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CITY ATTORNEY STYMIES ATTEMPTS TO EXPOSE TRUTH OF SECRET DYSTER FUND: Were donors rewarded like campaign contributors by mayor?

By Frank Parlato Jr.

It had the sickly, reeking smell of a swamp right from the start.

Mayor Paul Dyster came into office with a plan to hire only "the brightest and best" from out of town to fill top positions at City Hall.

Elite, non-local employees were not to cost taxpayers more than what locals, already employed at City Hall, were being paid, in spite of the fact that these new hires would get six figure salaries.

Secret donors would pay the difference.

Niagara Falls elected a man who apparently believed his constituents were not bright enough for leadership roles in City Hall.

After he was elected, Dyster suggested the real problem was that the people here were too corrupt to govern themselves.

He told the Buffalo News, "I think having somebody from the outside who has a sense of objectivity about what is or is not an appropriate level of government participation -- for example, in a project -- and, in particular, someone who does not have any personal ties to the people whose loan and grant applications he has to process ... can be a substantial advantage."

The comment is disturbing, considering that many of the loans, grants, contracts, appointments and awards of the Dyster administration have been made to people with whom Dyster has personal ties.

According to Freedom of Information request responses, Dyster directed to the law firm of Hodgson Russ LLP of Buffalo, legal work that resulted in the firm receiving $149,588 in fees since November 2009, much of the work being handled by Hodgson Russ partner Daniel C. Oliverio.

Oliverio returned the compliment by handing Dyster a handsome check for $1,000 for his campaign.

Gary Coscia of Largo Capital, who helped build the courthouse, delivered for Dyster repeatedly, most recently with a check for $1,000. Dyster and Coscia graduated together from Bishop Duffy in 1972.

As is well known, Dyster fired city engineer Bob Curtis on day one of his administration, and did not hire another city engineer until the courthouse was finished. The city engineer is the city official qualified and normally responsible for monitoring construction and change order requests.

Without a city engineer, Coscia and his partners, while building the courthouse, put in for unmonitored, uncontested change orders costing about $3 million more than the original contract price.

The courthouse wound up costing the city more than $410 per square foot to build. The national average of like-use, like-construction governmental buildings, according to Reed's Construction Data, is around $225 per square foot.

Another donor to Dyster is Leonard DePrima, vice president of the LiRo Group, whose Buffalo firm has received $356,000 in engineering and consulting fees from the Dyster administration.

LiRo received $28,000, according to records from the city controllers' office, for an item labeled "11th Street basketball courts design."

The $28,000 apparently was not for building the courts -- which consist actually of pavement, two 10-foot poles and two hoops per court -- but simply for the design.

Mark Storch, director of business development for Foit-Albert Associates, gave Dyster $3,635.

As the contribution was larger, so was the reward.

Foit-Albert Associates received three city contracts -- $535,412 to study 10th Street, $1.2 million to draw plans for fuel-dispensing facilities, and $266,464 to design improvements for handicap access at various facilities. Developer Craig Avery got a $200,000 grant from the city for a proposed bar on Third Street. Avery gave Dyster a donation of $1,100.

Lawyer Craig Touma worked as Dyster's campaign manager and donated more than $1,000.

In a luscious, seeming quid pro quo, Dyster appointed Touma's wife, Diane Vitello, as city court judge, without interviewing other candidates for the $100,000-plus-per-year position. Dyster shepherded a city grant for then-Niagara Falls Democratic Party Chairman and campaign contributor Michael F. Lewis for a spa on Main Street.

Lewis, of course, worked diligently, although ultimately unsuccessfully, to unseat council members who did not vote regularly with Dyster.

"The way I would look at it, we're draining the swamp," Dyster said in 2009. Using the draining swamp as an analogy for transparent government and the eradication of corrupt public officials, Dyster added, "When you drain the swamp, it gets easier to see the alligators. Then, as you drain the swamp, you find more alligators. You get rid of those alligators. You keep draining the swamp. You'll probably find some more alligators."

