Newsday.com

5 school districts claimed same "full-time" lawyer

BY SANDRA PEDDIE

sandra.peddie@newsday.com

4:24 PM EST, February 14, 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, his law firm was paid more than $2.5 million in fees, records show.

The attorney, Lawrence W. Reich, was listed as full time by as many as 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. On Thursday, 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 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 the 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, who has since retired and now works in the 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 -- 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, including Dragone, it made no mention of Reich.

Copyright © 2008, Newsday Inc.

Newsday.com

Four law firms dominate school district services

BY STACEY ALTHERR and EDEN LAIKIN

stacey.altherr@newsday.com
eden.laikin@newsday.com

10:40 PM EST, February 23, 2008

On Long Island, where public education is a multi-billion-dollar enterprise, four law firms control more than 60 percent of the estimated cost for legal services.

In 106 of the 124 school districts, $56.9 million was spent for legal fees from 2000 through 2004 -- $16.4 million alone during the 2003-2004 school year. Experts say legal costs have grown since then, with lawyers handling a wide range of issues from personnel and union issues to special education lawsuits.

The four law firms -- Guercio & Guercio in Farmingdale; Ingerman Smith in Hauppauge; Ehrlich, Frazer & Feldman, and Jaspan Schlesinger Hoffman, both of Garden City -- earned the majority of that total amount during that period, the most recent data available to Newsday.

Some experts say that consolidation of legal services is expected because educational law is highly specialized and few lawyers are experts at it.

In an unprecedented series of moves that have unfolded in rapid-fire fashion in the past week, three of these firms -- Guercio & Guercio being the exception -- that have attorneys whose arrangements with school districts allowed them to receive lucrative public benefits while working as private legal counsel are now under state and federal investigation.

Subpoenas and probes

Last week, Ingerman Smith turned over its files on former law partner Lawrence Reich to the FBI and the IRS. New York State Attorney General Andrew Cuomo has opened both a civil and criminal investigation and has subpoenaed records at the three law firms.

Federal and state investigations were begun a week ago after Newsday reported that Reich, while at Ingerman Smith, was also listed as a full-time employee at five school districts at the same time, even as the law firm was on retainer to those same districts, allowing him to earn an annual state pension of more than $61,000.

Carol Hoffman, a partner at Jaspan Schlesinger Hoffman, was listed on public records as an employee at different times at four districts, Newsday has reported. At Plainedge and Beth.page she was listed as full time; at East Rockaway and Lawrence, part time.

Jerome Ehrlich, a partner of the Garden City law firm of Ehrlich, Frazer & Feldman, was employed part time by two districts, Hewlett-Woodmere and Great Neck simultaneously -- and prior to that, full time at Bellmore-Merrick Central High School District. That allowed him to retire in 2006 with an annual pension of $34,029. Both served the districts as outside counsels at the time of the pension accruals. Hoffman has not yet retired.

Ingerman Smith, Ehrlich, Frazer & Feldman, and Jaspan Schlesinger Hoffman have been subpoened in recent days.

Federal and state criminal probes of numerous Long Island school districts is unprecedented. All of the firms involved have said they have done nothing wrong. Last week, Guercio & Guercio posted a letter on its Web site essentially stating that it had broken no laws and had never had one of its attorneys on a school payroll.

Education expertise

The evolution of how four law firms tied up the bulk of the legal work has to do with the growing complexities of education law, said Gregory Guercio, a partner in Guercio & Guercio, which currently represents 31 of the Island's 124 districts.

"School districts are $100 million plus corporations today with very significant and intense legal issues," said Guercio. "There is no school district that could employ enough staff lawyers with all the specialties necessary."

Representatives of the firms and others say that, as education law has become more complex within so many different areas of law, districts need larger firms to handle their needs. Those needs include lawyers having specialties in such diverse areas as labor, special education, litigation, and even public construction law and bonding issues.

"We have five lawyers that do only special education work," said Guercio.

Critics, who generally agree that large firms can handle more specialized needs, say that these law firms wield too much power with school boards and superintendents, and are not looking out for the best interests of taxpayers.

Relationships too close?

Very few school districts maintain inside counsel, experts say, because no one lawyer could handle all the work. Firms with expertise in the complexities of education law are hired by -- and report to -- boards of education, not superintendents, although they will represent them if litigation comes out of the duties of that position, such as a student suspension.

Newsday reported last week that, while acting as a district's attorney, Reich was also drafting contracts for individual administrators. Critics characterized that relationship as too cozy.

