Federal prosecutors say a politically connected hotel deal generated six figures in alleged bribes while New York struggled to house thousands of migrants.
Frank Carone, the man who helped build Eric Adams’ political career and served as his first chief of staff, was arrested by the FBI Wednesday morning on federal charges that he accepted $120,000 in bribes to steer a multimillion-dollar city contract to a Queens hotel while migrants flooded New York and the city scrambled to find them shelter.
A 13-count federal indictment unsealed in Brooklyn charges Carone, his brother Anthony Carone, hotel owner Yan Po Zhu and Zhu’s business manager Crystal Chen with conspiracy, federal program bribery, honest services wire fraud, money laundering, obstruction of justice, and tax fraud. All four were arrested Wednesday morning and appeared before U.S. Magistrate Judge Marcia Henry in the afternoon.
The scheme, prosecutors allege, ran from June 2022 through December 2023 and was engineered to exploit one of the worst humanitarian crises in the city’s recent history.
In 2022, New York was legally obligated as a “right to shelter” city to house every homeless person who sought it. Governors from southern states bused thousands of asylum seekers north, overwhelming the existing shelter system. The city began renting entire hotels under emergency contracts managed through the Department of Social Services, funded in part by approximately $1.8 billion in federal grant money that year.
Zhu owned the Microtel Inn by Wyndham at 29-12 40th Avenue in Long Island City, a 75-room hotel. He and Chen hired a consultant with city government experience to help them land one of the emergency shelter contracts. It didn’t work. DSS officials rejected the Microtel repeatedly, citing its small size and its location in a neighborhood already saturated with shelters. Community resistance to additional shelter sites in Long Island City had been sustained and vocal. On June 14, 2022, DSS officials told Chen directly that the Microtel was not a viable location. Two days later, Chen texted their consultant that the location was “a no currently,” but added that Zhu was also speaking to someone else in the mayor’s office.
That someone was Frank Carone.
The two had begun socializing as early as June 3, 2022, when Zhu and Carone were photographed together at Zhu’s Nassau County residence. That evening, according to the indictment, Zhu texted Carone details about the Microtel and solicited his help. Days later, Zhu texted Carone asking who he needed to contact about getting the hotel approved for the shelter program. Carone replied: “Ok standby.”
What followed, prosecutors allege, was a methodical corruption of the city’s emergency procurement process. Carone used his position as chief of staff to direct the DSS commissioner — identified in the indictment only as City Official #1 — to reconsider the Microtel despite the agency’s own professional assessment against it. City Official #2, the First Deputy Commissioner of the Department of Homeless Services, sent emails to DSS staff in July and again in October flagging the Microtel at City Official #1’s direction. Each time, professional staff pushed back. One associate commissioner noted the agency had “consistently told them no because it is directly next to a shelter.” Another DHS staffer complained that replacing the staff’s recommendations with the Microtel meant a loss of 75 shelter units and would require opening additional locations to make up the difference.
None of it stopped the contract from going through. On October 20, 2022, DSS formally requested City Hall approval to award the Microtel an emergency shelter contract. On November 1, the city’s Agency Chief Contracting Officer executed a letter of intent. The Microtel ultimately received $6,825,000 under the arrangement.
The bribe payments had already begun.
On October 14, 2022 — the same day Zhu met with Frank Carone at Carone’s home in Kings County — a holding company controlled by Zhu wired $10,000 to a bank account in the name of Anthony Carone’s law firm. Nine more payments followed over 11 months, totaling $120,000. To disguise them, Zhu’s company executed a document purporting to retain Anthony Carone’s firm for legal assistance in obtaining the shelter contract. The sham agreement called for 12 monthly payments of $10,000. Anthony Carone did not tell his law partners the account was being used, that Zhu had retained the firm, or that he was funneling money out of it to his brother.
