FBI subpoenas 5 school district for data on lawyer

BY ROBERT E. KESSLER AND SANDRA PEDDIE | robert.kessler@newsday.com
sandra.peddie@newsday.com

February 16, 2008

A federal grand jury in Central Islip has opened an investigation into possible fraudulent financial double-dipping at five Long Island school districts, according to several sources.

Agents with the Federal Bureau of Investigation served subpoenas for the financial records of the districts late Friday, according to the sources.

The subpoenas were served a day after Newsday reported that an attorney for the five districts, Lawrence W. Reich, received a public pension of $61,000 a year and health benefits for life after the districts reported to New York State that he was a full-time employee of each district.

Newsday reported that Reich, who said he had done nothing wrong, worked for the districts only part time, while also working for a law firm that was also billing the districts.

The subpoenas, from the office of the United States Attorney for the Eastern District, ordered the school districts -- Baldwin, Bellmore-Merrick High School, Copiague, East Meadow and Harborfields -- to provide all their records involving financial dealings with Reich, and his former law firm, Ingerman Smith Llp. The sources said attorneys at the firm were also part of the focus of the probe.

Ingerman Smith, formerly of Northport, but now located in Hauppauge, has represented nearly 50 Long Island school districts and currently represents approximately 40.

Robert Nardoza, a spokesman for Benton Campbell, the U.S. Attorney for the Eastern District, declined to comment.

Michael Conte, a spokesman for Harborfields, confirmed late Friday that his district had received a subpoena.

Officials for Baldwin, Bellmore-Merrick High School, Copiague and East Meadow did not immediately return phone calls. Reich and a spokesperson for Ingerman Smith also could not immediately be reached.

John Milgrom, a spokesman for New York Attorney General Andrew Cuomo, said Friday his office was reviewing the matter.

"While we've reached no conclusions, we take seriously and will fully investigate any claim involving a breach of the public trust or misuse of public funds," Milgrom said.

A Newsday review of records showed that Reich submitted no time sheets, never worked full time and that school officials knew he was working only part time. He was able to obtain state-funded family health coverage through the Baldwin school district and received pension credits from all five districts.

Reich retired from the districts with an annual pension of $61,459 in September 2006. But he continued working for some of the districts, according to letters he sent asking them to pay him a retainer, rather than a salary.

After Newsday inquired about Reich's arrangement on Thursday, the New York State comptroller sent letters to four of the five districts notifying them that they would be audited to determine whether they were properly classifying people who provide professional services as employees or contractors.

"We want to make sure that only individuals who are entitled to receive a state pension get a state pension," said Emily DeSantis, a spokeswoman for the comptroller.

In July 2007, state auditors uncovered the problem in an audit of the Harborfields school district, but apparently took no action. Although the final audit did not mention the issue, Reich notified the districts in October 2007 that he would no longer work for them.

In December, Ingerman Smith wrote a letter to one of the districts saying the Reich had left the law firm.