Investigation Finds Port Authority Exercised Lax Oversight Of Sale, Failed To Consider Value Of WTC Name In Future Decades; Conflict Of Interest By Outside Counsel

“World Trade Centers Association” Agrees To Return All Funds Paid By Port Authority For Use Of World Trade Center Name, Not Require Authority To Pay Membership Fees, And Pay New York 1/3 Of All Future Revenue From New York Metro Area

Attorney General Eric T. Schneiderman recently announced a settlement regarding the transfer of rights to the name “World Trade Center” from the Port Authority to a nonprofit called The World Trade Centers Association (WTCA) in 1986. The investigation found that the Port Authority exercised lax oversight and virtually no due diligence when approving the transfer for just $10. As part of the settlement, the Association has agreed to pay back $184,000 – the full amount it received from the Port Authority in order to use that name for the World Trade Center – and to pay New York State 33% of any revenue earned from the World Trade Center name in the New York Metropolitan area in future years. The agreement also calls on the State to direct the funds to the September 11 Memorial Foundation.

“After an investigation that looked back nearly 30 years, we found that the Port Authority sold this association its rights to the ‘World Trade Center’ name for pennies on the dollar,” said Attorney General Schneiderman. “Today’s settlement is a reasonable and fair way to compensate the people of New York State for the use of a cherished symbol—and I am calling on the State to direct these funds to honor those we lost on that terrible day in 2001.”

The investigation, which began in 2013 at the request of Governor Cuomo, found that the Port Authority exercised lax oversight when approving the transfer of the World Trade Center name in 1986 and performed virtually no due diligence. Surviving witnesses and documents indicate that the Port Authority simply failed to foresee the potentially considerable value of the Service Mark in the future or to take adequate steps to secure that value for the benefit of taxpayers in New York and New Jersey. Moreover, the outside counsel for the Port Authority had a clear conflict of interest in connection with the transfer of the name, simultaneously representing both the World Trade Center Association and the Port Authority in the transfer.

Since the offices and archives for both entities were based at the World Trade Center Complex and destroyed on September 11, 2001, much evidence was lost. In order to obtain the facts surrounding the sale of the name, Attorney General Schneiderman’s office interviewed numerous surviving witnesses with some connection to the circumstances including former employees and professionals associated with the Associatino and the Port Authority.

Starting in early 1985, the Port Authority began to explore the best possible way to protect the Service Mark from unlawful infringement and limit legal costs. On February 18, 1986, as advised by outside counsel – who was acting as counsel both for the Port Authority and the Association, a conflict of interest – the Port Authority signed an agreement transferring “the entire right, title and interest in and to said service mark WORLD TRADE CENTER,” among other items. In exchange, the Association agreed to pay the Port Authority $10 and “other consideration” not specified in the agreement. Since then, between 1991 and 2011, as a member of Association, the Port Authority paid an annual membership fee—in total, it has paid fees of approximately $184,000.

The failure to closely scrutinize the terms of the Confirmatory Assignment is consistent with a general culture of lax oversight at the Port Authority during that period. More than one Port Authority witness expressed the then-prevailing Port Authority view that it was “not bound by the same standards as other agencies” with respect to checks and balances.

The evidence did not find that the Association, or its current or former directors, officers or employees engaged in unlawful conduct. Rather, the clearest conclusion is that it benefited from a failure by the Port Authority to exercise sufficient due diligence or to investigate the value of the World Trade Center name. While these failures do not rise to the level of legal wrongdoing, they raise serious doubts about whether the Port Authority acted in the public interest in 1986.

Today’s agreement stipulates that the World Trade Center Association will:

• Pay $184,000 to New York State.
• Pay 33% of any revenues received by from use of the name in New York and New Jersey to for the next twenty (20) years, for up to $15,000 a year
• And waive membership fees for the Port Authority in perpetuity.

The agreement further requests that New York State direct the funds paid pursuant to this Assurance to the September 11 Memorial Foundation.

Full text of the settlement can be found here.