Selected reports issued by the Office of the State Comptroller during the week ending July 16, 2016

Selected reports issued by the Office of the State Comptroller during the week ending July 16, 2016

Source: Office of the State Comptroller

Click on text highlighted in color to access the entire report 

Bradford Fire Co. Treasurer Arrested for Stealing Public Funds

New York State Comptroller Thomas P. DiNapoli announced the arrest of Bradford Volunteer Fire Company Treasurer Sherry Hamilton. She was charged with grand larceny in the third degree, a class D felony, after an audit and investigation by DiNapoli’s office, working with the New York State Police and Steuben County District Attorney Brooks Baker, uncovered that Hamilton misappropriated more than $8,000 in fire company funds by allegedly taking "advance" payments on company activities and manipulating company bank accounts and records.

Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse.  Individuals can report allegations of fraud involving public funds by calling the toll-free Fraud Hotline at 1-888-672-4555, by transmitting an e-mail to investigations@osc.state.ny.us, by filing a complaint online athttp://osc.state.ny.us/investigations/complaintform2.htm or by mailing a complaint to Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

Independent Review Finds State Pension Fund Strong, But Warns of Risks Posed by Limited Staffing

New York State Comptroller Thomas P. DiNapoli released an independent fiduciary and conflict of interest reviewof the New York State Common Retirement Fund (Fund) that commended the Fund for its strong policies and ethical management, stating that DiNapoli’s office "maintains a very high level of ethical, professional and conflict of interest standards." Funston Advisory Services, who conducted the review, repeatedly warned, however, that existing constraints on the Fund’s staffing and compensation could have current and future consequences.

Managed Care Companies Wasting Millions in State Medicaid Dollars

United HealthCare and Amerigroup, managed care organizations that contract with the Department of Health to provide health services under the state’s Medicaid program, made at least $6.6 million in improper and questionable payments to ineligible providers over a four-year period, including almost $60,000 in payments to pharmacies for medications that were prescribed by deceased doctors, according to an auditreleased by State Comptroller Thomas P. DiNapoli.

Audits of State entities released by State Comptroller DiNapoli

Port Authority of New York and New Jersey (PANYNJ): Inspecting Highway Bridges and Repairing Defects (Follow-Up) (2015-F-19)

An audit issued in May 2014 found the authority did not follow state Department of Transportation (DOT) requirements for classifying, reporting and repairing bridge defects. Instead, the PANYNJ followed its own methods and did not always comply with DOT’s requirement for an annual interim inspection if the repairs are not completed. Further, auditors noted that 10 of the 17 safety conditions sampled were not repaired for more than two years, including three which were open for five years. In a follow-up, auditors determined PANYNJ officials made progress in correcting the problems identified.

Higher Education Services Corporation: College of Westchester Tuition Assistance Program (2015-T-5)

Auditors determined that the procedures used by Westchesterofficials to certify students for state financial aid substantially complied with the governing law and regulations.

Office of General Services (OGS) and State Education Department (SED): Preferred Source Contracting (2014-S-77)

Although SED is responsible for monitoring the New York State Industries for the Disabled (NYSID) preferred source contracting program activities, it has provided only minimal oversight. As such, there is little assurance that NYSID is awarding contracts in a manner that best meets the purpose of the program, that member agencies and corporate partners are meeting contract requirements, and that the majority of the contracted work is being completed by disabled workers. Auditors also looked at the role that OGS plays in the program and found OGS is appropriately fulfilling its current responsibilities under the program. Nonetheless, auditors identified opportunities for OGS to improve its effectiveness.

From the LawBlogs – Week ending July 16, 2016

From the LawBlogs – Week ending July 16, 2016

[Internet links highlighted in color]

Posted by Justia

Prew v. Employee Ret. Sys. of City of Providence

“Petitioner, after more than fifteen years of service in the City of Providence, [Rhode Island] Police Department, was injured while on duty. The Department concluded that Petitioner’s injury interfered with her ability to handle a firearm. Later that month, Petitioner applied to the City of Providence Retirement Board for accidental-disability retirement. The Board voted to deny Petitioner’s application, finding that Petitioner’s condition was correctable with surgery and that Petitioner failed to mitigate her injury by undergoing surgery. The Supreme Court quashed the Board’s decision, holding that the Providence Code of Ordinances does not require an otherwise eligible employee to mitigate her injury by undergoing a surgical procedure in order to qualify for an accidental-disability pension. Remanded.”

N.B. Among the rulings by New York courts on the issue of "directing an employee to submit to surgery" are the following:

In Schenectady PBA v PERB, 196 A.D.2d 171, the Appellate Divisions said that General Municipal Law "§207-c evinces a legislative intent to balance a police officer's right to receive full salary and certain benefits while disabled due to an injury incurred in the line of duty, with certain rights of the employer, including the right to have the employee submit to medical and surgical treatment, and to obligate the injured officers to perform light duty if able," as §207-c expressly authorized an employer to discontinue paying benefits if the injured officer refused to accept light duty assignments or refused medical treatment.

