AG Cuomo Predicts "Hundreds" of NY Lawyers to be Implicated

Pension Probe Will Snare "Hundreds" of NY Attorneys, Cuomo Predicts
The New York Law Journal by Joel Stashenko - May 9, 2008

ALBANY - Attorney General Andrew M. Cuomo predicted yesterday that "hundreds and hundreds" of attorneys will ultimately be implicated in his office's investigation of government entities improperly enrolling non-employees in public pension funds. While his investigators have only exposed the "tip of the iceberg" so far, Mr. Cuomo said the problem is not limited to a few school districts on Long Island which were initially exposed for having put attorneys doing work for the districts on the public pension rolls.

Mr. Cuomo said the problem is also evident at BOCES school districts, "special" districts like sewer or water districts and towns and villages. "In many ways, this situation is the public integrity version of death by a thousand cuts," Mr. Cuomo said. "Ten thousand governments. Little scams. Chronic widespread corruption and fraud. And in the end, the taxpayers bleed millions of dollars." While "there will be people beyond lawyers" found to be receiving improper public pension benefits, "the predominant class will be lawyers," Mr. Cuomo said. Mr. Cuomo announced settlements of $50,000 each yesterday between his office and the Hodgson Russ law firm in Buffalo and with Albany attorney Maureen Harris. Ms. Harris, a 2006 appointee to the state Public Service Commission by then-Governor George Pataki, was formerly with Girvin & Ferlazzo, an Albany firm Mr. Cuomo said he is investigating for its relationship with the Hamilton-Fulton-Montgomery BOCES.

Ellen Biben, special deputy attorney general for public integrity, said yesterday that Ms. Harris went on the Hamilton-Fulton-Montgomery BOCES payroll in 2005 as a $30,000-a-year labor relations specialist. However, she provided no such services in 2005 or 2006, when she left Girvin & Ferlazzo and the BOCES payroll, Ms. Biben said. Ms. Harris agreed in her settlement with Mr. Cuomo's office to forfeit pension credits she earned for being an employee of the BOCES district. Ms. Biben said Ms. Harris was one of at least 12 Girvin & Ferlazzo attorneys appearing on the Hamilton-Fulton-Montgomery BOCES payroll between 1991 and 2008. She contended that the firm, paid more than $200,000 a year by the BOCES district, paid some attorneys with that money regardless of whether they did work for the district.

"The Girvin firm was given the discretion to determine how many and which Girvin lawyers would be placed on the BOCES payroll and set the salary that each lawyer would receive regardless of whether that lawyer was doing any work for the BOCES," Ms. Biden said. "Indeed, to the Girvin firm, participation in the New York state pension system was a perk of partnership instead of the benefit earned from actual state employment." Mr. Cuomo said a criminal and civil investigation by his office is continuing against Girvin & Ferlazzo and that the settlement announced yesterday was only with Ms. Harris. Her attorney, Michael L. Koenig, said Ms. Harris regarded the pension credits she received as a firm benefit for partners at Girvin & Ferlazzo "pursuant to a longstanding relationship her firm had with BOCES." Ms. Harris' settlement will not affect her position at the Public Service Commission, Mr. Koenig said.

"It does not and it should not in any way affect her status as a commissioner," he said. "It was one year out of nine years she was an attorney in private practice. It has no bearing on her current position." Girvin & Ferlazzo's managing partner, Jeffrey D. Honeywell, was one of the firm's lawyers who Ms. Biben said received pension credits for being classified as an employee of the BOCES district. Mr. Honeywell issued a statement yesterday that the firm's contracts were reviewed and approved in the past by the state Education Department and that former Comptroller H. Carl McCall found in the late 1990s that it did not violate state pension fund rules for attorneys employed by multiple school districts to be enrolled in the retirement fund.

"The rules and regulations covering the area of employment in this area are at best confusing and not universally applied," Mr. Honeywell said. "Our hope is that the review by the attorney general and comptroller will result in clarity for the future to guide our clients and all municipal entities." Mr. Honeywell said his firm is cooperating with Mr. Cuomo. "We do this because we have done nothing wrong," Mr. Honeywell said. Mr. Honeywell was one of four attorneys at Girvin & Ferlazzo who were removed from the state and local retirement system by Comptroller Thomas DiNapoli last month for being improperly classified as employees of the Hamilton-Fulton-Montgomery BOCES district. Service credits were deducted from a fifth attorney with the firm.

Hodgson Russ agreed in its settlement with Mr. Cuomo to also pay $50,000 and to end its long-standing practice of having its attorneys on the payrolls of five BOCES districts in western New York as part-time employees. Unlike the Girvin & Ferlazzo lawyers, Mr. Cuomo's office said the Hodgson Russ attorneys were not enrolled in the public pension system nor did they receive other benefits such as health insurance coverage. Mr. Cuomo said BOCES districts have classified outside attorneys as employees because there is an advantage for them to do so under state regulations that provide higher state education aid for the payment of employees as opposed to paying independent contractors. State Education Commissioner Richard Mills on Wednesday informed school districts that those incentives would be eliminated.

Hodgson Russ' president and CEO, Gary M. Schober, said in an interview yesterday that neither the firm nor its attorneys gained financially in any way by their being named as employees of the Cattaraugus-Allegany-Erie-Wyoming BOCES, the Erie 1 BOCES, the Erie 2 BOCES, the Orleans-Niagara BOCES and the Monroe 2 BOCES districts. "We believe there was nothing improper with our lawyers being placed on the payrolls of the BOCES," Mr. Schober said in an interview. "At the same time, we understand the attorney general's point of view. Since he does have strong feelings about the issues, we are willing to discontinue the practice and continue representing our clients as independent contractors instead of employees."

Mr. Cuomo said yesterday lawyers can legitimately be employees of school districts and other local government units, but he said the rules are clear when people qualify as bona-fide employees and when they are independent contractors. "You're an employee," Mr. Cuomo said. "You have an office, a desk, a telephone. You go there." Lawyers, of all professionals, should know when employment arrangements are legitimate, the attorney general said. "This is not a discrete area of the law," Mr. Cuomo said. "This is a very well-known issue. This is a question between being an employee and being an independent contractor. It's well litigated. It arises in business all day long. It arises in households."