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Long Beach plans to seek clawback of excessive separation payments

The Long Beach City Council plans to submit

The Long Beach City Council plans to submit a new response to an audit by the office of state Comptroller Thomas P. DiNapoli. Credit: Newsday / J. Conrad Williams Jr.

The Long Beach City Council voted Friday to submit a new response to the state comptroller that argues the city did not have authorization for the past seven years to issue excessive separation payments to employees and could hold some officials personally liable for authorizing them.

The City Council said it wants to recoup payments based on a report by outside counsel John Gross in a response due by Friday to a draft audit by the office of Comptroller Thomas P. DiNapoli. The draft audit looked at the city’s long-term fiscal crisis and identified 10 current and former city employees who were overpaid more than $500,000 in separation payments and drawdowns of accrued time from 2017-2018.

The City Council voted last month to rescind a previous report by a former federal prosecutor that found that Long Beach issued $3.1 million in "questionable" payments in the past decade to city and union employees for nearly all accrued time. Council members said the report was drafted without council knowledge and presented a conflict of interest because the attorney was hired by former city managers who received payments.

"The council believes an independent investigation of the propriety of the decisions of certain city managers and acting city managers, and whether they should be held personally and individually liable to the city for any amounts paid is warranted," the new report states.

The resolution was approved by council members Anissa Moore, Scott Mandel and John Bendo. Council members Anthony Eramo and Chumi Diamond were absent. 

The report questioned some payments to management, union and police unions. The council's report argued that payments violated city code and constituted a conflict of interest.

The council said the city could hold city officials personally liable for overpayments and questioned payments made by former City Manager Jack Schnirman and a payment to former Acting City Manager Rob Agostisi.

Schnirman returned $55,000 to the city in September, after the comptroller's audit said he was overpaid for 662 hours of sick time, exceeding the city’s cap of 30 percent. The money was part of a $108,000 separation payment Schnirman received when he left in December 2017 to serve as Nassau County comptroller.

“The Comptroller’s report urges the Council to undertake 'claw-back' efforts to recover these overpayments,” the report said. “Once the Council is able to secure the pertinent information necessary to support such an effort, it will undertake necessary steps to rectify the overpayments. Certain City officials may be personally liable for authorization of these improper payments.”

The city’s response said the council could also invoke a violation of the “Faithless service doctrine,” which would allow the council to “clawback any compensation paid to (an) employee during the period of disloyalty.”

City Council members said they would pursue hiring outside counsel and an auditing firm at their Dec. 3 meeting to analyze overpayments that exceeded the comptroller's audit scope of one year in the draft audit.

The council's report also proposed future legislation to invoke caps on union and police contracts, which they acknowledged could be challenged in court.

"Attempting to clawback money from retirees will be a fight that will drag on for years and potentially leave us worse off than we are now," Long Beach PBA member Brian Wells told the council.

Council members said they reserve the right to take further action following the outcome of investigations by the Nassau County district attorney and U.S. Attorney’s offices into the payments. 

Acting City Manager John Mirando advised the council on Friday morning against approving the response, citing inconsistencies in the city's report  and omissions that could subject the City Council and the city to potential lawsuits.

“There are many other inaccuracies and omissions in this response, specifically ignoring millions of dollars of payments that, by the comptroller’s methodology, should have been included,” Mirando wrote to council members. “Certain exempt employees, CSEA employees and ALL paid firefighters are curiously excluded from the response.”

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