Report of the New York State Bar Association Commercial and Federal Litigation Section 1995

Mayor Rudolph W. Giuliani’s proposed comprehensive plan to regulate and reform the Fulton Fish Market deserves the full and immediate support of the New York City Council. The Council should enact enabling legislation allowing for such regulation and reform.

That plan includes the following. The City, having taken direct control over the Market from the South Street Seaport Corporation as of March 1, 1995, is now negotiating new leases allowing the City to collect fair market rents from wholesalers operating on City property. The Department of Business Services (“DBS”) will be given greater flexibility to manage the Market and generate revenues. DBS will establish operational rates and procedures for businesses in the Market and will be authorized to impose stiff penalties for violations of its rules. All businesses operating in the Market will have to be licensed, registered, and/or enter into lease agreements. DBS will decide how many licenses to issue, denying licenses to individuals found to be unfit to do business in the Market. The Department of Investigation (“DOI”) will be authorized to conduct background investigations of businesses and employees there. In addition, there will be an increased law enforcement presence in the Market through the joint efforts of the New York City Police Department, DOI and the U.S. Attorney for the Southern District of New York.

Seen in a larger context, this plan is the logical next step in the innovative war on business corruption that has been fought by our local, state and federal prosecutors over the past decade. Traditional criminal prosecutions have successfully targeted the leadership of organized crime. Our prosecutors have recognized, however, that a different approach is needed when attempting to eradicate organized crime influence from mainstream business. Removing mob influence from legitimate industry requires more than jailing organized crime leaders. Others are always waiting to take their place.

Divestiture, disengagement and dissolution have become the tools by which prosecutors seek structural reform of corrupted organizations and industries. Structural reform is a strategy that has its conceptual roots in the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”). That strategy has been developed and applied by U.S. Attorneys in the Southern and Eastern Districts of New York, the New York State Organized Crime Task Force, the Manhattan District Attorney’s Office, the New York City School Construction Authority, and the New York State Department of Environmental Conservation.

Monitors have been appointed to oversee the activities of corrupt unions and of companies operating in mob-dominated industries such as commercial carting on Long Island and trucking in the New York City garment center. This approach seeks to rid legitimate industry of organized crime domination by refashioning and monitoring organizations and industries in an effort to eliminate corruption and create a legitimate business environment.

The proposed Fulton Fish Market legislation goes beyond the purview of the prosecutor, enlisting an all-out commitment by our City administration to reform the structure of the Market. It also goes beyond judicially created trusteeships and monitorships, by bringing to bear the full weight and resources of the City to restore and maintain honest business practices in industries infiltrated by corruption. Ultimately, the plan’s success will be measured by whether it rids the Market of corruption and improve the bottom line for business and consumers. The twin guiding principles of these kinds of efforts must be a zero tolerance for corruption and an emphasis on profitable management.

We are not simply dealing with corrupt businesses, but with a corrupted business environment. We are therefore faced with both a law enforcement challenge and an administrative challenge. Law enforcement must respond with both reactive and proactive investigation. Administrative management must prevent corrupt business activity, prequalifying firms seeking to do business, and monitoring their ongoing activity to guard against the encroachment of corruption. Criminal prosecution must be used to target those who engage in corrupt activity. Civil prosecution must be used to take the profit out of corrupt activity and return that money to honest operations.

To achieve what needs to be done in ridding our City business environment of corrupting influences in general, and in the Fulton Fish Market in particular, will take vigilance, talent and independence. The relentless war on the mob fought during the past decade by our local, state and federal prosecutors has stripped organized crime of its top leadership and brought it under attack, industry by industry, union by union.

Our current City administration includes a group of talented former prosecutors, starting with the Mayor himself. Our local, state and federal prosecutors and law enforcement officials have the experience, the ability and the proven will to reinforce these legislative and administrative initiatives.

Now is the time to take the next logical step in the war against business corruption in our City. The proposed plan to regulate and reform the Fulton Fish Market deserves the full and immediate support of the City Council. The Council should enact enabling legislation. This effort will take us beyond prosecutorial responses towards a fully committed City governmental
approach aimed at insuring an honest and profitable business environment.