Greer Companies’ Tax Credits Advance

A city alder pushed back against the Elicker administration after it doubled down on greenlighting another $900,000 in housing-rehab tax credits for companies accused of fraud and controlled by an imprisoned sex predator.

That debate played out — in an oblique, bureaucratic fashion — Thursday night during the latest virtual meeting of the Board of Alders Health and Human Services Committee.

It was the latest chapter in an ongoing quest by city government to enable imprisoned sex offender Rabbi Daniel Greer to keep hundreds of thousands of government-approved dollars flowing to his real-estate nonprofits as he seeks to free himself from prison and avoid paying a victim a court-ordered $21.7 million judgment.

That local enabling has taken the form of finger-pointing at the state and claims that the city is powerless to act beyond offering automatic approval of new tax credits.

Greer’s local companies each year get close to $1 million in tax credits approved to shop around to potential donors through the Connecticut Neighborhood Assistance Act (NAA) program. Through the program, the state Department of Revenue Services (DRS) gives out state business tax credits to for-profit companies that make cash contributions to eligible nonprofits.

Greer’s nonprofits can’t get that money unless New Haven’s government first approves their requests to participate in the tax credit program.

The Elicker administration has to say yes. Then the Board of Alders has to say yes. Their approvals are required before the state can dole out the credits.

They all said yes last year.

And they’re on track to say yes again — insisting on a virtually-no-questions-asked process unlike any other government approval process (such as the allocation of federal block grants).

This year’s list of eligible local recipients of NAA tax credits was the sole item on the alder committee’s agenda Thursday night.

This year, as has been the case for many years, six separate nonprofits controlled by Rabbi Greer have applied to the city to receive up to $900,000 in state tax breaks under the program. They claim to need the money to help pay for a variety of energy efficiency upgrades at the 52 affordable rental properties they own in the Edgewood neighborhood.

Greer’s companies submitted those government-subsidy applications while Greer himself sits in prison serving a 20-year sentence for sexually assaulting a former yeshiva student, Eliyahu Mirlis. Greer has appealed the criminal case.

The NAA applications also come at the same time that those six nonprofits remain tied up in federal court in a separate civil lawsuit, in which Mirlis has accused them of funneling the imprisoned local landlord money and helping him avoid paying the $21.7 million court-ordered judgment to his abuse victim. And, unlike the Elicker administration and the Board of Alders, one of Greer’s companies’ donors has taken action to halt the money flow out of concern over alleged fraud (an accusation the Greer camp denies).

Despite the cloud of controversy — and a federal judge’s temporary restraining order barring Greer’s companies from buying and selling properties — a top Elicker Administration official claims the city’s hands are tied by state law to approve the request for state tax credits, no questions asked, no independent local review conducted.

So the Elicker administration included Greer’s companies in the list of local nonprofits that should benefit from NAA in the list under consideration Thursday night.

And the City Plan Commission, apparently unaware of Greers’ companies’ inclusion, recently rubber-stamped the list as well.

Thursday night marked the first opportunity this year for alders to weigh in on whether or not Greer’s companies’ should (or must?) get access to $900,000 in public subsidies simply because they filled out the right forms and promised to spend the money on community-service projects.

Given that opportunity, the alders … punted. Kind of.

In the process, they actually sped up approval of the credits, through a process that allows the full Board of Alders to vote on it sooner.

The committee alders asked no specific questions and raised no specific concerns Thursday about Greer’s companies’ bid to participate in NAA this year.

But one alder, Steven Winter, did raise larger questions about the rubberstamping process. Winter, who represents Prospect Hill and parts of Newhallville and Dixwell, pushed the city’s NAA point-person on how much leeway city government has when it comes to determining which local nonprofits can participate in the annual tax break program designed to help neighborhoods thrive.

Meanwhile, the committee’s chair, Darryl Brackeen of Upper Westville, used the hearing to take aim at the state for offering little guidance on an unclear section of the law, without taking any stand on whether alders have any power to do anything but rubberstamp requests for approvals that come before them.