In contrast, in Kauffman v Dolce, 216 A.D.2d 298 the critical issue concerned City of White Plains Firefighter Kauffman’s refusal to undergo surgery for a second time. The City terminated his General Municipal Law §207-a disability benefits on the ground that his refusal undergo the second surgery constituted a waiver of his right to these benefits. Supreme Court reinstated Kauffman's §207-a benefits, finding that his refusal to undergo surgery a second time was reasonable in light of the unsuccessful previous surgery and "the lack of the likelihood of success of the proposed surgery." The Appellate Division sustained the lower court's ruling, observing that the Court of Appeals' holding in Schenectady Police Benevolent Association v Public Employment Relations Board, 85 NY2d 480, that a municipality could require police officers receiving General Municipal Law 207-c benefits to undergo corrective surgery "under appropriate circumstances ... where reasonable,"  did not apply in Kauffman's situation.

A school teacher who had lost an eye as the result of an injury on the job refused to undergo eye surgery involving the other eye because of the problems which could result. Such refusal was held reasonable by the Workers' Compensation Board. When the insurance carrier appealed, the Appellate Division affirmed the Workers' Compensation Board's determination,  holding  that the Board's finding that the teacher's refusal was reasonable under the circumstances was supported by the record (Burroughs v Goshen Public Schools, 98 A.D.2d 891).

Posted by Employment Law Daily

Police officer’s racial profiling led to job loss

By David Stephanides, Esq.

A local police department was proud of its reputation for stopping alcohol- or drug-impaired drivers passing through its city, and it encouraged its officers to make a high volume of stops. A well-respected officer decided, on his own initiative, to be more aggressive with his traffic stops to get his numbers up (City of Chaska, Minnesota and Law Enforcement Labor Services, Inc., Local No. 210, St. Paul, Minnesota,Feb. 19, 2016, Richard Miller, Arbitrator).

Employee with mental health issues unqualified due to safety risk; no direct threat defense required

By Dave Strausfeld, J.D.

The Wisconsin Division of Motor Vehicles was not required to rely on a direct-threat defense in a discriminatory discharge suit brought by an employee with a mental health disability whose behavior raised safety concerns, so it did not need to bear the burden of proof associated with that affirmative defense, held the Seventh Circuit, affirming summary judgment dismissing her Rehabilitation Act claim. Rather, it could simply argue she failed to make a showing that she was “otherwise qualified” for her position, and on this issue she bore the evidentiary burden. Sending her for an independent medical examination did not necessarily trigger the direct-threat framework (Felix v. Wisconsin Department of Transportation, July 6, 2016, Rovner, I.).

First Amendment may protect officer from retaliation for aiding FBI investigation

By Dave Strausfeld, J.D.

The First Amendment might protect a police sergeant from retaliation for aiding an FBI investigation into corruption by police department and town officials, held the Fifth Circuit, reversing a summary judgment ruling. His involvement in the FBI investigation did not appear to be within the ordinary perimeters of his job duties, especially since he was forbidden to disclose it to anyone in the police department, so he appeared to be communicating with the FBI in his capacity as a “citizen.” But on a separate issue, he did not state a False Claims Act whistleblower retaliation claim against individual town officials because a 2009 amendment did not expand the FCA to provide individual liability (Howell v. Town of Ball, July 1, 2016, Jolly, E.).

An arbitration award must be vacated if a party's rights were impaired by an arbitrator exceeding his or her power in making the determination

An arbitration award must be vacated if a party's rights were impaired by an arbitrator exceeding his or her power in making the determination

Matter of O'Flynn (Monroe County Deputy Sheriffs' Assn., Inc.), 2016 NY Slip Op. 05261, Appellate Division, Fourth Department

The Monroe County Sheriff’s Department terminated then Deputy Sergeant Paul Doser from his position after Doser was involved in a one-car rollover accident and it was determined that he was driving while intoxicated (DWI).

The appointing authority filed disciplinary charges against Doser alleging: (1) Driving while intoxicated in violation of Vehicle and Traffic Law §1192(3); (2) Aggravated DWI with a blood alcohol content of .18 percent or greater in violation of Vehicle and Traffic Law §1192(2-a)(a); (3) Aggravated DWI with a child in the car in violation of Vehicle and Traffic Law §1192(2-a)(b); (4) Endangering the welfare of a child in violation of Penal Law §260.10(1); and (5) Engaging in conduct unbecoming of his position. 

Consistent with the controlling collective bargaining agreement (CBA), the Department held a administrative disciplinary hearing at which Doser was represented by the Monroe County Deputy Sheriffs' Association, Inc. [Association]. Doser was found guilty of all the charges filed against him and the penalty imposed was termination.

Doser then filed a grievance challenging the Department’s disciplinary decision and, pursuant to the CBA, a hearing was held before an arbitrator.

At the arbitration the arbitrator found that certain evidence, including the chemical test results measuring Doser's blood alcohol content, was inadmissible. Refusing to consider such evidence, the arbitrator found that the second and fifth charges were not supported by clear and convincing evidence and dismissed those charges but sustained charges one, three, and four.

Comparing the penalty imposed on Doser, termination, with the penalties imposed on other officers also involved in similar DWI-related violations, the arbitrator noted that none of the other officers had been terminated. Concluding that Doser's termination was arbitrary and capricious, the arbitrator ruled [1] that demotion, rather than termination, was the appropriate penalty and [2] that Doser was to be reinstated by the Department and compensated for lost pay.

