Zi .bo .D7B9 AGAIN THE QTY PAYS How William H. Reynolds, the Mayor's Friend, Turns His Dreamland Failure Into a $1,360,000 Success at the Taxpayer s' Expense BUREAU OF CITY INQUIRY 1917 I BUREAU OF CITY INQUIRY, 87 NASSAU STREET, NEW YORK, MAY 11, 1 917. HON. CHARLES S. WHITMAN, ^ '0 /oA GOVERNOR, STATE OF NEW YORK. --OvA^ Sir: On February 17, 1917, I submitted to you a report of the Bureau of City Inquiry on the purchase of Rockaway Park by The City of New York. The report revealed, among other things, a profit of 2,400 per cent, made by the Neponsit Realty Com- pany on forty-seven acres obtained from the State and included in the park sold to the city. In a communication accompanying the report I stated the report on its face appeared to bear proof of conspiracy to de- fraud both the State and the city, and requested investigation of the Rockaway Park purchase, together with other land deals with the city. I now beg to submit a report of the Bureau of City Inquiry on the city's purchase, still uncompleted after six years, of Dream- land Park. With this report I renew my request to you for an investi- gation of the Rockaway Park, Dreamland Park and other land purchases by The City of New York, all from a group of Brook- lyn land speculators of which William H. Reynolds is the head, ^ and with whom Frank Bailey, William M. Greve and Clifford S. Kelsey are associated as principals. I renew this request for the reason that John Purroy Mitchcl, at present Mayor of the City, and William A. Prendergast, Comp- troller, are responsible, by their official acts, as special cotrimittee- men and members of the Board of Estimate and Apportionment, for the city's part in the Rockaway Park. Dreamland Park and Dther land deals, and that there is no ground for hope of an official investigation by any constituted city office, such as the Commis- sioner of Accounts. Furthermore, both the Mayor and the Comp- troller have repeatedly reiterated in public their support of the city land deals in which William H. Reynolds has been involved. The bare facts show that the Senate, the Assembly, State and City officials have acted in furtherance of Reynolds' land schemes over a number of years. In 1906, when Reynolds was threatened with a real estate failure at Long Beach, Long Island, the State Legislature enacted a bill empowering the city to buy his Long I^each propertv for a seaside park; this notwithstanding the fact Long_ Beach lies in a county outside the city limits. This unique law is in the statute books as Chapter 456 of the Laws of 1906. When Reynolds failed to have the then city officials buy^Long Beach, his friends and business associates, Greve and Kelsey, turned up as the owners of the Rockaway Park propertv. which property was the onlv alternative for the seaside park then to be aciiuired by the city. Jn this Rockaway I'ark i)urchase Frank liailey was tinanci'ally interested and Keynoals nunscii testified for Greve and Kelsev. ( )n reports and recommendations by John I'nrrov Mitchel and' W'ilham A. Prendergasi, at present the chief officials of the city, this Rockaway Park pnrchase, in- volving in one detail a 2,400 per cent, profit, was consummated. By means of a joker in a Legislative act, and finally by means of a unanimous vote of the State Land Commissioners, the prop- erty on which this 2,400 per cent, profit was made was turned over bv the State to Greve, Kelsey, etc. Otherwise the property would have gone free of cost to the city. The joker is in the statute books as Chapter 568 of the Laws of 1909. The unani- mous vote of the State Land Commissioners is in the minutes of the commission for the year 1909. AVhen the city in 191 1 wanted land in connection with the South Brooklyn Marginal Railroad, Reynolds turned up as the owner of that land. Recommendation for its purchase also was made by John Purroy Mit^hel and William A. Prendergast. This land Reynolds acquired through four dummies, obtaining posses- sion of the last of it ten days before the city took its first official step or action to acquire the same. The prices paid by Reynolds w-ere from 35>^ to 60 cents a square foot. On the further recommendation of John Purroy ]\Iitchel and William A. Pren- dergast the city took an option on this land at $1.30 a square foot. The report I now submit reveals the same gross_ irregulari- ties in the case of the Dreamland Park purchase as in the case of the Rockaway Park and South Brooklyn transactions. The report quotes testimony by Reynolds in which he admits misrep- resentation to the city ; it shows John Purroy Mitchel and William A. Prendergast rejecting the opinion of the Chief Engineer of the city ; it shows the city at present committed by option to pay Reynolds $1,360,000 for property, which cost him $457,500; it shows Reynolds, after six years of delays, profiting^ still further to the extent of $1,153.86 every week. These are a few of many such facts revealed in the report. It is a matter of public right that all facts in regard to William H. Reynolds' land deals with the city be fully and finally uncov- ered and placed on official record. A searching and complete offi- cial investigation of all these transactions is necessary in the cause of just and good government. The known facts are of a nature demanding the full truth, irrespective of any question of political exigency, and apart from the fact that the official aid in these transactions has come to him frorn so-called reformers, placed in high office and supported there by leaders in the public and private life of the city. Respectfully, (Signed) WILLL\M BULLOCK. Director. THE REPORT SENT TO THE GOVERNOR: ^Villiam H. Reynolds today has a bill for $360,000 in interest against the City on account of the uncompleted purchase of his Dreamland Park, and the total is increasing $1,153.86 every weeL, The City, by an option from Reynolds, has been paying him 6 per cent, interest since August i, 191 1. In six years the tiual price has not been decided. It appears the exact i)rice will not be fixed for two or more years, and for all that time the City must pay Reynolds interest, this in addition to the purchase price. Already the interest cost to the City alone exceeds the asr-essed valuation of the land being bought from Reynolds. The a-- sessed total is $340,000, as against the present interest bill of $360,000. ]Moreover, the interest cost is growing $60,000 a year. On top of all this the City's option on the Reynolds property is $1,000,000. The Commissioners on Award at present sitting may decide on more or less than this sum, but whatever their decision may be the City must pay Reynolds 6 per cent, interest on tlie total purchase price for from six to eight years. Receiving 6 per cent, interest from the City on the $1,000,000 option gives Reynolds 13 per cent, on the $457,500 he paid for the property. REYNOLDS PAID $457,500 AND GETS $1,758,000. The Dreamland proi)erty being taken by the City cost Reyn'O':. $457,500. Reynolds himself, when asking for decreased taxe.-. swore he had paid an "exorbitant price."' He further testified the property had not increased in value, this testimony being" given by him only three months before the City took its option. Yet the City's option, with interest, would give Re\nolds Si.