In a federal corruption case, a New York City homeless crisis emergency shelter contract worth $6.825 million has transformed into a scandal. The Eastern District Court of Brooklyn unveiled a 13-count indictment on the 24th, charging former New York City Mayor Adams’ chief of staff, Frank V. Carone, with bribery. The indictment alleges that Carone assisted a Chinese hotel operator, Yan Po Zhu (also known as Andy Zhu), in obtaining the shelter contract through misuse of power. It also accuses them of money laundering, tax evasion, and falsifying evidence through a law firm’s account.
The four defendants, including the 56-year-old Carone, his 54-year-old brother and lawyer Anthony J. Carone, the 51-year-old hotel operator Zhu, and 39-year-old hotel manager Crystal Chen, were arrested on Wednesday morning and appeared in court in the afternoon. Both Zhu and Chen are said to be of Chinese nationality, with Zhu reportedly originating from Fujian province.
According to federal prosecutors, in 2022, New York City faced an influx of asylum seekers, leading to a shortage of shelter space. The city began signing emergency shelter contracts with hotels. The city received approximately $1.8 billion and $2.5 billion in federal aid in 2022 and 2023, respectively, to accommodate asylum seekers. However, the defendants are accused of exploiting this crisis for personal gain.
The Microtel Inn, a small hotel located at 29-12 40th Avenue in Long Island City, was not initially a favored shelter location by the city government. Officials from the Department of Social Services (DSS) had repeatedly deemed the hotel unsuitable due to its small size of 75 rooms and the strong opposition from the community, given the concentration of shelters in Long Island City.
Internal emails revealed complaints from officials when the Microtel location was reconsidered, indicating the reluctance and skepticism towards the choice. However, after Carone’s involvement, the Microtel case was reconsidered and finally awarded the emergency shelter contract in November 2022, valued at $6.825 million.
The prosecution alleges that, as part of the exchange, Zhu and Chen paid a total of $120,000 in bribes, funneled through a law firm controlled by Carone’s brother. To conceal the flow of funds, they signed a fictitious consultant agreement with the law firm, which was supposedly for legal services that were never rendered. These funds were later used to pay Carone’s personal expenses, including travel, dining, gym memberships, clothing, and daily purchases.
The indictment includes charges of wire fraud, federal program bribery, money laundering, obstruction of justice, and tax-related offenses. If convicted, the defendants face a maximum sentence of 20 years for each felony charge. Following their court appearance in the Brooklyn federal court on the 24th, the defendants were granted bail. Carone’s bail was set at $2 million, his brother’s at $500,000, Zhu’s at $8 million with electronic monitoring, and Chen’s at $100,000 pending trial.
Carone, aged 56, is a close ally of former Mayor Adams for decades. Records show that Zhu had made substantial donations to Adams’ campaign in 2018 and 2023, and Chen contributed in 2021. This case marks the latest corruption scandal surrounding the Adams administration, with federal authorities conducting simultaneous searches on the residences of several current and former high-ranking NYPD officials closely associated with Adams on the 24th.
Carone’s attorney, Arthur Aidala, criticized the case as a fabrication of charges by federal prosecutors after years of investigation. He emphasized that the Carone brothers acted lawfully and the allegations were misleading. Despite Carone’s assistance in managing the immigrant crisis, Aidala stated that his involvement with the shelter contract was irrelevant. He expressed confidence that the truth would be revealed during trial and believed the jury would render a verdict of not guilty.
Carone had previously denied any wrongdoing when the investigation was first exposed earlier this year, asserting his innocence.