The Department filed a CPLR §7511 petition seeking to vacate the arbitrator's determination and award. Finding that the arbitrator “exceeded his authority by improperly neglecting to consider certain evidence” received in the course of the disciplinary hearing, Supreme Court vacated the award in its entirety, and ordered a rehearing before a different arbitrator.

The Association appealed the Supreme Court’s decision. The Appellate Division, however, sustained the lower court’s ruling, explaining that CPLR §7511(b) provides that an arbitration award must be vacated if, as relevant in this appeal, “a party's rights were impaired by an arbitrator who exceeded his [or her] power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made."

The Appellate Division observed that "[i]t is well settled that a court may vacate an arbitration award only if it violates a strong public policy, is irrational, or clearly exceeds a specifically enumerated limitation on the arbitrator's power" and “[o]utside of these narrowly circumscribed exceptions, courts lack authority to review arbitral decisions, even where an arbitrator has made an error of law or fact." The court concluded that the arbitrator, in this instance, had “clearly exceeded his authority as provided by the CBA.”

Rather than comply with the provisions in the CBA that "[t]he arbitrator shall review the record of the disciplinary hearing and determine if the finding of guilt was based upon clear and convincing evidence," the arbitrator, instead of reviewing the record from the hearing, considered only a portion of the record after having decided to exclude certain evidence from his review.

Having failed to review all the evidence that, in this instance, the arbitrator was required to review, the Appellate Division concluded that Supreme Court had properly found that the arbitrator exceeded his authority and vacated the arbitration award. In so doing, the Appellate Division rejected the Association’s argument that “any error in this regard was harmless.” Rather, said the court, the arbitrator’s refusal to consider the inappropriately-excluded evidence directly resulted in the dismissal of two out of the five charges.

In addition, the Appellate Division rejected the Association’s claim that even if that error did not impact the arbitrator's determination as to the penalty to be imposed, the imposition of the penalty of termination was arbitrary and capricious in and of itself. The Appellate Division disagreed, explaining by the arbitrator's  making comparisons between the conduct alleged against Doser and that committed by other officers in other, similar, cases after excluding certain evidence against Doser resulted making a comparison without the benefit of a full review of the record.

As to the objection of the Association to Supreme Court’s ordering a rehearing before a different arbitrator, the Appellate Division said that in “vacating an arbitration award, a court has the discretion to ‘order a rehearing and determination of all or any of the issues either before the same arbitrator or before a new arbitrator.’" As the arbitrator making the decision challenged by the Department exceeded his authority under the CBA, the Appellate Division said it conclude that the court did not abuse its discretion in ordering that a different arbitrator conduct the rehearing and affirmed the Supreme Court’s order vacating the initial arbitrator’s opinion and award and ordering a rehearing before a different arbitrator.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_05261.htm

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New York State’s Human Rights Law does not protect an employee from all retaliation, only from retaliation that results in an injury or harm

New York State’s Human Rights Law does not protect an employee from all retaliation, only from retaliation that results in an injury or harm

Napierala v New York State Div. of Human Rights, 2016 NY Slip Op 04832, Appellate Division, Fourth Department

Lisa Napierala challenged New York State Division of Human Rights’ [SDHR] determination of "no probable cause" with respect to her complaint that Erie Community College [ECC] had retaliated against her in violation of the State’s Human Rights Law. Supreme Court granted Napierala’s CPLR Article 78 petition and the SDHR appealed.

The Appellate Division unanimously reversed the Supreme Court’s ruling “on the law” and reinstated SDHR’s determination.

Napierala, a security officer at ECC had alleged that ECC had retaliated against her "by subjecting her to adverse employment actions after she complained of discrimination." In particular, she contended that:

1. ECC retaliated against her by assigning her to guard duty in its athletic center at a time when the gymnasium floor was being polyurethaned and strong fumes resulted in her becoming ill near the end of her shift.*  

2. ECC retaliated against her when it allegedly lost her "On-the-Job-Training Certificate," which led to the lapse of her security license and resulted in her suspension without pay.

In reinstating SDHR’s finding of "no probable cause" the Appellate Division observed that when SDHR renders a determination of no probable cause without holding a hearing, the appropriate standard of judicial review is whether the "no probable cause" determination was arbitrary and capricious or lacked a rational basis. Further, noted the court, SDHR "has broad discretion to determine the method to be employed in investigating complaints … and its determinations are entitled to considerable deference due to its expertise in evaluating discrimination claims."

The court said that in its view, SDHR's determination is not arbitrary or capricious and it has a rational basis. Further, the record established that Napierala "had a full and fair opportunity to present her case and that [SDHR's] investigation was neither abbreviated nor one-sided." Probable cause exists, explained the Appellate Division, "only when, after giving full credence to the complainant’s version of the events, there is some evidence of unlawful discrimination."

Crediting Napierala’s contention that ECC intentionally assigned her to its athletic center knowing that the gym floor was being polyurethaned, the Appellate Division concluded that there is no evidence of unlawful discrimination as Napierala:

[1] was not forced to stay at the athletic center against her will, nor 

[2] was she disciplined for leaving work early. 