- 360,000 for the property today, or four times the assessed value. In addition to this, Reynolds already has 8398,000 for fire insur- ance collected following the Dreamland hre, making a total lA $1,758,000. A second Commission on Award now is taking testimony on Dreamland. In more than a year this Commission has not heard all of Reynolds' wdtnesses, and not one City witness has testifieil. It took tile first Commission more than three years to make i:.- award of $1,014,602.32, which award was set aside by the Appel- late Division of the Supreme Court as "largely excessive." Ti'e second Commission is proceeding with the same delav, and all t - time Reynolds is getting 6 per cent, interest. THE MITCHEL-PRENDERGAST COMMITTEE PUT THROUGH THE DREAMLAND DEAL. SIDE- TRACKING OTHER SEASIDE PARK PLANS WHICH WOULD HAVE SAVED THE CITY MILLIONS. John Purroy Mitchel and William A. Prendcrgast arc ihe City officials responsible for the Dreamland deal. 'J1iey controHed the special committee of the Hoard of j^stimate \yhich recommended and facilitated the piu-chase. As members of this committee thev got the P.oard of b'.stimate to accept no fewer than four options on Reynolds' property. The fourth and last o])tion, for $1,000,000, is the option in force todav. TlilS OPTION WAS GIVEN BY REYNOLDS WHEN J IIS DREAMLAND COMPANY NO LONGER OWNED THE PROPERTY. Tlie ^Mitchel-Prcndcroast committee forced the Dreamland deal through, notwitlistanding the fact the City might have re- claimed sixty-three acres of Coney Island frontage for an outlay of ::!>6o,ooo; and notwithstanding the fact the City might have obtained ninety acres of additional frontage for $2,250,000, with business establishments thereon returning profit sufficient to pay all carrying charges, including" the yearly interest on the pu:' chase price. In addition, this 90-acre offer carried with it oppor- tunitv for a nnmicipal bathing house to accommodate 8,000 per- sons.' BUT THIS OKEER AND THE EIRST. BOTH SO AD\'ANTAGEOUS TO THE PUBLK^ WERE P.RUSH ED ASIDE BY THE MITCHEL-PRENDERGAST COMMIT- Th:E IN ORDER THAT THERE ^ITGIIT BE NO HITCH IX THE DREAMLAND DEAL. REYNOLDS' DREAMLAND COMPANY WAS ON THE VERGE OF BANKRUPTCY, AND A "JOKER" IN THE OPTION WOULD HAVE MADE THE CITY ASSUME $1,450,000 IN MORTGAGES. There is rei)eated evidence that ReyntJlds unloaded his jjrop- erty on the Cit}^ to save his Dreamland Company from bank- ruptcy. By Reynolds' own testimony his Dreamland Amuse- ment Park was a failure from the start. It never paid the in- terest on its bonds. It defaulted on its taxes to the City. It defaulted also on its water rates to the City. When the purchas_e of the Dreamland property was recfnn- mended and put through by the ]\Iitchel-Prendergast committee, Reynolds' company was encumbered with $1,450,000 in mort- gages. By the terms of the first option accepted by the IVoard of Estimate, the City would have paid Reynolds $1,500,000 as the maximum and $1,350,000 as the minimum price for the prop- erty, and on top of that would have had to assume the Si. 450.000 in mortgages. This '"joker" was discovered by Mayor Gavnor, but nm until alter the Board of Estimate, on recommendation of the ^litchel- Prendergast committee, had voted the options. THE SAME BROOKLYN LAND SPECULATORS WHO HAVE PROFITED BY SELLING OTHER REAL ESTATE TO THE CITY ARE IN THE DREAM- LAND DEAL WITH REYNOLDS. Involved with Reynolds in the Dreamland deal are certain lirooklyn real estate speculators who have been directly or in- directly interested with Reynolds in other land deals costing the City excessive prices. Among these men are William M. ( "ireve, iM-ank Bailey, Joseph Huber and George E. Dolxson. Greve, a friend and business associate of Revnolds. is vice- president of the Xeponsit Realty Company, which made a profit of more than 2,400 per cent, by the sale of a lar^e part of Rock- away Park to the City. He is second vice-president and member of the Buying and Selling- Committee of the Realty Associates, the company which has assisted Reynolds financially in his City land deals. ' Bailey is president of the Realty Associates and vice-president of the Title Guarantee and Trust Company. It was through the Title Guarantee and Trust Company that Reynolds obtained his first mortgage, for $750,000, on Dreamland. The same company also has shared Avith the Realty Associates in financially backing Reynolds in other land transactions with the City. Dobson has been a friend and business associate of Reynolds for many years. He is president of the Harway Improvement Company, which in 191 5 was exposed as attempting to exchange twenty-one acres of property for fifty-two acres of City land, all near Coney Island. Greve, friend of both Reynolds and Dobson, testified he "looked after the Harwav property," and that the Realty Associates had taken 100 acres of the Dobson Company's land. Dobson was a director with Reynolds in Wonderland, the cor- poration for which the Dreamland Company was substituted. Part of the money to be paid by the City for the Dreamland prop- erty is to be used to liquidate a judgment, with interest, againsr Dobson, Reynolds and other direcl )rs of Wonderland. A SUMMARY OF MAIN FACTS. REYNOLDS DID NOT OWN DREAMLAND WHEN HE GAVE THE $1,000,000 OPTION IN FORCE TODAY, AND ADMITTED MISREPRESENTATION TO THE CITY; WHILE THE MITCHEL-PRENDERGAST COMMITTEE REJECTED THE OPINION OF THE CHIEF ENGINEER OF THE BOARD OF ESTIMATE THAT THE OPTION SHOULD NOT EXCEED $699,000. Among the facts brought to light in this report are the fol- lowing : — ALTHOUGH THR CITY TOOK ITS FIRST DREAMLAND OPTION OX JULY 27, 1911, THE FINAL PRICE TO BE PAID HAS NOT YET BEEN DETERMINED, AND MAY NOT BE DE- TERMINED UNTIL 1919. THH SIX YEARS OF DELAY HAVE C.IN'EN WILLIAM H REYNOLDS $360 000 IN INTEREST OVER AND ABOVE THE OPTIOX PRICE OF $1,000,000. THE IXTEREST COST IS GROW- ING $60 000 A YEAR, OR $1 153.86 EVERY WEEK. THE ENTIRE AREA TAKEN BY THE CITY WAS ORIGIN- ALLY BOUGHT BY REYNOLDS FOR $457 500; HE TESTIFIED THIS WAS AN 'EXORBITANT PRICE" AND THAT THERE HAD BEEN NO INCREASE IN VALUE. YET THE CITY'S OP- TION. WITH INTEREST. WOULD GIVE REYNOLDS $1,360,000 P^OR THE PROPERTY. ADDED TO THIS IS $398 000 COLLECT ED BY REYNOLDS IN FIRE INSURANCE, MAKING A TOTAL OF $1 758 000. the $1360 000 which the city would pay reynolds Today is for land valued and assessed by the tax department at $340,000. john purroy mitchel and william a. prender- gast controlled the special committee of the board of estimate which recommended and facili- tated the purchase; and are responsible 'for thk dreamland deal. the mitchel-prenderg-ast committee got the board of estimate to accept no fewer than four options from reynolds on dreamland. the fourth and last option is the option in force today. rey- nolds gave this option, and the mitchel-prender- gast committee recommended it, although rety- nolds and his dreamland corporation no longer oavned the property. the mitchel-prenderfast committee put the dreamland deal through the board of estimate, notwithsanding the fact the city could have re- claimed 63 acres of coney island land for $60,000; and notwithstanding the fact the city might have bought 90 other acres, with income covering all carrying