Schools group faces funding, pension probe

A nonprofit group that provides services in more than 89

Long Island school districts has fired a top official accused of misusing

funds, and is facing questions about whether one of its programs violated state

pension laws.

SCOPE Education Services dismissed Executive Director John J. Fagan Jr. on

Dec. 31, after 25 years on the job, for allegedly using at least $90,000 in

SCOPE funds to pay personal expenses such as his graduate school tuition and

his cable bill without the board of directors' approval.

SCOPE officials say they also recently learned that the group's practice of

placing retired educators in jobs as interim school administrators may violate

the law limiting what retirees can earn while collecting a state pension,

unless they get a waiver from the Education Department, to prevent so-called

double-dipping.

Law enforcement sources and SCOPE officials say the Suffolk County district

attorney is investigating Fagan and how the interim program was run.

State law allows retired educators to work in public education, but

requires those younger than 65 who expect to earn more than $27,500 in a year

to get a waiver or risk having their pensions reduced.

"The point of requiring a waiver is to protect the taxpayer, so that you're

not paying somebody twice for doing the same job," said David Neustadt,

spokesman for the state comptroller's office. "The purpose of the waiver is to

make sure it's only done when necessary."

SCOPE Board President James Ruck said Fagan presented two legal opinions

from a firm officials declined to identify, suggesting that the retirees placed

by SCOPE didn't need waivers because they were considered employees of the

nonprofit group, not the districts in which they worked.

"What we're dealing with as an organization is distressing to say the

least," said Ruck, who also is superintendent of the Sachem district. "From our

perspective, we were betrayed by someone we trusted."

Fagan denies any wrongdoing. "It's almost like a witch-hunt," said Fagan,

who is suing to get his job back. Before he was fired, Fagan had been on paid

suspension from his $172,000-a-year post since July.

Last month, SCOPE asked the state to grant waivers to about 40 of the 74

retired educators placed by SCOPE this school year. Ruck said the group stopped

making new placements last fall, and may disband the program when the school

year ends in June.

The board also is conducting a forensic audit - the second since July - to

determine the extent of the alleged financial improprieties, Ruck said.

So far, SCOPE officials have accused Fagan of charging more than $13,000 in

personal expenses on a SCOPE credit card, taking $24,270 in unauthorized

salary and loans, and giving a SCOPE-issued Chrysler to a friend while he drove

a Jaguar supplied by the group.

The irregularities were discovered after Fagan cut four checks for $6,000

each to himself and three employees last May, and two of the employees reported

it to a board member, SCOPE officials said in interviews and court records

filed responding to Fagan's lawsuit. Fagan has repaid about $12,000, according

to the records.

Fagan's $11-million lawsuit was dismissed Jan. 7. But last week, he refiled

the lawsuit seeking reinstatement and accusing the board of defamation and

contract violations because he was fired without a hearing.

"SCOPE was to be my legacy," Fagan said. "I built a very fine organization

that did a lot of good for a lot of people. I truly mourn what is happening.

The board's actions have hurt SCOPE just at the time of its greatest growth."

SCOPE, based in Smithtown, is a 40-year-old, state-chartered organization

founded to help Suffolk school districts pool resources and information to

improve education. Today, it provides services ranging from child care and

teacher training to enrichment programs and professional publications.

The interim administrator program, begun in 1997, has grown into SCOPE's

second-largest behind child care, supplying administrators to scores of Island

school districts. Of SCOPE's $18.8 million in gross revenues last year, $8.8

million came from the interim program.

School districts pay SCOPE for the interim administrators, and SCOPE pays

the retired educators, after taking an average commission of 7 percent. Last

year, SCOPE netted $1.1 million, about $292,000 of which came from hiring out

interim administrators, according to interim executive director Joseph Del

Rosso.

He said the program's growth has been spurred by a statewide shortage of

school administrators created by rising teacher salaries, which have made the

leap into supervisory jobs less attractive for veteran educators.

Last year, the state Education Department granted 273 waivers to retired

educators who expected to earn more than the state wages limit, and turned down

13. "There is a very strong need for this service that is recognized at the

state level," Del Rosso said.

SCOPE officials say they believed the question of whether the interim

program complied with state law was first addressed in October 1999, when Fagan

presented the board with a legal opinion that waivers were not necessary.

In May 2001, after the state Teacher's Retirement System in a newsletter to

retirees warned that those working as consultants through a private agency

might need waivers, the board was given another legal opinion backing SCOPE's

position, Ruck said.

A few months ago, however, Ruck said the board learned of a May 1999 legal

opinion raising questions about how the program was run. SCOPE's general

counsel, Kevin Seaman of Stony Brook, said he issued that May 1999 opinion to

Fagan.

SCOPE refused to release any of the legal opinions about the program to

Newsday, citing the criminal investigations.

In a separate pension-related case, Suffolk prosecutors last week charged

former William Floyd administrator Daniel Cifonelli with grand larceny for,

among other things, allegedly defrauding the state pension system by working as

a consultant for the district without getting a waiver. Cifonelli did not work

for SCOPE.

The state retirement system has suspended Cifonelli's pension until he

repays more than $400,000 he earned from that consulting work.

Retirees placed by SCOPE won't be similarly penalized, however, even if

they needed waivers in the past, state officials say.

"I don't think what we're seeing here is the abuse seen in other areas,

like we've seen in William Floyd," said David Daly, a retirement system

spokesman.

But an attorney for William Floyd said the district is being unfairly

singled out for what is considered a routine practice.

"If, in fact, what Cifonelli did was criminal, there are 100 other

administrators on Long Island who are very, very nervous," said Terry O'Neil,

the district's lawyer. "It's a very, very common practice."

Staff writer Sandra Peddie contributed to this story.

The rules on retirees' waivers

If a retired teacher or administrator wants to return to work in a public

school district, they can't earn more than $27,500 in a calendar year without

getting special approval.

If they want to exceed that amount, and are younger than 65, they must

either:

Get a one- or two-year waiver from the state Education Department, through

an application made by the district in which they are working. To obtain one,

the district must show that it has been unable to fill a position with a

qualified non-retiree. Or:

Work as a consultant or independent contractor. The state Teachers

Retirement System must approve the consulting contract, making sure the retiree

is not working as an employee of the district, with set hours or

responsibilities or in an established job title.

The only exception is for retirees who joined the retirement system before

May 31, 1973. For them, earnings are unlimited unless they return to the

employer they worked for during the 2 years prior to retiring. In that

instance, they can't earn more than the difference between their maximum

pension benefit and the greater of their final average salary or the salary

they would be receiving had they continued in service.

Members who joined the system on or after May 31, 1973, and are working as

consultants are subject to the earnings limitations or the waiver process.