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February 16, 2003

Trade Center Developer Objects to City's Insurance Talks

By CHARLES V. BAGLI

Larry A. Silverstein, the developer who controls the World Trade Center lease, claims that his effort to get the largest possible insurance settlement to rebuild Lower Manhattan is being undermined by city officials.

With public officials on the verge of adopting a development proposal for the site, Mr. Silverstein has complained in recent weeks that despite his legal obligation to rebuild the trade center he has been shut out of the planning process. At the same time, he said he has been undermined in his negotiations with the 23 insurance companies that provided coverage for the trade center.

Mr. Silverstein is battling the insurers in court, claiming that there were two separate attacks on two buildings at the trade center, entitling him to a double payment of nearly $7 billion that he would use for rebuilding.

In what one participant described as a confrontational meeting at City Hall on Thursday, Mr. Silverstein told Mayor Michael R. Bloomberg that the city's plan to take control of the 16-acre site and billions of dollars in insurance proceeds was unrealistic, according to people on both sides who were there.

According to an executive who had been briefed on the City Hall meeting, Mr. Silverstein also objected to contact between the insurance companies and City Hall that he said undermined his efforts. That was a reference to what Mr. Silverstein believes were secret negotiations between Daniel L. Doctoroff, the deputy mayor for economic development, and Jacques E. Dubois, chairman of Swiss Re America, the largest of the insurers, over a possible insurance settlement, said the executive who had been briefed.

Mr. Doctoroff, who attended the City Hall meeting, acknowledged that he had met with Mr. Dubois, but said the discussions were for informational purposes and did not constitute secret settlement negotiations.

"I have met with Jacques," Mr. Doctoroff said on Friday, "just as I've met with every party in this thing, to understand the issues."

Mr. Silverstein was on his yacht over the weekend and unavailable for comment. Michael McNamara, a spokesman for Swiss Re, said: "We have meetings with many officials, both public and private. We don't comment on those meetings. We intend to be a good corporate citizen."

Mr. Doctoroff has met Mr. Dubois before, over the city's Olympic bid. In December 2001, Swiss Re pledged to contribute at least $100,000 to NYC2012, a group founded by Mr. Doctoroff to promote the city's bid to be the host of the 2012 Olympic Games. Mr. Doctoroff resigned from the group after he became deputy mayor.

Mr. Bloomberg has outlined a vision for Lower Manhattan that is at odds with Mr. Silverstein's. The mayor has proposed that the city take over the trade center site in a land swap with the Port Authority of New York and New Jersey, which currently owns the land. Under this plan, the city would buy out Mr. Silverstein and get the insurance proceeds, which could be spent on housing, transportation and other things both off and on the site. The mayor's plan envisioned negotiating a $5 billion insurance settlement. Mr. Doctoroff said that the number was merely an estimate and not the result of discussions with Swiss Re.

But Mr. Silverstein told the mayor that the city's plan was not feasible.

Six weeks before the terrorist attack on the trade center, Mr. Silverstein completed a deal with the Port Authority of New York and New Jersey valued at $3.2 billion to lease the twin towers for 99 years. His partner, Westfield America, leased the 450,000-square-foot underground mall.

Mr. Silverstein said that under his lease, he is obligated to rebuild the 10 million square feet of office space that once stood at the trade center. But the two rebuilding proposals currently under consideration depict far less commercial space on the site. Mr. Silverstein contends that anything less than 10 million plays into the hands of the insurance companies, because they pay correspondingly less money.

"They're going to have to be tweaked to get up to 10 million square feet," Mr. Silverstein said of the proposals.

His legal battles with the insurance companies have involved months of litigation and a host of claims and counterclaims, mostly expressed in dry legal terms. But Swiss Re has been unusually personal and vitriolic, describing Mr. Silverstein as a rapacious developer whose insurance claims are "extortionate" and a "self-motivated hoax."

Last August, Mr. Dubois of Swiss Re expressed enthusiasm for Mr. Doctoroff's land swap proposal. "I think it's an opportunity for the city to take charge of the site," he said, adding, "We'd be much more amenable in our negotiations if we thought the beneficiaries were the people of New York, rather than someone claiming a huge windfall."

The remarks prompted one lawyer to wonder how an insurance company could offer two different settlements depending not on the insurance contract, but on the identity of the recipient.

The Silverstein camp expressed outrage, suggesting that Mr. Doctoroff was doing the work of the insurance companies, an industry with which he was familiar during his career as an investment banker.

Copyright 2003 The New York Times Company