The state inspector general finally concluded its yearlong EnCap investigation, revealing an eight-year streak of deceit from the developer that promised a "Miracle in the Meadowlands." The project, which began as a plan to turn landfills into golf courses and evolved to include housing, office space and a hotel, is on hold while new project executive The Trump Organization cleans up the landfills and comes up with a new plan for the property.

The 277-page report, detailing the partnership between the state and the developer to clean up landfills in Rutherford and Lyndhurst, pointed to mismanagement and overstated qualifications on the part of EnCap. The report also detailed what some local officials called a "divide-and-conquer" approach taken by EnCap attorney Eric Wisler to push through hundreds of millions of dollars in public financing from the state, as well as the local governments in Rutherford and Lyndhurst.

"The project is a study of what can go wrong when a public body with high-minded public policy goals and compelled by its status to engage in fair dealing joins forces with a private entity whose primary goal is to maximize its profit and operates in a ‘buyer beware’ atmosphere," wrote Inspector General Mary Jane Cooper in the report.

In a prepared statement, EnCap Golf Holdings dismissed charges of deceit. "EnCap strongly disagrees that it intentionally misled any public agency or constituent group over the past eight years," wrote EnCap spokesman Timothy White.

However, the developer confessed to mismanagement. "The Inspector General is correct that, while no public funds have been lost, EnCap made a number of mistakes in implementing and managing the project," White added.

Recommendations

The only recommendations the Office of the Inspector General made in the report were, performing audits to follow the trail of public funding and installing a "Point Entity" to manage all future public-private joint projects, particularly when control of a project is handed over to a private partner. Also, the inspector general recommended review from other agencies to determine whether other actions might be taken. Specifically, the report called on the Division of Criminal Justice to determine whether any of the conduct revealed warrants criminal investigation.

Local officials criticized the report, stating it did not go any further than press reports about the problems with the project. They also questioned the validity of a report issued by the state seeking to investigate potential misconduct on behalf of the state itself. The report did not place any blame on the state, which had given $4 for every $1 EnCap invested into the project.

"It’s a slanted version where no one gets any blame in the state," said North Arlington Councilman Steve Tanelli, who represents a town currently involved in litigation with the developer over a separate redevelopment project also detailed in the report. "What we had [on Feb. 28] was a sanitized version of an X-rated story."

Where was the state?

Once EnCap brokered deals to secure future taxes on homes, office space, a hotel and golf courses on the project site with the participating towns, it asked the state for an additional $450 million in bonds from the state.

At this point, Governor Jon Corzine stepped in and raised the possibility of taxpayers in those towns left "holding the bag" on the loans. Corzine then called for the investigation to find out how EnCap managed to secure so much public financing.

The inspector general’s office found that EnCap convinced Lyndhurst and Rutherford that without giving up a portion of future tax revenues on the project, the company would be unable to move the project forward, thus leaving the towns with unsightly and financially burdensome landfills.

EnCap did not mention that it had already secured financing from the state to the tune of $464 million. These include $150 from the Economic Development Authority, $212 million from the Environmental Infrastructure Trust and $102 million from the Bergen County Improvement Authority.

Conversely, the report said the state was unaware of the separate deals brokered with the towns. Local officials were skeptical. "I’m not buying into the fact that the state didn’t know what the local people were doing," said Rutherford Mayor John Hipp, who ousted Bernadette McPherson on a wave of anti-EnCap sentiment in the borough.

Hipp said Department of Community Affairs commissioner and Meadowlands Commission Chairwoman Susan Bass Levin was well aware of the financial agreements, known as PILOT agreements, or payments in lieu of taxes. "The report failed to investigate that the Meadowlands Commission was fully aware of those negotiations," he added.

Thom Ammirato, a spokesman for North Arlington, said the project should have stayed within the New Jersey Meadowlands Commission rather than being negotiated by the towns separately. "It was basically the ‘divide-and-conquer’ approach that [EnCap attorney] Bob DeCotiis wanted for EnCap," he said.

Tanelli and Ammirato placed much of the blame on the state. "We elect people to office and we employ people in the bureaucracy to protect us from EnCap, to protect us from Eric Wisler," said Ammirato.

North Arlington officials want the matter investigated further by the U.S. attorney general, as they believe the state is biased. "It’s time the U.S. attorney steps in because it’s obvious they can’t police themselves," said Tanelli.

As a borough councilman in 2006, North Arlington Mayor Peter Massa sent a letter to New Jersey’s top prosecutor, U.S. Attorney Christopher Christie in Newark calling for an investigation into EnCap. Ammirato does not know if the attorney general took his letter seriously. "We won’t know until subpoenas are dropped," he said.

No landfill experience

The report charged EnCap with deceiving public officials into believing the firm had experience with landfill remediation work. The New Jersey Meadowlands Commission believed EnCap had closed a landfill and shaped it into a golf course in Texas. However, the report revealed that the former owner of the Texas landfill closed the landfill and EnCap merely put the finishing touches on the course.

NJMC officials also believed the project was well financed, as owner Louis Gonda was known as one of the wealthiest men in the world. However, Gonda’s funds were not put into the project and the project actually had a very limited amount of capital: $18.9 million.

"However, control of the project was in the hands of a small company with only approximately $18.9 million in capital run by money managers and a geologist inexperienced in landfill closure," said Cooper.

The report said EnCap had a very small number of hands on employees and EnCap President William Gauger was mostly an "absentee owner." Cooper characterized the project as "a stutter-start, disorganized and mismanaged operation."

Campaign contributions

The campaign funds of politicians responsible for enabling the EnCap project swelled while Gauger and Wisler attempted to have the project pushed through. The report went through contributions made by EnCap or individuals responsible for work on the project within six months of legislation that enabled the project.

State Senator Paul Sarlo, who sponsored bills to enable EnCap while an assemblyman in 2004 and a state senator in 2006, accepted $1,750 in campaign money from EnCap officials in 2004. Wisler said he authored legislation designed to allow EnCap to cash in on future tax payments. Wisler gave the draft bill to Sarlo, who then introduced it to the legislature.

In April 2004, former Governor James McGreevey signed off on a $5 million loan to EnCap. That same month, Gauger gave $25,000 to McGreevey’s campaign. Gauger told the inspector general he truly supported McGreevey and EnCap did not reimburse him for the contribution.

Wisler told the inspector general his law firm suggested Cherokee and EnCap make "tactical contributions" to politicians, but denied the notion that contributions were made to influence a specific event.

In addition to McGreevey and Sarlo, EnCap gave thousands to the New Jersey State Democratic Committee and a smaller amount to the New Jersey State Republican Committee. District 36 Assemblyman Gary Schaer also received money from EnCap while EnCap enabling legislation was being introduced in the legislature.

Locally, former Lyndhurst Mayor James Guida, who signed Lyndhurst’s financial agreement with EnCap, accepted $2,500 from EnCap in 2001 and $8,522 in 2005. Former Rutherford Mayor Bernadette McPherson and former North Arlington Mayor Russell Pitman, both of whom signed off on EnCap’s financial agreement in their respective towns, did not accept campaign funding from EnCap, the report found.

The report did not go so far as to accuse the officials or EnCap of wrongdoing and did not suggest that the campaign contribution swayed votes. However, an individual "might perceive" the votes and campaign contributions as part of a quid pro quo deal between EnCap and the elected officials. The report called this perception unhealthy for the system.