Attorney General Cuomo Announces That Long Island And Broome County Lawyers Will Pay $25,000 To Settle Pension Abuse Cases

ALBANY, N.Y. (January 26, 2009) - Attorney General Andrew M. Cuomo today announced two settlement agreements with Long Island and Broome County lawyers as part of his ongoing investigation into local government waste and abuse of the state pension system.

Long Island lawyer Terence E. Smolev will pay the State of New York $15,000 to end an investigation into his improperly being listed as a putative part-time “employee” of the North Merrick Union Free School District between 1975 and 1998, and he will forfeit any claim to monetary contributions made to the state retirement system during that time.

Vestal lawyer Michael D. Sherwood similarly was improperly listed as a putative part-time “employee” of the Vestal Central School District from 1995 through 2008. Under his settlement agreement, Sherwood will pay the State of New York $10,000 and forfeit any claim to monetary contributions made to the state retirement system during his time with the school district.

“My office continues to uncover evidence of fraud and abuse in the state pension system and New York taxpayers continue footing the bill,” said Attorney General Cuomo. “I will continue to aggressively pursue those who rip off New York’s taxpayers and seek the return of that money to the state.”

Smolev was improperly listed as a putative part-time “employee” at the North Merrick Union Free School District from 1975 through 1998, during which time he earned credits with the state pension system. At all times, Smolev was providing services as an independent contractor and not as an employee which meant he was not entitled to taxpayer-funded pension benefits. He also received family health and dental benefits from the district, which are ordinarily only available to actual employees and not retained outside counsel. Smolev applied for retirement benefits from the state Employee Retirement System in 2005 solely as a result of his purported “employment” at North Merrick.

Sherwood was originally retained by the Vestal Central School District in 1983 as outside retained counsel. He also maintained a full-time law practice. In early 1995, Sherwood was improperly placed on the school district’s payroll as a salaried part-time “employee” with the title “School Attorney.” Although Sherwood was listed on payroll as a part-time “employee,” and although he was paid in the form of a “salary” rather than through payments to his law firm, he provided services to the district in the exact same manner as he had when he was first retained in 1983 as an independent contractor. The primary purpose of including Sherwood on the district’s payroll and paying him a “salary” as a putative “employee” was so that he could accumulate pension credits in the state retirement system.

In 2003, the Vestal Central School District made Sherwood a “hearing officer,” increasing his “salary” and the value of his credits in the pension system. In total, Sherwood was improperly listed as a putative part-time “employee” of the Vestal Central School District from 1995 through 2008 during which time he earned approximately five years’ worth of credits with the state pension system.

In 2008, while the Attorney General’s investigation was ongoing, Sherwood's pension credits for his work at the Vestal Central School District were rescinded. His credits properly earned during his long tenure as a Vestal town justice remain intact.

Attorney General Cuomo’s ongoing statewide investigation of pension abuse includes more than 4,000 local governments and special districts across New York State, all school districts and the 37 Boards of Cooperative Educational Services (“BOCES”). The investigation has already revealed that many lawyers and other professionals had improperly 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.

To date, Attorney General Cuomo’s investigation into fraud and abuse in the public pension systems has returned more than $1.6 million to taxpayers through actions involving the conduct of more than 70 attorneys and other professionals.

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 e-mail at public.integrity@ag.ny.gov.

The settlements announced today were handled by Assistant Attorneys General Darcy M. Goddard and Renee L. Jarusinsky.

 

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