Democratic Nassau Legis. David Denenberg dropped out of the race for State Senate in the 8th District on Tuesday, hours after a lawsuit by his former law firm accused him of defrauding a client of more than $2 million by billing for "fictitious" services that he never performed.
Denenberg (D-Merrick) called the allegations "extremely serious" and said the timing of the suit was political.
Davidoff Hutcher & Citron, of Garden City, referred the allegations to Loretta Lynch, U.S. attorney for the Eastern District, and Denenberg said he would cooperate with the office to "establish the truth." But he did not specifically deny the allegations.
The firm is seeking $3.6 million from Denenberg, which includes all compensation paid to him from 2006-2014.
"My family, the electorate, the campaign and this position are way too important to be subject to outrageous allegations and negative attacks against me personally," Denenberg said in a statement. "Therefore, I withdraw from the race."
The 34-page suit filed in State Supreme Court in Manhattan on Tuesday accused Denenberg of a "cold, calculated scheme" that included at least 374 separate acts of mail fraud over an eight-year period.
The suit also accused Denenberg of drafting false court orders and forging the signatures of two U.S. District Court judges on court documents.
Davidoff Hutcher & Citron employed Denenberg from 2006 until June.
In one case, Denenberg allegedly prepared a "fake order" in which the court granted his client a motion for summary judgment, dismissing a claim against it with prejudice, the suit said.
In another, the suit says, Denenberg created a bogus order, also purportedly signed by a judge, dismissing claims between a plaintiff and the client."These bills -- mailed via U.S. Postal Service, or transmitted to the client over the Internet, all at Denenberg's direction -- were works of fiction," according to the suit.
Denenberg hired Garden City attorney Bruce Barket to fight the allegations and to "prosecute my claims against the firm."
Barket declined to comment Tuesday, saying he would answer the claims in court and not in the news media.
William Muller, chief executive assistant U.S. attorney for the Eastern District, declined to comment.
Nassau Democratic Party chairman Jay Jacobs said Tuesday that he will nominate Denenberg for a yet-undetermined State Supreme Court judgeship on a minor party political line, which under state law would allow the party to replace Denenberg on the November Senate ballot. Jacobs said it was unclear whom the party will offer voters in Denenberg's place.
Senate Republican Leader Dean Skelos (R-Rockville Centre) said the political maneuvering shows "total disrespect for our judicial system by nominating this criminal to a Supreme Court judgeship."
Denenberg, who is serving his eighth term as a county lawmaker, was running against Legis. Michael Venditto (R-Massapequa) for the Senate seat vacated last year by Republican Charles Fuschillo Jr.
The seat is critical for state Republicans and Democrats, who are vying for control of the closely divided chamber.
Venditto campaign spokesman James Moriarty said the allegations against Denenberg are "serious" and "truly disturbing."
Former U.S. Sen. Alfonse D'Amato, a Republican, called on Denenberg to resign his Nassau legislative seat, but Jacobs and Barket said Denenberg plans to keep it. County legislators run for re-election next year.
Newsday reported in June that Denenberg had left his job as a partner at Davidoff Hutcher & Citron, a civil litigation firm.
Denenberg, who was chairman of the firm's intellectual property law group, said at the time that the decision was "mutual," but declined to elaborate.
The lawsuit says Denenberg benefitted financially from the schemes, receiving annual bonuses of 25 percent based on the alleged fraudulent billings. Denenberg earned $360,000 per year in base salary, the suit said.
In an email to clients Tuesday, Jeffrey Citron, a managing partner of the law firm, said Denenberg was fired for "billing irregularities" involving "fictitious services and phony expenses."
"I have been practicing for almost 40 years and this has been the most painful experience I have ever dealt with," Citron wrote. "Denenberg was a trusted member of the firm. To learn of his rogue actions that destroyed that trust has been very difficult."
Citron said the firm immediately contacted the client -- which court filings identify as Systemax, of Port Washington -- and promised full restitution.
"We then met with Mr. Denenberg, confronted him with the situation, and when he acknowledged his wrongdoing dismissed him on the spot," Citron wrote.
"We also retained independent ethicist counsel to ensure that we were doing everything correctly."According to the suit, Denenberg admitted to the misconduct in an August 2014 meeting with Systemax. The firm declined to comment.
Citron wrote in his email that the law firm and Systemax conducted internal reviews to determine the full scope of the alleged fraud.
"We conclusively established that Denenberg acted on his own and without the knowledge of anyone at DHC," Citron wrote. "We also determined that no other client has been impacted by Denenberg's actions."
Shams Tarek, a spokesman for Nassau District Attorney Kathleen Rice, said "this matter was not referred to us but we have reached out to the U.S. Attorney's Office and offered any assistance they may need."
In a statement Tuesday, the firm said it was "saddened" about the lawsuit but that Denenberg's actions "left us no choice."
Denenberg's departure from the race comes only hours after Senate Minority Leader Andrea Stewart-Cousins (D-Yonkers) said she would postpone a Denenberg fundraising trip that had been scheduled before the lawsuit was filed.
The law firm employs both Democratic and Republican political leaders and contributes to lawmakers from both parties, including Skelos and former State Comptroller Thomas DiNapoli, a Democrat.
The firm employs former GOP North Hempstead Supervisor John Kiernan, the firm's of-counsel, and Long Beach Democratic Leader Michael Zapson, the managing attorney of the firm's Long Island office.
In 2005, Denenberg pleaded guilty to a misdemeanor election law violation -- falsely certifying that he had witnessed eight people sign a nominating petition in June 2003 for his bid to be elected a Democratic committeeman.
Denenberg, who blamed the mistake on carelessness, was sentenced to a year of unsupervised probation. The New York and New Jersey bar associations suspended Denenberg's license for 90 days.
With Robert E. Kessler
and Yancey Roy