According to representatives in the firms, most districts pay two separate retainers -- one for labor counsel and one for general counsel. Retainer rates vary, but most are between $30,000 to $50,000 a year for each of the two areas. That gives school administrators and boards access to them from a quick phone call on an employee matter to representing the district on a complicated special education case. General counsels also sit at school board meetings to advise the board on matters of law and to close the meeting to the public to discuss personnel matters.

The labor counsel, usually from the same law firm, deals with grievances filed by employees to negotiating with unions.

"One contract could take 18 months to two years to settle, with a tremendous amount of our time for that," said John Gross, a senior partner with Ingerman Smith, which has 30 attorneys and represents 35 school districts.

For other litigation, attorneys charge a lesser rate, about half of their normal $400 an hour, said Gross.

Roy Simon, a professor and expert on legal ethics at Hofstra Law School, said that attorneys also benefit from charging a retainer, because it builds close relationships with the school board.

"It makes deep connections," he said. "It is less likely that if someone will charge less, that the district will use them instead."

Steven Schlesinger, a partner with Jaspan Schlesinger Hoffman, who has developer Donald Trump as a client, said school districts get a bargain when his firm represents them. He said stories about the federal and state investigations will hurt districts in the long run because large law firms won't want to solicit their business.

"Right now, my private client is paying $550 an hour, and school districts are paying $215 to $225 an hour, plus all the bad publicity I can find," he said.

Lorraine Deller, executive director of Nassau-Suffolk School Board Association, said school boards are awaiting the results of the investigation and hoping for some clear-cut direction.

"Right now, we are still puzzled as to what exactly are the ramifications of the story," she said.

Newsday.com

Cuomo wants records from every LI school district

BY ROBERT E. KESSLER

robert.kessler@newsday.com

February 24, 2008

The investigation into possible financial misconduct at Long Island school districts has escalated sharply as New York State Attorney General Andrew Cuomo requested that all 124 districts on Long Island provide extensive information on their relationships with lawyers and law firms for the past eight years.

"Double dipping and self-dealing cannot be permitted," Cuomo spokesman Jeffrey Lerner said late yesterday afternoon, in explaining the marked expansion of Cuomo's ongoing probe. "The attorney general's office will be looking beyond whether any one person did something wrong. We are now focused on determining whether these alleged abuses are systemwide."

Ten days ago, Newsday reported that one lawyer, Lawrence Reich, had been a full-time employee of five school districts simultaneously, even as he and his law firm, Ingerman Smith of Hauppauge, were being paid for services. That arrangement allowed Reich to receive a state pension and lifetime health benefits.

Since that story was published, two more lawyers were reported by Newsday to have been on the payrolls of six additional districts, bringing the total to 11. Yesterday's developments expand the investigation to every Long Island district.

Since the first story broke, a federal grand jury in Central Islip has opened an investigation and federal prosecutors, FBI and IRS agents have questioned potential witnesses and issued subpoenas.

Cuomo, in a separate but parallel investigation, has subpoenaed three law firms in the past week to get their records in connection with attorneys receiving state retirement credit for working full or part time for the school systems while their law firms were also paid by the districts. Nobody has been charged.

Stressing the speed of the investigation, yesterday's letter to the districts from Cuomo's office asks that all the requested material be returned in writing by Friday and that before then a state investigator might contact the districts for oral reports on the material.

The letter - sent to all the school districts on Friday - was signed by the head of Cuomo's public integrity unit, Ellen Nachtigall Biben, who has the title of special deputy attorney general.

Among the information requested is the names of all lawyers who were paid as district employees while their firms also were retained by the district; the amount of money paid directly to the lawyers as district employees and the amount of money paid separately to their firms; and the names and amounts of payments to all lawyers by the districts.

The districts were asked to supply the information voluntarily. But sources told Newsday yesterday that the attorney general's office was prepared to issue subpoenas to compel any district that declined to cooperate voluntarily.

Newsday.com

TO: Fellow Mad-as-Hell Taxpayers

February 24, 2008

Another day, another scandal involving wasted tax dollars. Isn't that the way you feel sometimes when you pick up the newspaper?

This past week, there was a story about a prosperous-looking lawyer, Lawrence Reich, who wriggled his way into the state pension system. He did so by having himself listed as a full-time employee on the books of five separate Long Island school districts. In fact, he was working as a consultant, but his dishonesty qualified him for a public pension of nearly $62,000 a year. By the end of the week, two more law firms and 11 school districts were implicated in similar sweetheart deals. We taxpayers are their dupes.

