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Cuomo: Lawyer pensions on school payrolls are "fraud"

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

6:53 PM EDT, April 3, 2008

New York State Attorney General Andrew Cuomo Thursday night said his office believes that "multiple acts of fraud" were committed when Long Island school districts put private attorneys on their payrolls so that the attorneys could receive hundreds of thousands of dollars in state pensions.

In a statement, Cuomo spokesman John Milgrim said, "We do not believe this is merely a case of innocent mistakes or misunderstandings of the relevant regulations. We have reason to believe there have been long-term and multiple acts of frauds committed upon the state pension system and related to intentional misclassification of contractors as employees so they receive taxpayer funded benefits."

Milgrim also said that the attorney general's office is now expanding its investigation of these practices from school districts and special districts to include towns and villages statewide.

In a separate action Thursday, New York State Comptroller Thomas DiNapoli moved to recoup all pension money awarded to private attorneys who were improperly reported as public employees, his office announced Thursday.

The comptroller also will require local governments and school districts throughout the state to re-certify any professional person on a payroll who does not appear to be an employee.

"Pensions are for employees," DiNapoli said. "They earn their pensions and they deserve them. Unfortunately, some individuals have taken advantage of the retirement system and received benefits they were not entitled to."

DiNapoli's spokesman, Dennis Tompkins, declined to say how much money the comptroller might recoup because the office is just beginning its review of records.

Also Thursday, Nassau County Comptroller Howard Weitzman urged both state Attorney General Andrew Cuomo and Nassau District Attorney Kathleen Rice to investigate the case of Valley Stream real estate lawyer Albert D'Agostino. Milgrim told Newsday Thursday night that his office is investigating D'Agostino. Newsday reported Thursday that D'Agostino got retroactive credit for 21 years in the state pension system, even though he was paid as an independent contractor all those years. Those credits helped him secure an annual pension of $106,702 for life.

Weitzman, in his letter to law enforcement, said he was "deeply concerned about the propriety" of D'Agostino's retroactive credits and that "the expense to all state taxpayers who have to support the pension system simply cannot be measured."

A Nassau D.A. spokesman declined comment.

DiNapoli also announced major new regulations -- which closely follow Internal Revenue Service guidelines, but provide more specifics -- to determine whether someone is an employee. In general, the IRS guidelines define an employee as someone whose work is directly supervised, who submits time sheets and who has set hours, a workplace and equipment provided by the employer. How the person is paid also is considered.

The comptroller's new regulations state that any attorney, physician, engineer, architect, accountant or auditor who is engaged under a contract or any other agreement is presumed to be an independent contractor and not an employee.

"Basically, the door has been shut on this," said Dennis Tompkins, DiNapoli's spokesman. "Going forward, any attorney who has a contract with a school district or a local government will most likely not be considered an employee."

Neil Lederer, past president of the Suffolk County Superintendents Association and currently superintendent of the Lindenhurst school district, applauded the new regulations.

"I'm all in favor of it," he said. "When Newsday broke the story, I was shocked by the impropriety of it."

The comptroller's announcement follows Newsday stories that since February have revealed at least 23 school districts reported private attorneys as employees, enabling them to get pension credits and, in come cases, health benefits. Since the first story in February about attorney Lawrence Reich, who was falsely reported as a full-time employee by five school districts at the same time, the Federal Bureau of Investigation, Internal Revenue Service and New York Attorney General all have launched criminal investigations.

Jay Worona, general counsel to the New York State School Boards Association, said the comptroller's new regulations ended any ambiguity that might have existed in the past. He added, "I think school districts want to do the right thing."

Milgrim said, "We don't believe it's acceptable to say, 'Oops, sorry, millions of taxpayer dollars are gone.' We need to know what happened and why so it doesn't happen again."