The secret, well-mannered minuet
An excerpt from When the Levee Breaks by Bill Keisling
Patronage violations on the Pennsylvania turnpike certainly are illegal and outrageous, but perhaps most outrageous are the practices at the turnpike and throughout government that remain legal. We've seen that the hiring procedures are cozy and incestuous, creating inefficiency, waste, and special treatment. Now consider the legalized system of kickbacks and bribery loosely called "pinstripe patronage."
Everybody needs a pal
Contractors, legal counsel and bond underwriters are soaking taxpayers for millions of dollars, then kicking back millions of dollars in profits to politicians. In Pennsylvania this inbred system of legalized contractor corruption has begun to generate questions about the very independence, integrity and fairness of our government and our justice system.
Several employees complained to me that turnpike associate executive director S. Michael Palermo used his influence to have the commission purchase its new eastern regional headquarters from his former real estate associate, Joseph Tarantino of Norristown's Continental Realty. "Palermo said it was okay, since his own real estate license is in escrow," one employee told me. Records indicate the turnpike bought the building for $2,150,000 on December 3, 1991.
The new regional headquarters sits beside mile marker 330.2 of the turnpike, at 251 Flint Hill Road in King of Prussia. A large, modern office building, it has its own ramp onto the turnpike. I visited the new building over Thanksgiving 1992, while it was still unoccupied. I walked around the expansive grounds, taking in the running paths and outdoor handball courts.
I telephoned the old eastern regional headquarters, at the time still open for business, and asked the receptionist for the name of the broker who had sold the turnpike its new building. "Joe Tarantino, of Continental in Norristown," she answered in a flash. This was just the switchboard operator.
Records at the state bureau of professional and occupational affairs list an S. Michael Palermo as holding an associate real estate broker's license that has been inactive since 1990. At the time his real estate license lapsed in 1990 he was listed as working with Continental Realty of Norristown. He first registered to sell real estate on April 1, 1975, according to state records. Palermo has been with the turnpike since 1985. He is usually described by his co-workers as enjoying the long-time friendship and patronage of state senator Vincent Fumo. In September 1985, Palermo became the turnpike's eastern region assistant executive director, or the Democratic patronage boss, a position he held until August 20, 1991, when he was promoted to associate executive director. (Patronage promotions, you'll recall, were ruled unconstitutional by the Supreme Court's Rutan decision in June, 1990.)
Tarantino's real estate license dates back to December 14, 1973, according to state records. One turnpike worker remembered that Tarantino used to work on the turnpike, in maintenance, I was told. After Tarantino left the turnpike to concentrate on real estate he paved over a surplus piece of turnpike property to serve as his parking lot. The turnpike sent a standard letter asking him to vacate its property. Tarantino's state representative then contacted the turnpike, requesting that the realtor be allowed to rent the parcel. The turnpike complied. Tarantino's rent on the parcel, strangely, began to decrease over the years, I was told.
It was Mike Palermo's suggestion that the turnpike buy the building offered by Tarantino. Palermo drafted a memorandum justifying the purchase. His memo reviewed four possibilities for the new eastern regional headquarters, including the Flint Hill Road property. Palermo's memo ended with the recommendation that the turnpike buy the building offered by his former real estate firm. Turnpike officials were "scared" by the conflict, and instructed Palermo to have no more to do with the sale. Palermo distanced himself. Shortly thereafter, the commission made an offer for the building.
Records in the Montgomery County Recorder of Deeds office describe the new regional headquarters as a 37,925 square foot multi-office building constructed in 1977 on 4.39 acres of land. The property was deeded to a Robert DiMarco on January 20, 1986, for one dollar. On September 16, 1986, DiMarco sold the property to Flint Hill Road Associates for $975,000. In 1991, at the time of sale to the turnpike, the realty transfer tax statement of value set its fair market value at $1,424,120.
At least one turnpike employee expressed an official opinion that the turnpike could have paid less than $2,150,000. The building originally listed for about $3.2 million, I was told. The turnpike representative handling the negotiations first offered $1.4 million, close to the fair market value. The owners then reduced the price to $2.8 million. The turnpike's representative informed the commission that the depressed 1991 real estate market was soft, and recommended holding out for a price well below $2 million. The negotiator was overruled. "The commissioners seemed to want the building at any price," I was told.
One employee expressed the opinion that the agency prevented its representative from driving a harder bargain. How can we fairly judge whether the turnpike overpaid for the building? I was asked. Palermo and Tarantino seem satisfied. Who can say whether the public got the best agreement?