The New York State’s Human Rights Law and Title VII of the Civil Rights Act of 1964, and, in the words of the Appellate Division, "are textually similar and ultimately employ the same standards of recovery," and thus "federal case law in this area . . . proves helpful to the resolution of this appeal." The Appellate Division then pointed out that the United States Court of Appeals for the Second Circuit has opined that Title VII "does not protect an employee from all retaliation, but only retaliation that produces an injury or harm.  ... and in Napieralasituation there was no injury or harm."

Turning to Napierala’s allegation concerning the security license lapse issue, the Appellate Division stated that it did not appear from the record that ECC ever was in possession of Napierala’s training certificate. In any event, the court said that the record shows that ECC provided Napierala with an opportunity to rectify the situation. While Napierala was ultimately suspended without pay, this suspension was initiated only after she failed to rectify the situation, an action consistent with ECC’s treatment of other security officers with lapsed licenses.

As to SDHR’s failure to hold a hearing concerning Napierala’s complaint, the Appellate Division explained that “there was no need for a hearing ‘because the record does not demonstrate the existence of unresolved questions that required further scrutiny.’”

Citing McFarland v New York State Div. of Human Rights, 241 AD2d 108, the court explained that "[A]s long as the investigation is sufficient and the [petitioner is] afforded a full opportunity to present his [or her] claims, [i]t is within the discretion of [SDHR] to decide the method or methods to be employed in investigating a claim." As SDHR had contacted both Napierala and ECC and had requested specified answers and documents related to Napierala’s allegations, "the conflicting evidence before SDHR did not create a material issue of fact that warranted a formal hearing."

* Napieralaleft work after leaving a voice message with her supervisor advising him that she had to leave her shift early. She subsequently met with the Human Resources Department to discuss why she went home sick without first obtaining her supervisor's permission. However, no disciplinary action against her was taken.

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_04832.htm

Changes in IRS rule concerning deferred compensation plans of a state, a local government and other tax-exempt organizations proposed

Changes in IRS rule concerning deferred compensation plans of a state, a local government and other tax-exempt organizations proposed

Source: The FEDERAL REGISTER, 40548, Vol. 81, No. 120

Proposed regulations set out rules addressing the taxation of compensation applicable to "tax deferred compensation plans" established and maintained by State or local governments and other tax exempt organizations.* 

The proposed regulations include rules for determining "when amounts deferred under these plans are includible in income, the amounts that are includible in income, and the types of plans that are not subject to these rules."

The proposed regulations would affect participants, beneficiaries, sponsors, and administrators of certain plans sponsored by State or local governments or tax-exempt organizations that provide for a deferral of compensation.

* Article 8-C of New York State's Education Law, Special Annuity Plan, establishes a “deferred compensation plan” available to “a person employed by the state university [of New York and the employees at the Statutory Contract Colleges at Cornell and Alfred Universities], the board of higher education of the city of New York, or a community college established and operated under article one hundred twenty-six” of the Education Law as permitted pursuant to §403(b) of the Internal Revenue Code, as amended. Article 63 of the Education Law allows “§403(b) deferred compensation plans” to be made available to employees of a school district or a BOCES by the appointing authority.

The proposed regulations and notice of public hearing is posted on the Internet at: https://www.gpo.gov/fdsys/pkg/FR-2016-06-22/pdf/2016-14329.pdf

Collateral estoppel effect given to the factual findings of the hearing officer made in the course of an administrative hearing

Collateral estoppel effect given to the factual findings of the hearing officer made in the course of an administrative hearing

Matter of Mykhaskiv (Westhampton Beach Union Free Sch. Dist.--Commissioner of Labor), 2016 NY Slip Op 05214, Appellate Division, Third Department

Oksana Mykhaskiv appealed a decision of the Unemployment Insurance Appeal Board after it ruled that she was disqualified from receiving unemployment insurance benefits after determining that the Westhampton Beach Union Free School District had terminated Mykhaskivemployment due to her misconduct.

Mykhaskiv had been employed as a custodian with a school district. Several charges were preferred against her alleging misconduct and neglect of duty. The specifications set out in disciplinary charges filed against her included allegations that she failed to comply with her supervisor's directive to assist in cleaning an area assigned to another coworker who was absent from work.

In the disciplinary hearing held pursuant to Civil Service Law §75, the Hearing Officer sustained, among other things, the charge that Mykhaskiv was guilty of misconduct, finding that she refused to comply with her supervisor's directive to clean a particular area. Based upon the Hearing Officer's findings of fact and recommendation, Mykhaskiv was discharged from her employment for insubordinate behavior.

Subsequently the Unemployment Insurance Appeal Board denied Mykhaskiv application for unemployment insurance, finding that her employment was terminated due to disqualifying misconduct. Mykhaskiv appealed the Board’s decision.

The Appellate Division said that the record indicates that Mykhaskiv had a full and fair opportunity to litigate the issue of her misconduct at the Civil Service Law §75 hearing.

Citing Matter of Ranni [Ross], 58 NY2d 715, the Appellate Division said that at the §75 disciplinary hearing [1] Mykhaskiv was represented by an attorney, [2] had a representative from her union present and [3] was afforded an opportunity to testify, present witnesses and cross-examine the school district's witnesses. Under these circumstances, said the court, “the Board properly gave collateral estoppel effect to the factual findings of the Hearing Officer.”