Ultimately, the committee alders took no action on the proposed NAA list — meaning that the full Board of Alders can take the matter up for debate and a final vote at its next meeting on Monday.

That expedited timeline allows the city to submit a certified list of NAA-eligible nonprofits by the state’s July 1 deadline for the program.

LCI Deputy: City’s Hands Are Tied

So, if there was no vote Thursday night, what did happen? And why did the meeting matter at all?

Although NAA is run by the state, the city plays a critical role each year in determining which New Haven organizations get to participate in the limited, competitive program.

First, the city’s Livable City Initiative (LCI) collects, reviews, and passes along local applications to the Board of Alders. Then an aldermanic committee hosts a public hearing on that list. Then the full Board of Alders takes a final vote and passes a certified list along to the state.

Thursday night’s meeting marked the second step in that process.

LCI Deputy Director Cathy Schroeter kicked off the meeting by explaining the program and her understanding of the city’s purview when it comes to evaluating applications.

“This is not city funds,” she said. ​“It’s not something we’re approving funding for. It’s not our money. It’s not state money. It is state tax credits. These are donated funds.”

Schroeter said that she serves as the liaison between the state and the nonprofits interested in participating in this program. She looks at their project proposals to make sure they’re complete. She reviews project narratives and the first pages of 990 tax forms. She confirms that the proposed projects are designed to support low-to-moderate income communities through eligible activities like energy efficiency upgrades.

If the applications are filled out correctly, she collects them into one digital folder and passes them along to the alders for review.

“The State of Connecticut is the administrator of the program. They will then approve each individual proposal. They will assign an amount of donations that they can receive.” Then those eligible and approved nonprofits have to find private donors to make cash contributions in exchange for state business tax credits.

For multi-year programs that bring in more than $25,000 in NAA-eligible donations, Schroeter said, those participating nonprofits have to submit to the city a ​“post-project review” confirming that they spent the money in the way they said they would. The city conducts no independent audit, and instead — per state law — relies on the participating nonprofit and its accountant to certify their own compliance.

And that’s that.

Alder Winter: City Legislators Do Have Power

Or is it?

Alder Winter (pictured) challenged Schroeter on her interpretation of some of the sections of the relevant state law.

He pointed out that Connecticut General Statutes Sec. 12 – 632 pretty clearly states that cities can submit NAA lists to DRS only ​“after approval by the legislative body of such municipality”.

“It does seem like there’s a role for the local legislature to play in approving whatever gets sent to the state,” Winter said.

“You’re approving the list of the entities based on my review of the proposals and programs,” Schroeter said.

She pointed to CGS Sec. 12 – 636 as giving the Commissioner of Revenue Services the authority to approve NAA proposals, and then to set the maximum state tax credit allowable to any given participating company.

“DRS is the one actually approving them for the program. The City of New Haven does not,” she claimed. Instead, she continued, the city’s sole responsibility is to tell the state whether an application is complete, and whether a proposed program would serve the community in an eligible way.

Winter pushed back. That section about the approval by a municipality’s legislative body seems to use the word ​“approval” for a reason. ​“If we were just transmitting, it would say ​‘transmit’ or ​‘sent.” It does say ​‘approval.”

Plus, Winter said, NAA is all about improving neighborhoods. It would make sense for the law to allow local legislatures to have some say as to whether or not a project would be serving the interest of the neighborhoods they represent.

Winter then pivoted to the question of audits.

Does the city really undertake no substantive review of NAA-funded projects after they are complete to make sure that the money has been spent in the way those companies said it would be?

That’s right, Schroeter said. The city does not — and, she claimed, cannot —conduct an independent audit of NAA-funded projects.

Why?

Because, she said, the legislature repealed in 2012 a section of the law explicitly granting municipalities the ability to audit these programs. The lack of a requirement to independently audit, in her interpretation, became a requirement not to independentlu audit whether public funds were spent for their designated purposes.

