Brooklyn Hospital’s Sale, Backed by de Blasio and Cuomo, Is Drawing Federal Scrutiny

Before Mayor Bill de Blasio and Gov. Andrew M. Cuomo began their bitter public feud, the two men found themselves on the same side of tense negotiations over the future of Long Island College Hospital in Cobble Hill, Brooklyn.

In the end, the leaders, both Democrats, would get what they were after: The state sold the hospital, and Mr. de Blasio could claim victory for having preserved union-backed health care at the site.

But the outcome now appears to be under federal scrutiny, the latest subject of a sprawling investigation into fund-raising and potential pay-to-play politics in New York. Federal subpoenas have been received by the health care workers union, 1199 S.E.I.U., which has supported Mr. de Blasio and Mr. Cuomo, and by the hospital’s former owner, the State University of New York.

A developer, Fortis Property Group, which had been favored by SUNY, bought the hospital, with the sale completed in 2015. Prosecutors are seeking information related to the sale and, in particular, communications between SUNY and top City Hall officials or those associated with the mayor’s nonprofit group, Campaign for One New York, about the hospital’s fate, according to the subpoena, dated July 14 and described by an official who had seen it.

The subpoena names Mr. de Blasio; Anthony E. Shorris, the first deputy mayor; four top mayoral aides; and Ross Offinger, who had been finance director of the mayor’s 2013 campaign, according to the official, who requested anonymity citing the continuing federal investigation.

On Thursday, the union also received a federal subpoena related to its own involvement in the hospital deal, according to an official there who declined to describe its contents.

The inquiry into Long Island College Hospital, known as LICH, opened a new front in an investigation of Mr. de Blasio that has already focused on fund-raising for the Campaign for One New York and by the mayor’s aides for Democrats in tight State Senate races in 2014. Mr. Cuomo’s administration, too, is the subject of federal scrutiny related to state spending on projects in Buffalo, referred to as the Buffalo Billion.

The governor’s office said it had not received a subpoena related to the deal. “This administration had no say or role in the sale of LICH but supported resolving this issue and the court fight,” said Richard Azzopardi, a spokesman for Mr. Cuomo, adding that SUNY had been “losing hundreds of millions of dollars operating the hospital.”

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City Hall said it had not gotten one either. “We will of course share whatever appropriate information is requested of us during any review of this matter,” said Eric F. Phillips, the mayor’s press secretary.

A spokesman for the Campaign for One New York declined to comment on whether it had received a subpoena.

The precise focus of the federal subpoenas related to the hospital and Mr. de Blasio’s involvement was unclear, but prosecutors’ attention to 1199 S.E.I.U. could shed light on the overlapping interests at play in the hospital’s closing and eventual sale to the developer.

The impending shutdown of the hospital brought a year of loud wrangling, with public demonstrations, overlapping court cases and the on-camera arrest of Mr. de Blasio, then the New York City public advocate and a candidate for mayor, at a protest in July 2013. The subpoena also seeks communications between SUNY and the public advocate’s office that year, the official said.

The process for deciding on the sale rested in the state’s hands. But its fate played an outsize role in city politics during the 2013 mayoral race.

Mr. de Blasio vowed to preserve the hospital and, in late July of that year, filed a lawsuit seeking to keep it open. He was joined by community groups eager to preserve the medical center, which served both the brownstones of northwest Brooklyn and the public housing blocks of Red Hook. (A judge ultimately removed Mr. de Blasio from the case, citing a lack of standing to bring the suit as public advocate.)

As late as Dec. 17, just days before taking office as mayor, Mr. de Blasio voiced his opposition to the state’s preferred plan, the Fortis Property Group’s, which on that day was withdrawn by the university’s board of trustees amid protests at their meeting.

By early 2014, however, both Albany and City Hall appeared to be pushing for Fortis, which had been a partner with NYU Langone Medical Center in operating an emergency room at the site. By that point, the parties involved were considering settling their case in State Supreme Court in Brooklyn.

Mr. de Blasio announced a settlement on Feb. 21. It included a new request for proposals for the site, with health care requirements in addition to development. Fortis joined with NYU Langone, but found itself ranked third in the bidding after the Brooklyn Health Partners and the Peebles Corporation.

The head of Peebles, Don Peebles, has said he was asked around that time to donate money to Mr. de Blasio’s political nonprofit, and said he gave $20,000 on March 6, 2014.

On March 7, 1199 S.E.I.U. contributed $250,000 to the group, according to its disclosure forms.

Mr. Cuomo, for his part, received campaign donations of $5,000 from the president of Fortis, Joel Kestenbaum, in late November 2013, and $12,500 from Mr. Kestenbaum’s uncle, Moshe Kestenbaum, in January 2014. A spokeswoman for Fortis declined to comment on whether the company had received a subpoena.

After the Peebles bid was rejected by SUNY and the judge — over a dispute regarding remediation at the site, according to those familiar with the negotiations at the time — Don Peebles asked for the money back; it was returned in July of that year, according to a spokesman for the nonprofit.

A spokeswoman for Mr. Peebles declined to say whether he had received a subpoena related to the deal, citing the “pending legal matters.”

The university, which had also found issues with the Brooklyn Health Partners bid, ultimately sold the hospital for $240 million to Fortis, which by then had the backing of the 1199 union as well.

“From our perspective, we wanted a legitimate entity to run the health care,” Helen Schaub, the union’s vice president for policy, said in an interview conducted before she was aware the union had been subpoenaed. (Officials have since declined to comment.)

An emergency room is now operating in the former hospital building, but many community members, and Mr. de Blasio’s successor as public advocate, Letitia James, have remained upset at the compromise and still favor a full-scale hospital at the site.

“At the end of the day, the interests of the community were overlooked and the process to save Long Island College Hospital was perverted,” said Ms. James, a Democrat.

Mr. de Blasio’s sudden support for Fortis, and his abandonment of his effort to keep the hospital, remains a puzzlement to some. “City Hall urged the community to support the Fortis/NYU proposal as early as February 2014,” said Jeff Strabone, a vocal community activist who was then on the board of the Cobble Hill Association.

“I was surprised at the time, given that the mayor as candidate had favored keeping the hospital open,” Mr. Strabone added. “The decision was the governor’s, but I expected more of a fight for LICH from the mayor.”

City Hall officials defended the mayor’s efforts, saying he had fought for as much health care in the deal as appeared possible to secure.

After the deal was reached, the mayor’s nonprofit group paid for a letter from a member of the Carroll Gardens Neighborhood Association to be sent around the community to soothe any remaining tensions.

“I was asked by Mayor de Blasio to share my views,” said the member, Gary Reilly, in the letter on June 26, 2014. “The outcome is much better than we expected.”