A Nassau County Court judge Thursday removed Democratic attorney Steven R. Schlesinger from a court-appointed post, citing his mismanagement of a charitable foundation and noting that he’d spent more than $8 million of the foundation’s money without court approval.
Surrogate Judge Margaret C. Reilly issued an 87-page ruling that was a scathing critique of Schlesinger, the influential former attorney for the Nassau County Democratic Party. Riley’s ruling called Schlesinger “unfit” to continue as fiduciary of the $11 million Kermit Gitenstein Foundation because he had disobeyed court orders and state law.
“Acting without statutory or judicial authority is the apparent management style of Steve R. Schlesinger as receiver . . . ” Reilly stated in the ruling. “The facts in this case are undisputed.”
Reilly cited as evidence Schlesinger’s failure to inform the court about a $25,000 donation to the North Shore-LIJ Health System, which was actually for tickets to “a very special evening” on the Intrepid Sea, Air and Space Museum that included a performance by Harry Connick Jr. She also cited a $25,000 donation to Gold Coast Cares, a charity that raises money for St. Jude’s Hospital, for “an exquisite evening at Oheka Castle” that included “cocktails, seated gourmet dinner, live music and a fabulous silent auction.”
Gary Lewi, a spokesman for Jaspan Schlesinger LLP, Schlesinger’s law firm, said the firm could not comment until after lawyers had reviewed the judge’s ruling.
Paul Sabatino, a former counsel to the Suffolk Legislature and chief deputy county executive who helped craft Suffolk’s ethics code, said judges don’t often remove lawyers from fiduciary appointments.
“For any fiduciary to be removed by a surrogate is an extraordinary action because fiduciaries are held to the highest standard of behavior,” Sabatino said. “They have to act prudently and in the best interest of the estate.”
Reilly’s order to remove Schlesinger put Nassau County Public Administrator Jeffrey E. DeLuca in control of the foundation and its assets, including any money held in the estates of the deceased members of the Gitenstein family, whose wealth was used to create the foundation. Shirley Gitenstein, the last member of the family to be in control of the Gitenstein foundation, passed away in 2007 with no heir.
Reilly scheduled a June 3 hearing in which attorneys for the public administrator, which handles estates when there are no heirs, and the state attorney general’s office, which regulates charities in New York State, are to appear before the court. The purpose of the hearing was not indicated in the judge’s ruling and court order.
Newsday first published a story in August 2015 raising questions about Schlesinger’s management of the foundation and his disbursements of foundation money to political allies and associates. Schlesinger directed $250,000 to a foundation run by his friend, Oheka Castle owner Gary Melius; $200,000 to Surprise Lake Camp, where Nassau Democratic Party chief Jay Jacobs has an unpaid seat on the board of directors; and $50,000 to former Sen. Alfonse D’Amato’s family foundation for construction of a splash park.
Newsday reported that Schlesinger’s $250,000 donation to the Elena Melius Foundation, which is run by Melius, occurred the same week as Schlesinger’s wedding at Melius’ Gold Coast Estate.
The New York attorney general’s office and the U.S. attorney’s office for the Eastern District both launched separate investigations following Newsday’s report, according to court records.
In addition, former Surrogate Court Judge Edward McCarty appointed Suffolk County attorney and one-time federal prosecutor Joseph W. Ryan as court examiner and ordered an interim accounting of the foundation’s finances. Results of the account led McCarty to order his own investigation of the foundation’s finances. McCarty, who retired last year, said he wanted Ryan to “reaffirm the confidence of the public in the oversight responsibility” of the court.
At the time, McCarty suspended Schlesinger from making distributions from the foundation but kept him in charge of its administration.
Schlesinger fought back in court, arguing that any investigation by Ryan would duplicate the state attorney general’s investigation. But Reilly rejected that argument in her ruling yesterday, stating that her predecessor “did not overlook or misapprehend the facts or law” when he ordered a court investigation of Schlesinger’s management of the foundation.
During a court appearance in December, Schlesinger stated that he did not take “one penny from the foundation.” Reilly found that Schlesinger’s statement “simply lacks candor” because he received a $131,323.39 commission as administrator of the estate of Shirley Gitenstein. That money wasn’t Schlesinger’s to take because proceeds should have gone to the Gitenstein foundation, the judge’s ruling states.
Reilly acknowledged that her predecessor approved Scheslinger’s commission but said: “Court approval does not erase the fact that Steven R. Schlesinger knowingly took money from the Foundation that did not belong to him.”
Ryan, the court examiner, filed court documents in March in which he stated that evidence suggested Schlesinger allowed Jacobs and Melius to decide how to spend nearly $700,000 from the foundation.
Ryan stated that Schlesinger “may have abdicated his responsibility to award grants” to Jacobs and Melius to determine what grantees would get foundation money. As evidence, Ryan submitted an email exchange in which Melius directed one of Schlesinger’s employees to donate $100,000 of the $700,000 to specific organizations.
Through his lawyer, Melius denied any wrongdoing. Jacobs denied that he ever had any control over the foundation and that he only suggested Surprise Lake to Schlesinger after he was asked about possible grant recipients.
In a new court filing this month, Ryan included an email exchange between Jacobs and a Surprise Lake Camp official. In the email, Jacobs writes that “we plan to fully liquidate the foundation within 2 years” and states who was to receive grants from the foundation.
“Mr. Jacobs appears to be a key participant in the foundation agenda,” Ryan stated in court records.
In the same court filing, Ryan noted that there were no receipts for Schlesinger’s Oheka Castle wedding.
With Sandra Peddie and Will Van Sant
Nassau Surrogate Judge Margaret C. Reilly, in an order issued Thursday that ended attorney Steven Schlesinger’s court appointed stewardship of the $11 million Kermit Gitenstein Foundation, noted that Schlesinger:
- Distributed roughly $8.1 million of foundation money without court approval.
- Did not disclose that his friend, Oheka Castle owner Gary Melius, had ties to beneficiaries of Gitenstein Foundation disbursements.
- Took a $131,323 commission that belonged to the foundation.
- Failed to tell the court that a $25,000 donation to the North Shore-LIJ Health System was actually for tickets to “a very special evening” on the Intrepid Sea, Air and Space Museum, including a performance by Harry Connick Jr.
- Did not comply with court orders, engaged in potential self-dealing, gave money to charities that “did not remotely resemble” the foundation’s purpose and wasted hundreds of thousands of dollars on attorney, bond, accounting and storage fees.