Oyster Bay loan guarantees unenforceable and unfathomable

If former Nassau County Executive Ed Mangano indeed helped Oyster Bay concessionaire Harendra Singh secure nearly $20 million in indirect loan guarantees from the town, he didn't do a very good job of it.

Two appellate courts -- one federal and the other state -- have found that two of three loan guarantees central to Mangano's federal conviction are invalid and "unenforceable" because the town board never authorized them.

The federal appellate panel, in fact, declared one guarantee imposed an "unfathomable obligation" upon the Town of Oyster Bay.

A lawsuit involving the third loan guarantee is pending, but its hard to imagine a state court judge ignoring separate but similar decisions from both the federal and state appellate divisions.

 

Mangano was convicted by a federal court jury in March of accepting bribes and kickbacks from Singh in return for using his official government position to help secure town backing for millions of dollars in loans. Mangano and his wife, Linda, who was convicted on related charges, are appealing their convictions.

In July, the U.S. Court of Appeals for the Second Circuit affirmed a lower court decision, dismissing PHL Variable Insurance Co.'s lawsuit against Oyster Bay Town. PHL was seeking to recoup more than $6 million after Singh stopped payment on an $8 million loan allegedly guaranteed by the town.

On Sept. 18,  the state Appellate Division, Second Judicial Department, unanimously overturned a lower court decision and dismissed a claim filed by Atalaya Asset Income Fund against the town. After Singh stopped making payments on a $1.8 million loan, Atalya sued a Singh company and Oyster Bay for breach of contract and unjust enrichment in an effort to recover its money under the loan guarantee.

Still to be decided is a suit by Phoenix Life Insurance Company, another affiliate of the Phoenix Cos. seeking repayment from the town for its loan to Singh.

The companies say they relied on amended concession agreements, drawn up by then-Assistant Town Attorney Fred Mei and signed by then-Town Attorney Leonard Genova, to make the loans to Singh. The agreements included indirect loan guarantees, structured in a way to get around a state constitutional bar against municipalities offering credit to private entities.

When the lenders demanded an outside opinion as to the legality of the guarantees, Mei hired the Democrat-connected law firm of Harris Beach, which represented Singh at the time. Harris Beach told lenders in its opinion letters that it had been retained to represent Oyster Bay, though the town board never hired the firm nor paid it.

The federal appellate decision said the amended concession agreement and the opinion letters should have "raised a red flag" because they specifically mention town-board approval of other concession agreements but not of the amended deal. The decision notes that opinion letters claiming the amended agreement had been"duly authorized" and was a "valid binding obligation" were actually "a legal opinion rather than a statement of fact."

It also said PHL's indirect loan guarantee imposed "a new and unfathomable obligation whereby if the town terminated the concession agreement because (Singh)--even if still making loan payments to PHL--failed to make concession payments to the Town, the Town would be required to make payments to PHL."


The Mangano's are scheduled to be sentenced in December.

No sentencing has been scheduled for Singh, who pleaded in Oct. 2016 to federal corruption charges,  nor Mei, who secretly pleaded guilty in Sept. 2015 to a charge of honest services fraud.

Singh and Mei testified for the government.

Genova, who admitted taking bribes from Singh, testified for the government in return for immunity from federal prosecution.

Neither the Harris Beach law firm nor any of its attorneys were charged with any wrongdoing.