FOR RELEASE:

Hevesi Rescinds Approval Of Canal Corp. Contract With Hutchens Because Agency Provided False & Misleading Information

State Comptroller Alan G. Hevesi said today that he has rescinded the May, 2002 approval of a contract between the state Canal Corporation and Buffalo businessman Richard Hutchens for development rights along the Erie Canal because of false and misleading statements made by the Canal Corporation regarding the agreement.

Under the terms of the contract, it is not effective without the approval of the Comptroller, so rescinding the approval renders the contract null and void.

“The Canal Corporation and its parent, the Thruway Authority, have repeatedly asserted that the approval of the Hutchens contract 18 months ago by the Comptroller’s Office is an indication that the contract met our review standards,” Hevesi said. “But it is now clear that the Canal Corporation did not provide honest and complete answers to the Comptroller’s Office during the contract review process, so I am rescinding this Office’s approval which thereby voids the Hutchens contract.”

Hevesi formally rescinded the contract approval, which resulted in the voiding of the contract, in letters sent Friday, October 17 to Thruway Authority Chairman Michael Fleischer and each member of the Thruway Authority Board of Directors, a copy of which is attached. In the letters, Hevesi detailed findings based on an in-depth analysis of the contract review process and on information disclosed at a recent hearing of the Assembly Committee on Corporations, Commissions and Authorities that focused on the Hutchens contract.

Among these findings are the following:

• Hutchens was not the only firm interested in and prepared to pursue real estate development along the canal, contrary to information provided by Canal Corporation officials during the contract review process. At least seven firms that contacted Canal Corporation in response to a 1996 solicitation were interested in real estate development, but were either excluded for specious reasons or ignored. One of the firms was so interested in canal-side development that it went on to complete three residential developments without Canal Corporation assistance.

• Canal Corporation officials falsely told the Comptroller’s Office that they followed up with all 33 firms that responded to the 1996 letter. There is only evidence of Canal Corp. sending letters to 14 of the 33. Comptroller’s Office staff were able to locate 18 of the 33. Only two of the 18 recalled any follow-up conversations.

• Hutchens had inside information that other firms did not have access to, and it appears his proposal was the model for the Canal Corporation’s 1999 solicitation. A proposal made by Hutchens as early as 1996, and refined through interaction with the Canal Corporation during the following years, became the model described in the official solicitation for residential developments along the canal advertised in the Contract Reporter in 1999.

• Before the Canal Corporation’s formal solicitation for canal-front development concepts, attempts were made to influence at least one Thruway Authority and Canal Corporation Board Member to support the Hutchens proposal. A handwritten note and other communications from 1998 discuss efforts by Hutchens to discuss his proposal with Board Member Nancy Carey.

In his letter, the Comptroller also asked the Thruway Authority to return the $30,000 payment to Hutchens and to inform all entities which may be effected by the contract that has been voided.

“Development along the Erie Canal will be an important part of upstate economic development efforts in the coming years,” Hevesi said. “But there is no excuse for not giving every potential developer an equal opportunity to compete for the right to build. When the State offers a valuable opportunity, it must use a fair and open competitive process to award it. That is not only in the interest of fairness for the vendors, but also to ensure that the taxpayers receive the best possible deal.”

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