Publication Date: June 8, 1997
© Gannett Suburban Newspapers
By Bill Dentzer with Jonathan Bandler
Staff Writers
Among the lakes, ponds and reservoirs that dot Westchester's more rural spaces, Quarry Lake in North Castle is unique, its crystal clear water ranging from patina green to Caribbean blue under the deepest blue sky.
Its beauty belies its recent role as backdrop for a turbid tale of theft, fraud, broken promises, misplaced trust, and greed all to be spun out later this year in a Manhattan courtroom.
Born by accident in the early part of the century, the lake lay more or less undisturbed until 1995, when a group of investors arrived with a thirst for more than water. They wanted to bottle Quarry Lake and sell it like Perrier, using a 23-room mansion overlooking the lake as a private club.
They would buy the lake, the house, and 45 surrounding acres from an enigmatic heiress who had won the property in an estate fight after her prior husband's death. And to sweeten the deal, they would pay millions to install water and sewer lines for neighboring residents.
These residents, though they lived amid one of the greatest reservoir systems in the world, still drew water from wells or collected it from rain, and lived under threat of both drought and contamination from overburdened septic systems. Giving them reliable plumbing was a project the town itself could not afford.
It sounded too good to be true, and it was. The plan faltered amid opposition from environmentalists and neighboring communities and collapsed last summer. But it was really doomed from the start.
As Manhattan prosecutors now allege, the Queens man behind the deal had stolen the money to finance it from the foster care agency he ran. Most of the $2.8 million he allegedly took remains in the hands of the heiress, who refuses to give it back.
And the residents, to whom he appeared as a water-bearing white knight, remain high and dry, with polluted wells and putrid sinkholes in their yards.
"This man was a nice man," said North Castle Supervisor John Lombardi, who badly wanted the new sewer lines. "Why he did this, I have no idea why he did it, or why it was even necessary."
Wardheeler's dream
Despite the charges he faces, people still think of Michael Pope, the central figure in the Quarry Lake saga, as a "nice man." A 36-year-old Harvard graduate and onetime divinity student, he apparently found his calling in helping kids, starting with a youth center in the St. Albans section of his native Queens.
As a ward-heeler for Queens Republicans, his party loyalty won him appointed posts in Mayor Rudolph Giuliani's administration. Through them, he came to be installed as chairman of a not-for-profit foster care agency in Harlem, the Richard Allen Center on Life.
Pope was appointed chairman of the agency in November 1995. On Nov. 9, according to North Castle's records, he had his first meeting with town officials. Claiming to represent a group of anonymous investors, he pitched his dream for Quarry Lake.
A month later, prosecutors now allege, he began withdrawing from the agency the millions he would need to make his dream come true.
Mysterious Veronica Hearst
The lake and its surroundings have a storied past. The neighborhood, Quarry Heights, is named for the granite pits that operated from 1913 to 1916 during the construction of nearby Kensico Dam. The lake was created when water from an underground spring burst from a fissure in the rock, rising so fast that workers were forced to leave their tools behind.
In 1931, amid the Great Depression, a New Yorker named Nathan Straus, whose family was half of the Abraham & Straus department store chain and devoted their wealth and influence to philanthropy and civic causes, built a home beside the lake. He and his wife, Helen Sachs Straus, raised four sons there.
One son, Irving Straus, remembers his father's rule that people bathe before swimming in the lake.
``It was absolutely crystal clear, he said. ``You could see down 20, 30 feet.''
Nathan Straus died in 1961. Six years later, his wife sold 146 acres of the estate to Westchester County for $503,000 to create a nature preserve what is now Cranberry Lake Park. The Straus family held onto 45 acres that included the house and three-acre Quarry Lake.
Helen Straus' family held the property until 1980, when a Colombian manufacturer named Andres de Uribe bought it for $550,000. Two years later, Uribe was dead of brain cancer, and his heirs were fighting his second wife, Veronica, for his estate, including the house and property at Quarry Lake.
The mysterious Veronica de Uribe is now the equally mysterious Veronica Hearst, the fifty-something third wife of 81-year-old Randolph A. Hearst, chairman of the Hearst Corp. and heir to the Hearst publishing fortune. She married the elderly Uribe, her second husband, two months before his death in 1982. In 1985, she settled with Uribe's heirs and received the house and property at Quarry Lake. She married Hearst in July 1987.