Then there was the $85,000 Mastic Beach public pool tile repair that turned into a $7.1-million payday for the contractors. Can you imagine continuing to sign those bills without at least asking a few tough questions?

If hard-working, honest Long Islanders aren't fed up by now with this abuse of our trust, then we are as numb as ocean swimmers in February. It's one thing to look at a rising property tax bill and think, "At least I'm getting good services." Most people don't mind paying for a fair value, right?

But giving money to people who game the system, who are continually figuring out new and sneakier ways to enrich themselves beyond our control ... that leaves a sick feeling. One way to handle it is to immerse ourselves in our busy lives. We shrug about how we're powerless, roll up the windows in our minivans and keep driving on.

But reality continues to knock.

This winter, we learned that the superintendent of the Water Authority of Great Neck North, Robert Graziano, makes $192,427 a year, which is more than the salary for the governor of New York! He bought a car on the taxpayer's dime - a 2005 Ford Crown Victoria - and also a 42-inch plasma TV. He justified the TV to his board by saying it was for "security" purposes. Oh, sure. That Giants-Patriots game probably never looked safer.

The man even hired his son, Gregory, and got him a $38,300 pay increase just this year. Which of us wouldn't like to obtain secure jobs for our children and pay them enough to live in Nassau County? Gregory Graziano's salary is now $140,000.

These special districts are part of what drives up the cost of living and makes it hard for our children to settle here. Special taxing districts bill Nassau and Suffolk taxpayers $500 million a year, or about $726 for every family of four. That money could go a long way toward paying the home heating bills this winter.

Time to wake up

It feels as though some public employees - not all of them, of course; thank goodness there are still dedicated public servants here who respect their constituents - have lost their sense of honor. Honor is an old-fashioned word, but what else keeps someone from dipping a hand in the till when he or she can get away with it?

Brookhaven Town Supervisor Brian X. Foley, who took office five years into the project, says he welcomes an investigation of the out-of-control spending on the Mastic Beach pool. Too bad it wasn't investigated long before all the headlines. Or how about Harborfields' former assistant schools superintendent, who warned Reich in 2005 that he should correct the record of his employment status or risk having his "picture in Newsday"?

Really, is public humiliation the only check on these people? Sometimes, it feels as though they are laughing at us.

The first wake-up call came a few years ago, when officials announced that Roslyn school administrators had stolen millions of dollars from the district. Don't you remember seeing the former school superintendent, Frank Tassone, dressed for his sentencing in an orange jailhouse jumpsuit? He got four to 12 years in prison. What a shame. This is a man who was in a position to be a role model for our children. Let's hope they don't follow his example.

His arrest led to probes of several Island school districts, and that lesson wasn't lost on voters. They rejected school budgets in near-record numbers in 2005. The voting booth is one of the only outlets for our outrage.

But most of the school districts scheduled a second vote and won. Word spread among parents that if the budgets weren't approved, the schools would cut our classroom teacher's aide or the band program or bus service - things that are near to our hearts. Of course we felt blackmailed into passing the budget on the second vote. Even when taxpayers try to stand up, we get shoved back down into our seats.

Is it any wonder we develop a cynical shell and tune out?

Only a few hundred people voted in this past December's election of special district representatives, even after the Graziano tale and other abuses of the system came to light. To be fair, one would have to be a walking Day Runner to keep up with these special district election schedules. There are 11 dates a year across Long Island - one every month except for February.

Reform is clearly needed. Gov. Eliot Spitzer has at least proposed to do away with the salaries and benefits of special district officers; unpaid posts are the norm in most of New York. Officials should also create a simpler election calendar. And, sure, the FBI is on the case investigating Reich. County prosecutors, state comptrollers, IRS agents - we can rely on them to step in when a situation turns really bad.

But school embezzlers and other scoundrels will probably keep gambling that they won't get caught.

What to do, what to do?

There's more we can do, as individuals. But it's going to take stepping on the brakes of that minivan and rolling down our windows. It's going to take a quiet revolution in what we value.

Say we decided to give up boasting about our cars or boats or summer homes. Say we bragged instead about how carefully our school district spends our money - and we know because we attend the meetings or serve on the board.

We could keep an eye open for that commissioner or labor leader living beyond his or her means, and ask how that's possible. When a public pool is closed for five years running - stranding the girls' swim team on dry land - we could make a few more inquiries. Learn about the Freedom of Information Act. Request documentation. Write a letter to the editor. Blow the whistle.