In addition, the court noted that the record confirmed that the Board made its own conclusions as to whether Mykhankiv’s behavior constituted disqualifying misconduct for the purposes of determining her eligibility for unemployment insurance benefits. Insubordinate behavior has been held to constitute disqualifying misconduct within the meaning of the Unemployment Insurance Law.

As substantial evidence supported the Board's finding that Mykhankiv, who had previously been warned about failing to comply with a supervisor’s directives, was disqualified from receiving unemployment insurance benefits, the Appellate Division declined to disturb the Board's determination.

The decision is posted on the Internet at:

Top of Form

Bottom of Form

http://www.nycourts.gov/reporter/3dseries/2016/2016_05214.htm

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Selected preliminary appeal statements filed with the Court of Appeals during the month of June 2016

Selected preliminary appeal statements filed with the Court of Appeals during the month of June 2016

Source: Court of Appeals 

Is a demand to negotiate a municipality's police disciplinary procedure a mandatory subject of collective bargaining?

City of Schenectady v New York State Public Employment Relations Board (PERB), 136 AD3d 1086

Leave to appeal granted by Court of Appeals,

Issue: Did the Taylor Law, as codified in Civil Service Law Article 14, supersede Article 9 of the Second Class Cities Law thereby making City of Schenectady's police disciplinary procedure a mandatory subject of collective bargaining?

Supreme Court, Albany County, among other things, dismissed Schenectady's CPLR Article 78 application to review a determination of PERB finding that Schenectady's police disciplinary procedures were a mandatory subject of collective bargaining. The Appellate Division affirmed. [See, also, Matter of Patrolmen's Benevolent Assn. of City of N.Y., Inc. v New York State Pub. Empl. Relations Bd., 6 NY3d 563 and Matter of Town of Wallkill v Civil Serv. Empls. Assn., Inc. (Local 1000, AFSCME, AFL-CIO, Town Of Wallkill Police Dept. Unit, Orange County Local 836), 19 NY3d 1066.] 

Offsetting the loss of future pension benefits
Andino v Mills, 135 AD3d 407

Leave to appeal granted by Appellate Division

Issue: Did the Appellate Division correctly hold that, under Oden v Chemung County Indus. Dev. Agency, 87 NY2d 81, the jury's award for future loss of pension benefits should have been offset by the total amount that plaintiff was projected to receive under her accidental disability pension?

Supreme Court, Bronx County, after a hearing, denied defendants' motion for a collateral source offset pursuant to CPLR 4545; thereafter, Supreme Court, upon a jury verdict, awarded plaintiff the principal sums of $600,000 for past pain and suffering, $23,000,000 for future pain and suffering over 37 years, $283,422 for past lost earnings, $2,392,512 for future lost earnings over 19.24 years, $2,100,000 for future medical expenses over 37 years, and $2,490,829 for future loss of pension over 17.7 years; App. Div. modified to grant that portion of defendants' motion seeking to offset the jury's award of future pension benefits by the amount of plaintiff's accidental disability benefits, and to vacate the award for future pain and suffering and order a new trial as to such damages, unless plaintiff, within 30 days of service of a copy of the order with notice of entry, stipulated to accept a reduced award for future pain and suffering in the amount of $2.7 million and to entry of an amended judgment in accordance therewith, and otherwise affirmed.

Providing for the defense and indemnification of public officers and employees named as defendants in certain litigation

Providing for the defense and indemnification of public officers and employees named as defendants in certain litigation

Scimeca v Brentwood Union Free Sch. Dist., 2016 NY Slip Op 05157, Appellate Division, Second Department

The Brentwood Union Free School District [Brentwood] and a number of Brentwood employees* [Employees] were named as respondents in complaint filed with the New York State Division of Human Rights [SDHR] by another Brentwood employee [Complainant].

Employees sought “defense and indemnification” by Brentwood and a law firm other than the law firm representing Brentwood in the SDHR action was designated by Brentwood’s insurance carrier to represent Employees in the SDHR proceeding. Employees, however, perceiving conflict of interest between themselves and Brentwood, employed a different attorney to represent them in the SDHR action. Employees then sought reimbursement for the fees and litigation expenses they had incurred in defending themselves in the SDHR action from Brentwood, citing Public Officers Law §18 as authority for such payments.

Brentwood declined to  pay the fees and litigation expenses incurred by Employees as a result of their having employed their own attorney for this purpose. Employees filed an Article 78 petition seeking a court order to compel Brentwood to indemnify them for the legal expenses they had incurred in defending themselves in the SDHR action.

The Supreme Court denied the employees’ petition and dismissed the proceeding; the Appellate Division affirmed the Supreme Court’s ruling.

Both Public Officers Law §18** and Education Law §3811 provide for a political subdivision of the State to provide for the defense and indemnification of its employees in certain actions or proceedings. 

The provisions of Public Officers Law §18, however, only become available to the employees of the political subdivision as the result of  the governing body of the political subdivision adopting a law, rule, regulation or resolution [1] providing for such representation and indemnification of its employees at the entities expense and [2] providing for the reimburse employees of any the costs and damages for which the employees are liable, exclusive of punitive or exemplary damages, fines or penalties.

