New York Attorney General Cuomo has secretly convened a grand jury to investigate allegations of involvement by the New York State police in politically motivated plots to discredit state legislators and other politicians, according to an exclusive story in today’s New York Post. The Post says an unnamed source close to the New York Power Authority identified this secret grand jury as the source of the subpoena served on the Authority’s now-suspended inspector general, Daniel Wiese, a former colonel in the State Police. The article states that in late March, Governor Patterson sent Cuomo a letter authorizing him to conduct the inquiry under New York State Executive Law § 63.3, which allows an attorney general to investigate indictable offenses at the request of the governor.
The subpoena for Wiese’s electronic communications resulted in the revelation that these records had mysteriously gone missing. Then last week, the former State Police security chief for governors Spitzer and Pataki, Gary Berwick, committed suicide. The Post story says the grand jury has issued a subpoena for Berwick’s suicide note.
Cuomo has assembled an impressive team of lawyers and investigators to conduct the inquiry into the so-called Troopergate scandal, headed by former federal prosecutor Sharon McCarthy. The former Deputy Chief of the Criminal Division in the U.S. Attorney’s office in Manhattan, McCarthy gave up a lucrative partnership at Kostelanetz & Fink, a Manhattan law firm specializing in white collar and tax offenses, to take the position.
Since we’re right across the street from the New York AG’s office, I sometimes run into Sharon at Starbucks. Though she is always rushing off to work, she is invariably pleasant. But potential targets of her investigation should not be lulled into complacency by her pleasant demeanor. She is a skilled and tenacious prosecutor, and for her to leave her partnership to head this investigation, she must believe there is some meat on the bones of these allegations. CR
New York State Attorney General Andrew Cuomo is investigating the possibility that hundreds of lawyers across New York State have been granted what he alleges are illegal pension benefits from school districts and other governmental entities that improperly enrolled non-employees in public pension funds. On Thursday, Cuomo announced settlements with Hodgson Russ of Buffalo and attorney Maureen Harris of Girvin & Ferlazzo of Albany. He said that a criminal and civil investigation into the Girvin firm was continuing.
The situation became public in February, when Newsday published an article stating that a private attorney, Lawrence Reich, was listed as a full-time employee of five school districts even as he was listed as a partner at the law firm Ingerman Smith and the districts were paying his law firm for his services. That arrangement allowed Reich to qualify for a public pension of over $60,000 and health benefits for life. The arrangement had come to light when attorney Janet Wilson, who had become embroiled in a lawsuit against one of the school district when it had declined to renew her contract, told another partner at Reich’s firm that she planned to notify the state employee retirement system about Reich’s arrangement.
According to a deputy attorney general, Harris was one of at least twelve Girvin attorneys who were on the public payroll between 1991 and 2008. The firm was given the discretion to determine how many and which lawyers would be placed on the public payroll and set the salary that each lawyer would receive, regardless of whether that lawyer was doing any work for the school district. Harris’s attorney said she regarded the pension benefit as “pursuant to a longstanding relationship” her firm had with the district.
This investigation is an example of how something that is accepted as perfectly fine on one day becomes flavor-of-the-month fraud the next day because a prosecutor decides so. It is particularly important that anyone defending such an investigation learn all there is to know about when someone can be considered a public employee. Even if the lawyers were wrong about an interpretation of when that status can be confirmed, it may constitute a complete defense if they believed in good faith they were entitled to the benefits. CR
In an investigation that could lead to criminal charges, New York State Attorney General Andrew Cuomo has issued subpoenas to 18 banks – including Citigroup, Merrill Lynch, Morgan Stanley, and JPMorgan Chase – that underwrote and brokered investments in the now-collapsed auction-rate securities market. The AG is seeking information dating back to 2003 on the extent to which the banks artifically supported the market and how they disclosed the risks of auction failures to investors.
Auction-rate securities are long-term bonds that were often marketed as short-term investments because buyers could sell them at periodic auctions. For two decades, securities dealers had routinely bought unwanted bonds at auction to prevent failure. The $330-billion market collapsed in February, when dealers suddenly stopped bidding in an effort to conserve capital in light of the subprime mortgage crisis.
The investigation was reportedly instigated when more than fifty lenders had to stop making federally guaranteed student loans. Now nine other state attorneys general have formed a task force to investigate whether brokers misrepresented ARSs as an alternative to money-market investments when they sold them to individuals.
The subpoenas were issued under New York’s Martin Act, a sweeping and broad statutory scheme dating to 1921 that criminalizes misrepresentation in connection with the purchase and sale of securities. The Act has been used regularly by both the New York County DA’s office and former AG Elliot Spitzer to police securities trading on Wall Street. Now it is being used yet again, and institutions and individuals face tremendous potential criminal liability. Intense and powerful market forces provide explanation, mitigation, and defenses for those ensnared in the AG’s latest effort to blame someone – anyone – for the sorry state of our economy. CR
Late last week, the New York State Attorney General’s office launched a 12-hour raid on State Police headquarters in Albany as part of its ongoing investigation into former governor Spitzer’s alleged use of the state police to spy on Senate Majority Leader Joseph Bruno, the New York Post reported.
Even more troubling, the Post reports, the AG also sent the State Police a letter informing them that Glenn Valle, its longtime chief counsel, could not represent troopers implicated by the investigation.
Typically, prosecutors take this position when an attorney is either personally involved in the activities under investigation or has a conflict of interest. All we know is that during contentious hearings held last year before the state Senate Investigations Committee, Valle defended State Police for following Spitzer’s directives. Now state Republican lawmakers are calling for his resignation.
The problem is, there’s no referee. There’s no judge to ask for a decision. Where does the AG get off with unilaterally disqualifying an attorney? In any contested case in which a prosecutor wants to disqualify an attorney, there is a hearing with evidence and proof. The U.S. Attorney or DA does not write to the client and say, “Hey, buddy, gotta get a new lawyer.” They go to a judge and follow proper procedure.
Responding to the Post’s previous story about Governor Paterson’s request for the investigation, State Attorney General Cuomo issued a statement in which he pointed out that “combining politics and police work is a toxic brew.” By disqualifying an attorney without a hearing, the AG is only throwing more poisoned entrails into the cauldron. Let’s hope that the addition of local white-collar stalwarts Robert Fiske and Michael Armstrong as advisers in this inquiry, announced today, improves the AG's judgment.