There are a few souls in every community who get involved beyond all expectation. Perhaps we could learn to treasure them more, and join them. That would give new meaning to the word "citizen." That would be an example worth setting.

Forward this message to everyone you know.

Newsday.com

School doubled lawyer's salary, boosting pension

BY SANDRA PEDDIE AND EDEN LAIKIN

eden.laikin@newsday.com; sandra.peddie@newsday.com

March 6, 2008

Hewlett-Woodmere school officials more than doubled the salary of a private attorney on its payroll in his last two years at the district - substantially boosting his New York State pension - while paying his law firm more than $400,000 in additional fees during those same years, district records show.

The attorney, Jerome Ehrlich, was a partner in the Garden City law firm of Ehrlich, Frazer & Feldman at the time. School district records show that Ehrlich's salary jumped from $25,000 in 2004 to $60,000 in 2005 and 2006. School records show he worked fewer days for the district after the raise.

"That's convenient; looks like a pension booster to me," said E.J. McMahon, director of the Albany-based Empire Center for New York State Policy, a pro-business think tank. "It's hard to figure out how they would justify it unless they were getting twice as many hours" or doing Ehrlich a favor.

Ehrlich is one of three Long Island attorneys under federal and state investigation because of their financial arrangements with school districts. The Federal Bureau of Investigation, Internal Revenue Service and New York Attorney General all launched probes after Newsday reported last month that five school districts falsely reported to the state that attorney Lawrence Reich worked full- time at each one, enabling him to get a pension of approximately $61,000 a year. While employing him, the districts were also paying his law firm more than $2.5 million in fees.

The third attorney is Carol Hoffman, a partner at Jaspan Schlesinger Hoffman, in Garden City.

District Superintendent Les Omotami did not return calls for comment yesterday. Howard Weinick, the school board president, said in a written statement that the board's contract with Ehrlich was "cost-effective and operationally efficient." Weinick did not respond to e-mails asking why the board approved Ehrlich as an employee in the first place.

The amount of a New York State pension is roughly calculated by multiplying the number of years worked by the average of the three highest consecutive years of salary. Ehrlich, 71, retired from the district in June 2006 with a pension of $34,029.

Emily DeSantis, spokeswoman for the state comptroller, which administers public pensions, said her office would not comment on the increase in Ehrlich's pay, nor would she calculate how much Ehrlich's pension would have been without the increase.

Ehrlich's contract shows that the district also agreed to pay 100 percent of his health insurance upon his retirement, as well as that of his wife, for life.

State and district records show that Ehrlich worked fewer days after his salary was increased by the school board. In 2004, he worked 207.50 days, and in 2005, he worked 173 days.

In an e-mail to Newsday, Weinick disputed those numbers, saying that the district's payroll software "resulted in reporting errors to the state." He said Ehrlich should have been reported as having worked only 130 days.

Ehrlich's lawyer, John Carman of Garden City, said Ehrlich did, in fact, increase his workload by having regular office hours one day a week at the district.

"He was getting $60,000 to be available one day a week, which isn't extraordinary, given what attorneys make these days," he said.

He declined to say whether Ehrlich asked for the raise.

By working at Hewlett-Woodmere and, over the years, the Bellmore-Merrick High School and Great Neck school districts, as well, Ehrlich was able to get credit for a total of 38 1/2 years in the public pension system - even though he was in private practice the entire time. It is that financial arrangement that is at the heart of the federal and state investigations.

Internal Revenue Service rules bar an individual from getting paid as both an employee and independent contractor for the same work.

District vendor records obtained by Newsday show that Hewlett-Woodmere paid his law firm, Ehrlich, Frazer & Feldman, $155,498 in 2004, $203,105 in 2005 and $211,157.15 in 2006.

In a letter to school officials, Ehrlich's partners - Florence Frazer and Jacob Feldman - said Ehrlich was a school district employee before the formation of Ehrlich, Frazer & Feldman in 1992. They said there was no double billing.

Ehrlich joined the Hewlett-Woodmere payroll in 1971. He was reported as full-time starting in 1978 and remained an employee until 1987. He was back on the district's payroll from 1994 until he retired in June 2006. During that time, from 1978 to 1985, Ehrlich also became an employee of the Bellmore-Merrick Central High School District, reported mainly as full-time.

Copyright © 2008, Newsday Inc.

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