charges, including interest. for $25 000 an acre. as against the $142,800 an acre called for in reynolds' option. by unloading his property on the city, reynolds saved his dreamland corporation from bank- ruptcy reynolds himself testified that his dreamland amusement park was a failure from the start; that it never paid interest on its bonds, owed salaries, and defaulted water rates and taxes to the city. a "joker" in the first two options recommended and put through the board of estimate by the mitchel-prendergast committee would have com- pelled the city to pay $1 450 000 in mortgages on dreamland. mayor gaynor two months later re- vealed this "joker " and the third and fourth op- tions then followed, these for $1,000,000 on a de- creased area and with dreamland lf.ft tc) pay its own mortgages. the third option named the dreamland corpo- ration as the owner of the property. whereas the corporation had ceased to be the owner 29 days before the report of the mitchel-prender- gast committee recommending it, and 44 days be- fore the board of estimate voted it. the fourth option— the option in force today— apparently w^as drawn in view of the fact that the dreamland corporation no longer was the owner. notwithstanding this the mitchel-pren- dergast committee reported to the board of es- timate for "the acquisition" of the dreamland corporation's property; and on this report the board voted the option. by the terms of the option the city must pay reynolds interest on the purchase price for l3i/i MONTHS BEFORE IT TOOK TITLE OR OWNED THE PARk- THE INTEREST DATI?sG FROM AUGUST 1. i;tn AND THE CITY'S TITLE FROM SEPTEMBER 14, 1912. BY THE TERMS OF THE OPTION THE CITY RELIEVED REYNOLDS OF ALL TAXES AND ASSESSMENTS FROM AU- GUST 1, 1911, OR FOR 131/2 MONTHS BEFORE THE CITY r>WNED THE PROPERTY. WILLIAM H. REYNOLDS, WHEN A W^ITNESS UNDER OATH ADMITTED HE HAD REPRESENTED TO CITY OFFICIALS THAT HIS DREAMLAND CORPORATION OWNED THE PROP- ERTY. WHEN AS A MATTER OF FACT IT DID NOT OWN IT. JOSEPH HUBER, REYNOLDS' PARTNER, AND THE NEW AND KEAL OWNER ALSO ADMITTED UNDER OATH HE KNEW REYNOLDS HAD MISREI'RESENTED HIMSELF AS THE OWNER. THE MINUTES OF THE BOARD OF ESTIMATE REVEAL AVILLIAM H. REYNOLDS MAKING "PROPOSITIONS" IN WRIT- ING FOUR MONTHS ^VFTER THE FOURTH OPTION, AS IF HE OR HIS DREAMLAND CORPORATION STILL OWNED THE PROPERTY. THESE "PROPOSITIONS" WERE FOR THE PROP^IT OF HIMSELF OR HIS ASSOCIATES AND WERE AP- PROVED BY THE BOARD INVOLVED WITH REYNOLDS IN THE DREAMLAND DEAL ARE MEMBERS OF THE SAME GROUP OF LAND SPECULA- TORS WHO HAVE BEEN INTERESTED WITH HIM IN THE SALE OF ROCKAWAY PARK, SOUTH BROOKLYN, OR OTHER PROPERTY. AT EXCESSIVE PRICES TO THE CITY. AMONG THESE ARE FRANK BAILED WILLIAM M. GREVE JOSEPH HUBER AND GEORGE F. DOBSON. THE CLOSE ASSOCIATION OF REYNOLDS GREVE BAILEY AND OTHERS IN THE BROOKLYN GROUP OF LAND SPECU- LAT()RS WHO HAVE BEEN ACTIVE IN SELLING LAND TO THE CITY, IS REVEALED BY THE SAME "DUMMIES" BEING USED IN THE INCORPORATION OF DIPP'ERENT LAND COM- ?ANn^":s. THE WHOLE DREAMLAND AREA COMPRISING 8.72 ACRES, COST REYNOLDS ONLY $61(5 500. THE CITY'S $1 000 000 OP- TION IS ON 7 ACRES FRONTING THE OCEAN. THE 1.72 ACRES RETAINED BY REYNOLDS FRONTS ON SURF AVENUE AND ]S VALUED BY THE MITCHEL PRENDERGAST COMMITTEE AT $500 000. PART OF THE MONEY TO COME FROM THE CITY IS TO P.E APPLIED TO PAYMENT. WITH INTEREST, OF A JUDG- MENT AGAINST WILLIAM H. REYNOLDS GEORGE F. DOB- SON AND OTHERS. MORE OF THE CITY'S MONEY WILL GO TO REYNOLDS FOR "PERSONAL SERVICES"; STILL MORE WILL BE PAID REYNOLDS ON ACCOUNT OF STOCK AND BOND HOLDINGS. TOTALING $1351500 IN DREAMLAND. THE MITCHEL - PRENDERGAST COMMITTEE PUT THROUGH THE $1000 000 OPTION ALTHOUGH CHIEF EN- GINEER LEWIS OF THE BOARD OF ESTIMATE HELD IN A REPORT TO THE BOARD THAT THE OPTION SHOULD NOl EXCEED $699 000. THE MITCHEL-PRENDERGAST COMMITTEE ACTING ON REYNOLDS' OPINION ADDED $50 0.0 TO THE OPTION PRICE FOR SO-CALLED "BREAKAGE OF PLOTTAGE" WHILH IT- S SELF WORKED TO REiYXOLDS' PR,OFlT BY LKAVIXG HIM THE :most valuable p-art of the property, or that FRONTING ON SURF AVENUE. STILL FURTHER DISRE- GARDING THE CHIEF ENGINEER'S REPORT. THE COMMIT- TEE ADDED $250 000 MORE TO THE OPTION. MAKIN( J A ROUND TOTAL OF .|;!00 000 MORE THAN THE FIGURE ()F THE CHIEF ENGINEER. ON APRIL 12, 1911 REl'NOLDS SWORE THAT ALL THE DREAMLAND LAND WITH ALL BUILDINGS AND IMPROVE- MENTS THEREON. HAD A TOTAL VALUE OF $750 000; ON JULY" 27, 1911, REYNOLDS GOT THE MITCHEL-PRENDERGAST COMMITTEE TO RECOMMEND, AND THE BOARD OF ESTI- MATE TO ACCEPT, A MAXIMUM OPTION OF $1500 000 AND A MINIMUM! OPTION OF SI 350 000 ON THIS SAME LAND THEN A FIRE-SWEPT WASTE. THE TESTIMONY OF REYNOLDS PLACIXG THE TOTAL VALUE OF DREAMLAXD WITH ALL IMPROVEMEXTS, AT $750,000 WAS AVAILABLE TO. THE MITCHEL-PRENDERGAST COMMITTEE IN THE TAX DEPARTMENT BUT IT NEVER WAS MADE KNOWX TO THE BOARD OF ESTIMATE AND ONLY' WAS BROUGHT OUT A Y'EAR AFTER THE VOTING OF THE FOURTH OPTION WHEN REl'NOLDS HIMSELF WAS A WITNESS BEFORE THE COMMISSIONERS ON AWARD. THE MITCHEL-PRENDERGAST COMMITTEE BROUGHT THE MATTER OF THE DREAMLAND PURCHASE BEFORE THE BOARD OF ESTIMATE WITHOUT PRELIMINARY RE- PORT. WITHOUT PLACING IT ON THE BOARD'S CALENDAR; AND RECOMMENDED THE PURCHASE IN A THREE-PARA- GRAPH REPORT, BARE OF DETAILED INFORMATION'. COMPTROLLEIR PRENDERGAST HIRED TWO REY'NOLDS APPRAISERS— WILLIAM P. RAE AND BY'RON L. KENNELLY . —TO ADVISE THE CITY WHAT PRICE TO PAY REl'NOLDS FOR DREAMLAND. RAE IS THE MAN WHO ADVISED COMP- TROLLER PRENDERGAST TO PAY REl'NOLDS $1.32 A SQUARE FOOT FOR THE SOUTH BROOKLYN PROPERTY REYNOLDS IS SELLING THE CITY, AND WHICH HE HAD OBTAINe'd AT 60 CENTS A SQUARE FOOT. . AT THIS SOUTH BROOKLYN CONDP^MNATION BOTH RAE AND KENNELLY APPEARED AS VOLUNTARY WITNESSES FOR REYNOLDS USING AGAINST THE CITY THE APPRAISALS THEY HAD GIVEN COMPTROL- LER PRENDERGAST. RAE ADMITTED UNDER OATH THAT COMPTROLLER PRENDERGAST ARFLANGED FOR HIM TO BE PAID FOR HIS DREAMLAND APPRAISAL FOR THE CITY, BY JOSEPH HU- BER REYNOLDS' PARTNER, AND THE SECOND LARGEST BONDHOLDER IN DREAMLAND. KENNELLY SWORE HE COULD NOT REMEMBER WHO PAID HIM FOR HIS DREAM- LAND APPRAISAL FOR THE CITY. RAE TESTIFIED THAT HE GAVE COMl'TROLLER PREN- DERGAST AN APPRAISAL OF $1 350.000 ON DREAMLAND; THE Al'PELLATE DIVISION OF THE SUPREME COURT SET ASIDE THE FIRST AWARD OF $1.014 602.32 AS "LARGELY' EXCES- SIVE." RAE ^^'AS REVEALED AS HAVING 013TAINED A LOAN ON IVROPERTY NEAR SEACVATE P^ROM THE REALTY ASSO- CIATES THE BROOKLYN CORPORATION TH.AT HAS FINAN- CIALLY ASSISTED REYNOLDS IX HIS CITY LAND DEALS. THE FACT OP THE RAE LOAN WAS SWORN TO BY WILL- L\M M. GREVE, OFFICER OF THE REALTY ASSOCIATES, AND FRIEND AND BUSINESS ASSOCIATE OF REYNOLDS. KENNELLY. THE OTHER REYNOLDS APPRAISER HIRED BY COMPTROLLER PRENDERGAST, WAS A WITNESS AGAINST THE CITY ON THE PURCHASE OF ROCKAWAY PARK FROM WILLIAM M. GREVE AND OTHER FRIENDS AND BUSINESS ASSOCIATES OF REYNOLDS. HE TESTIFIED ROCKAWAY PARK HAD A VALUE OF $1,862,707 AND THE AWARD WAS $1,250,000. HE PLACED A VALUE OF $7 500 AN ACRE ON THE PARK, INCLUDING 47 ACRES OBTAINED BY GREVE FROM THE STATE AT $200 AN ACRE. KENNELLY' S APPRAISAL ON DREAMLAND HAS NOT BEEN REVEALED. COMPTROLLER PRENDERGAST PERSIST- ING IN REFUSAL TO MAKE KNOWN THE FACTS RELATIVE TO HIS EMPLOYMENT OF REYNOLDS' APPRAISERS TO TELL THE CITY WHAT TO PAY REYNOLDS OR HIS BUSINESS ASSOCIATES FOR LAND. , THE OFFICIAL CITY RECORDS SHOW REYNOLDS WAS SUCCESSFUL MORE THAN ONCE IN HOODWINKING THE BOARD OF ESTIMATE. HE GOT THE BOARD TO TAKE OP- TIONS WHICH WOULD HAVE MADE THE CITY ASSUME $1.