Education Law §3811applies to officers, the teaching or supervisory staff, and non-instructional employee of any school district, other than the city school district of the city of New York or any board of cooperative educational services. §3811 provides for the defense of such personnel in any action or proceeding and all of his or her reasonable costs and expenses, as well as all costs and damages adjudged against him or her other than those incurred [1] in a criminal prosecution or [2] an action or a proceeding brought against him or her by a school district, including proceedings before the Commissioner of Education, arising out of the exercise of his or her powers or the performance of his or her duties under the Education Law.

According to the decision by the Appellate Division, Brentwood extended the benefits of Public Officers Law §18 to its employees, but, as that statute specifically authorizes, specified that "[t]he benefits accorded to Brentwood employees under Section 18 of the Public Officers Law shall supplement and be available in addition to defense and indemnification protection conferred by other enactments or provisions of law," such as Education Law §3811.

Insofar as relevant in this proceeding, the Appellate Division said:

1. Education Law §3811 does not exclusively govern the retention of counsel for a school district employee entitled to a defense under that statute and Public Officers Law §18;

2. Public Officers Law §18(3)(b), applies in the event that either the employer or a court determines that a conflict of interest exists and permits an employee to obtain an attorney of his or her choice and that this provision is consistent with Education Law §3811;

3. Education Law §3811 provides that the trustees or board of education have the right to designate and appoint legal counsel for an eligible employee as long as it does so within 10 days of receiving notice of the relevant action or proceeding; otherwise the employee may select his or her own legal counsel; and

4. The provisions of Public Officers Law §18 and Education Law §3811 can be read together to provide that the trustees or the board have the right to designate and appoint counsel within 10 days of receiving notice of an action or proceeding, unless the School District and the employee have conflicting interests, in which case the employee is permitted to select his or her own counsel. Under this reading, Public Officers Law §18 supplements Education Law §3811 by addressing and making provision for a specific set of circumstances not addressed in Education Law §3811.

That said, the Appellate Division noted that Brentwoodcorrectly contended that no conflict of interest existed between Brentwood and Employees with respect to defending the subject SDHR complaint that would otherwise entitle Employees to select private counsel, payable by the School District

The court explained that the SDHR complaint, which was asserted against Brentwood and Employees jointly, did not allege that Employees committed any acts outside the scope of their employment and, significantly, Brentwood, in its response to the complaint, did not assert that Employees were acting outside the scope of their employment, or that they acted improperly in any way.

As Brentwood “categorically denied all of the allegations in the complaint, countered each of the allegations with detailed facts aimed at demonstrating their falsity, and asserted that it was the Complainant who had threatened and intimidated one of [the Employees], the court concluded that no conflict of interest existed between Brentwood and Employeeswith regard to the subject SDHR complaint that would otherwise have entitled Employees to employ private counsel, to be paid by Brentwood, under a theory that a "conflict of interest" between the parties existed.

Accordingly, said the Appellate Division, Supreme Court “properly denied, and the proceeding [was] properly dismissed.”

* Although all not all public employees of a public entity are public officers, all public officers of that entity are public employees.

** §17 of the Public Officers Law provides for the defense and indemnification of officers and employees of the State as the employer in the event such persons are defendants in a civil action arising out acts or omissions involving or performed within the scope of their official duties. §19 of the Public Officers Law addresses so reimbursing an officer or an employee of the State as the employer named as a defendant in a criminal action arising out of acting within the scope of his or her public employment or duties upon his or her acquittal or upon the dismissal of the criminal charges against such officer or employee. 

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_05157.htm

Applying the Doctrine of Collateral Estoppel

Applying the Doctrine of Collateral Estoppel

Clifford v County of Rockland, 2016 NY Slip Op 05112, Appellate Division, Second Department

The doctrine of collateral estoppel bars a party from relitigating an issue clearly raised in an action or proceeding and decided against that party in a subsequent action or proceeding regardless of whether or not the tribunals or causes of action are the same.

This doctrine was applied in litigation brought by Deirdre A. Clifford in a New York State court seeking to recover damages for an alleged breach of contract and discrimination on the basis of disability in violation of New York’s Executive Law §296, the State's Human Rights Law.

Clifford, an employee of County of Rockland, commenced this action against the County in Supreme Court. Rockland, however, moved to dismiss Clifford’s complaint as barred by the doctrine of collateral estoppel, citing the dismissal of her claims against it in an earlier federal action she had brought in the United States District Court for the Southern District of New York.*

Clifford, on the other hand, claimed that her State action should go forward because the Federal District Court had declined to exercise supplemental jurisdiction over her State law claims.

Supreme Court granted the County's motion to dismiss Clifford’s petition, which ruling was affirmed by the Appellate Division. The Appellate Division explained that the doctrine of collateral estoppel comes into play when four conditions are met:

(1) The issues in both proceedings are identical;

(2) The issues in the prior proceeding were actually litigated and decided;

(3) There was a full and fair opportunity to litigate in the prior proceeding: and

(4) The issue previously litigated was necessary to support a valid and final judgment on the merits.