Meanwhile, instead of salaries being in the $60,000 range for top City Hall employees, Dyster boosted pay to $110,000 for the city administrator, $100,000 for the economic development director, $93,000 for the city corporation counsel, and $90,000 for the city engineer.

Dyster's out-of-state team included Donna Owens, a former mid-level bureaucrat in the garbage collection department in Atlanta; Peter Kay, a journeyman mid-level bureaucrat from Ohio; Ali Marzban, an unlicensed engineer from Iran; and the chronically unemployed Roger Melchior, of Florida, for fire chief.

Dyster had to fire Melchior for using a racial slur and Marzban for not having an engineering license. The council fired Kay for alleged non-performance.

The remaining pick from afar, Donna Owens, other than taking a policeman off the streets to guard her office, requiring City Hall employees to wear ID badges, and putting surveillance cameras throughout City Hall -- in short, making City Hall more paranoid -- seems to have accomplished little to justify the more than $160,000 she gets paid in salary and benefits.

The money used to hire and partially pay the record-breaking salaries of Owens, Kay and others from out of town was administered through the Community Foundation for Greater Buffalo and funded by anonymous donors who lumped their donations into something called "Build A Better Niagara Fund."

After an expose in the Niagara Falls Reporter, the council, led by Sam Fruscione and Robert Anderson, killed the secret donors plan for 2009. But the new higher salaries remain, creating a much more expensive city government.

The Reporter filed a Freedom of Information request with City Hall on Feb. 10, asking for "all information, documentation, contracts, memorandums, e-mails, correspondence" concerning the anonymous fund.

The response from city attorney Craig Johnson was "None in my possession."

This may be weasel wording. The FOIL request was not directed to Johnson personally, but to City Hall. There had to be deposit slips, letters of transmittal, contractual agreements between attorneys of the city and the foundation, and documents and communications between the city controller and the foundation bookkeepers.

The city administrator was budgeted at about $60,000 in 2008. The extra $50,000 to make up her $110,000 salary came in 2008 from anonymous donors.

Owens and Kay, hired in 2008, were paid with city biweekly paychecks, which means the city received money from anonymous donors, deposited those dollars by co-mingling them with city funds, and returned the dollars with a paycheck to the employees hired by the mayor.

It's been long rumored, and e-mails obtained by the Reporter suggest, that James V. Glynn of the Maid of the Mist Steamboat Corp, one of Dyster's largest campaign donors, may have had a hand in the secret funding. Glynn quietly contracted to acquire the Comfort Inn and the Pointe Strip retail storefronts on Old Falls Street in 2008.

If Dyster knew about Glynn's purchase, he apparently never mentioned it to the council or the public when he recommended to the council that they approve a $310,000 buy-out, using state money, of the Old Falls Street outdoor city vendors lease, eliminating Glynn's main retail competition.

According to confidential e-mails obtained by the Reporter, Glynn's son Christopher sat in on the hiring of Owens and Kay, who could, in their capacities at City Hall, aid Glynn in his development plans. Was Glynn among the secret donors who paid part of their salaries in 2008?

A million dollars was reportedly made available by secret donors for the mayor's use.

Dyster claimed to the Buffalo News, "I don't know who established the fund. I have no direct knowledge of that, nor am I trying to find that out."

Is it possible that $1 million was committed to Dyster's hiring plan without Dyster knowing who donated the money?

If the secret donors were altruistic and wanted to help Dyster get superior talent to run a premier City Hall, with no strings attached, as Dyster still claims, why doesn't one of the donors step forward and clear the air?

Who was really behind the secret fund, and what rewards if any did they get from Dyster's City Hall?

This and the courthouse scandal are the twin leviathan alligators in Dyster's re-election room.

(Mayor Paul Dyster declined multiple requests for an interview for this story.)

Niagara Falls Reporter www.niagarafallsreporter.com March 8, 2011