- 450,000 IN MORTGAGES; HE GOT THE BOARD TO TAKE AN OPTION ON LAND HIS DREAMLAND COMPANY DID NOT OWN; HE GOT IT TO AGREE TO PAY THE PARK PRICE FOR A 200-FOOT STRIP TO SURF AVENUE WHICH THE DREAMLAND COMPANY DID NOT OWN; AND FOR THIS ALLEGED PRIVILEGE HE GOT THE CITY TO AGREE TO BUILD A STREET OR CURB AND SIDEWALK TO IMPROVE THE SURF AVENUE FRONTAGE NOT INCUSED IN THE PARK. H. C. PYLE THE FIRST "EXPERT" WITNESS FOR REY- NOLDS, WAS SHOWN TO HAVE MADE ONLY TWO SALES OlP PROPERTY IN CONEY ISLAND, ONE TEN YEARS AND THE OTHER TWO YEARS BEFORE HIS TESTIMONY. HE AD- MITTED HE DID NOT KNOW THE VALUE OF LOTS ON THE OCEAN FRONT MAKING UP THE PARK, BUT PLACED A TOTAL VALUE OF $1 426.000 ON THE DREAMLAND PROP- ERTY FOR WHICH THE AWARD OF $1,014,602.32 WAS SET ASIDE BY THE APPELLATE DIVISION OP THE SUPREME COURT AS "LARGELY EXCESSIVE.'' WILLIAM M. GREVE, THE FRIEND AND BUSINESS ASSO- CIATE OV REYNOLDS. WHO NEGOTIATED THE SALE OF ROCKAWAY PARK TO THE CITY, TESTIFIED FOR REYNOLDS ON DREAMLAND. HE ADMITTED THAT HE HELD DREAM- LAND BONDS THAT HE HELD STOCK IN THE LONG BEACH ESTATES, OF WHICH REYNOLDS IS PRESIDENT; THAT HE HAD BEEN CONNECTED FOR TWELVE YEARS WITH THE REALTY ASSOCIATES, THE BROOKLYN CORPORATION OP WHICH FRANK BAILEY IS PRESIDENT, AND WHICH HAS FINANCIALLY ASSISTED REYNOLDS IN HIS LAND DEALS WITH THE CITY. GREVE SWORE TO A VALUE OF $1,252, 90S FOR DREAMLAND, AS AGAINST THE $1 014.602.32 AWARD SET ASIDE BY THE APPELLATE DIVISION OF THE SUPREME .COURT. GREVE, WHEN A REYNOLDS WITNESS, ADMITTED THAT 10 A "DUMMY" FOR HIMSELF OR A COMPANY OF WHICH HE WAS PART OWNER. HAD A CLAIM FOR DAMAGE GROWING OUT OF THE DREAMLAND PROCEEDING. THE FIRST COMMISSIONERS OF AWARD FILED THEIR OATHS OF OFFICE ON MARCH 14, 1912, AND MADE THEIR AWARD ON APRIL 5, 1915. SO THAT THEIR DECISION CAME AFTER THREE YEARS OF DELAYS ONLY TO BE SET ASIDE BY THE SUPREME COURT. THE SECOND COMMISSIONERS OF AWARD FILED THEIR OATHS OP OFFICE ON MAY 15, 1916 AND HAVE NOT YET FINISHED HEARING THE WIT- NESSES FOR REYNOLDS. NOR HAVE THEY YET HEARD A SINGLE WITNESS BFOR THE CITY. THE CLOSE ASSOCIATION OF THE BROOKLYN LAND SPECULATORS PROFITING BY CITY DEALS, IS SHOWN BY THE USE OF THE SAME "DUMMIES" FOR INCORPORATION OF DIFFERENT COMPANIES. A detailed account of the Dreamland deal, all drawn from offi- cial records, follows herewith : On August 18, 1903, a company named Wonderland was in- corporated for the purpose of operatviig an amusement park at Coney Island. The incorporators were William H. Reyn- olds, Percy B. Purdy, John H. Whyte, William C. Groves and George E. Hall. After the incorporation Reynolds, Purdy, George F. Dobson, Eugene D. Wood and Samuel vS. White- house became directors. The close association of Reynolds, Dobson, Frank Bailey, Clifford S. Kelsey and William M. Greve is pointedly shown by the appearance of the "dummies" John H. Whyte and Wil- liam G. Groves among the incorporators of Wonderland. The same Whyte and Groves were used as "dummies" in the incor- poration, on July 15, 1914, of the Exeter Corporation. Later these "dummies" were replaced by Bailey, Kelsey and Greve. Then with Bailey. Kelsey and Greve on the Board of Directors, Reynolds transferred to this Exeter Corporation certain South Brooklyn property, located where he is selling land both to the City and to the State. Reynolds testified that it was decided to substitute Dream- land for Wonderland, as a better advertising name. Dreamland was incorporated on March 3. 1904. The names on the incor- poration papers were Tohn H. Whyte. William G. Groves, Henry J. Worcester. Walter C. Edwards. George W. Johnson alnd John Finley. After the incorporation these "dummies" were replaced as directors by Reynolds, Dobson, Joseph Huber and S. S. Whitehouse, attorney for, Reynolds. FROM A STATE OF IMPENDING BANKRUPTCY REYNOLDS' DREAMLAND COMPANY TODAY STANDS TO REALIZE A GRAND TOTAL OF $2,258,000. On March 12, 1904, Wonderland completed purchases giving it 8J2 acres of Coney Island, between Surf Avenue and the 11 ocean. The tutal i)rice paid for this pr()i)ert}' was ^(5^:i,.■)ll(). The buildings on the ])ro])erty were valued at •$.>-). 000, so that the price of the naked land was $()lT,.-)00. It is 7 acres of this l)ro])erty which the city is taking for pa.rk purposes. The remaining l.^ark.. .")00,000 $2.-^->s.ooo AA'onderland \vas inct^rporated for .Sl.":00.000 and Dreamland for $1,500,000. On March 12. 1904. Wonderland, having com- pleted its land ])urchases. transferred all its proi)ertv to Dream- land. On the same day Dreamland took out a mortgage for 8750,000. 'idle luortgage was in favor of the Title Guarantee and Trust Com])any. and was to secure pa}-ment of $750,000 in gold l)onds. Dreamland issued $l.r)00,000 in common stock. Half of this amount, or •ST-'iO.ooO, was retained by Reynolds for ])romoting- the company, ddie other half was allotted to ])urJiasers of the gold l)onds: one share of the common stock being g-iven free with each g'-old bond. Reyr*olds testified the bonds were sold at par. DREAMLAND WAS A FINANCIAL FAILURE FROM THE START, CONTINUING TO ACCUMULATE DEBTS FOR SEVEN YEARS, UNABLE TO PAY JUDGMENTS AND SALARIES, AND DE- FAULTING ON TAXES AND WATER RATES TO THE CITY. Reynolds also testified that he was the largest bondholder in Dreamland, and that he held S;>00,::)0 of the l)onds. The common stock that went free with these bonds, added to the .ST50.000 in stock for ])romoting the company, bring:', the total of the common stock owned bv Revnolds to $1,050,750. IX STOCKS AX I) I'.OXDS REYNOLDS, ACCORDING TO HIS TESTI.MoX^■. HAS A GRAXD TOTAL IXTRRKST IN DREAM I. AX I) ol' $l,:5r)l,oOO. Dreandand ne\ er was i)rofitable: I'd-om Reynolds' own tes- timony it api)ears that from the day it was first o])ene(l to the i)ublic in liMil nntil it was destroyed by fire c>n Mav 27, Uni, it continued to accunudate debts. W hen a witness before the Comnnssioncrs on Award, l\e\-n- : 12 olds testified that at the time of the fire there were six mort- gages on Dreamland, amounting; to i?l,4.")U,000. This total \Aa"s made u]) of separate mortgages for .$3.j,000. $05,000, SiOO,(>00. $-20(),000, .$;500,(>()() and $750,000. These mortgages did not complete the liabilities of the e-irporation. Taxes and water rents were and still are owing the City. Judgments remained un])ai(l. Reynolds testified that salaries had not been paid. In a report to the Statej Comptroller for the year ending October iU, lOll, Reynolds stated Dreamland had a total of average liability of $1.;]()0,500 : and appraised the $1,500,000 iTi common stock at Si 5.0(10, or >>1 a share. In this same State rei)ort. recpiired l)y law, Reynolds gave the gross value of Dreamland's real estate at $800,000. Yet in the same year for which this report was made, or on July 27. 1911, Reynolds succeeded in having the Board of Esti- mate take two options on the proi)erty. one for $1,350,000 at private sale, the other for $1,500,000 at condemnation. At the time of the fire Dreamland carried insurance of $;;!t8.000. U]) to October 11, 1912. $;l85,;5!i8. n of this insur- ance had been paid, and claims then Avere jicnding for the unpaid balance of SI 2.