Cronyism questions after court taps lawyer Steven Schlesinger to manage foundation worth millions

In 2007, a Nassau County Surrogate's Court judge tapped Steven Schlesinger -- then an influential attorney for the Nassau County Democratic Party -- to manage the multimillion-dollar Kermit Gitenstein Foundation, a private family trust with no heir.

It was a lucrative appointment, but an even better perk was that the job made Schlesinger a generous benefactor: It required that he give away to charity hundreds of thousands of dollars from the estate each year.

A Newsday review of the Gitenstein Foundation court file found that Schlesinger directed $250,000 of the estate's money to the Elena Melius Foundation, a nonprofit run by political power broker and Oheka Castle owner Gary Melius. Tax records show that Melius' foundation finished 2013 with just $7,245 before the donation from Schlesinger, who is one of Melius' closest friends.

Schlesinger asked the court system to approve the donation to Melius' foundation four days after Melius was wounded in a February 2014 unsolved shooting, records show. That request also fell two days before Schlesinger held his wedding at Oheka Castle, Melius' Gold Coast estate and one of Long Island's most lavish wedding venues. According to a check Schlesinger provided to Newsday, he didn't pay for his wedding until five months after it occurred.

The state attorney general's office, which oversees charitable organizations, and the judge responsible for the Gitenstein Foundation case both approved the $250,000 donation to the Elena Melius Foundation, which is named after Melius' deceased mother and was created to promote children's health and welfare.

Though Schlesinger hasn't been accused of any wrongdoing, the Surrogate's Court's decision to have him handle the Gitenstein case, and the way he directed the foundation's money to Melius and other organizations where he has personal ties, raises questions about cronyism and political favoritism that the state court system has been trying to eliminate for more than a decade.

For example, the case file shows Schlesinger steered the foundation's money to Hofstra University Law School, his alma mater, and Touro Law School, where Schlesinger is a member of the school's board of governors. He also gave $100,000 to a camp that includes Nassau Democratic Party boss Jay Jacobs as a board member, and $50,000 to a foundation run by former Sen. Al D'Amato, a friend of Melius and, like Schlesinger, a frequent visitor to Oheka Castle for poker games.

Newsday contacted the state attorney general's office for this story several weeks ago, and a source in the office confirmed Thursday that investigators are now examining Schlesinger's management of the Gitenstein Foundation and how the foundation's money has been spent. The source asked to remain anonymous because the attorney general's office usually does not comment on potential or ongoing investigations.

Melissa Grace, a spokeswoman for Attorney General Eric T. Schneiderman, emailed Newsday a statement that said the office "is committed to cracking down on misconduct by fiduciaries" across the state. "Charitable donations are strictly protected by New York law -- and we will enforce those laws," Grace wrote.

David Bookstaver, a spokesman for the state courts, cited Chief Judge Jonathan Lippman's February announcement of a new effort to weed out political patronage in fiduciary appointments. Lippman's announcement followed stories Newsday published last year that showed Long Island judges violated court rules concerning fiduciary appointments in cases involving Melius, Schlesinger and a network of associates.

Bookstaver said that Lippman has appointed a committee to review the current rules.

"Clearly, more needs to be done," Bookstaver said.

A donation and a wedding

Schlesinger wrote in a June email to Newsday that there is no connection between the donation to the Melius Foundation and his Oheka Castle wedding. Schlesinger wrote that he paid more than "fair consideration" for the wedding when he "settled the bill."

Schlesinger included in his email a copy of a $75,000 check to Oheka Catering, dated Aug. 14, 2014, and drawn from a business account of the Jaspan Schlesinger law firm, where Schlesinger is a partner.

That check was written months after Schlesinger's wedding, which occurred on March 2, 2014, and included 125 people, according to an interview Schlesinger gave to New York Magazine.

"Gary and I negotiated for a while and I insisted I pay full freight after I got back from honeymoon," Schlesinger wrote of the payment delay. "I sent him the check and he cashed it. We are friends, so it was more informal. He wanted to charge me less and I wouldn't let him."

Schlesinger said he could not provide Newsday with an itemized receipt for his wedding costs. Schlesinger said the donation was "based solely on my belief that that Foundation's good work be continued despite Gary Melius' life-threatening injury and continued recovery."

