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Post date: May 6 2014

A.G Schneiderman And Comptroller DiNapoli Announce Guilty Plea By Former Met Council CFO In $9m Kickback Scheme

Herbert Friedman Admits To Participating In Decades-Long Theft From NYC Charity; Faces Jail Time And Agrees To Pay $775K Restitution To The Publicly Funded Social Services Group

Schneiderman & DiNapoli: Those Who Rip Off New York Taxpayers And Important Not-For-Profits Will Be Prosecuted And Face Jail Time

NEW YORK – New York State Attorney General Eric T. Schneiderman and New York State Comptroller Thomas P. DiNapoli today announced the guilty plea of Herbert Friedman, former chief financial officer of the Metropolitan Council on Jewish Poverty (Met Council). Friedman pleaded guilty to felony Grand Larceny and Conspiracy charges for facilitating the theft of $9 million from the taxpayer-funded nonprofit organization in a 20-year grand larceny and kickback scheme. 

Friedman admitted that between the early 1990s and 2009, he received approximately $250,000 from the grand larceny and kickback scheme. Three other defendants, David Cohen, William Rapfogel and Joseph Ross, previously pleaded guilty in the case. Further information on the case is available here.

“Herb Friedman abused his position of trust to help steal millions of dollars from a taxpayer-funded charitable organization--one dedicated to serving some of New York City’s poorest and most vulnerable residents,” Attorney General Schneiderman said. “As this case has shown as much as any other, those who rip off taxpayers and charitable organizations will be prosecuted and punished. I want to thank Comptroller DiNapoli for his continued partnership in efforts to root out public corruption and ensure that taxpayer money is protected. I also thank the Met Council board of directors for bringing this activity to light and cooperating with our investigation.”

State Comptroller DiNapoli said, “The kick-backs and corruption went deep at the Met Council -- but sooner or later this type of greed is exposed. The plea of Herb Friedman is another important step in holding accountable those who put their personal gain first. I commend Attorney General Schneiderman and his staff for their diligence and pledge to continue to work with the Attorney General through our Joint Task Force to root out public corruption.”

Met Council is a New York State not-for-profit organization that provides the poor and elderly in the metropolitan New York City area with social, economic, housing, food and emergency financial assistance as well as anti-family violence programs. Met Council receives funding through New York State and New York City grants, legislative member items and contracts.

Friedman, 80, pleaded guilty today before the Honorable Michael Obus in New York County Supreme Court to Grand Larceny in the Third Degree (a class D felony) and Conspiracy in the Fourth Degree (a class E felony). In exchange for his guilty plea, Friedman will be sentenced to four months in jail and will pay $775,000 in restitution. If he fails to pay the restitution by his sentencing date, June 17th, he faces no less than one year behind bars and up to 1 ½ to 4 ½ years in state prison. 

Cohen, who served as head of the council until 1993, when Rapfogel took over, previously admitted to his part in the elaborate scheme. The thefts began in 1992, when Cohen devised the scam with Joseph Ross, of Century Coverage Corporation, in which the company would submit inflated invoices for insurance coverage to Met Council. The scheme involved Met Council paying inflated premiums and Ross then paying cash kickbacks to Cohen and Friedman, who was Met Council's chief financial officer until he left in 2009. Friedman, who was responsible for overseeing all payments to outside vendors such as Century, today admitted to his part in this scheme. 

Prior to Rapfogel, Cohen was Met Council’s executive director. After resigning that top post, he served as a consultant to the nonprofit. About six months after Rapfogel took over, he joined the ongoing conspiracy and received kickbacks, either in envelopes of cash or through payments of personal expenses by Ross. Initially, Ross paid Rapfogel and Cohen each $20,000 to $30,000 per year, but the inflated amount on the insurance policies increased over time, with Rapfogel ultimately receiving approximately $30,000 per month. 

These convictions are a result of an ongoing investigation by the Attorney General’s Office in conjunction with New York State Comptroller DiNapoli, as part of the Joint Task Force on Public Integrity. 

The joint investigation by the Attorney General’s and Comptroller’s offices continues.

Attorney General Schneiderman and Comptroller DiNapoli would like to thank the New York City Department of Investigation, the New York State Department of Financial Services and the New York State Department of Taxation and Finance for their assistance with the investigation.

Gerard Matheson is the lead investigator assigned to the case. Supervising Investigator Michael Ward of the Investigations Bureau is also working on the case. The Investigations Bureau is led by Chief Investigator Dominick Zarella. Also assisting in the investigation are Supervising Auditor Edward J. Keegan, Associate Auditor Matthew Croghan, Assistant Attorney General Milton Yu and Investigative Analyst II Paul Strocko of the Criminal Enforcement and Financial Crimes Bureau, Legal Support Analyst KerryAnn Rodriguez and Supervising Analyst Brian Selfon of the Public Integrity Bureau, and Policy Analyst Liam Arbetman of the Charities Bureau. 

This case is being prosecuted by Gary T. Fishman, Chief of the Criminal Enforcement and Financial Crimes Bureau, with Assistant Attorney General Jihee Suh of the Public Integrity Bureau. The Attorney General's Criminal Justice Division is led by Executive Deputy Attorney General Kelly Donovan.