(;o 1.5:5. THREE MONTHS BEFORE THE CITY TOOK ITS FIRST OPTION FOR $1,500,000 ON ALL THE DREAMLAND LAND REYNOLDS PETI- TIONED THE TAX COMMISSIONERS TO ASSESS IT AT $550,000 In 1011 it was proposed to increase the assessed valuation of all of the Dreamland property from $720,000 to $1)76,500, ui\'ided as follows : VALUE OF VALUE OF BUILD- REAL ESTATE INGS. ETC., OR OF- TOTAL AS- UXIMPROVED. LMPROVEMEXTS. SESSED VALUE. $729,500 $217,000 $976,500 Reynolds protested this increase and filed a formal petition re- questing a decrease to $750,000 with the Tax Department. The petition held the Dreamland land to be worth only $550,000, while the improvements thereon were valued at $200,000. 'T PAID AN EXORBITANT PRICE," TESTIFIED REYN- OLDS, AND A FEW WEEKS LATER GOT THE CITY TO TAKE AN OPTION AT $882,500 OVER AND ABOVE THAT "EXOR- BITANT PRICE." Following the filing of the petition, Reynolds a[)peared as u witness before the Tax Board on April! 1. 1911. His tes- timony was given six weeks before Dreamland burned down .nrl only three months before the City took its first option. Reynolds protested the proposed increased valuation under 13 oath, and was heard by Lawson Purdy, President of the Tax Board, and Judson G. Wall and Edward Kaufmann, Com- missioners. The following testimony was given by Reynolds : "By Mr. Reynolds : 'The assessed valuation has been in- creased by a little over $300,000. I bought an interest in the McKeon estate, $447,000 at auction seven years ago. I paid $200,000 down. AND I WILL SAY I PAID AN EX- ORBITANT PRICE. I first purchased the Surf Avenue frontage; thev sold it in two sections, and I Wx^S COM- PELLED TO BUY THE OCEAN FRONT AT DOUBLE THE PRICE. "SINCE DREAMLAND WAS INCORPORATED .NOT ONE DOLLAR HAS BEEN PAID TO THE IN- VESTORS AND NOT ONE DOLLAR OF THE $150,000 HAS BEEN PAID TO THE TITLE GUARANTEE AND TRUST COiMPANY. THE WILLIAMSBURG SAV- INGS BANK HAS $300,000 FIRST MORTGAGE ON DREAMLAND, AND IN SEVEN YEARS WE HAVE NEVER PAID ONE DOLLAR OF INTEREST. NO MAN HAS RECEIVED ONE CENT IN RETURN. AND IT HAS BEEN A LOSING VENTURE FROM THE START. I think, gentlemen, the main point I raise is that DREAMLAND HAS NOT INCREASED TO ANY SUCH EXTENT SINCE I PURCHASED IT SEVEN YEARS AGO. IT HAS NOT PAID ONE DOLLAR ON THE INVESTMENT. I ONLY PUT IT UP TO YOU, GENTLEMEN, THAT IN THE WHOLE SEVEN YEARS THAT WE HAVE RUN IT. WE HAVE NOT MADE A DOLLAR OUT OF IT. We helped to increase the value of everything down there at Dreamland. BUT WE NEVER GOT THE VALUE OF A DOLLAR. Q. What do you figure the market value? A. It was full last year. Q. YOU HAVE NOT PAID YOUR TAXES? A. NO. WE HAVE PAID NO SALARIES AND WE HAVE NOT BEEN GETTING ONE DOLLAR. By Reynolds' formal petition and testimony, the total value of all Dreamland, both real property and buildings, on April ir, 191 1, was $750,000. On July 27, the same year. Dreamland was a fire-swept waste, subsequently costing the City $25,000 for re- moval of wreckage; yet on this date the Mitchel-Prendergast committee recommended, and the Board of Estimate voted, two options for the purchase of the Dreamland real estate — one option for $1,500,000 and the other for $1,350,000. And it is on the least valuable part of the Dreamland site that the City today holds, on recommendation of the Mitchel-Prender- gast committee, an option of $1,000,000, involving up to the present $360,000 in interest. 14 DREAMLAND WAS IN SUCH A FINANCIAL PLIGHT IT HAD BEEN SOLD BY THE SHERIFF FOR NON-PAYMENT OF DEBTS. When the City first took action to acquire the property, there was no talk from Reynolds of Dreamland as a losing proposition. But the financial plight of Dreamland then and for several years before was so serious that its property had been sold at Sheriff's sale for non-payment of debts. On December 22, 1909, Eugene D. \\'ood got a judgment aiiainst Dreamland for $205,680. On the same date Joseph Huber got another judgment for $131,850. As a result of these judg- ments, Patrick T. Quinn. Sheriff of Kings County, on September 26. 1910, sold the site of Dreamland at public auction. The site was bought by Wood and Huber for $80,000. On August 29. 191 1, one month after the City had taken the first two options. Wood assigned his interest to Huber. On September 5, 191 1, a Sheriff's deed turned over the property to Huber. Under this deed Huber held title to the Dreamland site, in- cluding that part taken bv the Citv for the park. THE FACT THAT DREAMLAND HAD BEEN SOLD AT SHERIFF'S SALE WAS KEPT A SECRET BY REYN- OLDS WHEN NEGOTIATING THE FIRST TW^O OP- TIONS WITH THE CITY. The third option, for $1,000,000 on a part of Dreamland, was recommended by the Mitchel-Prendergast committee and adopted bv the Board of Estimate on October 19,1911. The fourth option, also for $1,000,000, was similarly accepted by the City on Jan- uary 12, 19T2. REYNOLDS GAVE BOTH THE THIRD AND FOURTH OPTIONS ON THE PRETENSE HIS DREAMLAND COMPANY STILL OWNED PROPERTY IT HAD LOST WEEKS BEFORE. Both of these options were given by Reynolds on the pretense his Dreamland Corporation owned the property. But the corpo- ration had ceased to be the owner on September 5, 191 1. SO THAT REYNOLDS GAVE THE CITY AN OPTION ON PROPERTY HE OR HIS CORPORATION DID NOT OWN. The Dreamland fire broke out about 3 a. m. on May 2"], 191 1. While the firemen still were throwing water on the ruins Reyn- olds began a campaign to unload the site on the City for a public park. In a Manhattan morning new^spaper of May 28, 191 1, Reynolds was quoted as follows: "I believe the best thing that could be done with the property would be its purchase by the City for a park. THE OLD ARGUMENT OF EXCESSIVE COST NO LONGER HOLDS. No buildings remain to be condemned. Only the cost of the land need be considered. If the Citv was a private institution, I will wager that no time would be lost in grasping this great opportunity." 15 IN THREE MONTHS REYNOLDS' ' VALUATION JUMPED FROM $550,000 TO $1,500,000, AND THE MITCHEL-PRENDERGAST COMMITTEE AC- CEPTED THE LATTER FIGURE. The "great opportunity"' seen by Reynolds existed only for his Dreamland Company. Sale of the property to the City of- fered the one chance of escape from financial collapse. Operating its amusement park at a growing and continuous loss, unable to pay its salaries and its taxes, unable e\en to pay the interest on its bonds, with all its properly reduced to a fire-swept w^aste, the Reynolds company's financial hope lay in getting the City to buy its land. r>y Reynolds' own testimony on Aprill ii, 191 1, all of this land, with all buildings and improvements thereon, had a total value of $750,000. The land, alone he valued at $550,000. But selling this same land when a fire-swept waste to the City only three months later, Revnolds insisted on a cash option of $1,350,000 or $1,500,000 if taken by condemnation. And these options were approved l)v the Mitchel-Prenderga.