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Five districts falsely reported lawyer's job status

BY SANDRA PEDDIE | sandra.peddie@newsday.com

February 15, 2008

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Five Long Island school districts falsely reported to the state that a part-time private attorney was a full-time employee in each district, enabling him to earn a public pension of nearly $62,000 and health benefits for life.

At the same time, the districts paid his law firm more than $2.5 million in fees, records show.

The attorney, Lawrence W. Reich, was listed as full time by five different school districts at once - Baldwin, Copiague, East Meadow, Bellmore-Merrick High School and Harborfields, according to records supplied by the New York State comptroller's office. In 2000, for example, he was credited with working 1,271 days in one year. The year before, he was credited with working 1,286 days.

State auditors uncovered the problem seven months ago in Harborfields, but took no action. Yesterday, the state comptroller sent letters to four of the five districts - Baldwin, Copiague, Bellmore-Merrick and Harborfields - notifying them that they would be audited to determine whether they were properly classifying people who provide professional services as employees or contractors.

In a statement, Comptroller Thomas DiNapoli said, "We have decided to take a closer look at this issue to make sure that only those individuals who are entitled to receive a state pension get a state pension."

Reich defended his arrangement with the districts as "common practice" among attorneys on Long Island.

A Newsday review of records shows that Reich submitted no time sheets, never worked full time for any of the districts and that school officials knew he was only working part time. They allowed him to collect public benefits worth tens of thousands of dollars. His law firm, Ingerman Smith of Northport, knew of the arrangement, as well, the records show. And an official at one district even made light of the situation in a letter warning Reich that there might be a problem with his status and asking him how to "correct the record" of his "employment."

Records show that Reich drafted contracts setting the compensation for superintendents and other top administrators. School officials told Newsday it wasn't a conflict of interest for him to do that while he was working as the school attorney because he reported to the boards of education, not the superintendents.

Under Internal Revenue Service rules, a person cannot be paid both as an independent contractor and employee for the same job.

"Clearly, it's an attempt to manipulate the system so that a person can receive Cadillac fringe benefits that a person in the private sector would otherwise not be entitled to," said Paul Sabatino, a municipal lawyer who is also former Suffolk chief deputy county executive.

"To me, that has the appearance of impropriety, and I wouldn't do it," said William Bernstein, co-chairman of Suffolk Bar Association's taxation committee. "It's obvious to me why he wanted to be an employee."

In an interview, Reich insisted he had done nothing wrong. "I don't file these papers," he said. "I don't have the faintest idea what they're filing for me."

He said that he did propose that the districts pay him a salary, while also paying a retainer to his firm, in which he was a partner. "I followed essentially a practice that was very common among my colleagues in the industry," he said.

Former State Comptroller Alan Hevesi harshly criticized a similar arrangement in February 2005, when his office discovered that a small state authority for horse breeding had given Rocky Point attorney Steven Losquadro full-time benefits, even though he worked part time. Hevesi called the arrangement "unacceptable and highly inappropriate," and Losquadro agreed to stop receiving health benefits.

That audit, reported in Newsday, caught the attention of Joseph Dragone, Harborfields' then-assistant superintendent for business. On March 3, 2005, he wrote Reich, asking him how to "correct the record of your 'employment' by the school district."

He added, "Although you are obviously better looking than Steven Losquadro, I would still not like to see your picture in Newsday, nor am I interested, quite frankly, in my own fifteen minutes of fame."

A copy of the letter was sent to then-Harborfields Superintendent Raymond McCloat, since retired and now working in Freeport schools. In an interview, McCloat said Reich's arrangement was "never questioned" while he was at Harborfields.

Harborfields officials refused to release Dragone's letter and other correspondence requested under the Freedom of Information Law, but Newsday obtained them elsewhere.

Dragone declined to be interviewed, but said in an e-mail: "Sorry, but other than the fact that Larry was a professional colleague in three districts in which I worked and good friend for more than 30 years, I would have no desire to comment to the news media about my relationship with him."

Reich began his career in the state Education Department Office of Counsel in 1967, according to his resume. He left in 1978 to work for the law firm. That same year, he started working for the Baldwin school district, which provided him with family health coverage.