Why Giuliani Cut De Niro and Weinstein Out of Navy Yard Deal

When Mayor Rudolph Giuliani abruptly yanked the proposed Brooklyn Navy Yard movie studio deal from Robert De Niro and Miramax Films co-chairman Harvey Weinstein, a last-minute detail slipped off City Hall’s “to-do” list. Nobody called Mr. De Niro and Mr. Weinstein to tell them that the Mayor had decided to award the coveted project to Brooklyn entrepreneurs Louis Madigan and Cary Hart, who had waged a bitter six-month campaign to wrest control of the site from the actor and the mogul.

So Mr. De Niro and Mr. Weinstein discovered that they were out after the Mayor announced his decision at a press conference on Oct. 13, according to a friend of both men.

“Bob and Harvey are ripshit,” the friend said. “They put in an enormous amount of time [on the project]. And instead of thanking them, the Mayor consciously or unconsciously shat all over them.”

The niggling omission typified the bizarre struggle over the $150 million project, which would replace 15 acres of rotting Brooklyn waterfront with a dozen sound stages grand enough to compete with Hollywood. Indeed, the Mayor’s curt dismissal of Mr. De Niro and Mr. Weinstein was greeted with instant speculation about Mr. Giuliani’s motives: Surely this was all about the Mayor getting back at Mr. Weinstein for his high-profile support of Hillary Clinton, Mr. Giuliani’s likely opponent in next year’s Senate race.

But a close look at the project’s history-coupled with an exclusive interview with Mr. Madigan-reveals that Senate politics had no apparent role in this strange tale. More to the point, the upstarts’ victory was in part the product of a series of City Hall gaffes, turf wars among mayoral aides and tensions between the competing developers.

The nine-month battle deserves a place among the great real estate struggles of the 1990′s. Improbably, three of the city’s most seasoned deal makers, Mr. De Niro, Mr. Weinstein and their developer and financial backer, Steven Roth, were outmaneuvered by two little-known Brooklynites-Mr. Hart, a dapper set designer with a square soul patch, and Mr. Madigan, a heavyset Internet addict who devotes his time off-line to bowling and opera.

For months, the De Niro-Weinstein-Roth group attempted to take control of the project from Mr. Madigan and his associates, who held temporary development rights to the site-either by partnering with them or by buying them out. But Mr. Madigan claims the tough-minded negotiations of Mr. Roth’s Vornado Realty Trust infuriated him and his partners, driving them into the arms of another developer, New Jersey-based Douglas Steiner, whose company now will develop the project.

The De Niro-Weinstein-Roth trio also had a powerful enemy in City Hall: Deputy Mayor Rudy Washington, who oversees the Navy Yard and was a quiet champion of Mr. Madigan’s group. Mr. Washington spent months working behind the scenes at City Hall to loosen the De Niro-led group’s grip on the project. At one point, according to sources, Mr. Washington even extended Mr. Madigan’s group’s rights to the site, without the apparent knowledge of Mr. De Niro’s group.

A spokesman for the Mayor denied a request to interview Mr. Washington.

Mr. Madigan said Vornado wouldn’t give him a deal that would cover his debts of $2.4 million at a time when he was desperate and had already spent three years working on the project. “We got the property for three reasons,” Mr. Madigan told The Observer . “We offered the city a better deal, we had the right to develop the property, and the other side suffered from greed and massive hubris.”

Mr. Roth’s office didn’t return a call. But one source from the De Niro-Weinstein camp contended that the city would never have bothered to throw its weight behind such a risky project if Mr. De Niro, Mr. Weinstein and Mr. Roth hadn’t given it an initial dose of credibility and star power.

Who Are These People?

Indeed, the very idea that characters so unworthy of boldface type have been given a chance to build the high-profile studio has caused a minor uproar. New York Post columnist Cindy Adams, for instance, recently offered a stinging assessment of the audacious trio, whom she termed “non-anybodies.” “Who are these non-New York players nobody ever heard of? Steiner is a builder in-ready? Jersey.”

But Mr. Madigan grew up in-ready?-Brooklyn, which admittedly is a borough populated by all sorts of tax-paying, New York Post -buying non-anybodies. “My father was a fireman in New York,” he said. “He died from injuries in the famous Waldbaum’s fire in Brooklyn. He fell through the roof with six firemen who died.”

The struggle over the site dates back to last spring, when Mr. Giuliani threw a lavish press conference in a cavernous Navy Yard building to announce that Mr. De Niro, in his capacity as head of TriBeCa Productions, and Mr. Weinstein would soon break ground. At the time, Mr. Madigan’s camp held temporary rights to the site and were hoping to collaborate with the De Niro group.