Schlesinger, who is still in charge of the Gitenstein Foundation, answered some questions by email but declined to be interviewed for this story.

Nonprofit experts interviewed by Newsday said Schlesinger's donation to Melius' foundation warrants an investigation by the state attorney general's Charities Bureau. Because the donation came within days of the wedding, the experts said it was reasonable to question whether Schlesinger received a personal benefit from the donation.

"It looks suspicious," said Jack B. Siegel, a Chicago attorney and the author of "A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good." "I think the Charities Bureau should be investigating that."

Once Schlesinger decided to have his wedding at Oheka Castle, he should have recused himself from being in charge of the Gitenstein Foundation, said Pablo Eisenberg, senior fellow with Georgetown University's Center for Public and Nonprofit Leadership in Washington, D.C.

"I'm surprised the attorney general's Charities Bureau let him go," Eisenberg said of the office's initial approval of the donation. "It's highly unusual. It certainly bears looking into."

Schlesinger, in his email to Newsday, wrote that because the state attorney general's Charities Bureau approved of his donation to the Elena Melius Foundation, any implication of him "misusing foundation money . . . would be done with reckless disregard" for the truth.

Schlesinger did not respond to a written question asking if he had notified the attorney general's office that he was friends with Melius and planned to have his wedding at Oheka Castle.

Melius declined to answer questions about Schlesinger's donation from the Gitenstein Foundation or Schlesinger's wedding. Melius referred questions to his attorney, Joseph Tacopina, who did not return calls for comment.

'A very substantial matter'

When someone dies without a will, or they fail to name an heir to administer their estate, the county's public administrator, a government employee appointed by the Surrogate's Court judge, handles the finances and other matters of the estate.

The Gitenstein case was among the most lucrative to come to Nassau County's Surrogate's Court. Records maintained by the court system show that of the 2,200 estate cases in the county's Surrogate's Court since 2005 where fiduciaries filed papers seeking compensation, only about 50 -- or 2 percent -- have been worth more than $10 million, like the Gitenstein Foundation.

Court records show the Gitenstein Foundation was created in 1969 to make donations to Jewish organizations and temples and health-related organizations. In the years immediately before Schlesinger's appointment, the foundation made donations almost exclusively to Jewish hospitals in the United States and in Israel, as well as to organizations such as the Jewish Braille Institute of America and the General Israel Orphans Home for Girls.

Shirley Gitenstein was the last trustee of the Gitenstein Foundation when she died in 2007 at 85. She named no executor in her will but called for her estate to be sold off and for the proceeds to go to the family's foundation.

Then-Public Administrator David Gugerty and the state attorney general's office in October 2007 jointly petitioned then-Surrogate's Judge John B. Riordan to appoint an attorney to oversee the estate and appoint a permanent receiver of the foundation, which had grown to $10 million by 2008 and eventually increased to $11.4 million, court records show. The foundation requires its administrator to give away to charity 5 percent of that money annually.

Both jobs would go to Schlesinger. Although court records don't spell out how much he stands to earn from the appointments, Schlesinger petitioned the court in 2011 to receive $131,329 in commission for his role as estate administrator. The court file doesn't indicate how much his total compensation could be for the fiduciary appointment as receiver.

The decision to appoint Schlesinger involved people in the court system who knew him well. Gugerty, a former counsel to the Democratic majority of the Nassau County Legislature, had teamed up with Schlesinger in 2006 to form a winning legal strategy that helped then-Presiding Officer Judith Jacobs fight off an attempted coup by dissident Democrats. Gugerty now works as Nassau's Democratic election commissioner.

Schlesinger also has more personal ties to Gugerty, whose wife is Nassau County acting Supreme Court Justice Helene F. Gugerty. Caryn R. Fink, who married Schlesinger at Oheka Castle last year, is Helene Gugerty's law clerk.

Dave Gugerty declined to be interviewed for this story.

Riordan said he picked Schlesinger from a court-maintained list of qualified attorneys to manage the Gitenstein Foundation and that Schlesinger was a good match based on his experience and knowledge of Jewish charities. While hundreds of lawyers would have been on the list of qualified attorneys under state fiduciary appointment rules, the Gitenstein case wasn't typical, Riordan said.

