May 17, 2008
Ex-Speaker Hires Lawyer in Inquiry
By WILLIAM K. RASHBAUM and RAY RIVERA, NY TIMES

Gifford Miller, the former City Council speaker, has hired a criminal defense lawyer to represent him in a federal investigation into the Council’s longstanding practice of allocating millions of dollars to phantom nonprofit groups, people involved in the case said on Friday.

The Council, which had hired a criminal lawyer to represent itself in the inquiry by federal prosecutors and the City Department of Investigation, recently hired another one to represent staff members who were being questioned, several of the people said.

The two lawyers, along with a third criminal defense lawyer representing the current speaker, Christine C. Quinn, are being paid with city funds; Mr. Miller’s lawyer, Henry Putzel III, is not.

Mr. Putzel said in a brief statement that the former speaker “had done nothing wrong, and when the facts are fully developed, I am quite sure that everyone will conclude as much.” He said that his client intends “to cooperate fully.”

Other than Ms. Quinn, Council officials said no one else in the 51-member Council had sought to have the city pay for individual legal representation, even though several have had to defend their spending in the face of news reports about allocations to nonprofit groups that hired council members’ friends, relatives and staff members. It was unclear, however, whether any council members had retained lawyers with their own money.

While no member of the Council has been singled out for scrutiny by investigators, the authorities have indicated that the inquiry is broad, aggressive and continuing along two tracks. First, it is examining the practice of squirreling away millions of dollars in the name of phantom organizations; second, it is reviewing how individual council members have directed their discretionary spending to nonprofit groups, and how the groups have spent it.

As a result, Council officials on Friday sent a memo to members outlining the process by which they can seek to have the Council pay for defense lawyers.

Mr. Miller, who served as speaker from January 2002 until December 2005, has kept a low profile since the investigation was disclosed in April.

The Council’s use of fictitious organizations to hold money in reserve dated to at least the 1990s, when Peter F. Vallone Sr. was the speaker. The practice, records show, expanded after Mr. Miller took over the following year and the names of the phantom groups became more legitimate-sounding.

Ms. Quinn, who has worked to increase transparency in the budget process, has said that when she learned of the practice last year she ordered that it be stopped.

Defense lawyers and prosecutors not involved in the case said it was routine — and common sense — for anyone who may be approached during an investigation to hire a lawyer.

“The smart thing to do is to hire a lawyer to figure out what the prosecutors think and want,” Edward A. McDonald, a white-collar defense lawyer who prosecuted public corruption cases as an assistant United States attorney, said in an e-mail message. One person involved in the case said that Evan Barr, the defense lawyer hired to represent Council staff members, had accompanied “a handful” of witnesses who had been interviewed.

Anxiety has been building among council members since the investigation was disclosed and Ms. Quinn revealed that she had been asked to turn over hundreds of pages of documents to the city and federal investigators. Less than two weeks later, federal authorities announced the indictment of two aides to Councilman Kendall Stewart of Brooklyn on charges that they had embezzled $145,000 from a group he funded.

Last month, Steven R. Peikin, the lawyer retained by the Council to represent it, briefed members about the inquiry.

In the memo sent on Friday, the Council’s Office of General Counsel said it and the city’s corporation counsel would decide to provide outside representation for council members on a case-by-case basis.

The decision, the memo said, would depend on several prerequisites, including a requirement that the council member or employee did not engage in intentional wrongdoing and cooperated with the investigation.

The ripples of the investigation are being felt throughout city government. Mayor Michael R. Bloomberg’s office this week detailed a little-known fund that it uses to finance council member items and outlined steps to tighten control over that process.

City agencies also have begun denying access to public documents about city contracts involving council member items, citing the investigation.

Itemized conflicts
Tuesday, April 29th 2008, Miguel Martinez Lombard for News

The stench of waste, fraud and corruption wafting out of the City Council grows ranker by the day as news organizations and prosecutors dig into how lawmakers have doled out millions of dollars in so-called member items.

The picture is that each council member gets a pot of money with which to do pretty much as he or she pleases on the claim that the cash will provide valuable community services. But there is virtually no documentation of exactly who gets the money and what they are doing with it.

All too predictably, self-dealing abounds. So far, the Daily News, our competitors and authorities have uncovered conflicts of interest and other questionable activities by seven of 51 Council members. And, rest assured, more sleaze will soon emerge.

Erik Dilan, Brooklyn, funneled $187,000 to a group that employs only his wife. Maria del Carmen Arroyo, Bronx, handed $82,000 to an organization where her sister and nephew worked. Maria Baez, Bronx, tried to give $7,500 to a non-existent tenants association.

Miguel Martinez, Manhattan, sent more than $400,000 to a nonprofit where his sister is on the board of directors. Hiram Monserrate, Queens, directed more than $400,000 in city funds to an organization run by top aides. Larry Seabrook, Bronx, scored $900,000 for the Bronx African American Chamber of Commerce, a group with the same address as his office.

Kendall Stewart, Brooklyn, gave $356,000 to a nonprofit run by his chief of staff, who was busted for embezzling $145,000.

What do the groups do with the money? Who knows?

Seabrook said his grant to the Bronx African American Chamber of Commerce would pay for, among other things, "community revitalization," but the organization never registered as a charity with the attorney general.

Dilan said his money would pay for sports programs but then switched to claim immigration services. Monserrate's funding went to a group that has never registered as a charity and failed to file tax returns for two years. Its mission was variously described as providing recreation and education programs, services to immigrants and "street activities including music and cultural enrichment."

Will anyone on the Council have the decency to call for ending all member items? Anyone?

May 17, 2008
Editorial, NY TIMES
Mr. Bloomberg’s Small Pot of Gold

Each day, it seems, there is more news about how New York’s politicians — in the City Council and the State Legislature — hand out taxpayer funds as political sweets to friends and allies. The only one who seemed exempt from the game was Mayor Michael Bloomberg.

Not quite, it turns out. As Mr. Bloomberg’s administration has reported, the mayor’s office has its own small pot of taxpayer cash to reward favorite city politicians who then reward their favorite local projects.

The $4.5 million that Mr. Bloomberg has handed out this fiscal year is a pittance compared with the $360 million that the City Council was given for discretionary spending. And the mayor’s items have not turned up in any of the various city or federal investigations under way. Yet, the really fat slush funds at the City Council and in Albany don’t excuse a small one in the mayor’s office.

The council giveaways have caused the most stir. Two aides to Councilman Kendall Stewart have been charged with embezzling funds. Many other council members have apparently directed their allotment to organizations run by family members or political backers. Council Speaker Christine Quinn has spent the last few months trying to deal with revelations that her office parked money in accounts for phony organizations so it would be available for later distribution.

Much of Mr. Bloomberg’s generosity seems to be directed at his closest political allies. Nearly half of the $4.5 million approved by the mayor’s office has gone to groups favored by Councilman Simcha Felder of Brooklyn, who routinely backs Mr. Bloomberg. Brooklyn Borough President Marty Markowitz, another cheerleader, got $900,000 for part of his summer concert series. Councilman Erik Martin Dilan received $60,000 for a project that is headed by his wife, an obvious conflict of interest.

Mr. Bloomberg and Ms. Quinn are trying to enact reforms to root out conflicts of interest, impose more contract oversight and provide transparency to how this money is spent. That’s a start but it is not enough.

This process is far too prone to abuse. Albany, the City Council and the mayor’s office should eliminate all discretionary funds. Recipients should compete for the money as part of a normal bidding process, and the money should be allocated through the normal budgetary process. That is a good deal for all taxpayers.