Attorney General Andrew Cuomo, Senate Majority Leader Joseph L. Bruno And Assembly Speaker Sheldon Silver Announce Landmark Legislation To End Waste, Fraud And Abuse In Schools And The Public Retirement System

ALBANY, N.Y. (June 23, 2008) – Attorney General Andrew M. Cuomo, Senate Majority Leader Joseph L. Bruno and Assembly Speaker Sheldon Silver today announced comprehensive landmark legislation to increase government accountability at all levels and end fraud and abuse in the state retirement system with tough new penalties for fraud, the closing of “double dipping” loopholes for retirees and increased transparency and accountability in school spending plans.

The Attorney General’s Government Accountability and Fraud Stop Act, introduced in both houses of the Legislature at the request of Attorney General Cuomo, makes pension fraud a felony and makes those who defraud taxpayers subject to treble damages. It ends the loophole in which a public employee can retire and return to the same job days later to dramatically enhance their compensation and benefits. Lawyers will be banned from working for the same school as both an employee and outside contractor, and schools will be held accountable for their hiring and pay practices with dramatic new public reporting procedures.

The legislation comes amidst the Attorney General’s unprecedented and ongoing investigation into long-term and systemic fraud in the public pension and benefits systems.

“New York’s public pension system has been ripe for fraud and abuse, and that stops now,” said Attorney General Cuomo. “This legislation is the product of extraordinary bipartisan efforts to reign in the public pension fraud that has festered for decades and cost New York’s taxpayers millions. I applaud the leaders and members in the Senate and Assembly who worked hard to make this happen. My office will not allow another dollar to be spent on public benefits going to private contractors, and this legislation will help make that happen by imposing tough penalties while increasing transparency and accountability in all levels of government.”

Attorney General Cuomo also today announced he will designate a special prosecutor in his office dedicated to fighting fraud in the public pension system.

Senate Majority Leader Joseph L. Bruno said: “This legislation will prevent excessive and wasteful spending, and mitigate problems that have resulted from school districts paying generous pensions to superintendents, as well as waivers routinely granted by the State Education Department that have cleared the way for this practice. This bill will strengthen accountability and help repair the confidence taxpayers should have in their school districts. I applaud Senators Dean Skelos and Ken LaValle for working with Attorney General Cuomo to get this done.”

Assembly Speaker Sheldon Silver (D-Manhattan) said: “Taxpayers across New York must have full confidence that their tax dollars are not wasted on special compensation agreements that unnecessarily line the pockets of those who should not qualify for a public pension. This agreement provides for a comprehensive disclosure of salaries and benefits of school administrators, supervisors and consultants, thereby allowing for greater scrutiny of school administrator salaries. It also gives the state an effective means to recoup benefits paid to those who have not earned them. I want to thank Governor Paterson and Attorney General Cuomo for his initiative in creating this legislation, and for his work with Comptroller Tom DiNapoli in uncovering the abuses that made this legislation necessary.”

Sen. Dean Skelos, Senate sponsor of the legislation, said: “School districts must be accountable for every penny of the taxpayers’ money they spend. This new law ensures that lawyers who aren’t entitled cannot access the public pension system, makes administrative costs more transparent and establishes new safeguards to end ‘double-dipping’ practices that have cost property taxpayers millions of dollars. This agreement reflects a comprehensive approach that will prevent improper expenditures of our school taxes and provide stringent penalties for those who seek to abuse the system.”

Assemblyman Robert K. Sweeney, Assembly sponsor of the legislation, said: “No more pension schemes. No more gaming the system. This legislation will put an end to this type of taxpayer abuse. The deceitful arrangements that have allowed lawyers placed on school payrolls to receive retirement and other benefits must but be put to an end immediately. Long Island taxpayers and taxpayers all over New York State deserve better. I want to thank Attorney General Cuomo, Speaker Silver and Comptroller DiNapoli for their leadership on this issue, and I want to extend my thanks to my colleagues in the Senate and Assembly.

