Investigation of the Waterfront Commission of New York Harbor

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een completed, few of the audits were completed within the past three years or thecurrent licensing cycle.In Accommodating a Stevedoring Company Owner, the Commission Subverted theWaterfront Commission ActThe Inspector General found that former General Counsel Jon Deutsch arrangedfor Frank Cardaci, owner of ASA Apple, to continue to operate his waterfront warehouseby representing that the company’s waterfront operations would be assumed by acompany ostensibly owned by Cardaci’s wife. Although other Commission employeeswere aware of the irregularity, the arrangement apparently was not presented to thecommissioners for approval. Commission employees believed that Deutsch made thearrangements to accommodate Michael DeCotiis, former Chief Counsel to GovernorJames McGreevey. As Counsel to the Governor, DeCotiis wrote a letter ofrecommendation to the commissioners in favor of Deutsch’s appointment as generalcounsel. Commission employees testified that, although they thought the arrangementirregular and improper, none spoke out or attempted to disrupt the plans.The Waterfront Commission Act bars the licensing of a stevedoring company if“any member, officer or stockholder” is convicted of a felony. 18 In 1995, Frank Cardaciparticipated in a diversion scheme in which goods intended for international distributionwere sold domestically at higher prices. Cardaci, then an employee of ASA Apple, wasaware of the scheme and allowed the goods to be warehoused in ASA Apple’s waterfrontwarehouse. On February 1, 2002, Cardaci pled guilty in United States District Court inNew Jersey to a felony. On September 13, 2002, Cardaci was sentenced to two yearsprobation and ordered to pay a $1,000 dollar fine. Cardaci did not notify the WaterfrontCommission of his arrest or his conviction at the time.The Waterfront Commission did not become aware of Cardaci’s felony convictionuntil December 9, 2005, when Cardaci disclosed the conviction on his personalsupplement to ASA Apple’s application for renewal of its stevedore license. In additionto Cardaci’s felony conviction and his failure to notify the Waterfront Commissionearlier, the latest compliance audit of ASA Apple, covering the years 2000 to 2003, found101 regulatory violations. 19 The previous audit of ASA Apple uncovered 48 violations.On October 24, 2006, over 10 months after the conviction was discovered,Cardaci met with officials of the Licensing and Legal Divisions to discuss the18 Article VI, section 3(e) of the Waterfront Commission Act states in relevant part in the issuance ofstevedoring licenses, “No such license shall be granted: (e) If the applicant or any member, officer orstockholder required by section 2 of this article to sign or be identified in the application for license has,without subsequent pardon, been convicted by a court of the United States or any state or territory thereofof the commission of, or the attempt or conspiracy to commit, treason, murder, manslaughter or any felonyor high misdemeanor or any of the misdemeanors or offenses described in subdivision (b) of section 3 ofarticle V.” After five years from the end of the convicted individual’s sentence, the applicant may submitevidence to the Waterfront Commission to be licensed.19 The audit was of ASA Apple’s records from January 2000 through December 2003. The WaterfrontCommission Audit Report is dated October 20, 2006.25
epercussions of his felony conviction. On November 16, 2006, nearly one year after thefelony conviction was discovered, ASA Apple was ordered to cease its waterfrontoperations by November 30, 2006, pursuant to the Waterfront Commission Act.On November 27, 2006, after receiving communication from Cardaci’s attorney,Michael DeCotiis, members of the Waterfront Commission held an internal meeting atwhich then-General Counsel Jon Deutsch proposed restructuring ASA Apple to allow thecompany to continue to operate its warehouse at the port. At the time, the relationshipbetween Deutsch and DeCotiis was not known to many of the Waterfront Commissionemployees.Shortly after the internal