Huntington official Sal Ferro loaned $4M to developer with stake in Melville project, records show

Huntington Councilman Sal Ferro proposed a change to the town's zoning code that could have allowed a local developer, to whom Ferro loaned $4 million, to build housing and offices in a section of Melville where the developer owns a stake in an office building, records show. 

Town officials in March proposed two resolutions to transform Melville into a walkable downtown and to shore up tax revenue amid waning demand for office space. Town Supervisor Ed Smyth advanced a plan to create a town center in the area south of the Long Island Expressway, between the south service road and Ruland Road.

Ferro's plan could have allowed developer Gregory DeRosa's company, G2D Group, to transform at least one property outside the center, 560 Broadhollow Rd., in which he has a financial stake, into a mixed-use building. DeRosa, who has been sued by an investor for fraud in a civil case, told Newsday last year he would like to redevelop the office building, which was 70% vacant, with apartments, retail and offices.

While the town board on Oct. 4 pulled Ferro's proposal from consideration "for the foreseeable future," just days ahead of a planned vote on both resolutions, it has the option to vote on Ferro's resolution until December. It also delayed a vote on the town center.

Meanwhile, Smyth on Oct. 8 said he asked town ethics board counsel Steve Leventhal to conduct an "ethics inquiry" into whether Ferro "had any conflict of interest with any of the town’s business, or business before the town board, starting with Greg DeRosa."

The town ethics code states town officers should not "participate in any decision or take any official action ... including discussing, deliberating or voting on a matter, when he or she knows or has reason to know that the action may confer a direct or indirect, material, financial or other benefit."

Asked about a potential conflict of interest, Smyth said, "To be clear, we don’t have any belief that there is any business before the town, but Sal wants to make sure the public has confidence in him and that there’s no conflict."

Ethics experts Newsday interviewed said Ferro should not have proposed a town initiative that could potentially benefit a developer with whom he has a financial relationship. 

Susan Lerner, executive director of Common Cause/New York, a nonpartisan group that aims to provide transparency and fairness in government, said in an email: "At a minimum, the lawmaker should have disclosed publicly his personal connection directly to other members of the board and then recused himself for any vote on the project."

Smyth said he did not know that Ferro had personal business dealings with DeRosa.

Leventhal did not return a request for comment, and ethics board chairwoman Sheryl L. Randazzo said she could not comment on matters that may go before the committee.

Ron Alber, Ferro's Commack-based attorney, said in an email that Ferro "does not stand to benefit from any DeRosa projects in [the] Town of Huntington."

$4M in loans to DeRosa

Ferro wired a total of $4 million between July 17, 2023, and April, 3, 2024, to DeRosa, his wife, Nicolle, and Spectre Consulting Group LLC, in which DeRosa owns a stake, according to Ferro's attorney and legal records. 

Ferro, a former owner of a home improvement company and a past president of the Long Island Builders Institute, told Newsday he had known DeRosa for years. DeRosa asked him for a loan because he had a cash flow problem, Ferro said. 

"I saw he had plenty of real estate to back it and I gave him a loan," Ferro said. "I thought it was going to be a short-term loan."

Ferro and the DeRosas signed two mortgages, making the DeRosas' Woodfield Court home in Laurel Hollow collateral for $2.5 million of the debt, property records show. 

In February, Ferro loaned another $1.5 million to the developer, Alber said, adding the loans had annual interest rates ranging from 12% to 15%, with maturity terms ranging from one week to a little more than two years.

The DeRosas paid back $500,000, but defaulted on all three loans, the attorney said. 

Before Ferro made the loans, the DeRosas got a $2.84 million mortgage on their Laurel Hollow property in 2020 from Morgan Stanley, records show. The home has been in contract to sell since May, according to Zillow. The home was last listed for $4.4 million. 

In an email to Newsday, Ferro, 60, of Commack, said, "I have followed every appropriate channel to ensure that my business decisions did not create a conflict of interest. But ... I allowed myself to make significant loans based on false information."

DeRosa is facing multiple lawsuits, including one filed last month alleging he defrauded a Huntington investor out of millions of dollars that were to be used to purchase a commercial property in Huntington, Newsday previously reported.

