EPCAL runway. File photo: Peter Blasl

With all the talk about the pending EPCAL sale, we still should consider a huge part of it that earns scarce, if any, comment: the EPCAL sale contract. Let’s take a look, in simple, non-lawyerly terms, at this pivotal document. See the EPCAL agreement of sale on the town’s website.  (Editor’s note: The full document is also embedded below.)

After all, this agreement is the heart of the whole EPCAL deal. No need to feel discouraged or overwhelmed to review it. Maybe that’s what those who hammered out this agreement were counting on — that folks in Riverhead would sooner leave it to others to delve into it than do so ourselves. But its critical details are not complicated, and are so careless, so poorly drafted, so much against the town’s interest that they cry out for a hard look by all of us.

With so much to pick from, we should limit this discussion to a few major parts of this contract. When you consider what you are about to read here, you may well wonder whose side our former town officials and their minions, and some of our present ones, were really on as they put this together.

The “Intended Development Plan” in Exhibit B of the agreement is a good place to start. One short page is all that sets out what the buyer, Calverton Aviation & Technology (CAT), has to do with the property after the sale. Remember, the town counts on an aviation manufacturing operation for EPCAL’s future. And it’s true that this agreement requires that the runways will be “improved.” That’s where the clarity, if you can call it that, stops. Then we have the gray area about what CAT will build: 1 million square feet of “commercial and industrial space.” This is the agreement’s primary focus, but see how vague and loose this commitment really is.

The timeframe to build this industrial, 1 million square feet is up in the air, and left entirely to CAT. Exhibit B shows only that it is “contemplated” that buildout will commence “within 18 to 24 months of required approvals.” There’s another snag: approvals remain undefined. Are they site plan approvals, or variances, or DEC permits, or other state or county agencies? The glaring deficiency here is that the agreement says nothing about CAT’s obligation to obtain any approvals. Consider this: the simplest, most basic, boilerplate language in any property sale contract would call for a good faith, diligent effort to obtain approvals, but this contract inexplicably does not.

“Guaranty of performance” sounds like fancy legalese, but all it means is the buyer not only promises to act, but also pays a substantial penalty for failing to do what’s promised. Called a “completion guaranty,” the agreement does indeed have one about a minor part of the deal, CAT’s promise to “improve” the runways, whatever that means. But as to the million square feet of industrial building, there is amazingly no completion guaranty for that, or for any other part of this agreement, as a reading of page 6 and of Exhibit C will show.

What this means is that the Agreement is toothless, because if CAT fails to perform its obligations, including in particular this proposed 1 million square feet of industrial construction, the town (as the CDA) has no power to enforce it. This is because the enforcement language under the agreement provides that the town CDA’s “sole remedy” for material defaults is to “Terminate the Agreement,” and “receive liquidated damages” in the maximum amount of $500,000 (Agreement, pages 29-30), and that no “consequential, indirect, special or punitive” damages may be sought against CAT (page 31).

So what does it mean when the town has the right to terminate the agreement in the event of the buyers’ failure to do what the contract requires? Normally, it generally means the town can retake the property. You would think that those who negotiated this contract would not rely on what normally or generally would happen, that they would have the common sense to SPELL OUT the town’s rights to take back title to the land. But not here.

A crucial definition of when and how title would return to the town after CAT’s default is simply not there, left out, thus open to interpretation – a sure path to costly and prolonged litigation. Avoiding just that should motivate any contract draftsman, negotiator, consultant or town representative. But for those connected to this agreement, it wasn’t even an afterthought. Or was it?

Does some credit go to one councilman, who decried this appalling agreement last December? Sadly no, as now he is resoundingly silent about it, putting as much distance between those remarks and his upcoming, inconsistent support for the deal. But then, Riverhead councilmanic inconsistencies are becoming the norm.

It won’t accomplish much to get into what motivated such a bailout by those who made this agreement on our behalf. Nor will we dwell on the disgusting way it was railroaded through the town board by a 3-2 vote, at the last minute, before the former supervisor left office, having just been defeated at the polls largely owing to his furtive antics with all things EPCAL. His time in office had only hours left. His gullible courtship of the fast-talking song and dance man from Luminati, more than anything else, led to this agreement. No wonder the clever Triple Five seized upon the imbalanced contract just by signing on. But is it that they are so clever, or is it that we have been naive, if not plain stupid? Time to salvage everything is fast running out.

And it’s a waste of time to respond to the illogical argument of some that vague and unclear agreements are to be expected when dealing with big players, no matter how questionable, because, well, that’s just how they operate; that they even consider buying from Riverhead is nothing less than a marvelous gift, like found money, worth any risk. And all deals have risk. Not to worry if, as here, the risk is a reckless gamble.

We might consider the town’s financial administrator’s recent review of what was supposed to be the audited personal and corporate financial statements that CAT was mandated by town board resolution to share. It is a standing regulation of the town that the buyer’s financials shall pass muster with the town’s financial administrator. For his part, he reports that CAT submitted NONE of what the town’s rules require, making it impossible to know how and when CAT will perform anything this agreement calls for them to do.

After the town’s financial chief gave his opinion that town law requires, and candid as it was, he was favored with screaming tirades both from the usual suspects on the town board and even from the elusive and evasive Triple Five patriarch who stood in the audience at a recent town board work session. Ever hear of crocodile tears? He knew exactly what financials he was told he should submit, knew exactly how he deliberately failed to do so, and yet indignantly yelled that he gave everyone everything they wanted. Doesn’t this often-demonstrated lack of respect for the town foretell the level of his respect when the agreement’s post-sale obligations kick in?

What to conclude? This agreement is still most relevant to the upcoming town board vote as to whether CAT is qualified and eligible and credible to perform its obligations. The abysmally poor position in which this agreement places the town, however, compels each town board member to revisit with far more vigor and scrutiny the question of CAT’s qualification and eligibility. The inescapable reality: this sale is based on an utterly deficient agreement, filled by design with broadly generic and vague descriptions, lacking in the most basic definitions, for a $40 million urban renewal sale of the people’s unique and most valuable asset. There are summer houses on LI that sell for that price, but with far better – far more sensible – sales contracts.

Riverhead / CAT Agreement of Sale by East End Local Media Corp. on Scribd

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Greg Blass
Greg has spent his life in public service since he enlisted in the U.S. Navy as a teenager. He is a former Suffolk County Family Court judge, six-term Suffolk County legislator and commissioner of Social Services. Now retired, Greg is active in volunteer work and is a board member of several charities. He lives in Jamesport. Email Greg