Turnpike employees say Tarantino's commission for the sale was in the six figures, though I'm told he recently surrendered some of the commission due to problems with the building's roof. Tarantino also holds a consulting contract with the turnpike, for work connected with the old Reading/Lancaster interchange. That's not all. In 1993 Tarantino serves as the turnpike's "land use consultant." "There's a turnpike Land Use Committee," I was told. "Joe Tarantino submitted a bid to become the committee's consultant. His bid turned out to be the lowest. Now Wal-Mart wants to buy some land from the turnpike and Tarantino's the negotiator." I attempted to contact Tarantino, but he did not respond.
The Republicans didn't object to the eastern regional office deal, one employee explained, because in another year or so it will be their turn to award the turnpike's new western regional office.
'We should all take heart by this high-level of cooperation. The Democrats pick a lawyer. Next time, the Republicans get one. I've come to see this patronage dance as an intricate, genteel, well-mannered minuet. In matters of their own business, the two parties never miss their turn, their bow, the cooperative wink. Just try to pass a budget, fund a library, feed kids at school, buy books, make our tax system more fair, rebuild our cities, provide opportunities for our young people -- in short, all the things that make our society work -- there the inter-party cooperation ends.'
No one kicks, because everybody seems to have their own hustle going. The commissioners and the politicians all have their own sweetheart contractors. One commissioner, for example, has a favored contractor in Belle Vernon, a worked complained. At the Pennsylvania turnpike you encounter endless stories of sweetheart deals and occasional screw-ups. My favorite story? A few years ago, an engineering firm in Westmoreland County built a bridge underpass that was too low.
Members of both parties display a bottomless well of cooperation while they pass out lucrative contracts to each other's friends. Consider the selection of attorneys who represent the turnpike commission. When people sue the turnpike, the commission contacts the state attorney general's office to ask if the AG wishes to represent the agency in court. This has really become no more than a courtesy, as the attorney general's office seldom performs the work. (The governor of Pennsylvania in 1993 requested a budget of $65 million for the attorney general's office, a $6 million increase over the previous year; the attorney general employs hundreds of in-house lawyers, all collecting high pay. The AG's office still has no resources or inclination to handle all the state's legal work — but that's another story.)
So the attorney general invariably delegates the task of representing the turnpike back to the commission. This causes the turnpike's legal department to send a memo to Republican commissioner James Malone and Democratic commissioner James Dodaro, advising them to select an outside attorney. There are no bids. The two parties graciously take turns selecting a favored law firm. The Democrats take a pick; next time, the Republicans get a pick.
Democrat Dodaro in 1992 often selected either the law firm of Saul, Ewing, Remick & Saul (which is the firm of then-house speaker Bob O'Donnell), or Astor, Weiss & Newman (which is the law firm of senator Fumo). These are sometimes large contracts. In late 1992, for example, Saul, Ewing, Remick & Saul billed the turnpike $64,640 for services rendered and expenses for a single complicated case. Among firms selected by Republican Malone was Rawle & Henderson, of Philadelphia, founded in 1783 as the Rawle Law Office, and recognized as the oldest continuing practice in the United States. Not all selections were so venerable. It was presumably Dodaro who selected Stephen Zappala, Jr., son of the state supreme court justice, to perform a small amount of turnpike legal work. ("Steve, Jr., hasn't really done much work for the turnpike," I'm told. "He handled a small case involving a truck that hit a turnpike bridge.")
We should all take heart by this high-level of cooperation. The Democrats pick a lawyer. Next time, the Republicans get one. I've come to see this patronage dance as an intricate, genteel, well-mannered minuet. In matters of their own business, the two parties never miss their turn, their bow, the cooperative wink.
Just try to pass a budget, fund a library, feed kids at school, buy books, make our tax system more fair, rebuild our cities, provide opportunities for our young people -- in short, all the things that make our society work -- there the inter-party cooperation ends.
While I was writing this book, in December 1992, state house speaker Bob O'Donnell was deposed, replaced as speaker by William DeWeese of Green County. O'Donnell's law firm, since his replacement, hasn't received turnpike legal work, I'm told. Soon after DeWeese's elevation to speaker the turnpike did however select a Green County bank to hold a $35 million liquid fuel tax deposit.
Editor's note: This essay originally appeared as Chapter 7 of When the Levee Breaks by William Keisling.