A Nassau County judge has suspended prominent Democratic attorney Steven R. Schlesinger from distributing funds from an $11 million foundation he controls as permanent receiver.
Schlesinger’s suspension comes after he had been ordered to file an interim accounting of the Kermit Gitenstein Foundation’s finances no later than Dec. 10. The judge said in court that he found donations from the charity “inconsistent” with Schlesinger’s court filings.
Surrogate’s Court Judge Edward McCarty also appointed his own investigator to review Schlesinger’s stewardship of the foundation amid ongoing investigations by the state attorney general and inspector general for the state court system.StoryLawyer must give accounting of $11M charityStoryAudio: Judge Edward M. McCarty III hearing (8 minutes long)Story$11M trust's head faces cronyism questions
“There were certain aspects of the accounting, that I’m not going to go into, which I found inconsistent with other filings,” McCarty said during a hearing Thursday in Mineola. “The court finds the need for a far more definitive analysis of the documents.”
Schlesinger, who is managing partner of the Garden City law firm Jaspan Schlesinger, LLP, attended the Thursday hearing and promised an appeal of McCarty’s order for the court to probe the foundation further. Schlesinger said McCarty’s investigator was not needed because he had filed “a clean accounting” of the foundation’s money.
“I’m troubled by the court’s swan song in this,” Schlesinger said, making an apparent reference to McCarty’s retirement at the end of the month. “My obligation will be to appeal your order simply because it would be a waste of money for the foundation and duplicate what the attorney general is already doing.”
Schlesinger will maintain the position of receiver and oversee administration of the foundation during the court’s investigation, McCarty said.
Bennett Gershman, a former Manhattan prosecutor and now a professor of law at Pace University in White Plains who specializes in government and judicial ethics, said he had never heard of a receiver suspended under the circumstances like those surrounding Schlesinger’s control of the Gitenstein foundation.
“It strikes me as unusual,” Gershman said. “The judge is obviously troubled by what he’s seen in the records. Given the fact that the attorney general is already investigating, it shows the gravity of the matter.”
Though McCarty did not specify what he discovered in the accounting that warranted court investigation, he said that he must ensure “that the fiduciary receiver executes his duties without fraud, the appearance of impropriety or political consideration.”
The judge named Suffolk County attorney Joseph W. Ryan Jr., a former federal prosecutor who once served as president of the Nassau County Bar Association, to investigate the operation of the Gitenstein Foundation. McCarty said he expected Ryan’s examination of the foundation to last “a few months” and that Ryan would be paid from money in the charity’s bank accounts.
McCarty had ordered the accounting on Oct. 13 after a Newsday investigation in August showed Schlesinger, an influential attorney with the Nassau County Democratic Party, steered gifts from the foundation to organizations where he had personal connections.
The gifts included $250,000 to a nonprofit run by his friend, Oheka Castle owner Gary Melius; $50,000 to a charity run by another friend, former Sen. Alfonse D’Amato; $1 million to the Jacob D. Fuchsberg School of Law at Touro College, where Schlesinger is a member of the board of directors; and $100,000 to a children’s camp where Nassau County Democratic Party boss Jay Jacobs is a board member, court records show.
Schlesinger’s disbursement of $250,000 from the foundation to Melius’ charity came the same week Schlesinger held his wedding at Oheka Castle, Melius’ Gold Coast estate. Schlesinger paid Melius $75,000 for the wedding five months after it occurred and didn’t provide an itemized receipt when Newsday asked for one.
McCarty said that his trust, and the public’s trust in Schlesinger’s “execution” of the mission of the Gitenstein Foundation, “were radically changed” as a result of “public media” reporting on the charity.
After Shirley Gitenstein died in 2007 without leaving an heir, her estate — which included a family foundation that gave money to Jewish organizations and health care — landed in Nassau County Surrogate’s Court. McCarty’s predecessor, former Surrogate’s Court Judge John B. Riordan, chose Schlesinger to be permanent receiver of the foundation in November 2007.
The accounting Schlesinger filed is dated Dec. 4 and shows the Gitenstein Foundation has a cash balance of $1.8 million and that $11.2 million in distributions have been made between 2009 and Oct. 31, 2015. Schlesinger has not yet applied to be paid commissions for his work as a receiver, the accounting shows.
Ryan’s investigation into Schlesinger’s role as receiver of the Gitenstein Foundation joins an ongoing investigation by the state attorney general’s Charities Bureau, which regulates charities in New York. The attorney general’s office issued subpoenas in August to other charities that received foundation money from Schlesinger, including North Shore-LIJ, which received $4.2 million from the foundation in 2011, and Nassau Healthcare Corp., the public benefit corporation that runs Nassau University Medical Center. In 2009, the foundation gave the hospital center $1.2 million to buy three digital mammography units.
Schlesinger also received a subpoena from the attorney general, sources said.
Emily Stern, an assistant attorney general assigned to the attorney general’s Charities Bureau, said her investigation wouldn’t be limited despite McCarty’s appointment of his own investigator.
“I’m certainly happy to confer with Mr. Ryan,” Stern said. “We don’t usually have a court-appointed investigator work with the state.”
Jaspan Schlesinger attorney Michael P. Ryan, who represented Schlesinger at the hearing, said McCarty had engaged in an “improper exercise of judicial discretion” by stating that he found donations “inconsistent” with court filings and then not giving Schlesinger and his law firm an opportunity to respond to specific allegations from the accounting.
“You make some sort of scurrilous remark about some sort of findings in the accounting that aren’t proper,” Michael P. Ryan said. “Please, spread them on the record and I can answer them.”
McCarty noted Michael P. Ryan’s complaint and added that he thought Schlesinger would be “more than happy” to cooperate with the new investigator and the attorney general’s probe.
“I’m sorry if I feel outraged, your honor, but I do,” Ryan said.
“Well, control your outrage,” McCarty said.