Attorney General Cuomo's Statewide Pension Fraud Investigation Ends Improper Law Firm Relationships In Western New York

BUFFALO, N.Y. (April 28, 2009) - Attorney General Andrew M. Cuomo today announced settlement agreements relating to long-standing improper employment arrangements between two law firms and a western New York Board of Cooperative Educational Services (BOCES).

The settlements are with the law firm Phillips Lytle LLP, which has offices throughout New York State, and the two-partner law firm Lundberg & Gustafson LLP, located in Jamestown, New York. The settlements were reached after investigations by the Attorney General revealed that both firms allowed their lawyers to be listed as part-time “employees” of the Erie 2-Chautauqua-Cattaragas BOCES when, in truth, the lawyers always provided services to the BOCES and it component school districts as independent contractors.

“By allowing their lawyers to be listed as so-called ‘employees,’ these firms helped the BOCES and their component school districts get taxpayer subsidies to which they were not entitled,” said Attorney General Cuomo. “My office will continue to aggressively pursue wrongful claims made at the taxpayers’ expense as we work to restore integrity to the state’s payrolls and pension system.”

The BOCES and its component school districts have participated since the mid-1980s in a labor relations “Cooperative Services Agreement.” This agreement was designed, in part, to reduce costs to school districts by providing that BOCES employees, and not hired outside counsel, should be used for labor relations negotiations. The BOCES and component school districts would obtain state subsidies when they complied with the agreement. By allowing their lawyers to be listed on the BOCES’ payroll as so-called “employees,” the firms assisted the BOCES and its component school districts to obtain state aid for which they were not eligible.

The Attorney General’s investigation revealed that Phillips Lytle LLP allowed the BOCES to list seven of its lawyers as employees of the BOCES at various times between the mid-1980s and late 2008. None of the Phillips Lytle lawyers received pension credits or other employment-type benefits in connection with their work at the BOCES. Phillips Lytle LLP will pay $20,000 under the settlement.

The Attorney General’s investigation also revealed that Lundberg & Gustafson (formerly known as Beckstrom & Plumb) allowed the BOCES to list several of its lawyers as employees at various times between 1988 and late 2008. Only three of those lawyers, none of whom initiated the arrangement, are currently partners in or employees of the firm. Of those three lawyers, none received pension credits or other benefits in connection with the BOCES. Lundberg & Gustafson will pay $5,000 under the settlement.

The BOCES ceased its improper “employment” practices in connection with the labor relations agreement in response to the Attorney General’s investigation

Attorney General Cuomo’s ongoing investigation of improper relationships between lawyers, law firms, and public sector entities has expanded to include all New York State school districts, 37 BOCES, and more than 4,000 local governments and special districts across New York State. To date, the investigation has resulted in settlements returning more than $1.65 million to taxpayers.

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 Attorney General Lauren Popper Ellis and Acting Deputy Chief of the Consumer Frauds and Protection Bureau Darcy M. Goddard.

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