In 1992, Veronica Hearst added 2,600 square feet to the house, including a new octagonal living room. Based on town assessment records, the property is now valued around $3.4 million.
An answer to prayers
Exactly how Pope and Hearst came together as buyer and seller has not been disclosed. The real estate firm that worked on the sale would only say that Pope was referred to them through another client whom they would not identify.
Pope initially presented himself to North Castle as the corporate secretary for an investment group called Maverick Investors, which wanted to draw 100,000 gallons a day from Quarry Lake, five days a week, a total of 26 million gallons a year. They planned to convert Hearst's house into a private club, building tennis courts on the property to complement the existing swimming pool. Which came first the idea for the club, or for bottling the water also has not been disclosed.
To North Castle, the plan seemed at once both far-fetched and heaven-sent. Town officials doubted it could turn a profit, but said they might approve it if the investors would install sewer and water lines for roughly 60 Quarry Heights residents who still used wells and septic systems.
The sewer lines would add $3 million to the project, but Pope didn't flinch.
"It seemed like a joke, but he was so convincing that he could make it work," said Kevin Eccleston, a Quarry Heights resident.
It was the same "no problem" attitude that had made workers at the foster care center leery of Pope from the start.
24-count indictment
Ironically, Pope's arrival in November 1995 initially saved the Richard Allen Center on Life. Two months earlier, the city's Administration for Children's Services told the agency it was canceling its contract because of poor performance. The agency sued. Its lawyer, Bruce Hubbard, argued that ACS owed the agency at least a hearing.
In November, the lawsuit was dismissed. According to Hubbard, two weeks later, at the urging of the Giuliani administration, the agency's board of directors installed Pope as chairman and chief executive officer. Pope himself, according to prosecutors, had promised that the agency's contract would be renewed if he were named chairman.
"He had this `I can fix it because I'm connected' attitude that really bothered me," Hubbard said. "He told us he could save the agency and he in fact did that. But now we know why."
Four months earlier, Giuliani had appointed Pope to a two-year term on the advisory board of the city Human Resources Administration/Department of Social Services, ostensibly for his 10 years as director of the St. Albans Youth Outreach Center near his home in Jamaica, Queens. Giuliani also appointed him in November 1995 to the board of directors of the New York City Off Track Betting Corp. Pope's resume says he served on the transition teams for both Giuliani and Gov. George Pataki.
According to Hubbard, even before the directors of the foster-care agency heard of Pope, they met Richard Ross, a Merrill Lynch broker from Yonkers who became the agency's investment adviser after he convinced the agency to let him handle its investments, Hubbard said. Ross, whose resume notes that he is a certified fraud examiner, is allegedly the man who covered for Pope at Merrill Lynch by keeping quiet about the transactions. Both were named in the grand jury's 24-count indictment.
According to prosecutors, two weeks after Pope became chairman, he transferred $2 million from the agency's Citibank account to set up a new account at Merrill Lynch, also obtaining a line of credit. Soon after he transferred another $350,000.
Prosecutors say Pope made his first withdrawal of $250,000 on Dec. 1. They charge that Pope paid Ross $25,000 to keep quiet about the transactions.
Ross pleaded guilty last month to a single charge of criminal possession of stolen property and will be sentenced in September. Reached by phone recently and asked for comment, he hung up the phone.
The Scheme's Team
Meanwhile, in North Castle, people wondered exactly who Pope's investors were. Initially, he claimed that they were wealthy individuals who wanted to remain anonymous. But at the town's insistence, he later produced eleven names who, with Pope, comprised ABW Investors Group.
Among those listed as "principals and acquisition team members" was Rudy Washington, a New York City deputy mayor who is friends with Pope and attends the same Queens church as Pope. But Colleen Roche, a Giuliani spokeswoman, said Washington was not involved in any of Pope's business ventures, including his efforts to buy the Hearst property.
"Michael Pope disappointed a lot of people, including Rudy Washington, whose name was used (as an investor) without his permission or knowledge," Roche said.
Howard Birnbach, a lawyer from Great Neck, attended meetings with Pope in North Castle and was listed as ABW's in-house counsel. Accountant Paul Strohmenger, also of Long Island, was listed as ABW's due diligence advisor. Both referred calls about ABW to Pope's lawyer, Robert Schwartz, who has not returned calls for comment.