Further, said the Appellate Division, the party attempting to invoke the doctrine has the burden of demonstrating the identity of the issues, while the party seeking to avoid the court’s application of the doctrine must establish the lack of a full and fair opportunity to litigate the issue in the earlier proceeding. Stated another way, the doctrine will be applied where the initial tribunal, having jurisdiction, declined to exercise its jurisdiction over a plaintiff's claims but decided issues identical to those raised by the plaintiff in his or her subsequent action before another tribunal.

Here, said the Appellate Division, Clifford’s breach of contract claim in her State action alleged that certain terms of a disciplinary action settlement agreement disposing of certain disciplinary charges filed against her were violated. However, said the court, those allegations which she now raised in her State action were considered and rejected in the federal action.

With respect to Clifford’s claims under New York State’s Human Rights Law [NYSHRL], the Appellate Division said that "the standards for recovery under the New York Human Rights Law are in nearly all instances identical to Title VII [of the Civil Rights Act of 1964] and other federal law" and the Federal District Court determined that Rockland County had “legitimate, independent, and nondiscriminatory reasons for its employment actions, and that those reasons were not a pretext for discrimination.”

This determination, said the court, was dispositive of Clifford’s NYSHRL claims.

Finding that [1] Rockland County had met its burden of demonstrating that the issues Clifford raised in her State action were identical to those decided against her in the federal action and [2] Clifford failed to demonstrate that she did not have a full and fair opportunity to litigate these issues in her federal action, the Appellate Division held that Supreme Court properly granted the County's motion to dismiss Clifford’s State complaint.

* Clifford v County of Rockland, 2012 WL 2866268, 2012 US Dist LEXIS 98783 [USDC SD NY, 10 CV 9679 (VB)], affirmed 528 Fed Appx 6 [2d Cir]).

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_05112.htm

Selected reports issued by the Office of the State Comptroller during the week ending July 9, 2016

Selected reports issued by the Office of the State Comptroller during the week ending July 9, 2016

Source: Office of the State Comptroller

Click on text highlighted in color to access the posting. 

Executive Director of Baychester Youth Council indicted for allegedly stealing more than $100,000 from federal grant monies

N.B. An indictment is an accusatory instrument and not proof of a defendant's guilt.

Earnestine Russell has been charged with grand larceny. Bronx District Attorney Darcel D. Clark and New York State Comptroller Thomas P. DiNapoli announced that the longtime director of a Bronx youth group has been indicted on charges she stole $112,000 from a state-administered, federally funded grant provided to support after-school programs for middle school children.

District Attorney Clark said, "The defendant, Earnestine Russell, allegedly turned the Baychester Youth Council into a façade for her thievery, and enriched herself for years instead of enriching the lives of the children she purported to cherish."

State Comptroller DiNapoli said, "Earnestine Russell allegedly took public money intended to give children a safe and nurturing place to go after school and spent it on personal trips and electronic equipment for herself. After my office found her theft, we worked closely with Bronx County District Attorney Darcel D. Clark and her staff to make certain that Ms. Russell is held accountable."

District Attorney Clark said that Ms. Russell, 66, was indicted on second-degree grand larceny and second-degree criminal possession of stolen property. She was arraigned on July 6, 2016, before Bronx Supreme Court Justice Steven Barrett. Bail was set at $30,000 cash and an examination of surety. Ms. Russell is due back in court on August 9, 2016.

According to the investigation by the Bronx District Attorney's Office and the State Comptroller's Office, in 2008, Ms. Russell--who has run the Baychester Youth Council since the 1980s -- received a federal grant, administered by the New York State Education Department, for more than $2.7 million over five years to create a 21st Century Community Learning Center.

The State Comptroller's Office audited Ms. Russell in 2012 and found she used $250,400 for inappropriate or undocumented expenses-- including a home theater-- and the grant was revoked.

The Bronx DA's Office began investigating and found that Ms. Russell had moved the grant money through numerous bank accounts; made cash withdrawals; wrote checks to cash, herself or family; and made wire transfers from the accounts. When confronted with her gambling records, which showed betting of more than $150,000 during the fraud period of 2009-2011, Ms. Russell denied betting, then explained the figures also showed winnings she bet. Ms. Russell also told investigators that she could "make whatever use of [the money]" she saw fit.

The case is being prosecuted by Assistant District Attorneys Markus Sztejnberg of the Economic Crimes Bureau and Jeffrey Glucksman , Chief of Trial Bureau 70, under the supervision of William Zelenka, Chief of the Economic Crimes Bureau, and Jean T. Walsh, Chief of the Investigations Division.

District Attorney Clark thanked the State Comptroller's Division of Investigations and Bureau of State Expenditures, as well as New York State Police Investigators John Bode and Charles Sands and Senior Investigators Michael Vazquez, Michael Davis and John Vescio for their assistance in the investigation, and retired Assistant Bronx District Attorney Linda Tacoma for her diligent work on the case.

For a copy of the audit, go to http://osc.state.ny.us/audits/allaudits/bseaudits/bse2011-0021.htm

Since taking office in 2007, DiNapoli has committed to fighting public corruption and encourages the public to help fight fraud and abuse.  Individuals can report allegations of fraud involving public funds by calling the toll-free Fraud Hotline at 1-888-672-4555, by transmitting an e-mail to investigations@osc.state.ny.us, by filing a complaint online athttp://osc.state.ny.us/investigations/complaintform2.htm or by mailing a complaint to Office of the State Comptroller, Division of Investigations, 14th Floor, 110 State St., Albany, NY 12236.