The remaining relevant section of the law requires participating nonprofits to submit post-project reviews (or ​“postproject audits,” as the state calls them) to the relevant municipal government, Schroeter said. In those post-project reviews, the participating nonprofits and their accountants must certify that they spent the money on allowable expenses.

“I personally and on behalf of the city will not be” conducting independent audits for NAA programs, Schroeter said. That would mean getting Corporation Counsel involved, and in her view potentially could veer from state law. ​“I would not do that ever. I haven’t done it in 13 years.” Instead, she reviews the statutorily-required post-project review, and then passes that document along to the state.

Winter ultimately took issue with Schroeter’s interpretation of that section of the law, as well.

And, during the discussion section of the meeting, Winter made clear that he thinks that the alders have more authority and leeway when it comes to approving NAA lists than the Elicker Administration had suggested.

“I differ from the testimony of the administration on the role that our body can play in modifying the list or removing some entity from approval,” he said. ​“In reading the statute, I think that we are a part of this process because we have a sense of the pulse of the neighborhood, of what will serve the neighborhood.”

“I think that there are questions around the audit process” as well, he continued. ​“My reading of the audit process is different than the reading that we heard tonight. I read it as saying that the city has a role in the process as well. I do think that, with regard to whether there’s any impropriety with how funds are being spent, those overarching objects of serving the neighborhood can factor into our approval or disapproval of an item on the list. .. And I think it would be beneficial to be looking at how funds have been spent historically and whether or not they have been used for the purposes the applicant stated in the application.”

Alder Brackeen: It’s The State’s Fault

The only other alder to speak up at Thursday night’s hearing was the committee’s chair, Alder Brackeen, Jr. (pictured)

He spent his time at the virtual mic lambasting the state for what he characterized as poor guidance and an unclear law.

“It appears to me that this state statute is very poorly written,” he said. ​“We are local officials. Cathy and LCI, they are the local city administration. We can only follow the statute that is written.

“One of the bigger questions I am curious about moving forward is: Will the state provide clear guidance to this deliberative body?”

He said the alders have wide control over city ordinances, but ​“we cannot override state statutes.”

“It’s just not clear,” he repeated. ​“It’s poorly written. So, moving forward, it will be the prerogative and the priority of this committee to seek state support and clarity.”

He said that the city has asked the state for guidance on how best to interpret this law. ​“We have more questions than we do answers,” he said.

A state spokesperson for DRS did not immediately respond to a request for comment by the publication time of this article. In comments provided for previous articles about the NAA program, a deputy commissioner told the Independent that the department did not have any records on hand of any audits of Greer’s companies’ participation in the NAA program. He and a DRS spokesperson also told the Independent that DRS’s Audit and Compliance Division is responsible for examining all credits administered by the department, including NAA credits.

Reports Provide Details, Raise Questions

So, what’s in these ​“post-project reviews” or ​“post-project audits,” anyway?

A reminder: Those are the documents put together by participating nonprofits that bring in more than $25,000 in NAA-enabled donations any given year.

These documents are the sole check in place at the local government level on whether or not these public subsidies are actually going to projects meant to help neighborhoods. Therefore, the city allows entities to serve as the only judges of whether they spent the money the right way.

Schroeter sent to the committee a collection of the most recent NAA post-project reviews, which covered programs approved in 2019.

The four Greer-controlled nonprofits that were able to raise money through the NAA program that year all filed and submitted post-project reviews to the city.

Those reports provide a detailed accounting of how the government-subsidized donations were spent, according to the nonprofits.

The Edgewood Corners report states that that company raised $145,714.25 towards its 2019 NAA program, and that it spent $91,207 on roof construction and $3,575 on a Star energy A/C unit.

The Edgewood Elm Housing report states that that company raised $93,142.83 towards its 2019 NAA program, and that it’s spent $9,970 on insulation, $24,675 on two new furnaces, and $26,000 on 13 thermopane windows for the three-family house at 783 Elm St., among other address-specific expenses.

