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Gitenstein Foundation probe suggests cronyism in donations

Political power broker Gary Melius, attorney Steven Schlesinger

Political power broker Gary Melius, attorney Steven Schlesinger and Nassau Democratic Party boss Jay Jacobs Credit: Credit Newsday / Thomas A. Ferrara; POOL Photo/Dick Yarwood; Howard Schnapp

An investigator has filed court documents in which he says there is evidence that suggests attorney Steven Schlesinger allowed two close associates — Nassau Democratic Party boss Jay Jacobs and political power broker Gary Melius — to decide how to spend nearly $700,000 from a multimillion-dollar foundation that a judge had appointed Schlesinger to manage.

Schlesinger, a partner in the Garden City law firm Jaspan Schlesinger LLP, “may have abdicated his responsibility to award grants” to Jacobs and Melius to determine what grantees would get foundation money, court examiner Joseph P. Ryan stated in records filed with the court in March. Ryan submitted, as evidence, an email exchange in which Melius directs one of Schlesinger’s employees to donate $100,000 of that money to specific organizations.

Among the donations Ryan cited in the filings was $200,000 to Surprise Lake Camp, where Jacobs sits on the board of directors. Ryan doesn’t also provide specific evidence about Jacobs’ role in guiding foundation grants, as he did by submitting the Melius email. However, Schlesinger worked for Jacobs as the Nassau County Democratic Party attorney at the time of the donation.

“Our preliminary analysis indicates that Mr. Schlesinger’s decisions were influenced by cronyism and other factors which the Court may find inappropriate,” Ryan stated in a court filing.

The court filings are the latest development following a Newsday report in August concerning Schlesinger’s questionable disbursements to his associates from the Kermit Gitenstein Foundation, an $11 million family foundation left leaderless when its final heir died in 2007. A Nassau County Surrogate’s Court judge picked Schlesinger to handle the foundation’s finances.

The newspaper’s report spawned investigations into Schlesinger’s management of the foundation by the New York attorney general’s office and the U.S. attorney’s office for the Eastern District.

In addition, former Nassau Surrogate Judge Edward McCarty appointed Ryan as court examiner and ordered an interim accounting of the foundation’s finances. That review led McCarty to conclude that Schlesinger made “inconsistent” court filings. McCarty, who retired at the end of last year, then ordered his own investigation of the foundation’s finances and said he wanted Ryan to “reaffirm the confidence of the public in the oversight responsibility” of the court.

Ryan’s March 15 court filings are an update of his investigation, which the court’s chief clerk has asked him to “discontinue” until the next hearing. Ryan says that hearing is scheduled for June 1.

Schlesinger had asked the current surrogate, Judge Margaret C. Reilly, to stop Ryan’s probe entirely, claiming it was unnecessary in light of the state attorney general’s investigation. But Reilly said during a January court hearing that Schlesinger “must cooperate” with Ryan’s investigation.

“When all of the facts are presented, they will clearly demonstrate that Mr. Schlesinger discharged his fiduciary duty appropriately and assured that all funds were distributed to worthy charities,” said Gary Lewi, a spokesman for Schlesinger’s law firm.

Melius’ attorney, Joe Tacopina, denied that Schlesinger turned over decisions about financial matters to his client.

Jacobs vehemently denied that he had any control over how the foundation’s money would be spent.

“There’s no evidence, there’s no basis in fact, and there’s no truth to it,” Jacobs said. “In fact, I have several large charities that I support, two of which I founded, that I most certainly would have directed monies to had I been in control — and I didn’t.” Jacobs added that he is an unpaid board member for the camp that received the grant.

Ryan’s court filings state that Schlesinger isn’t fully cooperating with his investigation and has refused to turn over records related to his wedding at Oheka Castle, Melius’ lavish Gold Coast estate. Newsday reported in its initial story on the Gitenstein foundation that Schlesinger directed a $250,000 donation to a charity controlled by Melius within days of his Oheka wedding.

Schlesinger claims that providing those records would require him to produce documents outside the scope of Ryan’s authority to investigate the foundation, Ryan’s court filings state.

It’s unclear whether the attorney general’s office has requested the same records from Schlesinger, but the court filings show that they have issued subpoenas for records from two organizations run by Melius: The Elena Melius Foundation and Oheka Catering. The subpoenas are an “effort to determine whether there was any connection between” the $250,000 grant and the cost of Schlesinger’s Oheka wedding.

Melius denies “any purported wrongdoing” involving The Elena Melius Foundation or Oheka Catering, Tacopina said.

Besides the wedding issue, Ryan’s court filings note that Schlesinger neglected to obtain the necessary approval from the Surrogate’s Court judge for 13 grants totaling more than $7 million from the Gitenstein foundation.

“Mr. Schlesinger should be required to explain why in the initial period, 2007-08, he sought prior court approval for separate grants, yet discontinued the practice in 2009-11,” Ryan’s court filing states. Schlesinger resumed seeking court approval from 2012-14.

Ryan’s filings also seek an answer for why Schlesinger never settled Shirley Gitenstein’s estate by transferring the remaining $1.4 million from it to the family foundation, as called for in her will.

Emily Stern, assistant attorney general, stated in a court filing that Ryan’s investigation has raised enough questions about Schlesinger’s management that a “co-receiver” should be appointed to distribute the charity’s money. The court stripped Schlesinger of that power last year.

Ryan’s preliminary reports to the court “raise serious issues about Mr. Schlesinger’s suitability to continue as receiver and his liability to the foundation due to the possibility of impropriety, malfeasance and nonfeasance,” Stern said in her court filing.

The court filings indicate that Ryan’s court-ordered investigation has been aided by the cooperation of the attorney general’s investigation. One of Ryan’s reports to the court notes that he has access to 2,000 documents the attorney general’s office obtained by subpoena from Schlesinger and foundation grantees, as well as more than 6,000 emails.

Included as an exhibit attached to Ryan’s report was a copy of a November 2013 email exchange between Melius and an employee of Schlesinger’s law firm. The employee wrote to Melius that she had spoken to “Steve” about grants from the Gitenstein foundation.

“I need to know what organizations you decided on and the amounts requested, so I can do the application to the court. I don’t want to miss any of them, so I need a list from you as soon as you can . . . ” Schlesinger’s employee wrote.

Melius responded: “I forwarded you all the emails, $10k to Pave the Way, $10k to Parents for Megans Law, $50k to St Jude, $15k to Sloan Kettering and $15k to the Mayo Clinic. I had sent them all to Steve. Thanks”

When Newsday first questioned Schlesinger about the timing of the $250,000 grant awarded to Melius just days before his Oheka wedding, Schlesinger acknowledged that he and Melius were friends. Schlesinger provided Newsday with a copy of a check that showed he paid Melius $75,000 from his law firm’s business account five months after the wedding occurred.

Schlesinger said at the time that 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.

Melius has hosted at Oheka Castle political fundraisers, parties and poker games for Long Island’s political class, including former U.S. Sen. Alfonse D’Amato, who runs his own charity that received a $50,000 grant during Schlesinger’s management of the Gitenstein foundation.

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