Barbara Thompson, a spokeswoman for the Manhattan District Attorney Robert Morgenthau, said prosecutors believe Pope acted alone in making what was to be a $2.35 million down payment on Hearst's property, which he paid in three installments: $250,000 on Dec. 1, 1995; $1.6 million on Jan. 3, 1996; and $500,000 on April 1, 1996.
The non-refundable payment Pope made to Hearst was only for an option to buy the property, and was less than one-third of the roughly $8 million initial asking price. Prosecutors allege he kept the agency in the dark about the withdrawals by arranging for statements to be mailed directly to his home.
In March, agency executives discovered Pope's withdrawals and confronted him. He told them he had invested the money and would repay the agency quickly.
The collapse
The pyramid scheme was collapsing around him, but Pope continued to push the Quarry Lake project. With environmental opposition mounting, he modified his plans and decided to drill wells to draw Quarry Lake's spring water instead of taking it from the lake itself.
The final death knell, as far as anyone knew at the time, came late in June when the town of Harrison, which owned the nearest sewer lines, indicated that they would not let Pope hook up the new sewer lines to theirs. Pope officially pulled the plug the second week in July.
By then, Merrill Lynch had heard from the agency, done a quick review of Pope and Ross, and referred the matter to law enforcement. On July 25, the city took over the Richard Allen Center on Life amid allegations of misuse of funds. The DA subpoenaed its records. Pope resigned as agency chairman and from the HRA advisory board and OTB board as well.
In August, Ross resigned from Merrill Lynch. The same month, the city cut the agency's funding, closing it for good. The cases of 493 foster care children under the agency's care were transferred to other agencies, and 120 people lost their jobs.
"We were told it was because the money was taken and there was none left," said Diane Padgett of Mount Vernon, who was the agency's deputy director. Like many of her colleagues, she still has not been paid for unused vacation. "The workers were very dedicated, and because these were hard-to-place children, everyone was worried about where the kids would go."
On Sept. 4, investigators from the DA's office made their first trip to North Castle to review the records.
No claim against Hearst
No one claims that Veronica Hearst knew the source of Pope's money, but they assumed that once she knew it was stolen, she would return it. That was not to be the case.
In July, RACOL's executive director, Ella McDonald, wrote to Hearst's attorney, Douglas S. Liebhafsky at Wachtell, Lipton, Rosen & Katz. A week later, he wrote back, indicating that although Veronica Hearst had "no legal responsibility" to do so, she nevertheless had "offered to share in the losses suffered by Merrill Lynch as the result of the pledging to it of city funds."
But that position changed by the time Pope was formally charged in May. When Morgenthau announced Pope's indictment, he said Veronica Hearst "has declined to return" the money. Now, New York City is thinking of going to court for it.
"We think that Mrs. Hearst should step up to the plate and be a good citizen and return this money, for which she gave only an option to sell her property," said Lorna Goodman, senior assistant corporation counsel. "This was clearly money stolen from the foster care operation of the city of New York, and it ended up in her hands. It would be an act of good citizenship to return it."
Liebhafsky says Veronica Hearst took the payment without knowing that anything was wrong with it and is therefore entitled to keep it.
"She made a deal with Pope or his Maverick Holdings, and there was a contract to purchase this land," Liebhafsky said. "Basically, nobody, neither the city nor Merrill Lynch nor anybody else has made any claims against Mrs. Hearst, and we don't really anticipate any. If anybody does get around to studying what really happened and what the laws are, they're going to find out that she is within her legal rights."
No Joy in North Castle, Harlem
Pope is currently free on $100,000 bail, facing multiple felony counts of grand larceny and commercial bribery. Meanwhile, the water-poor Quarry Heights residents - those not lucky enough to enjoy their own private, pristine lake - still wonder if they'll ever have reliably clean drinking water, and no house rules against flushing toilets too often.
"Many of us saw (Pope's plan) as the only chance we had to get clean water," Eccleston said. "I was very disappointed when it fell apart."
And those who watched the collapse of their agency have trouble understanding how Veronica Hearst's legal rights take precedence over a moral obligation.
"She should give it back; it was money geared to children and families," said Padgett, the former deputy director. "Maybe if she had given the money back last year (the agency) could have stayed open."
They also wonder how Pope, given his background, could allegedly conspire with Ross to fleece an agency that worked with some of the most underprivileged children in the city.
"These were two middle-class, well-educated black men who did their embezzling on the backs of poor kids and hard workers in Harlem," said Hubbard, who is black. "That's what hit me in the heart."