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Post date: August 22 2006

Former Newburgh Economic Development Director

Attorney General Spitzer today announced that his office has secured $40,000 from a former local official in Orange County to reimburse an unauthorized municipal money transfer to a private corporation.

"Public officials owe a duty to the public to serve in good faith and with loyalty," Spitzer said. "My office will pursue vigorously public officials who breach this duty."

On June 20, 2002, Lester Spellman, the director of the Newburgh Office of Economic Development and the head of the Newburgh Local Development Corporation (LDC), directed city staff to transfer $380,000 in economic development funds to a local business, Savoy of Newburgh, Inc. Savoy planned to use the monies to finance the opening of an entertainment venue in downtown Newburgh.

According to legal papers filed by Spitzer’s office in 2005, Spellman disregarded the LDC resolution denying Savoy’s loan request.

Upon discovering the unauthorized transfer, the city was able to recover $250,000 from Savoy, but the company claimed it already had spent $130,000. The city commenced a legal action against Savoy, and on May 25, 2006, the court entered judgment in the city’s favor.

The $40,000 received from Spellman under this additional court-ordered settlement will help offset any funds the city is unable to recover from Savoy and its principals as the city pursues enforcement of its judgment against them.

The Attorney General thanked the City of Newburgh for its cooperation with the investigation.

This case was handled by Assistant Attorney General Monica J. Stamm under the supervision of Carrie H. Cohen, Chief of the Public Integrity Unit. Assistant Attorney General Lynn Tabbott
and Investigator Michael Ward assisted with the investigation. Also assisting in the investigation were Investigators Michael Battisti and Royal Remington, under the supervision of Supervising Investigator David Adams.