N.Y. AG Reaches Settlements in BOCES Probe

New York Attorney General Andrew Cuomo announced settlements with a law firm that does bond counsel work and another attorney in an ongoing investigation into the practice of school districts and municipalities improperly listing outside attorneys as employees. Cuomo said the probe will reveal "hundreds and hundreds" of cases of attorneys engaged in an activity he called fraudulent.

"This issue is chronic, it is widespread, it is pervasive, it is all across the state of New York," Cuomo said. "This is a fraud that has gone on for years."

The attorney general's office identified two types of alleged wrongdoing under investigation involving the improper classification of outside attorneys as employees: one involves attorneys collecting or accruing state pension benefits, the other involves Boards of Cooperative Educational Services listing outside attorneys as employees in order to obtain state aid that the BOCES would not be eligible for if the attorneys were classified as outside consultants. BOCES were created to allow school districts to pool resources for special education.

The law firm Hodgson Russ LLP agreed to pay the state $50,000 and to stop allowing school districts to list its attorneys as employees. Attorneys at the firm had been listed as employees at five BOCES in Western New York that serve 112 school districts.

Although Hodgson Russ attorneys did not receive or accrue any public benefits, the practice allowed the BOCES to receive state aid they were not eligible for, the attorney general's office said.

"We will, without admitting any wrongdoing, discontinue the practice of permitting our attorneys to be placed on the payrolls of any BOCES and the attorney general will terminate his investigation of that practice," Gary Schober, president and CEO of Hodgson Russ, said in a statement. "The practice of placing attorneys on the payrolls of BOCES has been routinely approved by state officials, well known throughout the state and followed by many in upstate for approximately 25 years."

Schober said that the practice of placing attorneys on BOCES payrolls was begun many years ago. The firm did work for Cattaraugus-Allegany-Erie-Wyoming BOCES, Erie 1 BOCES, Erie 2 BOCES, Orleans-Niagara BOCES and Monroe 2 BOCES.

Last year Hodgson Russ served as bond counsel on 65 deals totalling $709,900, according to Thomson Reuters data. Twenty of those deals were for school districts in the state and totalled $127 million. Since 1998, Hodgson Russ has served as bond counsel on 135 deals for school districts in the state totaling $923.9 million, according to Thomson Reuters.

The other settlement announced yesterday was with Maureen Harris, a state public service commissioner who worked for one year at Girvin & Ferlazzo PC, a firm that State Comptroller Thomas DiNapoli said had improperly had seven attorneys listed as employees of the Hamilton Fulton Montgomery BOCES.

Special deputy attorney general Ellen Biben said that Harris was paid $30,000 for work at the BOCES and received pension credits but that she never did any work for the BOCES. The practice of listing Girvin Ferlazzo attorneys as employees at the BOCES began in 1989 and was considered a "perk" at the firm that was given to 12 attorneys during that time, Biben said.

Harris will pay the state $50,000 to settle the allegations. Harris' pension benefits accrued while at the firm were revoked by DiNapoli on Wednesday. Since 2002, Girvin & Ferlazzo has served as bond counsel on 135 deals totalling $657.3 million for school districts in the state, according to Thomson Reuters.

 

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