The Edgewood Village report states that that company raised $97,142.83 towards its 2019 NAA program, and that it’s spent $3,200 for a new tank at 49 Hubinger St., $9,485 for a new furnace at 733 Elm St., and $1,100 for upgraded kitchen plugs at 201 Ellsworth Ave., among other address-specific expenses.

And Yedidei Hagan’s report states that it raised $121,428.53 towards its 2019 NAA program, and that it’s spent $11,853.90 on construction, roof, and windows, $3,347.55 on electric upgrades, and $5,400 on in-house salaries.

While the post-project reports do provide new details about how Greer’s nonprofits claim to have spent these government subsidies, they also raise a number of questions.

For one, all four of these reports — for four ostensibly separate companies — were signed and certified by the same person: Jean Ledbury, Greer’s long-time personal secretary.

These reports also show that, at the time these reports were submitted to the city, over $150,000 worth of government-subsidized NAA donations remained listed as unspent.

That includes $50,932.55 for Edgewood Corners, $23,812.92 for Edgewood Village, and $89,927.08 for Yedidei Hagan. ​“We were unable to continue with project due to Covid-19,” the latter report reads.

Lastly, one property — 783 Elm — shows up in both Edgewood Elm’s and Edgewood Village’s reports. The Edgewood Elm report states that that property received two new furnaces ($24,674), new insulation ($9,970.25), and 13 new thermoplane windows ($26,000). The Edgewood Village report states that same property received new LED security lights ($1,600), upgraded first-floor kitchen electrical ($1,100), the removal of old siding ($3,465), and asbestos removal from furnaces ($15,500).

Spread across the two reports, that’s over $82,300 in rehab work at 783 Elm, as subsidized by NAA-eligible contributions.

(City building permit records do show that Edgewood Village, which owns the 783 Elm property, did indeed pull a handful of permits for rehab work at that site in 2020. The work detailed in those building permits adds up to $72,000: an estimated $17,000 in work to remove two oil boilers and install two gas boilers, an estimated $50,000 in work restoring the siding and rebuilding the front and back porches, and an estimated $5,000 in work removing the house’s vinyl siding.)

The fact that similar rehabilitation work for the exact same property appears in two different post-project reports for two ostensibly different companies raises the question of how independent these companies actually are from one another.

During Thursday night’s hearing, Alder Winter mentioned several times that the NAA program rules explicitly limit individual participating nonprofits from receiving more than $150,000 in NAA-eligible contributions in any given year.

Local attorney David Grudberg, who has represented Greer and his companies in recent legal cases, declined to comment for this story.

Greer’s Companies Sue Donors For Not Donating

Some of Greer’s donors have taken a more active approach than the city in assessing whether the money is being spent right.

The Greer-controlled nonprofits have launched a new lawsuit against an out-of-state insurance company for … not giving them money as part of the NAA tax credit program.

That lawsuit, first reported on by local blogger and attorney Larry Dressler, is Edgewood Elm Housing Inc., Edgewood Village Inc. and Yedidei Hagan Inc. v. Selective Insurance Company of the Southeast, Selective Insurance Company of South Carolina, Selective Insurance Company of America, Jeff Jacobson and Clocktower Tax Credits LLC.

The three Greer-controlled nonprofits first filed the lawsuit in state Superior Court on Feb. 25. The case has subsequently been moved over to the U.S. District Court of Connecticut, where federal Judge (and former top city attorney) Victor Bolden is presiding.

In the lawsuit, attorneys Grudberg and Amanda Nugent argue that the three different branches of the Selective Insurance Company — based out of Indiana, New Jersey, and South Carolina, respectively — broke their agreements to contribute a combined sum of $150,000 to the three Greer-controlled nonprofits as part of the 2020 NAA program.

According to the lawsuit, the insurance company branches reversed their prior decisions to donate after Clocktower’s Jeff Jacobson — a Connecticut-based tax credit broker who formerly worked for Greer’s nonprofits — told Selective that Greer was ​“in prison” and that his companies were allegedly involved in ​“some unspecified ​‘fraud’.”