-^t committee, recommended by it to the Board of Estimate, and so adopted Ijy the Board. WHILE THE OPTIONS WERE BEIXG NEGOTIATED THE TESTIMONY OF REYNOLDS \\\LUING DREAM- LAND, WTTH ALL ITS BETILDINGS AT $750,000, WAS AVAILABLE IN THE TAX DEPARTMENT. If the ]^Iitchel-Prendergast committee had knowledge of this testimony, that fact was not made known In' it to the Board oi Estimate. If the committee was without knowledge of the testi- mony, then it failed to olnain a\'ailal:)le City records on one of the first points of information required in all land i)urchases by the City. THE MITCHEL-PRENDERGAST COMMITTEE EITHER NEGLECTED ITS DUTY OR WITHHELD REYNOLDS' TESTIMONY FROM THE BOARD OF ESTIMATE. A\"ith the Reynolds testimony jjefore it, the Board of Estimate apparentlv would have been compelled to reiect the options. THE OFFICIAL RECORD MAKES CLEAR THAT THE MITCHEL-PRENDERGAST COMMITTEE EITHER NEG- LECTED ITS DUTY (m WTLFULLY WITHHELD REY- NOLD'S TESTIMONY FROM THE BOARD. The Dreamland purchase first came before the Board of Esti- mate on June 15, 191 1, in the form of a resolution from the Board of Aldermen favoring the i)urchase. This resolution had been adopted Iiy the Aldermen on June 6. \[)\ 1. The Board of Estimate referred the matter to a special com- mittee. John Purroy Mitchel, president of the I'oard of Alder- men ; William A. IVendergast, Comptroller, and Alfred E. Steers, President of the Itorough of r.rooklyn. were named as the three members of this committee. 'I'he Mitchel-Prendergast committee n]ade no i)reliminarv re- l^ort. Instead ii made a first and tinal report, on July 27, 191 1, Hatly recommending- the piirchai;e. Xo reference was made to City-owned property at Coney Island, which might he reclaimed or developed for park purposes. Xor was any reference made to other property which might have l)ccn acquired at lower cost than Dreamland. The Board of Estimate ]jrints a calendar of husiness for its meetings. The report of the Mitchel-Prendergast committee fa- voring the Dreamland purchase, and recommending options, was not on the calendar. To the contrar)-, the of^cial minutes re\"eal thai the matter was hrouglu U]) without notice. IHE MITCHEL-PRENDERGAST COMMITTEE RECOMMENDED THE $1,500,000 PURCHASE FROM REYNOLDS IN THREE SKEL- ETON PARAGRAPHS. The committee's report was dated Jul}- ly, 1911, the same day it was submitted to the Board. It consisted merely of three skeleton paragraphs, bare of all details on a plan involving an outlay by the City of several million dollars. Nothing! appears in the minutes of the Board in exjilanation of the fact that one option was for $1,350,000 and the other for $1,500,000 on the same and identical piece of property. A closing recommendation that "condemnation proceeding-s be instituted." however, made it clear that the Mitchel-Piendergast committee purposed to i)ay the $1,;; 00,000 rather than the $1,, ^0,000. That the Mitchel-Prendergast committee w^as determined to do all in its power to pay Reynolds the $1,500,000 is further shown by the fact that a resolution providing for condemnation proceedings was presented bv Comptroller Prendergast to the Board. This resolution was adopted unanimously ])y the lUjard. Reso- lutions for the two options, a resolution for the preparation for a map laying out the ]iark, and a resolution for a ]:)ublic hearing as reciuired by law, all were ])resented by the Comptroller and all were voted unaniuiously. No mention was made in. the Mitchel-Prendergast report, nor does any mention whatever ap])car in the board's minutes of this meeting, of the mortgages totalling $1,450,000 on Dreamland. NOR WAS IT REVEALED TPIAT BY THE TERMS Ol- THE MITCHEL-PRENDERGAST OPTION THE CLIA' NOT ONLY WOULD HAA E H.\D TO PAY REYNOLDS $1,500,000, PLUS INTEREST, BUT ALSO PAY THE $1.- 450,000 IN MORTGAGES. NOT ONE BUT TWO REYNOLDS APPRAISERS WERE HIRED BY COMPTROLLER PRENDERGAST TO ADVISE THE CITY WHAT TO PAY FOR DREAMLAND. There is sworn evidence to the effect that either before or after the first options on Dreamland, Comptroller Prendergast hired two Reynolds' ai)in-aisers to advise what the City should 17 pay Reynolds. These appraisers were William P. Rae and Bryan L. Kennelly. Rae testified that the date of his report to Comp- troller Prendergast was April 20, 1912. If this date is correct the value of his report was nil, for the reason that the last of the four options on Dreamland had been voted by the Board of Estimate on January 12, 191 2, or exactly three months before. The testimony of Rae was brought out at hearings in condem- nation proceedings by the city for the acquirement of land for a freight classification yard in connection with the South Brooklyn Marginal Railroad. Kennelly also was questioned regarding Dreamland at the same proceeding, both witnesses being heard shortly before the closing of testimony in May, 1916. It was them revealed that both Rae and Kennelly are apprais- ers for Reynolds or his Brooklyn associates in land deals with the city. Furthermore, it was revealed that Rae had been paid by Joseph Huber for telling Comptroller Prendergast what the city should pay Reynolds for Dreamland. Rae admitted that this plan of payment was arranged between the Comptroller and Huber. As shown by testimony, Pluber w'as the second largest bondholder in Dreamland. RAE'S TESTIMONY SHOWS HE WAS PAID FOR HIS DREAMLAND APPRAISAL FOR COMPTROLLER PRENDERGAST BY HUBER, REYNOLDS' PARTNER. The testimony given by Rae in this connection follows here- with : Q. Mr. Rae, you testified that you made numerous ap- praisals for the Comptroller. Is that correct? A. Yes. Q. Did you appraise for the Comptroller that part of the property belonging to the Dreamland Corporation, or to Joseph Huber, as trustee, which was acquired by the City of New York in a proceeding known as Public Park at Coney Island? A. I did. Q. Was that appraisal made about the year 191 1 or in the year 1910? A. My report is dated April 20, 191 2, to the Comptroller. Q. Was not your appraisal of that property approxi- mately $1,250,000? A. Somewhat above $1,250,000. It was $1,350,000. Q. DID THE COMPTROLLER PAY VoU FOR MAKING THAT APPRAISAL OR THE PROPERTY OWNERS ? A. HE ARRANGED FOR THE PAYMENT BY THE PROPERTY OWNER, MR. HUBER. Kennelly followed Rae on the stand, and was asked who paid him for his appraisal of Dreamland. *T don't remember who paid me," he replied. Rae appraised Dreamland for the Comptroller at $1,350,000; 18 Reynolds lias testified that his purchase price of $617,500 was exorbitant, and the AppeHate Division of the Supreme Court has set aside an award of $1,014,602.32 as "largely excessive." VOLUNTEERING AS A WITNESS AGAINST THE CITY, RAE USED IN REYNOLDS' BEHALF AN APPRAISAL HE HAD GIVEN COMP- TROLLER PRENDERGAST. Rae appeared as a voluntary witness for Reynolds in the South Brooklyn condemnation proceeding. He used in Reynolds' in- terest the same appraisal he had made for the Comptroller. He did this although it was pointed out to him that he was not re- quired to testify, unless he did so voluntarily. He swore in Reynolds' behalf to having given the Comptroller a valuation of $1.32 a square foot on the South Brooklyn property, which liad been obtained by Reynolds for 60 cents a square foot. And fol- lowing Rae's appraisal the City, on recommendation of the ?