Shawn Boburg The New Jersey Record
The Port Authority’s $10 sale of the World Trade Center name represented a gross undervaluation of the iconic trademark resulting from “lax oversight” and other problems at the bi-state agency when the deal was struck in the 1980s, a yearlong investigation by the New York attorney general has found.
The attorney general found no criminal wrongdoing but is expected to announce a settlement on Friday with the non-profit group that purchased the naming rights in a quiet deal 30 years ago and has since charged others for the privilege of labeling buildings as a “World Trade Center.”
Under the settlement, the World Trade Centers Association has agreed to pay up to $480,000 to New York State over the next 20 years. The attorney general wants that money directed to the National September 11 Memorial & Museum in lower Manhattan.
The investigation was initiated after The Record published an article about the millions of dollars the non-profit and its director, a retired Port Authority executive, made by selling the naming rights. Authorities acknowledged that the $10 deal would likely hold up to a legal challenge.
But they slammed the Port Authority’s oversight, writing in a settlement agreement obtained by The Record that the deal was made after “virtually no due diligence” by the Port Authority. And they also found that the outside attorney who advised the Port Authority to sell the trademark was working for the non-profit at the same time — what prosecutors called “a clear conflict of interest.”
That lawyer has since died, investigators said, as has Guy Tozzoli, the former Port Authority executive who made millions leading the non-profit, as it sold the World Trade Center name for use on buildings in hundreds of cities worldwide. Tozzoli’s base salary rose to $400,000 by 2011, and he received benefits from the non-profit like a luxury car, membership at the Rockland Country Club and a retirement package, investigators found. He died in 2013.
“After an investigation that looked back nearly 30 years, we found that the Port Authority sold this association its rights to the ‘World Trade Center’ name for pennies on the dollar,” New York Attorney General Eric Schneiderman said in a statement. He called the settlement “a reasonable and fair way to compensate the people of New York State for the use of a cherished symbol.”
The private association, which has more than 300 members, charges an initial $200,000 for use of the World Trade Center name on a building, plus $10,000 annually. It has also licensed the trademark for use on a host of products, including greeting cards, pens and binoculars. In 2012, it had revenues of about $7 million.
The investigation, which involved reviewing about 30,000 documents and interviewing surviving witnesses, generated a detailed timeline of how the trademark for a publicly owned complex fell into private hands. It was also complicated by the deaths of central players, faded memories and the loss of archived documents that were stored in the Twin Towers when they were destroyed in the 9/11 attacks, authorities said.
Investigators found that the Port Authority became concerned about the unauthorized use of the World Trade Center name in the mid-1980s. It turned to an outside attorney, Lee Robinson of the firm of Curtis, Morris & Safford, who advised registering the trademark in New York and New Jersey. But Robinson also advised the agency that the World Trade Centers Association, which Tozzoli had already founded, should be considered the “proper owner” and that the Port Authority should sign over the rights to avoid “the political ramifications incident to the Port Authority having to bring an infringement suit in, say, California.”
What his legal opinion left out, authorities wrote, was that the association was also his client.
“As outside counsel, Robinson had a clear conflict of interest that may have affected his legal advice in guiding the Port Authority,” the settlement agreement states.
Investigators said several people they interviewed “maintained that conflicts of interest like Robinson’s were commonplace in the 1980s.” And authorities concluded that Port Authority officials probably knew about the conflict: Robinson had close personal ties to the both the Port Authority’s general counsel — he was a law school roommate — and Tozzoli, who used his influence inside the Port Authority to aid the fledgling non-profit.
Nevertheless, the trademark was signed over in 1986 by a corporate secretary.
Two former Port Authority employees told investigators that the deal wouldn’t have required any other approval by Port Authority commissioners because the threshold for their consideration at the time was any contract worth more than $10,000.
“The failure to closely scrutinize the terms” of the deal, prosecutors wrote, “is consistent with a general culture of lax oversight at the Port Authority during that period.”
The former chief of the Port Authority’s division in charge of contracts, who is unnamed in the settlement agreement, told investigators that her responsibility at the agency was hiring “honest, capable employees” and that she was “not a believer in oversight.” She told them that she was not “interested” in copyright and trademark issues and would not have reviewed the work of her staff on those issues. Nor would the agency’s top attorney at the time, she said, “who was too senior to oversee the junior attorneys responsible for intellectual property issues.”
The agreement added: “More than one Port Authority witness expressed the then-prevailing Port Authority view that it was ‘not bound by the same standards as other agencies’ with respect to checks and balances.”
Investigators said they could not find any evidence that Tozzoli “exerted undue influence” during the transfer of the naming rights.
“The clearest conclusion is that WTCA benefited from a failure by the Port Authority to exercise sufficient due diligence or to investigate the value of the Service Mark,” prosecutors wrote. “While these failures do not rise to the level of legal wrongdoing, they raise serious doubts about whether the Port Authority acted in the public interest in 1986.”
But New York authorities said the deal would likely hold up in a legal challenge because the Port Authority has acknowledged the transfer of naming rights in documents since then and raised no question about it.
The settlement agreement says the association neither admits nor denies the findings but does deny any laws were broken.
“At the same time, WTCA appreciates the OAG’s [Office of the Attorney General] conclusion that the available evidence does not suggest that its current or former directors, officers or employees engaged in any unlawful conduct in connection with the transaction that gave rise to this investigation,” the association wrote in a response to the findings.
The association agreed to pay New York State $184,000 and as much as $15,000 a year it receives from use of the name in New York or New Jersey for the next 20 years. The Port Authority is granted membership in the association — providing use of the World Trade Center name — free of charge. In exchange, the attorney general agreed not to take any legal action and end its investigation. A spokesman for Schneiderman’s office said the decision on where to direct the money from the settlement rests with New York Gov. Andrew Cuomo, but that the attorney general was recommending it go to the 9/11 Memorial and Museum.
“WTCA fully cooperated with the AG’s investigation and agreed to make certain payments to the State of New York in order to put this matter behind us and to demonstrate that no revenue received by WTCA in the States of New York and New Jersey is being used for WTCA’s own gain,” said Bella Heule, executive vice president of the World Trade Centers Association. “We join with the AG in requesting, and we strongly hope, that WTCA’s monetary contribution will go to the September 11 Memorial Foundation.”
The agreement does not stop other parties from challenging the association’s ownership of the trademark, though.
And Port Authority Chairman John Degnan, who was appointed last year and first learned about the deal on Thursday, said he would consider taking action.
“I intend to examine whether there is a basis for the Port Authority to file a similar action,” he said.