Senator Ken LaValle said: “People expect that their school tax dollars are going toward the education of their children and not into the pockets of those who know how to beat the system. The bill we are
announcing today with the Attorney General will help restore the public's confidence in their school district's financial decisions and help rebuild the bond between the residential and school communities.”

Assemblyman Harvey Weisenberg said: “For too long, Long Island school districts have been beset by unethical pension arrangements that subsidize attorneys and consultants who have not earned these benefits. This fraud and waste is unacceptable. This measure seeks to address this unethical activity by providing taxpayers with information on school administrators, setting clearer qualifying guidelines, and administering harsh sanctions to those who benefit from deceitful agreements. Through a collaborative effort between the office of Attorney General Cuomo, Comptroller DiNapoli and members of the legislature this fraud and waste will not continue.”

Assembly Committee on Governmental Employees Chair Peter Abbate (D-Brooklyn) said: “For even a few school district and BOCES employees to be awarded pension benefits they have not properly earned is an unconscionable affront to taxpayers in New York. The public employee retirement system exists for those who have put in years of service and expertise, including our school employees. These pension systems should not be compromised by dishonest practices, which have already cost taxpayers tens of millions of dollars.”

The Attorney General’s Government Accountability and Fraud Stop Act includes the following:

Expands the Attorney General’s authority by establishing an additional new mechanism to recoup funds and impose penalties on attorneys who are not employees of school districts or BOCES, but who improperly receive compensation or benefits.
Attorney General can bring action to recover treble damages (penalties of up to three times the person's salary or other benefits fraudulently obtained).

Enhances the penalty for pension fraud from a misdemeanor to a felony and creates a new criminal penalty for lawyers who improperly receive compensation or benefits.

Prohibits lawyers from simultaneously being an employee and an independent contractor for a school district or BOCES for the purpose of providing legal service to the same school or BOCES.

Closes "double dipping" loopholes statewide by tightening the 211 waiver process for hiring retirees and prohibits retirees from returning to the same or a similar position for one year following retirement.
Waivers will be only granted when there is an urgent need for the retiree's services in a particular position because of an unplanned, unpredictable and unexpected vacancy where sufficient time is not available to recruit a qualified individual, and such hiring shall be deemed as non-permanent, or,
If the employer has undertaken extensive recruitment efforts to fill a vacancy and has determined that there are no available qualified non-retired candidates, and the employer must prepare a detailed recruitment plan to fill the vacancy on a permanent basis.

Requires schools to publicly list all compensation, including salary and benefits, for all administrators. The list will be posted on the school's web site and at public libraries within the school district.

Adds new levels of transparency for schools and BOCES which must now submit an annual list reporting the position and compensation of all employees granted 211 waivers, and a list of all lawyers providing services and whether they are employees or independent contractors.

Attorney General Cuomo's ongoing investigation of pension abuse has expanded from a single county in February to now include more than 4,000 local governments and special districts across New York State, all school districts and all 37 BOCES. The investigation has uncovered fraudulent employment arrangements in which lawyers improperly placed on school district payrolls were able to collect significant pension benefits normally reserved for public servants. In some cases, attorneys who appeared on the payrolls did not actually provide legal services for the school districts or BOCES in question.

The investigation has already revealed that many lawyers had remained on public payrolls for such extended periods of time, or were included on the payrolls of so many public sector employers simultaneously, that they accumulated substantial credits in the New York State pension system.

In recent weeks, law firms and lawyers from Buffalo to Long Island have rescinded pension benefits and paid more than $900,000 to settle cases against them. Dozens of lawyers across the state remain under active investigation.

The Attorney General’s Office urges individuals with knowledge of any questionable arrangements between any BOCES, local governments, or school districts and their outside professionals to contact the Public Integrity Bureau by telephone at 212-416-8090 or by email at public.integrity@ag.ny.gov.

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