Suffolk attorneys went to court late Wednesday to block the state from paying out nearly $1 million of the $165-million Mega Millions winnings to the Miller Place couple who won the lottery, because a county audit found taxpayers were overbilled for homeless shelters they once ran.
State Supreme Court Justice William Rebolini did not rule on whether the county had a right to the money. Instead, a deal was reached in Riverhead, in which the attorney for winners Richard and Mary Morrison agreed to temporarily hold the $950,921.90 in question in an interest-bearing escrow account while the case proceeds.
The parties were ordered to return to court Jan. 20.
County Attorney Christine Malafi had sought a temporary restraining order to keep the state from handing over to the Morrisons the part of their winnings equivalent to what is owed the county.
Assistant County Attorney Brian Callahan said the Morrisons "personally benefited" from their control of both the nonprofit Love'M Sheltering Inc., which operated the homeless shelters, and Love'M Inc., which owned the shelter properties. Richard Morrison, as executive director of both companies, pocketed rent money paid by Love'M Sheltering to Love'M Inc., Callahan said.
"Basically what the county is trying to recoup is taxpayer money," he said in court. The county, which is bound to house the homeless, contracts with agencies to provide that service.
The Morrisons' attorney, Michael Solomon, complained that the county failed to try to recoup the money until the Morrisons won the lottery.
"Because my clients have come into good fortune, the government is going to trample their rights," he said. After taxes, the Morrisons expect to collect $66 million, Solomon said.
But earlier Wednesday he contended no money is owed because, he said, the audit involved the nonprofit corporation, Love'M Sheltering Inc., and the Morrisons are not personally liable for the corporation's debts.
The couple was not in court but they spoke to reporters outside their home Wednesday. Richard Morrison, who has always disputed the audit findings, said, "It's a lie. They stole from us." His wife, Mary said, "We're good people. We've done no wrong."
The county says the Morrisons owe $612,000 from the original 2004 comptroller's audit plus interest costs, which at the time of the judgment last year was about $800,000.
Comptroller Joseph Sawicki's audit found Love'M Sheltering Inc. overbilled the county in 2000 for retroactive raises, pensions never funded and equipment auditors couldn't find.
"We're asking the Morrisons to do the right thing," said Gregory Blass, Suffolk's Social Services commissioner.
"This isn't just a windfall for the lottery winners, it could be a windfall for our homeless housing programs, which are at a crisis level," Blass said. Auditors in 2004 disallowed payments because the rentals were "not an arms' length transaction" and the Morrisons charged the county market rates, when they should have based rents on their actual costs of operation.
The county canceled Love'M Sheltering's contracts in 2005, putting the $2.3-million-a-year agency and its 55 employees out of business.
Blass said Love'M Sheltering's contract was terminated in part because Morrison was found to be encouraging shelter residents to move into his private Section 8 properties, a violation of his county contract. Morrison later sued the county, challenging the comptroller's right to audit their agency, but lost the case in 2008.
With Patrick Whittle
and Katie Serignese