The U.S. Attorney’s Office for the Eastern District has opened an inquiry into the Kermit Gitenstein Foundation, which has been managed by prominent Democratic attorney Steven Schlesinger since 2007, according to documents filed in Nassau County Surrogate’s Court Wednesday.
The probe by the U.S. attorney’s criminal division is the third investigation into the foundation to become public since August, when Newsday published a story concerning Schlesinger’s management of the foundation and his decisions to direct charitable contributions to institutions and individuals with whom he had personal and professional ties.
State Assistant Attorney General Emily Stern disclosed the federal inquiry in a legal brief filed with the Surrogate’s Court. The state attorney general’s office has been investigating Schlesinger’s stewardship of the foundation since last summer and the investigation is ongoing.
In addition, former Surrogate’s Court Judge Edward McCarty ordered last month a court investigation of Schlesinger’s handling of the foundation’s finances after finding donations made by Schlesinger “inconsistent” with court filings. McCarty appointed Suffolk County lawyer Joseph W. Ryan, a former federal prosecutor, as court investigator.
Earlier this month, Ryan reported to the court that Schlesinger was not cooperating with his request for personal and business records stemming from his management of the foundation.
Schlesinger had filed a motion seeking to end the court-ordered investigation, which he argued was unnecessary. Surrogate’s Court Judge Margaret C. Reilly told Michael Ryan, Schlesinger’s attorney, that Schlesinger “must cooperate” with the court’s investigation.
“There is an outstanding order,” Reilly said. “You must comply with the order.”
Gary Lewi, a spokesman for Schlesinger, said the law firm welcomes the opportunity to provide “an in-depth review” of the foundation’s finances in the face of another probe.
“The fact is there has been a full and complete accounting of the foundation’s books with every penny documented, many of the dollars going to charitable causes that provide improved health care and similar programs,” Lewi said.
At the same time he appointed Joseph Ryan court investigator in December, McCarty, who retired at the end of last year, suspended Schlesinger from making any further donations from the $11 million foundation. The Surrogate’s Court had appointed Schlesinger to be permanent receiver of the foundation in 2007, when the last heir of the foundation died.
With multiple ongoing investigations, Stern asked the court Wednesday to postpone for six months another hearing on the Gitenstein foundation. Reilly scheduled the next court for April 6.
Newsday reported in August that Schlesinger directed $250,000 from the Gitenstein foundation to the Elena Melius Foundation, which is run by Gary Melius, days before Schlesinger held his wedding at Oheka Castle, Melius’ Gold Coast estate.
Schlesinger acknowledged in an interview that he and Melius were friends, and he provided a copy of a check that showed he paid $75,000 for the wedding five months after it occurred. Schlesinger also said there was no connection between his wedding and the donation to the charity that Melius controlled, which is named after Melius’ late mother and supports children’s health and welfare.
Not-for-profit corporation experts told Newsday last summer that the timing of the $250,000 donation and Schlesinger’s wedding raised questions of whether the donation was wholly charitable, or in part a payment for the cost of the wedding.
McCarty and a lawyer with the state attorney general’s office signed off on the Schlesinger’s donation to Melius’ charity and other Gitenstein foundation grants. Ryan informed the court that Schlesinger never made McCarty, the former Surrogate, aware of his relationship with Melius or that he planned to hold his wedding at Oheka Castle.
In a letter to Schlesinger, attached to a court examiner’s report dated Jan. 11, Ryan requested from Schlesinger all documents “relating to Schlesinger’s wedding, including a contract, invoices for entertainment, flowers, favors, etc. and documents evidencing payment.”
Ryan also wrote to Melius on Jan. 4 seeking records that included “booking contract for food, entertainment, flowers, favors and the like: all invoices for payment, and accounting records related to Oheka cost and gross profit from the event.” Ryan’s court filing states he has received no response from Melius.
Joseph Tacopina, Melius’ attorney, said his client never received a subpoena for records and that Melius “firmly believes this is a political witch hunt between Steve Schlesinger and others which he will not succumb to.”
Ryan does not have subpoena power, and his court filing does not address whether Melius can be compelled to turn over records.
Separate from the Melius foundation grant, Ryan’s court filing states that an additional area “of significant concern” was whether Schlesinger used grants from the Gitenstein foundation to “promote legal business for his firm, Jaspan Schlesinger LLP, and to cater to firm clients.” Schlesinger is managing partner of Jaspan Schlesinger LLP.
Among the records Ryan requested from Schlesinger were Jaspan Schlesinger LLP billing records related to North Shore-Long Island Jewish Hospital and affiliates; Nassau Health Care Corp.; Hofstra University, including the Law and Medical Schools; Touro Law Center; Signature Bank; and Surprise Lake Camp.
Newsday’s investigation found that Schlesinger had once served or was currently serving on the board of directors of several of the entities that received donations from the Gitenstein foundation, something that charity experts said could be considered a conflict of interest for Schlesinger.
Ryan’s court filing notes that state law specifies that court appointees “faithfully, honestly and impartially discharge the trust committed to him” and must sign an oath kept on file with the court clerk’s office. Schlesinger signed the oath in the Gitenstein appointment on Nov. 2, 2007, court records show.
Ryan states in a court memorandum that Schlesinger made two successive $100,000 grants in 2008 and 2009 to Surprise Lake Camp in Cold Spring, N.Y. Jay Jacobs, chairman of the Nassau County Democratic Party, serves on the camp’s board of directors. When questioned by the Inspector General for Fiduciary Appointments, Schlesinger produced a client list that showed his law firm represented the Nassau Democratic Committee in 65 separate litigations over a five-year period.
Supreme Court and federal court records show that Schlesinger’s law firm was the plaintiff’s attorney in two lawsuits brought by Signature Bank in 2011 and 2012. Alfonse D’Amato, former Senator from New York, is on the board of directors of Signature Bank. Schlesinger in 2014 gave $50,000 to D’Amato’s charity, the Armand and Antoinette D’Amato Foundation, for construction of a splash park in Island Park, where D’Amato’s late mother lived.
Without Schlesinger’s cooperation, Ryan said he has so far been unable to “analyze the total efficiency, motive and nature” of Schlesinger’s actions regarding the Gitenstein foundation’s mission.
“This is an issue that goes to the heart of judicial integrity,” Ryan said.