Koch: This isn't how I used city funds

BY KARLA SCHUSTER | karla.schuster@newsday.com

November 30, 2007

Former mayor Ed Koch and current city officials said Thursday that charging travel and security expenses to obscure mayoral agencies was not routine at City Hall before or after Rudy Giuliani took office.

"That this was past practice is absolutely wrong," Koch said. "It didn't happen under me and I don't think it happened with David Dinkins, either."

Still, City Comptroller William Thompson said that when asked to look into the Giuliani-era recording practice in early 2002, aides to Mayor Michael Bloomberg told Thompson that they determined all the expenses charged to the obscure agencies were legitimate mayoral security costs.

"It's not a preferred way of doing budgeting; it's not transparent or open; and it's not the way the Bloomberg administration does business," Thompson said Thursday.

Giuliani, who served as mayor from 1994 through 2001, has faced questions over whether he tried to hide certain expenses during his second term as mayor since a report surfaced on Wednesday on the Web site Politico.com detailing how travel and security costs were shifted to little-known agencies such as the city Loft Board or the Procurement Policy Board. A review of some of the records in question shows that not all of the expenses appear to be travel- or security-related.

The tens of thousands of dollars were shifted into the agencies from 1999 to 2001 -- during a time Giuliani was reportedly involved in an extramarital affair with Judith Nathan, now his third wife.

Giuliani and his aides have said that they don't know how or why the expenses ended up in the other agencies' budgets, but that all the expenses were reimbursed by the Police Department, which supplies the mayoral security detail. Giuliani's aides have defended the moves as common past practice.

"At the end of the fiscal year, the Police Department would reimburse the funds so none of the offices would be out of any money. It was always returned," said Joseph Lhota, a former deputy mayor under Giuliani.

Bloomberg also referred the matter to the city's Department of Investigation, according to Thompson and Bloomberg spokesman Stu Loeser.

"During the Giuliani administration, we believe that security expenses that were originally paid by the mayor's office were ultimately reimbursed by the police department," Loeser said in an e-mail.

A spokeswoman for the DOI declined to comment, except to say that the agency "is gathering the files related to the investigation" of the Giuliani travel expenses.

A former Bloomberg administration official said he recalled Thompson's letter about the Giuliani travel and security expenses, but said it was hardly a priority, given the other issues facing the then-new mayor.

"This was just not a big issue for us," the official said, "not when there were probably fires still burning at the World Trade Center."

Thompson, whose auditors uncovered the accounting practice during an audit of the Loft Board, said he did not believe it broke any laws.

But a former Koch budget director, Alaire Townsend, said the practice "doesn't make a lot of sense.

"Money might get moved around within the mayor's office, but I don't know why an expense of the NYPD would get recorded that way," she said, "unless you just didn't want people to find it." Karla Schuster, Dan Janison, Anthony DeStefano, Rocco Parascandola, and Craig Gordon reported this story. It was written by Schuster.