The money moved to Frank Carone in two ways: Anthony directed Frank’s personal assistant to transfer funds from the law firm account to Frank’s American Express account, which Frank used for travel, dining, fitness memberships, clothing, and groceries. After Frank left the chief of staff position at the end of 2022, Anthony also began writing checks from the law firm account to Frank’s own law firm, Law Firm #1, which Frank owned and controlled.
The indictment notes that the dormant law firm account Anthony used had sat inactive since he opened it in May 2015. It came back to life in January 2022, the same month Frank Carone was appointed chief of staff.
Beyond the bribe payments, Frank Carone referred other clients to Anthony while serving in city government. In 2022 alone, Anthony funneled approximately $500,000 to Frank through the law firm account, commingling bribe proceeds with legitimate client fees in a way that made the full picture harder to trace. Frank did not disclose any of these payments to the NYC Conflicts of Interest Board, as he was required to do.
The indictment also contains a detail that had not appeared in prior public reporting: City Official #1, the DSS commissioner who ultimately directed his agency to award the Microtel its contract, later left city government and went to work at a consulting firm owned and operated by Frank Carone.
When Chen emailed Anthony Carone in November 2023 requesting to terminate the sham retainer agreement — all 12 payments having been made — Anthony responded demanding two additional months of fees for October and November, despite no services having been rendered. The following day, Frank texted Zhu: “I need to see you.” On December 25, 2023, the two exchanged a series of messages about the payments. Frank told Zhu he was “not happy about something” and would not discuss any future deals until the past was “worked out.” Zhu replied that he had “asked my partners to pay you for a year.” The indictment notes that Frank later deleted that message.
When the Carone brothers learned a federal grand jury was investigating them, prosecutors allege they moved quickly to cover their tracks. In July 2024, Frank and Anthony created a promissory note and backdated it to January 2022 to make the payments from the law firm account appear to be personal loans from Anthony to Frank. They submitted the fabricated document to federal investigators in October 2025. Prosecutors in the bond letter also allege that after Zhu sent Frank an incriminating text asking for help securing the shelter contract, Frank called Anthony, and Anthony then told Zhu to stop texting Frank about it.
Zhu and Chen also obstructed the investigation more directly. When FBI agents executed a search warrant at Zhu’s home on March 14, 2025, Zhu held his hand in front of his face for the duration of the search to prevent agents from using facial recognition to unlock his phone, swinging his arm in the air when agents attempted to hold the device toward him. At Chen’s home the same day, Chen agreed to unlock her phone, then claimed she could not remember her password and entered a series of incorrect codes until agents told her they believed she was lying. She then unlocked it.
Neither Frank nor Anthony Carone reported the bribe income on their initial 2022 tax returns. Anthony amended his personal return and his law firm’s partnership return in 2025, but only after learning of the federal investigation, declaring approximately $300,000 he had previously omitted.
The government, in its bond letter, flagged that Zhu and Chen are Chinese nationals with ties to a country that does not extradite to the United States. Frank Carone, 56, travels internationally and has done so on private planes. He recently sold his Brooklyn home for $4.5 million. Prosecutors are not seeking detention but asked the court for electronic monitoring, significant secured bonds, restricted travel, passport surrender, and a prohibition on contact between defendants.
Frank Carone’s attorney, Arthur Aidala, called the indictment “weak” and built on purely circumstantial evidence, and said that after three years of investigation, prosecutors had produced a case “not worth the paper upon which it is printed.” Aidala noted his client had been notified of the investigation three years ago and maintained his innocence. A spokesperson for former Mayor Adams said Carone had dedicated decades to public service and called it “an ongoing legal matter.”
The arrests came the same day federal agents separately executed search warrants on the homes of current and former NYPD officials as part of a bribery investigation stemming from an inquiry into Jeffrey Maddrey, who served as Adams’ chief of department before resigning in late 2024 amid sexual misconduct allegations. Warrants were also executed on the homes of former Deputy Commissioner Tarik Sheppard and current Chief of Manhattan South James McCarthy. Prosecutors confirmed the two cases are unrelated.
If convicted on the top counts, each defendant faces up to 20 years in prison.