^Iitchel-Prendergast Committee, took an option of $1.30 a square foot. Kennelly also testified for Reynolds in the South Brooklyn proceeding. He, too, used against the City the appraisal he had made for Comptroller Prendergast. and was a voluntary witness for Reynolds. It was this same Kennelly who testified against the City in the purchase of Rockaway Park, in which proceed- ing Reynolds himself was a witness against the City. COMPTROLLER PRENDERGAST HAS PERSISTED IN REFUSING TO MAKE PUBLIC THE FULL FACTS OF HIS EMPLOYMENT OF REYNOLDS AP- PRAISERS TO ADVISE THE CITY WHAT TO PAY REYNOLDS. The full facts of the employment by the Comptroller of ap- praisers for Reynolds to tell the City what to pay Reynolds or his associates for land have not yet been revealed. Comp- troller Prendergast himself has persisted in refusing to give information on this point. Plainly the facts in this connec- tion are of public importance. But it appears they can only be brought to light by compulsion, or by means of an official investigation. The fact that the first two options contained a "joker" bv which the City would have had to pay the mortgages o'f $1,450,000 on the property was revealed by Mayor Gaynor on August 28, 1911. This was two months 'after the options had been voted by the Board of Estimate. This revelation was made in a communication from Mayor Gaynor to the Cities Committee of the Legislature, then considering a new- City Charter. HOW MAYOR GAYNOR REVEALED THE "JOKER " MAKING THE CITY RESPONSIBLE FOR THE $1,450,000 MORTGAGE ON DREAMLAND. Mayor Gaynor's statement follows: 19 "At the last meetini;- of the IJoard of Estimate and Apportionment a resohition was passed to purchase land at (!oney Island of the i Dreamland Corporation. The price mentioned was $1,500,000, and every member of the Board, I am {|uite sure, supposed that the corpora- tion undertook in the option to convey an imencnm- bered and clear title for that sum. "IjUt mv attention has since ])ecn called to the fact that the option of that Corporation is not tliat it will convey a clear title, l)ut only thai it will convey (these arc the verv w^ords) its 'right, title and interest in and to' the propertv. UPON EXAIMINATION I FIND THE PROPERTY TO BE ENCUMBERED BY ?\10RTGAGES AMOUNTING TO $1,400,000. If the IMayor had a suspensixe veto power he could sus])cnd that resolution until the Board considered it a.iii'ain."' By Reynolds' testimony, the mortgages on the ])ropert>' totalled $1,450,00(1, or $5()',(»00 more than the figure stated l)y Alayor Gaynor. Following Mayor Gaynor's letter two suljstitute oi:)tions were taken on Dreamland. Each of these iu"ovi;ied for the Ciry to get the pro])erty at the 0|)tion price free of encum- brance. NO EXPLANATION OF THE $1,450,000 "JOKER" IS FOUND IN THE BOARD OF ESTIMATE MINUTES. Xo explanation of the omission of this ])rotecting clause from the first two o])tions appears in the minutes of the Hoard of Estimate. Yet this omission would have cost the city $1,450,000 over and above the purchase price. On August 31, 1911. Nelson P. Lewis submitted a report on Dreamland to the lioard of Estimate. Lewis was Chief luigineer to the Board, a position he still holds. A\'ith his re].iort was presented a map of the proposed ])ark. He stated that the full area of the Dreamland pro])erty was S.v2 acres, with a total assessment of $729,500. He reported that seven 'acres were being taken for the park, and that the toted Dreamland assessment was divided as follov/s : AREA TOTAL ASSESSED IN ACRES. A'ALUATION. Dreandand property taken by city. ' 7.0 v$;3 10.000 Dreamland property not taken bv cit\- ' El 3 390,000 $730,000 It w;is set forth in the Lewis report that the map he ]>re- sented had been prepared by the Chief Engineer of the l^opo- graphical Bureau of the P.orough of Brooklyn, from certain records Avith which he was familiar, and other reoortls in his office. Tins map conformed to the report made by the 20 Mitchel-Prendcrgast Ct^nimittec on July 2], ]1)1L and nut to the options voted, on that date by the Board of Estutiatc. (")n this point Eng:incer Lewis stated that the park to be laid out and as shown on the map. "DOES NOi. INCLUDE THE L\XD EXTEXDIXu EROAl SURF A\'EXU'E 20<) FEET SOUTHI< RLY. AXD DOES NOT, THEREFORE. COVER ALL Till- LAXD XAAIED IN THE OPTION.- CHIEF ENGINEER LEWIS REVEALED FACTS PROV- ING THE EXCESSIVE PRICE THE MITCHEL- PRENDERGAST OPTION WOULD GIVE REYNOLDS. Xo explanation as to wh>- this official City ma]) did not include all the ])roi)erty then was made to the Board of Esti- mate. But the map was approved, and thereafter the price, in the third and fourth options, was hxed at the ci])parently decreased price of $1,000,000. F]ut this sum exceeded the assessed value of the smaller area taken by $6(50,000 ; while Reynolds was left in possession of property four times more valuable than the City's part. It was pointed out by Lewis that the first oi)tiun ])rice of •■J) per cent. : and he held that the <:;ption on the decreased area, or the area which at present is being- ])urchased, should be reduced to $(iO!),000. His report ended with the following- statement : "I do not know whether the Dreandand Com])any is prepared to accept the proportion of the sum (^(iOO.OOO) named in the (p])tion which the assessed value r>f the part to be taken bears to that of their entire holdings. I am simply presenting the ma]) which the r)Oard instructed me to prepare and have endeavore(l to give as closely as ]50ssible the assessed value of the land to be acc|uired in order to com])ly witli the jjrcn-isions of the Charter." THE CITY COULD HAVE HAD 90 ACRES, WITH IN- COME COVERING CARRYING CHARGES, FOR $2,250,000, AS AGAINST THE OPTION PRICE OF $1,000,000 FOR REYNOLDS' 7 ACRES. The same day ihe Lewis re])(irt was submitted, an olier was made i'n writing of !)() acres for a i)ark on the Coney Isl.and water front for $2,2.")0,OOO. A bathing house with accommodations for 3,000 ])ersons : two hotels, sexeral stores. an ocean boardwalk, and the steel grandstand of the lirighton Beach race track, were included in the offer. The oher was made with the stateiuent that the income from the hotels, stores, bathing houses and privileges was sufficient to cover all the carrying charg-es of the i)roperty, ilicluding the interest on the i)ro])oseank A. Polk, Cori)oration Counsel, states that Reynolds" attorneys declined to cross-examine McHale because of his excellent qualifications, and adds the following: "The City is informed that these attornevs had agreed among themselves, before AkPLale vvas called' by the Citv to testify in this proceeding, not to cross-examine him. "They were afraid to cross-examine McHale and ])rei)ared • to take their chances by allowing his testimony to stand un- challenged." DAY'S CITY TESTIMONY WAS BASED ON ACTUAL SALES OF CONEY ISLAND LAND. ]:)av's sworn valuation of $449,225.76 was shown to have been ba.sed on sales_of real estate in Coney Island from Fifth street to Sea Gate and lying between Surf avenue and the ocean Thi< included the Dreamland tract. Regarding J)av's testimonv the Polk brief sets forth the following: "the attorneys for t1ie property owners did cross-examine 29 Day. The result of this cross-examination was that Day demonstrated by sales, by leases and by all other facts ob- tainable that had a bearing upon the value of property at Coney Island that the valuations testified to by him are just