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Pension probe to scrutinize state school districts

BY ROBERT E. KESSLER | robert.kessler@newsday.com

9:55 PM EST, March 5, 2008

The investigation into possible double-dipping by attorneys working for school districts in obtaining state pensions expanded markedly Wednesday, as State Attorney General Andrew Cuomo asked for information about potential financial irregularities from all 704 school districts across the state.

Cuomo asked for information from the school districts not only about dealings with attorneys, but also with all outside contractors, including physicians, accountants and architects. The new request for information included the school districts on Long Island and in Westchester.

Newsday previously has reported that Cuomo asked the 124 districts on Long Island and the 48 in Westchester about their relationships with attorneys. Cuomo also has subpoenaed the records of three law firms where Newsday has reported that attorneys obtained credits in the state pension system while being listed as either full time or part time at districts. The three lawyers involved -- Lawrence Reich, Carol Hoffman and Jerome Ehrlich -- have denied any wrongdoing.

A parallel but separate federal investigation by the U.S. attorney's office for the Eastern District, the FBI and the Criminal Investigation Division of the Internal Revenue Service, also is ongoing into the situation.

In the letter to all the state's school districts, Cuomo asked them to voluntarily report "situations in which individuals improperly sought classification as full- or part-time 'employees' to receive government benefits that they might not otherwise be entitled to as consultants, professional firms or other service providers." The letter also asked districts voluntarily report "situations in which a board, district or subdivision sought to classify individuals as employees in order to qualify for New York State reimbursement or cost-sharing arrangements."

Newsday has quoted school officials and the lawyers involved as saying the practice was acceptable and common. Cuomo spokesman Jeffrey Lerner said in a statement: "Just because a number of school boards and ... lawyers may have falsely characterized independent contractors and consultants as employees doesn't make it right. The fact that it was going on for multiple years is no excuse."