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Payroll probes expanded to special districts, libraries

BY SANDRA PEDDIE AND EDEN LAIKIN | sandra.peddie@newsday.com
eden.laikin@newsday.com

8:48 PM EDT, March 12, 2008

In a significant expansion of the probes into private consultants improperly getting public benefits, the New York State attorney general and the Nassau County comptroller are asking commissioner-run special districts, as well as some libraries, in Nassau to report any such arrangements.

Meanwhile, earlier this month, the Nassau district attorney's office subpoenaed records from dozens of special districts in the county, according to sources close to the probe. The district attorney requested time sheets, work diaries, reports to the state retirement system and retainer agreements for accountants, architects, attorneys, chiropractors, dentists, insurance brokers and nurses, the sources said.

Eric Phillips, spokesman for the district attorney's office, declined to comment.

The three probes mark the first time the investigation into consultants being placed on public payrolls has moved beyond school districts.

Last month, Newsday reported that five school districts falsely reported private, part-time attorney Lawrence Reich as a full-time employee, enabling him to collect a New York State pension of more than $61,000 and health benefits. After the story, the Federal Bureau of Investigation, the Internal Revenue Service and Attorney General Andrew Cuomo launched probes.

In this week's action, 36 districts and five libraries are being asked to report any individuals carried on their payrolls who are not defined as employees under IRS guidelines. Nassau Comptroller Howard Weitzman said he limited the letters to entities over which his office has audit authority.

"Recent events have shown us that this is much more widespread than we previously realized," Weitzman said.

The IRS distinguishes between employees and independent contractors because there are different tax implications for each. It considers factors such as whether the person has set hours, a workplace, time sheets and work that is directly supervised, according to the IRS Web site.

Last week, the New York State comptroller issued an opinion that Reich, of Centerport, had to pay back the pension he has been collecting since September 2006 because the districts improperly classified him as an employee.

Weitzman's letter cited several examples, uncovered by his auditors, of districts that improperly classified certain individuals as employees, enabling them to get benefits.

Sanitary District 6 in West Hempstead, for example, carried three attorneys on the payroll while also using five law firms, according to a 2005 comptroller's audit. None of the three had office space or had to document their hours.

Currently, only one attorney, John Ragano, remains on the payroll, said district Superintendent Martin Carroll. Although Ragano has no office, no set hours and no time sheets, he does not "bill for anything extra," Carroll said.

Ragano didn't return a call for comment yesterday.

John Milgrim, spokesman for the attorney general, said "We're committed to uncovering the full scope of these problems and putting an end to them."