Ex-contractors describe payoffs to Nagin



Posted on February 3, 2014 at 10:57 AM

Updated Monday, Feb 3 at 8:41 PM

Paul Murphy / Eyewitness News
Email: pmurphy@wwltv.com | Twitter: @pmurphywwl

David Hammer / Eyewitness News
Email: dhammer@wwltv.com | Twitter: @davidhammerWWL

NEW ORLEANS - Clad in an orange prison jumpsuit, a former investment banker now serving prison time for a fraud scheme in New Jersey testified that he helped arrange a $50,000 bribe to Ray Nagin in the former mayor's corruption trial Monday.

Michael McGrath said he used his daughter's trust account to wire Nagin the money, in exchange for the former mayor’s help in landing lucrative contracts.  The contracts involved failed attempts to build a mixed-use development at a former Entergy power plant on the Mississippi River and a new NASCAR track in New Orleans East.

McGrath is a former business partner of businessman Frank Fradella, who has already pleaded guilty to bribery in the Nagin case.

Prosecutor Matt Coman asked McGrath, "Did Ray Nagin ask you and Frank Fradella for a $50,000 payoff?"

"Yes, he did," McGrath replied.

"Did you facilitate that payoff?" Coman asked.

"Yes, I did," McGrath replied.

"Was this a bribe?"

McGrath answered, "Yes."

Eyewitness News Legal Analyst Donald "Chick" Foret said defense attorney Robert Jenkins attempted to call into question the veracity of McGrath's testimony.

"Mr. Jenkins did score some points on cross examination on Mr. McGrath when he pointed out that McGrath is in fact incarcerated, that he is serving a lengthy sentence for federal crimes that he committed in New Jersey.

McGrath joined the growing number of witnesses who testified he participated in bribing Nagin. He is the former chair of Home Solutions, a company owned by Fradella.

“The way the payment was made, Fradella had called me in mid- to late-May and asked, did I have someone who could write a $50,000 check?” McGrath testified.

“I asked what the money was for. He said it was to pay off Mayor Ray Nagin. He told me the payoff would be disguised in the mayor’s company, a company called Stone Age. I believe we would get 5 percent for the $50,000. But he told me that was just a cover story and really we wouldn’t get any ownership for the $50,000. He told me we wouldn’t get any IRS statements for it. He basically told me we wouldn’t see the money again. I told him I would find someone to do that.”

McGrath then said he used his daughter’s trust fund to pay the $50,000 after Fradella told him he had made a similar hidden payment with his children’s trust fund.

Before Coman wrapped up McGrath's testimony, he asked more about the alleged $50,000 bribe: "Who slapped you on the back and said thanks?"

McGrath answered, "Ray Nagin."

"Did you ever get the money back?"

"No," McGrath replied.

"Did you ever expect to get the money back?"

"No," McGrath replied.

"Did Ray Nagin deliver for you?"

"Yes," McGrath answered.

"Did you deliver for Ray Nagin?"

"Yes," McGrath answered.

McGrath said his home was raided by the FBI in January 2009 and he wanted to warn Nagin about it right away.

“I called Frank the day the FBI came to see me and said I was toxic and I didn’t want the mayor to have any contact with me on email or telephone,” McGrath said. “I wanted to keep a lid on this transaction. I was afraid this would come to surface at that time."

Former city contractor testifies

Earlier, former city contractor Fradella took the witness stand for a second day. He testified that he reached out to Nagin in October 2008, after his company Home Solutions was disqualified from bidding on a contract to rebuild and remodel Landry High School after Hurricane Katrina.

Fradella told the jury this was after he had already sent Nagin tens of thousands of dollars in bribes.

According to an email, presented by prosecutors, Nagin answered Fradella, saying, “Will weigh in on company’s behalf. This is outside my direct influence area so we’ll see.”

Fradella also testified in July 2010, he agreed to facilitate the hiring of Nagin as a consultant for a company called Green Energy Management after Nagin left office. The company was involved in a failed attempt to redevelop the old power plant on the New Orleans Riverfront. Nagin was to be paid $12,500 a month. Fradella says he made the first payment out of his children’s trust. He also testified that Green Energy made 8 other payments for a total of $112,500 in bribes before arrangement ended.

The government presented an email communication to Fradella pushing him to get the consultant contract done, saying “we need agreement signed ASAP…I need the money to pay my bills.”

"Ray Nagin, if you believe the testimony of the witnesses for the government, was desperate for cash," Foret said. "He was dsesperate for money."

Following the prosecution's questions, defense attorney Robert Jenkins began questioning Fradella.

On cross examination Jenkins tried to plant the seed with the jury that Fradella got a generous plea deal in exchange for his testimony against Nagin.

Fradella is awaiting sentencing for Insider Trading in Dallas and Bribery and False Statements in New Orleans.

Fradella told the jury, “I’m not here to please the government; I’m here to tell the truth.” Fradella admitted that some of the jobs he got with the city were as a result of being the low bidder in a public bid process and that Nagin had little to do with him receiving those contracts.

Prosecutor Rick Pickens wrapped up Fradella’s testimony with a series of questions:

Pickens: Who weighed in on your behalf with the bankers?

Fradella: The mayor.

Pickens: Who signed off on the city contracts?

Fradella: The mayor.

Pickens: Who helped keep you company afloat?

Fradella: The mayor.

Pickens: Who got a consulting contract?

Fradella: The mayor.

Witnesses testify about Grand Theatre deal

Testimony for the day continued into the late afternoon with Paul Ramoni, the former city of New Orleans risk manager, and Don Hutchinson, the former city economic development director at the time of the Grand Theatre deal.

Ramoni said the city gave Grand Theatre a $5 million loan as a part of a federal HUD program, but had no guarantees from owners Solomon, Ashton Ryan, Alden McDonald and others. In fact, the loan was never paid and the city is still paying HUD back on the debt.

As Eyewitness News reported exclusively, the Grand Theatre received an insurance check for damage from Hurricane Katrina, but couldn't cash it unless and until the city signed off.

Nagin signed an agreement with Solomon to endorse the theater's insurance checks for $750,000 in exchange for $234,000 in delinquent tax payments. But Solomon then asked to waive $54,000 in penalties from the $234,000 total tax liability, but Ramoni balked.

"It was legal, but I'd never seen it done," Ramoni testified.

Prosecutors then showed an email from Nagin asking Solomon for campaign contributions just before his 2006 reelection campaign, while Solomon was still seeking the tax waiver.

The Grand of the East eventually got its waiver, Ramoni said, which reduced the theater's tax bill from $234,000 to $185,000.  Ramoni said the former City Attorney Bob Ellis finalized the tax waiver without Ramoni's input.

Emails show an antsy Solomon emailing city officials asking for a decision on the waiver. Nagin emails to ask if he needs to "weight in" on the issue. That same evening, on May 23, 2006, Solomon asks an associate at an investing firm if she can get him access to their corporate plane service for the whole Nagin family and Nagin's bodyguard to go to New York City.

Records showed Solomon paid $23,500 for Nagin, his wife, his three children and bodyguard to fly to Teterboro, N.J., and get limo service into the city. In fact, the investment firm associate, Eileen McMahon, testified that Nagin requested the limo service, which hadn't been arranged ahead of time, and the company billed Solomon for it.