meeting, on December 11, 2006, WaterfrontCommission staff met with Cardaci and DeCotiis to negotiate an arrangement to allowASA Apple’s chief customer, a salt importer, to continue storing salt at ASA Apple’swarehouse. General Counsel Jon Deutsch, Director of Law Joy Kelly, Director ofLicensing Peter Goldfinger, Assistant Director of Licensing Jeffrey Schoen, Director ofAudit and Control Frank Nastasi, 20 and other members of the Divisions of Law and Auditand Control attended the meeting. At the meeting, it was agreed that Anchor Logistics, acompany owned by Cardaci’s wife, would assume ownership and control of thewaterfront warehouse. Former Assistant Counsel Brian McCann attended the meetingand summarized the agreement in a memorandum, stating, “It was agreed that…a newcompany named Anchor Logistics, Inc. would be created and would contract with DeadSea Works Inc., to transport salt (emphasis added).”The Waterfront Commission’s own records reveal that Anchor Logistics was nota new company. Rather, Anchor Logistics managed some operations for ASA Apple’swaterfront warehouse, and ASA Apple was its only client. Moreover, at the time theWaterfront Commission agreed to allow Anchor Logistics to assume control of ASAApple’s waterfront warehouse, Cardaci, not his wife, was the owner of Anchor Logistics.The Commission’s pre-licensing audit of Anchor Logistics disclosed that AnchorLogistics was first created in 1995, and that Cardaci transferred ownership of thecompany to his wife, Lisa Campagna, on December 31, 2006, three weeks after Deutscharranged the transfer of ASA Apple’s waterfront operations to Anchor Logistics. 21 ASAApple continued to operate warehouses outside of the Waterfront Commission’sjurisdiction, and Campagna stated that she would continue to be employed as ASAApple’s vice president after assuming control of Anchor Logistics. At a WaterfrontCommission hearing, Campagna stated that she intended to share funds with ASA Appleand that the two companies would maintain a business relationship. 22 DeCotiisrepresented Campagna and Anchor Logistics as well as ASA Apple during this process.20 All of the aforementioned people either no longer work at the Waterfront Commission or have beenreassigned to different positions.21 It should be noted that the Waterfront Commission Audit Report dated October 30, 2006, referencedabove, lists Anchor Logistics as an affiliated company of ASA Apple.22 A Waterfront Commission Audit Report indicates that, in 2005, ASA Apple paid $85,000 in“management fees” to Anchor Logistics.26
Page 5 and 6: Personal Use of Waterfront Commissi
Page 7 and 8: mandated core responsibilities. 2 T
Page 9: enforcement officer, he was hired a
Page 12 and 13: on August 5, 2009, Governor Corzine
Page 14 and 15: provides no details or guidance as
Page 16 and 17: III. ALLEGATIONS AND METHODOLOGYOn
Page 18 and 19: Police Division was lacking policie
Page 20 and 21: applicant’s prior criminal histor
Page 22 and 23: withdrew,” and that was a clue to
Page 24 and 25: Licensing-Related Abuses by Deutsch
Page 26 and 27: Acting Chief of Police McGowan. Deu
Page 28 and 29: the past ten years because the Audi
Page 32 and 33: ASA Apple was permitted to withdraw
Page 34 and 35: Commission’s first Association co
Page 36 and 37: Audit and Control Director Frank Na
Page 38 and 39: Although new hires are granted the
Page 40 and 41: 2008. Overall, while each location
Page 42 and 43: Organized Crime Unit, the US Depart
Page 44 and 45: check, the chief of police would re
Page 46 and 47: take the examination. During the In
Page 48 and 49: asked De Maria if he would be termi
Page 50 and 51: pay; shortly thereafter, his suspen
Page 52 and 53: The Inspector General learned that
Page 54 and 55: airport, one in McGowan’s assigne
Page 56 and 57: Federal laws restrict the manner in
Page 58 and 59: The Commission reported to the Insp
Page 60 and 61: In response to the Inspector Genera
Page 62 and 63: A consultant was retained to review
Page 64 and 65: In light of the findings of this re
Page 66 and 67: APPENDIX

Investigation of the Waterfront Commission of New York Harbor

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