But they were unhappy with their take in the deal. As The Observer reported at the time, Mr. Madigan and Mr. Hart had quietly threatened to sue to block the project. Meanwhile, they were secretly negotiating to build their own studio with backing from Mr. Steiner.

Only in recent weeks has it become apparent that reporters who trekked to Brooklyn for the press conference were not, in fact, witnessing the closing of a deal, or even something vaguely resembling a deal. In defending City Hall’s decision to yank the project from the De Niro group, Mr. Giuliani noted that, at the time, Mr. De Niro and Mr. Weinstein had only agreed to “explore” the idea.

“The word in the press release, repeated three times, is ‘explore,’” Mr. Giuliani said on Oct. 14. “‘Explore’ means there is no deal to any sensible, fair and honest person.”

But The Observer has obtained a letter, circulated by city officials just before the press conference, indicating that Mr. Giuliani is dramatically underplaying the city’s commitment to the De Niro group. It was written by Charles Millard, former president of the city’s Economic Development Corporation, dated April 29, 1999, and was given to key players involved in the negotiations. “As you know, this past Monday there was a meeting at Gracie Mansion to resolve the final terms for the Brooklyn Navy Yard studio project,” the memo read. “The term sheet now reflects the final rent terms agreed upon by Vornado Realty Trust, TriBeCa Productions and the City of New York. In anticipation of Mayor Giuliani’s announcement of the project next week, please arrange to have a signed copy of the term sheet delivered by overnight mail to my attention tomorrow.”

What’s more, a source in the De Niro camp said, the actor and Mr. Weinstein argued against holding a press conference before a deal was signed. But city officials, apparently eager to see Mr. Giuliani on a dais and swapping stickball-and-Coney Island stories with the actor and the mogul, made it clear they wanted Mr. De Niro and Mr. Weinstein to come to the pressconference.”IftheMayor wants to have a press conference, he gets a press conference,” the source said.

The irony is that City Hall’s decision to hold the press conference, which took place without the consent of Mr. Madigan and Mr. Hart, may have helped cost the De Niro camp the project. The press conference gave Mr. Madigan and Mr. Hart a strong legal hand against the city. It allowed them to accuse officials of acting in bad faith toward them, violating their temporary hold on the site.

In fact, the strength of their legal case was partly what swayed City Hall to reverse course. Mr. Madigan said his lawyers met with city officials in mid-September to persuade them that their deal was better for the city. (It would generate $60 million more in rent revenues, Mayoral aides argue, and wouldn’t require the $25 million city loan that the Miramax group wanted.) But Mr. Madigan also laid out their legal case, and that played a key role in persuading city officials to sign the lease soon after, giving them the project.

After the signing, City Hall buzzed with intrigue about this apparent coup, with many insiders speculating that Mr. Washington had secretly signed the lease without the knowledge of City Corporation counsel Michael Hess and even Mr. Giuliani. But lawyers representing the city were present at the signing of the lease.

What’s more, it’s clear that Senate politics had no role. The instant wisdom around City Hall, concocted even before a jittery flack’s “Thank you, Mr. Mayor!” had put an end to the Oct. 13 press conference, was that Mr. Weinstein’s party for the debut of Talk magazine, with Mrs. Clinton on the cover, killed the deal.

But, according to Mr. Madigan, the city was trying to get him to make a compromise deal with the De Niro-Weinstein camp folks for weeks after the Talk party. “Hess and others were pushing us for an all-party deal long after the Talk magazine blow-up,” Mr. Madigan said.

But Mr. Madigan wouldn’t budge. He told city officials repeatedly that he wouldn’t move forward with Vornado in control. He said if the city didn’t award him and Mr. Steiner the lease, they would sue.

In the end, city lawyers realized that Mr. Madigan had a good shot at winning his lawsuit, and they acquiesced.

So, faced with the Madigan group’s legal claim, Mr. Hess told officials at the Brooklyn Navy Yard Development Corporation that the city’s lawyers thought the Madigan group had a case. According to an administration official with knowledge of the situation, Navy Yard officials mistakenly took Mr. Hess’ opinion as an order from the top to sign the lease, and they did so. (Mr. Hess didn’t return The Observer ‘s call.) Mr. Giuliani was taken completely by surprise, the official said.

Mr. De Niro and Mr. Weinstein have stopped waiting by the phone.