Attorney Works Over 1,200 days in One Year (MORE, CLICK HERE)

Five districts falsely reported lawyer's job status
Newsday EXCLUSIVE
BY SANDRA PEDDIE - sandra.peddie@newsday.com - February 15, 2008

Five Long Island school districts falsely reported to the state that a part-time private attorney was a full-time employee in each district, enabling him to earn a public pension of nearly $62,000 and health benefits for life.

At the same time, the districts paid his law firm more than $2.5 million in fees, records show.

The attorney, Lawrence W. Reich, was listed as full time by five different school districts at once - Baldwin, Copiague, East Meadow, Bellmore-Merrick High School and Harborfields, according to records supplied by the New York State comptroller's office. In 2000, for example, he was credited with working 1,271 days in one year. The year before, he was credited with working 1,286 days.

State auditors uncovered the problem seven months ago in Harborfields, but took no action. Yesterday, the state comptroller sent letters to four of the five districts - Baldwin, Copiague, Bellmore-Merrick and Harborfields - notifying them that they would be audited to determine whether they were properly classifying people who provide professional services as employees or contractors.

In a statement, Comptroller Thomas DiNapoli said, "We have decided to take a closer look at this issue to make sure that only those individuals who are entitled to receive a state pension get a state pension."

Reich defended his arrangement with the districts as "common practice" among attorneys on Long Island.

A Newsday review of records shows that Reich submitted no time sheets, never worked full time for any of the districts and that school officials knew he was only working part time. They allowed him to collect public benefits worth tens of thousands of dollars. His law firm, Ingerman Smith of Northport, knew of the arrangement, as well, the records show. And an official at one district even made light of the situation in a letter warning Reich that there might be a problem with his status and asking him how to "correct the record" of his "employment."

Records show that Reich drafted contracts setting the compensation for superintendents and other top administrators. School officials told Newsday it wasn't a conflict of interest for him to do that while he was working as the school attorney because he reported to the boards of education, not the superintendents.

Under Internal Revenue Service rules, a person cannot be paid both as an independent contractor and employee for the same job.

"Clearly, it's an attempt to manipulate the system so that a person can receive Cadillac fringe benefits that a person in the private sector would otherwise not be entitled to," said Paul Sabatino, a municipal lawyer who is also former Suffolk chief deputy county executive.

"To me, that has the appearance of impropriety, and I wouldn't do it," said William Bernstein, co-chairman of Suffolk Bar Association's taxation committee. "It's obvious to me why he wanted to be an employee."

In an interview, Reich insisted he had done nothing wrong. "I don't file these papers," he said. "I don't have the faintest idea what they're filing for me."

He said that he did propose that the districts pay him a salary, while also paying a retainer to his firm, in which he was a partner. "I followed essentially a practice that was very common among my colleagues in the industry," he said.

Former State Comptroller Alan Hevesi harshly criticized a similar arrangement in February 2005, when his office discovered that a small state authority for horse breeding had given Rocky Point attorney Steven Losquadro full-time benefits, even though he worked part time. Hevesi called the arrangement "unacceptable and highly inappropriate," and Losquadro agreed to stop receiving health benefits.

That audit, reported in Newsday, caught the attention of Joseph Dragone, Harborfields' then-assistant superintendent for business. On March 3, 2005, he wrote Reich, asking him how to "correct the record of your 'employment' by the school district."

He added, "Although you are obviously better looking than Steven Losquadro, I would still not like to see your picture in Newsday, nor am I interested, quite frankly, in my own fifteen minutes of fame."

A copy of the letter was sent to then-Harborfields Superintendent Raymond McCloat, since retired and now working in Freeport schools. In an interview, McCloat said Reich's arrangement was "never questioned" while he was at Harborfields.

Harborfields officials refused to release Dragone's letter and other correspondence requested under the Freedom of Information Law, but Newsday obtained them elsewhere.

Dragone declined to be interviewed, but said in an e-mail: "Sorry, but other than the fact that Larry was a professional colleague in three districts in which I worked and good friend for more than 30 years, I would have no desire to comment to the news media about my relationship with him."

Reich began his career in the state Education Department Office of Counsel in 1967, according to his resume. He left in 1978 to work for the law firm. That same year, he started working for the Baldwin school district, which provided him with family health coverage.

Over the following years, Bellmore-Merrick High School, East Meadow, Copiague and Harborfields all listed Reich as an employee. In 2000, all five listed him as full time at the same time.

