Attorney General Cuomo Stops Firms Abuse Of Pension System In Upstate, Long Island And Westchester, And Works With Lawmakers In Creating Legislation To End The Abuses
ALBANY, N.Y. (June 3, 2008) – Attorney General Andrew M. Cuomo today announced settlements with three law firms and lawyers in Upstate, Long Island and Westchester ending improper employment arrangements with school districts and a Central New York Board of Cooperative Educational Services (“BOCES”). The settlements also rescind all public benefits wrongfully received and require the law firms and lawyers to pay the state a total $235,000.
At the same time, top state lawmakers in the Senate and Assembly joined with the Attorney General in announcing plans to introduce legislation that would finally end the abuses of the public pension system.
The settlements announced today come as part of Cuomo’s statewide investigation into the public pension systems and are with the Central New York firm of Ferrara, Fiorenza, Larrison, Barrett and Reitz P.C., the New York City firm of Aiello and Cannick and Long Island attorney Gilbert Henoch.
“Systemic abuse in the public pension and benefits systems has wasted millions of taxpayer dollars,” said Attorney General Cuomo. “We will continue to examine school districts and BOCES throughout the state to ensure that taxpayer dollars are not being wasted by providing pensions to lawyers who are not state employees or other unwarranted perks and benefits. It may have been common practice for decades but it ends now, and I am working with leaders in the Senate and Assembly to pass legislation shutting down the abuses for good.”
The Attorney General’s settlement with the East Syracuse-based Ferrara firm ends the firm's agreement with the Madison Oneida BOCES in Verona in which Ferrara attorneys were improperly listed as "employees" of the BOCES even though they were at all times providing services as outside retained counsel. The arrangement allowed the BOCES' component school districts to receive reimbursement from the state for a portion of the cost of the lawyers even though the districts were not eligible to receive that aid. A BOCES provides services to multiple school districts that individual school districts cannot afford to provide themselves.
At various times since 1994, 22 of the Ferrara firm’s present and former attorneys have been improperly listed as employees of the Madison Oneida BOCES. Of those 22 attorneys, Norman Gross, Henry Sobota, and Marc Reitz received state pension credits in connection with their work for the BOCES. These three attorneys have already taken steps to rescind the pension credits they received in connection with that work, and forfeit any claim they may have had to recoup employee contributions made to the pension system during that time. The firm has terminated its employment relationships with the BOCES, and will provide services to the BOCES going forward only as retained outside counsel. The firm has not collected any pension funds from ERS. The firm will also pay $100,000 to the state under the settlement.
Since 1997, two lawyers at the law firm Aiello & Cannick, Devereaux Cannick and Jennifer Fremgen, have been improperly listed as "employees" of the Mount Vernon City School District. At all times, however, Cannick and Fremgen were providing services as outside retained counsel. Under their agreement with the district, these lawyers received health benefits and state pension credits despite the fact that health insurance is normally reserved for employees as opposed to independent contractors.
Under the settlement agreement, Cannick and Fremgen have agreed to take all steps necessary to rescind all pension credits they received in connection with their work for Mount Vernon, to forfeit any claim they may have had to recoup employee contributions made to the pension system, to terminate the "employer/employee" agreement, and to work as independent contractors going forward. The firm has not collected any pension funds from ERS. The firm and the two lawyers will collectively pay $75,000 to the state under the settlement.
Long Island lawyer Gilbert Henoch, while employed as an attorney in private practice, was improperly listed as an employee at the Hempstead Union Free School District from 1970 to 1996 and at the East Meadow Union Free School District from 1980 to 1985, receiving health benefits from Hempstead and pension credits in the New York State Employees’ Retirement System from both. At all times, Henoch was providing services as an independent contactor and not as an employee as defined by law. Henoch applied for retirement benefits from ERS in 2003 and has to date received pension benefits of over $50,000.
Under the settlement agreement, Henoch will terminate his membership in ERS, forfeit any future claims to pension benefits in connection with the years he worked for Hempstead and East Meadow, forfeit any claims to employee contributions made to the pension system and pay the state $60,000.
Attorney General Cuomo’s ongoing statewide investigation of pension abuse has expanded to include more than 4,000 local governments and special districts across New York State and all 37 Boards of Cooperative Educational Services (“BOCES”). The investigation has already revealed that many lawyers had remained on school districts’ or BOCES’ payrolls for such extended periods of time, or were included on the payrolls of so many school districts or BOCES simultaneously, that they accumulated substantial credits in the New York state pension system.
Late last month, Attorney General Cuomo held a public hearing with state lawmakers on Long Island to review some findings of the investigation and to begin looking at potential solutions, including legislation, to end the abuse.
The Attorney General was again joined by leading members of the Senate and Assembly today announcing plans for such legislation.
Senator Dean Skelos said, “The Long Island public hearing provided critically-important information we needed to develop comprehensive legislation that will address this problem. This legislation will prevent future abuses of the system and help restore the taxpayers’ trust in our local school districts.”
Assemblyman Bob Sweeney said, “People are entitled to work and earn a salary, or retire with a pension, but not both simultaneously at taxpayer expense. The need is clear for legislation to stop this gaming of the system.”
Senator Kenneth P. LaValle said, “I am pleased to be working with Attorney General Cuomo and applaud his efforts to eliminate the abuse in spending of taxpayer dollars. 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. Waste, fraud, and mismanagement must be stopped. I am encouraged by the Attorney General’s actions to protect the taxpayer and hope that this will help restore the public’s confidence in the system.”
Assemblyman Harvey Weisenberg said, “Rampant fraud and abuse exists in our public pension system and it needs to end. Thanks to the leadership of Attorney General Cuomo some of the problems are beginning to come to a long-deserved end. I am pleased to be working with the Attorney General and my colleagues in the Senate and Assembly on legislation that establishes a bright line standard for all attorneys, outside consultants, schools and local governments that will end public pension fraud and abuse.”
Last month, the Attorney General announced settlements in the investigation with the Buffalo firm of Hodgson Russ LLP and Capital Region attorney Maureen Harris, a former partner with the Albany firm Girvin and Ferlazzo, P.C. and a current commissioner with the state Public Service Commission. Those settlements also ended improper employment arrangements with school districts and various BOCES and rescinded all public benefits the lawyers had wrongfully received.
Also recently, Cuomo announced his investigation was expanding to include the practice of school districts permitting employees to “double dip,” allowing them to earn both salaries and pensions simultaneously. The Attorney General’s office is examining whether this is a proper use of public funds, whether these practices and their implementation violate existing laws and regulations, and whether existing law needs to be clarified as to these practices.
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 email@example.com.
The settlements announced today were handled by Assistant Attorneys General Renee L. Jarusinsky and Darcy Goddard under the supervision of Special Deputy Chief of Staff Mitra Hormozi and Special Deputy Attorney General for Public Integrity Ellen Biben.