In a lawsuit filed last month, John P. Paci III, a former Huntington school board member and onetime backup quarterback for the New York Jets, said he provided $4.6 million to G2D to purchase the former Gundermann & Gundermann insurance office at 175 W. Carver St. in Huntington.

Paci alleged DeRosa knowingly misrepresented the likelihood that United Healthcare would agree to a 16-year lease at the property. 

DeRosa declined to comment. 

DeRosa's various LI projects

DeRosa's company, G2D Group, owns a 12% share in 560 Broadhollow Rd., according to Ferro's lawyer.

"In the short time that Mr. Ferro has known the debtor Gregory DeRosa, Mr. Ferro understood debtor Gregory DeRosa to have a minority interest in the ownership of the office building located at 560 Broadhollow Road," Alber said in an email. 

DeRosa also has a financial stake in about a dozen other apartment and office buildings on Long Island, according to property records and documents from regional industrial development agencies, which are authorized to grant tax benefits with the goal of spurring economic development. 

The developer has received tax incentives to build apartments at 1000 New York Ave. and 30 Stewart Ave. in Huntington, records show.

DeRosa told Newsday last summer that G2D was considering building 120 apartments above retail and office space at 560 Broadhollow Rd.

He has a stake in other nearby office buildings, including 575 and 576 Broadhollow Rd., according to tax and business registration records.

The original resolutions for the Melville downtown plan did not have a cap on the number of housing units. In late March, the town board set the maximum number of units for both proposals at 3,000, which was reduced to 2,500 in September. Citing community feedback, the board is proposing to further reduce housing for the town center to 1,500 units at a public hearing on Nov. 19.

"The town center is the jewel of this plan, and everything else was secondary to it," Smyth said. "The mixed-use outer area was not necessary for the success of the town center, and it was becoming a growing distraction." 

Ferro's proposal would have required developers to request special permits from the town.

Town records show Ferro, who joined the Huntington Town Board in 2022 and whose annual salary for 2024 is $76,840.92, has voted at least four times since March to set public hearings and extend the time to consider the measures. 

Ferro has said previously the Melville plan "will spur a huge amount of private investment to our area." 

"It will be a domino effect not only to the town and county through tax revenue but to the region overall with construction jobs and eventually small businesses such as retail and restaurants," he said.

Ethical concerns raised

Elected town officials are required to complete annual financial disclosure statements, which help identify potential conflicts. 

Ferro filed a disclosure with the town's ethics board in 2022 and 2023, Huntington Town Attorney Susan Coleman said.

Ferro's attorney, Alber, said his 2023 disclosure mentioned Spectre, a DeRosa company, and Ferro's earnings from the loan transactions.

Alber would not answer whether Ferro listed DeRosa's name on the disclosure. Coleman did not provide additional details on the disclosure.

Newsday requested the disclosure statements under the state's Freedom of Information Law after Ferro declined to provide the documents.

Neither the town nor Ferro's attorney would confirm whether Ferro sought an advisory opinion from the town ethics board on potential conflicts before sponsoring or voting on items related to Melville's redevelopment. 

If the ethics board finds Ferro violated any town code, the board will determine the penalties, Smyth said.

Ethics experts who reviewed Huntington Town’s code of conduct at Newsday's request said elected officials have a greater burden to be transparent.

Rachael Fauss, senior policy adviser for Reinvent Albany, which advocates for transparent and accountable New York government, said it’s up to the elected official to make sure everyone was aware that there could be a conflict.

"The onus is on the official to make sure it’s seen. If there’s enough of an interest to report it on the form, then there’s enough of an interest to ask the ethics board if a recusal is appropriate," she said.

Peter Loge, director of the Project on Ethics in Political Communication at the George Washington University in Washington, D.C., said: "A charitable view is that Ferro’s actions were aboveboard because he was familiar with DeRosa through his work as the past president of the building organization, and like all of us we sometimes do things for people we are familiar with or friendly with. It doesn’t have to be nefarious."

"But once you’re an elected official, you have a greater responsibility to not only be aboveboard, but to be seen to be aboveboard," Loge said.

"You have to avoid even the cynical appearance of being corrupt," he added.