Records also show he was paid part time. In 2002, for example, Baldwin paid him $14,999.92, East Meadow $14,000, Bellmore-Merrick High School $23,911.63, Copiague $26,363.65 and Harborfields $16,713.03. East Meadow school district records show that Reich left that district's payroll on Nov. 30, 2001.

Superintendents in Baldwin and Bellmore-Merrick, who were not at the districts when Reich was hired, declined to say whether they thought Reich's arrangement was appropriate.

But Copiague Superintendent William Bolton, who was not at the district when Reich started there in 1988, defended it as common practice. He also suggested that any questions about Reich's arrangement were making a mountain out of a molehill. "It seems rather small," he said.

James Brennan, Harborfields board president, said board members were assured by Reich and his law firm that his arrangement was appropriate. "We were always told that it was legitimate," he said.

Under state pension rules, a public employee can earn only one year's credit in a calendar year, regardless of the number of days credited, said Emily DeSantis, spokeswoman for the state comptroller.

However, because Reich was treated as an employee, he was allowed to accrue 41.82 years in the state pension system, according to records, even though he was in private practice most of that time. In addition, because Baldwin began listing him as a full-time employee in 1978, Reich was able to retain health benefits.

Ingerman Smith was aware of the arrangement. On Aug. 29, 1995, firm partner Daniel Greenberg wrote a letter to the Harborfields school district, saying, "We appreciate the board's willingness to accommodate this method of continuing its relationship with the firm."

Greenberg did not return a call for comment.

The firm is one of the larger educational law firms on Long Island, representing nearly 50 districts, according to its Web site. Campaign records show the firm has contributed generously to various state and local politicians.

In 2005, Janet Wilson arrived as superintendent in Harborfields. In August, she questioned Reich's arrangement, according to records.

In a letter she later wrote to the state retirement system, Wilson said the district asked Reich to either document his time or change the arrangement. "Despite several reminders to Mr. Reich, the arrangement remained unchanged." Then in September 2006, Reich retired from the districts with an annual pension of $61,459. But in letters, he made it clear that he planned to continue working for the districts.

"Although I intend to retire into the New York State Employees Retirement System, I have no intention to retire in the customary sense of the word. I will remain active as member of the law firm, and I will continue to serve the district as previously," he wrote.

He asked that the districts "reconfigure" his payment and pay him a traditional retainer, rather than a salary. That was in addition to the retainer being paid to the firm.

Then in July 2007, state auditors reviewing the books of the Harborfields school district questioned his pension eligibility, he said in the interview.

Upon the advice of auditors, Wilson wrote the state retirement system, making it clear the district had no records showing that Reich ever worked full time.

Reich said he also contacted the state, but was assured that his arrangement was common practice and that "I shouldn't be unduly concerned," Reich said.

In October 2007 - shortly before the Harborfields audit was released, Reich notified the districts that he was retiring for good. In December, the state comptroller's office released the Harborfields audit. Although it criticized excessive retirement payouts to several former administrators, it made no mention of Reich.

NEWSDAY'S FINDINGS

CLASSIFICATION. Five school districts falsely reported a private, part-time attorney as a full-time employee.

BENEFITS. Because he was on the district payrolls, the attorney, Lawrence Reich, of Northport, received health benefits and earned a yearly New York State pension of $61,459, even though he was a partner in a private law firm.

EXTRAS. His law firm, Ingerman, Smith of Northport, was paid more than $2.5 million from the school districts.

INACTION. State auditors uncovered the problem seven months ago, but have taken no action to date.

AUDITING. After Newsday asked the State Comptroller's office yesterday for comment, the office informed four of the five districts they would be audited.

EARLY WARNING SIGNS

In 2005, after State Comptroller Alan Hevesi harshly chastised a Rocky Point attorney for claiming full-time benefits from the state, one school official reached out to Reich in a letter, left, in hopes of avoiding an embarrassing Newsday story like one from Feb. 2005.

WHAT THEY PAID HIM (2006 figures)

Baldwin: $15,576.84

Bellmore-Merrick H.S.: $23,538.46

Copiague: $28,038.46

Harborfields: $30,124.66

Total: $97,278.42*

$61,459

Reich's annual state pension

1,065 Number of days Reich was reported working

0 Time sheets filed by Reich

* NOTE: In 2006, Reich worked for four school districts; he no longer worked for East Meadow