and fair and represent the fair and reasonable market value of this property, considering it in its most favorable light." The three witnesses for the City testified that the Surf avenue frontage, which was not included in the park, had a^ value four times greater than the land taken by the City. PYLE, THE FIRST REYNOLDS EXPERT, HAD MADE ONLY TWO SALES OF PROPERTY IN CONEY ISLAND IN TEN YEARS. Pyle. the first witness for Reynolds, was shown to have made only two sales of property in Coney Island, one ten years and the other two years, before his testimony. It was also shown that he had made no previous appraisals on the ocean or anywhere in the amusement section of Coney Island. Notwithstanding these facts, he swore that the part of the Dreamland property being taken by the City was worth $1,426,000. WILLIAM M. CALDER, AT PRESENT UNITED STATES SENATOR, WAS NAMED BY GREVE AS AN OFFICER OF THE REALTY ASSOCIATES, THE BROOKLYN CORPORATION WHICH HAS FINANCIALLY ASSISTED REYN- OLDS IN HIS LAND DEALS WITH THE CITY. Greve, who testified that Dreamland had a value of $1,252,908, was cross-examined regarding business affiliations with Reynolds, Frank Bailey and others either directly or indirectly interested with Reynolds in land deals with the city. The following extracts from Greve's testimony indicates the extent of his business affiliations with the group of Brooklyn land speculators in which Reynolds, Bailey and Greve himself are the principals : Q. Are you connected with any real estate companies or corporations here in Brooklyn? A. Several. I am second vice-president of the Realty Associates ; president of Greve & Co. ; vice-president of the Xeponsit Realty Company ; president of the Rockaway Point Company ; secretary and treasurer of the Parkway Baths Company, and some other corporations whose business is not particularly real estate. I have been connected with the Realty Associates about twelve years. Greve was asked how long Frank Bailey and others had been on the Board of Directors of the Realty Associates, and replied : "I couldn't tell you; most all have been on — William M. Calder is one — ^most of them except Mr. Calder have been on a long while." 30 GREVE SHOWED A BUSINESS CONNECTION BE- TWEEN HIMSELF AND RAE, THE REYNOLDS APPRAISER HIRED BY COMPTROLLER PRENDERGAST. Grcve revealed a business, connection between himself and William P. Rae, the Reynolds appraiser hired by Comptroller Prendergast to appraise Dreamland for the City. On this point Greve testified as follows : ''1 made a loan for the Realty Associates on property adjoining Sea Gate, now owned by a corporation controlled, I think, by William P. Rae. I purchased a second mortgage on behalf of the Realty Associates and also made a first mortgage there." Greve, furthermore, was forced to admit that he had owned Dreamland bonds, and that he was a stockholder in the Long Beach Estates, of which Reynolds is president. In this connec- tion the Polk brief for the City states the following: "Air. Greve is a stockholder of the Long Beach Estates. He was the owner of some of the Dreamland bonds, which are secured by the $750,000 mortgage. "He testified that he had sold these bonds, but could not tell the date of the sale or the party to whom he sold them. "THIS RECORD SHOWS THAT HE WAS ASKED AT THREE DIFFERENT HEARINGS WHETHER HE HAD ASCERTAINED THE DATE THAT HE DIS- POSED OF THESE DREAMLAND BONDS AND TO WHOM HE HAD SOLD THEM. AND HIS ANSWER W^AS ALWAYS THAT HE DID NOT KNOW THE DATE OR THE NAME OF THE PERSON." GREVE THROUGH A 'DUMMY" HOLDS AN INDI- RECT INTEREST IN THE DREAMLAND PROCEEDINGS. Another admission forced from Greve was that a "dummy" for himself, or for a company of which he was part owner, held a claim for damage in the Dreamland proceedings. In this regard the Polk brief states the following: "Mr. Greve is part owner of the leasehold from Gertrude Stratton to Catherine Murphy, and also part owner of the Twenty in One iVmusement Company, which had an assign- ment of the lease from Catherine Murphy, who was a dummy for Greve, as the record shows. Either Catherine Murphy or the Twenty in One Amusement Company is the claimant in this proceeding for an award for damage by reason of the ac(|uisition of Damage Parcels Nos. i and 2 (the Dream- land parcels)." Despite all these revelations, Greve was permitted to give de- tailed testimony on Dreamland values, and Reynolds' lawyers based arguments on his testimony in favor of a large award. An estimate of the real merit of Greve's testimony is shown by the fact that he valued Dreamland $238,300 over and above the award, which the Supreme Court set aside as "largely excessive." 31 Uii Ajjnl 5, 1915, the Commissioners made the award of $i,- ': .014.602.32. A.S their oaths of office had been filed on March 14,^; 1912,^ it had taken them more than three years to arrive at this^''" decision. This protracted delay not only meant the piling- of interest charges on the City, but additional expense in feel to •the Commissioners. On October 15. 1915, an order of the Supreme Court of Kino-s County was filed in the office of the County Clerk, Kino-g County, confirmincr the award. The order was signed bv Justice Black- mar, the same justice who confirmed the\great award on Rock- away Park. The order was appealed In- Corporation Counsel Polk. FOUR SUPREME COURT JUSTICES FOUND THAT THERE HAD BEEN AN AGITATION FOR THE CITY TO BUY DREAMLAND. AND THAT REYNOLDS WAS MUCH INTERESTED IN ADVANCING THE PROJECT. On 3^1arch 17, 1916, Justices Jenks, Thomas, .Mills and Rich, ' in the Appellate Division of the Supreme Court, reversed the finding- of Justice Blackmar. The opinion setting aside the award was wrtten by Justice Mills, and was, in part, as follows: "I am very strongly impressed that the purchase by or for the Dreamland Corporation in 1903 or 1904 was at the then full value of the land ; and the evidence warrants no conclu- sion that there was thereafter any such increase in valtie as indicated by this award. ''It seems evident that after the fire in May, 191 1, which almost totally destroyed the structures upon Dreamland, so that that corporation collected some $375,000 insurance, and, in October, 1912, still had $25,000 more of it due, agitation soon began for the taking of these parcels by the City for a public park. "Mr. Reynolds, ])resident of Dreamland, evidently was much interested in advancing the project." THE FOUR JUSTICES WERE STRONG IN THE OPIN- ION THE AWARD WAS "LARGELY EXCESSIVE," BUT REYNOLDS CONTINUES TO DRAW HIS 6 PER CENT. INTEREST. Finally, the justice stated that it was his "strong opinion" that the award for Dreamland was "largely excessive," and the other justices concurring in this opinion, the award was set aside. Justice Carr was the sole member of the court who did not concur in the ruling opinion. The justices on April 7, 1916, appointed William C. Beecher, Thomas O. Callender and Arthur S. Somers as new commission- ers. The Commissioners took their oaths of office on May 15, 1916. At the end of a year this new commission has not heard all of Reynolds" witnesses and has! not heard one witness for the City. Day by day, however, the 6 per cent, interest piles up in Reyn- olds' favor. .32 LIBRARY OF CONGRESS 003 604 007 5