Here’s what happened, according to Nugent and Grudberg:

In 2020, the city, the alders, and the state approved separate applications by Edgewood Elm, Edgewood Village, and Yedidei Hagan to solicit up to $150,000 each in NAA-eligible contributions to fund energy efficiency upgrades.

Those three nonprofits then worked with a broker to place the tax credits with interested donors.

“The broker identified the Selective Entities as parties that would donate money and receive tax credit allocations.”

According to the lawsuit, Selective Southeast agreed to give Edgewood Elm $25,000, Selective America agreed to give Edgewood Village $100,000, and Selective South Carolina agreed to give Yedidei Hagan $25,000. The three insurance company branches allegedly each filled out the requisite state form — known as a Form NAA-O2 — indicating their respective interests in donating to Greer’s nonprofits in exchange for the state tax credits.

On Dec. 11, 2020, the legal complaint reads, the state DRS published a list of approved NAA projects and the amounts for their corresponding corporate donors.

That state list allegedly indicated that Selective Southeast would receive tax credits worth $24,656.56, Selective America would receive tax credits worth $98,626.26, and Selective South Carolina would receive tax credits worth $24,656.56.

Those slightly lower amounts, Nugent and Grudberg wrote, were likely due to the fact that NAA has an annual $5 million cap, and, when any given year’s total donations to program-eligible projects exceeds that cap, the state pro-rates the amount of tax credits allocated.

On Dec. 16, the lawsuit continues, the Selective Insurance company branches prepared and mailed checks in the full amount of their original intended donations: $25,000 for Edgewood Elm, $100,000 for Edgewood Village, $25,000 for Yedidei Hagain. The three Greer-controlled nonprofits received those checks on Dec. 21.

That same day, Sarah Greer, whom the lawsuit identifies as the secretary and the director of each of the nonprofits — and who is also Daniel Greer’s wife — called the nonprofits’ tax broker to ask if the Selective companies wished to donate the full amounts they sent, or only the slightly smaller amounts that matched their tax credit allotment under the Dec. 11 DRS list.

“In response, the broker informed Sarah Greer that the Selective Entities had told their bank to stop payment on the donation checks, and that the Selective Entities were refusing to honor their agreement to donate to the Non-Profits in exchange for tax credits under the Program,” the lawsuit reads. 

“The Selective Entities’ stated reason, according to that broker, was that they had received information from Clocktower and Jacobson that Sarah Greer’s husband had been ​‘in prison’ and was allegedly involved in some unspecified ​‘fraud.’”

Nugent and Grudberg argue that this qualifies as a breach of contract, because Selective had already signed those NAA-02 forms indicating their intent to donate.

The attorneys state that Selective’s companies ​“went so far as to ask DRS to remove the December 11 DRS list from its website and replace it with one indicating that the Selective Entities had directed their payments to other entities, thereby erasing any trace of an association between the Selective Entities and the Non-Profits.”

All of this hurt the Greer-controlled companies because they lost out on donations they had planned for, and because they did not market the tax credits to other potential donors because they thought Selective was going to receive those credits in exchange for planned cash contributions, the suit charges.

The complaint accuses the Selective insurance companies breach of contract and of ​“bad faith” dealing with Greer’s companies. It also accuses Jacobson and Clocktower of interfering with contracts and with the companies’ business relations.

In a May 7 response, Jacobson and Clocktower denied wrongdoing, argued that the Greer-controlled companies failed to state a claim upon which relief could be granted, and demanded a trial by jury.

And on May 10, the Selective Companies filed a motion to dismiss the lawsuit’s second count, which alleges bad-faith dealing.

“Connecticut courts have defined bad faith as ​‘not simply bad judgment or negligence, but rather … the conscious doing of a wrong because of dishonest purpose or moral obliquity … it contemplates a state of mind affirmatively operating with furtive design or ill will,’” the motion to dismiss reads.

“A claim for bad faith is legally insufficient if the complaint fails to allege facts sufficient to support an inference that the defendant acted with a dishonest purpose or sinister motive.”