leshinsky said Septimus, who also runs a real estate title company, is earning a $375,000 salary as the new CEO while only doing part-time work. 

At Housing Bridge's Sept. 17, 2015, board meeting, its members discussed how the nonprofit had to rely on loans from the city over the summer and into the fall to pay its staff and utilities because City Comptroller Scott Stringer's Office refused to register four of five of its contracts, cutting it off from millions of dollars.

Stringer's office wanted Housing Bridge to clear building and safety violations at its shelters before it would register the contracts. Records show that one of the contracts was registered in September. Two more were finally registered in December.  

Robert Mercurio, a lawyer representing Housing Bridge, said in a statement that the nonprofit has adopted new governance and accounting policies that comply with New York law. Since Leshinsky's departure, the nonprofit also elected four new board members, Mercurio said.

Mercurio also defended the city's decision to continue doing business with Housing Bridge.

"The contracts awarded by the city to [Housing Bridge] in July 2015 were awarded to the reorganized entity only after the city was satisfied that [Housing Bridge] was operating in full compliance with NY law and that Mr. Leshinsky had no association with it," Mercurio said.

Mercurio added that Leshinsky is no longer involved with the reorganized Bridge to Employment of New York.