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$3.1M in 'questionable' payouts to Long Beach employees, attorney's report says

State Comptroller Thomas DiNapoli's draft audit recommended that

State Comptroller Thomas DiNapoli's draft audit recommended that Long Beach seek to recoup any payments that did not follow city code.  Credit: Newsday/Thomas A. Ferrara

A former federal prosecutor hired by Long Beach said in a new report this week that the city issued $3.1 million in "questionable" payments in the past decade to city managers, union employees and members of the police and fire departments.  

That amount is in addition to more than $500,000 in separation pay or payments of unused sick and vacation time made to 10 current and former employees between 2017 and 2018 that was disclosed last month in a draft audit by the state comptroller's office. The audit found that Long Beach did not follow city code limiting payouts to 50 days of vacation and 30% of earned sick time.

Anthony Capozzolo, who was hired last year to represent the city during the audit and criminal investigations into separation payments, said in a response to the draft audit that the city's vague payroll code allowed employees to take additional vacation and sick time payments for the past 25 years.

Long Beach officials identified the additional payments not included in the audit as questionable because they did not follow the state's interpretation of the city's payroll code.

"The lack of clarity in the Personnel Code prevented the City from taking more fiscally responsible measures with union, exempt and other employees with regard to payments out of employee leave accruals," Capozzolo wrote in the report.

Capozzolo has also represented the city and accompanied employees and elected officials during ongoing investigations by the Nassau County district attorney's office and the U.S. attorney's office. 

State Comptroller Thomas DiNapoli’s draft audit recommended that Long Beach seek to recoup any payments that did not follow city code. Capozzolo said the city must first consider the cost of litigation and the likelihood of payments being returned.

The draft audit also recommended the city update its payroll code to clarify separation payments. City officials said the City Council can update the code, but payments cannot be recouped without a definitive legal interpretation of the code and possible liability the city would face for payments already made.

"The [comptroller] office’s acknowledgment . . . that the Personnel Code needs revision because of a lack of 'clarity' suggests that attempts by the City to prove that such payments were 'inconsistent' with the City’s Personnel Code may be a fool’s errand that could lead to expensive and possibly unproductive litigation at best," Capozzolo said. "At worst, such efforts would likely constitute a further waste of financial resources that outstrip any limited potential benefit."

Nassau County Comptroller Jack Schnirman, a former Long Beach city manager, has been the only employee to return an overpayment. He paid back $52,000 about a week after the release of the draft audit.

The city had 30 days to respond to the audits before they are reviewed and completed by the state. The city delivered its response to the comptroller's office Monday.

Drawdowns of accrued time totaling $191,031 were given to 18 additional exempt employees, including Police Commissioner Michael Tangney, Deputy City Manager Michael Robinson, two former comptrollers in 2010 and 2011 and a former corporation counsel in 2014. Six former employees received $120,000 in questionable separation payments, including city managers Edwin Eaton in 2000 and Charles Theofan in 2011, according to the report.

The city’s report said most payments were calculated based on a 1997 payroll code that was interpreted by the city as allowing exempt employees to collect up to 100% of accrued time. City officials said there was no cap on payouts for sick time in the payroll code, but it prohibited exempt employees from earning compensatory time or terminal leave.

The city had followed a 2000 memo to clarify the payroll code by former Corporation Counsel Joel Asarch. The memo allowed exempt employees to convert any additional vacation beyond 50 days into sick time.

The payroll code said employees were “entitled to payment in cash for the same number of accumulated sick days at the rate of 30 percent of the total number of days accrued, multiplied by the rate of pay.”

The city’s report said the same practice was done for union employees represented by the Civil Service Employees Association, or CSEA. They received 100% of accrued sick time or equivalent vacation drawdowns, resulting in $975,161 in “questionable” payments to 168 union employees since 2008, the report said.

The city also outlined $375,103 in questionable separation payments to 62 CSEA employees who were paid beyond the contract limit of 50 days of vacation time.

The city’s report also lists $1.3 million in excessive payments since 2007 to 47 police officers, exceeding the PBA voluntary arbitration. Nine paid firefighters were also overpaid $154,441 in vacation hours between 2001 and 2013 beyond the same 50 days of vacation time, city officials said.

Long Beach offered retirement incentives in 2012, 2014 and 2016. Union and exempt employees were offered double the 30% entitlement for sick time, without an amendment to the city code, according to the city’s response. The incentives in 2014 and 2016 were not voted on by the City Council.

Assistant Corporation Counsel Greg Kalnitsky, who helped Capozzolo prepare the report, said the city’s response does not represent city employees or the five elected city council members.

Council Vice President John Bendo and Councilman Scott Mandel had attempted to block Capozzolo from issuing the city’s response to the audit, saying they were not informed when Capozzolo was hired and said the City Council was excluded from the report.  Agostisi recused himself from the response. Bendo and Mandel requested a 45-day extension for the City Council to respond.

Council President Anissa Moore planned to issue a response Monday.

"Any response purportedly submitted on behalf of the city would be inappropriate and counter to our collective goals of trying to correct any concerns raised and moving the City of Long Beach forward," Bendo and Mandel said.

New Acting City Manager John Mirando told comptroller's office officials that Capozzolo's report "represents the full and official response from the city."

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