"This was a very substantial matter," said Riordan, who lost a 2010 re-election bid and is now in private practice. "It called for a substantial attorney. I assumed Mr. Schlesinger fit the bill. It certainly wasn't done because of any political connections."

When Riordan ran for re-election in 2010, he did so with the Democratic Party line. At the time, Schlesinger was a member of the select group of Nassau County Democratic Party officials who screened candidates for judge.

(Schlesinger resigned as chairman of the party's law committee in January after a Newsday investigation found that two Suffolk County judges improperly handled court appointments involving Melius and his associates, including Schlesinger.)

The current Surrogate's Court judge, Edward McCarty, is a Republican who defeated Riordan, but he also is tied to Schlesinger. McCarty's law clerk, Lori A. Sullivan, used to work for Schlesinger's law firm, Jaspan Schlesinger, and was a witness to legal documents filed in the Gitenstein case on Schlesinger's behalf when she worked for his law firm, according to court records.

McCarty, who approved Schlesinger's request for the $250,000 donation to Melius' foundation, said he couldn't speak about Schlesinger's court appointment because it happened before voters elected him Surrogate's Court judge in 2010.

Without a complaint or objection from the attorney general, McCarty said, there was little he could do about how Schlesinger chose the recipients of foundation donations.

Rules for nonprofit leaders

Albany legislators in 2013 strengthened rules governing how nonprofit corporations operate, requiring its leaders to disclose conflicts of interests and to have a policy for dealing with the conflict. Those rules took effect in July 2014, after the Gitenstein donations Schlesinger made to Melius and others.

But state law had previously specified that court appointees "faithfully, honestly and impartially discharge the trust committed to him" and required that an oath be filed at the court clerk's office. Court records show Schlesinger signed the oath on Nov. 2, 2007.

In petitions Schlesinger filed with the court asking for approval to make donations from the foundation in 2008, his paperwork notes that he has "no affiliation or business relationship" with any of the intended beneficiaries.

Many of the early donations under Schlesinger's stewardship reflect the original purpose of the Gitenstein Foundation. For example, he directed $150,000 to Ezer Mizion Inc., which says it is the world's largest Jewish bone marrow donor registry, and $100,000 to the American Committee for Shaare Zedek, which raises money for a Jerusalem hospital.

But the conflict-of-interest language is absent in more recent petitions Schlesinger filed with the court, including the one requesting approval of the donation to Melius' foundation last year, court records show.

Schlesinger directed a $100,000 donation to Surprise Lake Camp for Jewish children in upstate Cold Spring, where Nassau Democratic Party boss Jacobs is a member of the camp's board of trustees, according to tax records.

Jacobs said he had nothing to do with Schlesinger's appointment as permanent receiver in the Gitenstein case. He said he recalls Schlesinger asking him for a recommendation for a Jewish charity that had a connection to children.

"I said the only one I knew or had a relation to was Surprise Lake," Jacobs said. "I certainly don't have any financial connection to that camp."

Schlesinger's largest single donation as head of the Gitenstein Foundation came in 2011, when he gave $4.2 million to North Shore-Long Island Jewish Health System in Great Neck. Schlesinger has been an associate trustee at North Shore-LIJ, and the donation funded the Hofstra North Shore-LIJ School of Medicine, which is owned jointly by North Shore-LIJ Health System and Hofstra University.

Schlesinger made million-dollar donations to Hofstra University Law School, where Schlesinger graduated in 1976, and Touro Law School, where he has a seat on the school's board.

Schlesinger directed $50,000 to former Sen. Al D'Amato's Armand and Antoinette D'Amato Foundation, which was created in 2013 to make "gifts and contributions for charitable, religious, scientific, literary or educational purposes." He also sent $10,000 to Gold Coast Cares, a group that raises money for St. Jude's Children's Hospital and holds its annual fundraiser at Oheka Castle. Melius is the group's fundraising chairman, according to the group's website.

Eisenberg, of Georgetown's Center for Public and Nonprofit Leadership, said an independent board of directors would have reduced the appearance that Schlesinger's donations involved a conflict of interest.

"If he were a good administrator, he would have appointed an independent board," Eisenberg said.

With Sandra Peddie