The civil suit filed in Manhattan Supreme Court alleges Espada and his family siphoned more than $14 million over five years out of Soundview, the health clinic he founded to provide care to the people of the South Bronx. The suit also accuses the Democrat of packing the board with relatives and Senate employees to rubber stamp expenditures designed to line their own pockets.
There was no immediate comment from Espada, who has previously called Cuomo's investigation a "witch hunt" to boost the attorney general's political career.
The lawsuit names 19 current and former officers and directors of Soundview in addition to Espada, and marks the first official charges filed against the Bronx politician amid a variety of ongoing probes.
The lawsuit alleges Espada diverted Soundview’s charitable assets and used the money for himself, his family, his friends, and his political operation. In the past five years, Espada has siphoned more than $14 million out of Soundview, including an unconditionally guaranteed severance package worth an estimated $9 million, which was put into a contract signed in 2005, the suit alleges.
The Chief Financial Officer and the Soundview board, which is packed with Espada’s family, friends, and Senate employees, approved the transactions, according to the lawsuit.
"It dwarfs anything we've even seen ... one year's bonus for each year worked," Cuomo said of the severance package on an afternoon conference call regarding the investigation. "Senator Espada and his family used Soundview as its piggy bank."
At a press conference later Espada blamed the suit on "political payback."
"It is clear to many that the motivation behind all of this is simple political payback for what the establishment likes to call the Senate coup, but what I call the start of real reform in the New York State Senate," he said. "There is an unfortunate pattern developing, a pattern where the AG garners tons of media attention for a supposed serious investigation, only to bring a case that is no where near commensurate to the resources devoted to it, nor the media attention he has brought to it on his ubiquitous off the record conference calls."
Cuomo's investigation found that Soundview paid about $80,000 in restaurant bills for 650 meals for Espada and his supporters, including more than 200 meals totaling $20,000 from two sushi restaurants that regularly received orders from Espada's wife and delivered to the politician's home in Mamaroneck.
The revelation of the deliveries to Mamaroneck revived previous questions about Espada's official place of residence and whether he should be a Bronx senator. Cuomo said that matter is under investigation.
The suit, part of Cuomo's ongoing investigation, also alleges that the health clinic paid for family vacations as purported business trips, and that it gave him an essentially unlimited line of credit on a corporate American Express card on which he racked up nearly half a million dollars in charges he later identified as personal.
Cuomo's office also found that Soundview gives Espada 14 weeks of annual leave on the first of each year before it accrued, enabling the senator to convert the time off into cash to offset personal expenses, including legal fees. Soundview thus allegedly extended Espada more than $75,000 in credit -- a violation of the state's nonprofit law.
"Taxpayer money was given to this not-for-profit to provide healthcare services to underprivileged patients, but our investigation
has found the funds flowed into the pockets of Sen. Espada and his supporters," Cuomo said in a statement. "Siphoning money
from a charity would be egregious under any circumstances, but the fact that this was orchestrated by the State Senate Majority Leader makes it especially reprehensible. In New York, no one is above the law, and this suit should finally make that clear to Senator Espada."
The lawsuit seeks to permanently remove Espada and current CFO Kenneth Brennan as officers of Soundview and to hold them liable to pay restitution and damages for allegedly fleecing taxpayers out of millions of dollars. It also aims to force all of the clinic's directors to resign their board positions, and to prevent all the defendants from serving in similar positions at any nonprofit in the future.
Espada, the freshman senator who ignited the coup that stymied state politics for more than a month last summer, faces a series of ongoing probes, the latest of which involves his ties to a shady consulting firm. Cuomo declined to comment on other investigations into Espada during a conference call this afternoon, citing the ongoing and overlapping nature of the probes.
In terms of the Soundview investigation, the attorney general said there is nothing in the lawsuit that would translate into charges of official misconduct as a state senator, which could cost Espada his seat. He did say, however, that criminal charges are "a very real possibility" but the charges filed today "are the appropriate charges at this time."
Cuomo also said that the conduct of Espada's son is a component of the investigation, which he emphatically described as "ongoing, active and developing."
Asked whether Espada's alleged misconduct highlights a need for nonprofit law reform, Cuomo said changing the law isn't the answer.
"The answer here is not that we need a new law ... the not-for-profit laws are clear," the attorney general said. "The answer here is that someone simply broke the law."
Espada said He said "will be responding to this complaint in the near future and will continue to work as Majority leader doing the work the people of the 33rd district elected me to do."