New York State Comptroller Thomas P. DiNapoli announced the following audits have been issued:

NYC Human Resources Administration (HRA) and the Office of Temporary and Disability Assistance (OTDA): Benefit Eligibility Assessment Process (2015-F-28)
An initial audit issued in May 2014 found that HRA applied a fair and consistent assessment process when determining client eligibility in compliance with governing policies and procedures. Auditors also determined that changes were necessary to reduce the number of overturned HRA determinations and costly, and in some cases unnecessary, OTDA Fair Hearings. Auditors also found that OTDA's closed-case coding system did not always adequately describe the case resolution. In a follow-up report, auditors found OTDA and HRA have made significant progress in addressing the issues identified in the initial report.

New York Wine and Grape Foundation: Use of State Appropriations (2015-S-102)
The foundation has appropriately used its state money to fund allowable activities. The foundation has also exceeded its contractual commitment to leverage state money. Although it is only required to obtain outside funding equal to what the state provides, it has obtained nearly double that. The foundation has established effective internal controls over most of its financial operations. However, auditors found that certain revenue payments were being sent directly to an employee's home and not to the foundation's business office. Foundation officials immediately rectified the problem.

Department of Health (DOH): Program Oversight and Monitoring of the Maximus Contract for the New York State of Health (Insurance Marketplace) Customer Service Center (2015-S-80)
DOH has an effective system to ensure that Maximus is complying with contract requirements and meeting performance standards. DOH can make improvements noted by actions already taken, such as requiring Maximus to provide a complete sample population for each business function the department reviews; and to increase staffing to complete more quality assurance reviews.

Department of Economic Development (ESD): Review of Trivision Tek Group Inc. (2016-BSE01-01)
Auditors found ESD approved three vouchers totaling $350,000 payable to Trivision for services previously paid for and for services never performed. This includes $330,200 for consulting services Trivision performed as a subcontractor at DOH and $19,800 for project management services that were never performed. As a result of the examination, auditors rejected the final $211,109 payment request from Trivision to ESD. In addition, ESD recovered the $138,891 it paid under the grant.

New York State Thruway Authority: Contract Participation of Disadvantaged Business Enterprises and Minority- and Women-Owned Business Enterprises (MWBE) (2014-S-76)
The Thruway has not accurately reported its MWBE utilization. For example, the authority consistently reports only a portion of its eligible contract expenses, thereby overstating its MWBE utilization rate. Further, the Thruway did not make adjustments for payments to MWBE prime contractors who, in turn, paid other MWBE contractors as subcontractors, resulting in a double-counting of payments.

State falls short in verifying if companies qualify for tax breaks under Excelsior Program

Empire State Development Corp. (ESD), the entity in charge of doling out millions of dollars in tax credits to companies that pledge to expand in New York state, could not verify that many of the companies participating in the Excelsior Jobs Program met their obligations or even justify giving the businesses tax breaks in the first place, according to an auditreleased by State Comptroller Thomas P. DiNapoli.

DiNapoli’s auditors found a range of problems from lowering job creation goals after companies did not meet expectations to not verifying if jobs were full-time or part-time. ESD also could not produce evidence that several companies actually created jobs and did not simply shift jobs.

“New York state gives away millions of dollars each year in tax breaks for companies that are supposed to create jobs and expand under the Excelsior program, but ESD’s oversight leaves a lot to be desired,” DiNapoli said. “ESD needs to stop lowering the bar and giving companies a pass when they fall short of promises. ESD needs to ensure these businesses are not taking advantage of state taxpayers.” 

The Excelsior Jobs Program, established in 2010, provides refundable tax credits to businesses in targeted industries in exchange for creating and maintaining specific numbers of new jobs or making significant capital investments. The program replaced the Empire Zone Program and was aimed at bringing greater accountability to the companies’ for their economic development commitments.

ESD requires companies to submit an annual performance report to account for their annual job creation and investment totals, as well as other supporting documentation such as tax reports and invoice receipts for qualified investments. Companies need to meet at least 75 percent of the agreed-upon commitments to receive any benefits.

According to ESD reports, 1,152 businesses applied to participate in the program from September 2010 through March 2015. Of these, the state accepted 328 businesses (29 percent), and committed over $548 million in tax credits to them in exchange for their commitment to invest nearly $5.8 billion and create 34,472 new jobs in New York.

Auditors examined 25 companies that, as of June 2015, were authorized to receive 39 tax credits totaling $4.84 million.

Specifically, DiNapoli’s auditors found ESD failed to exercise due diligence when approving any of the 25 sampled companies for participation in the program and does not follow its own protocol for scrutiny of applications. ESD did not provide auditors with documentation to verify that the 25 companies met all of the eligibility requirements before being officially admitted into the program and could not verify the companies met the agreed-upon job growth and investment benchmarks for five of the 39 (13 percent) tax credits totaling $214,000.

For 34 of the 39 issued tax credits totaling $4.6 million, ESD provided auditors with worksheets that staff used to compile data to support their tax credit calculations. However, although ESD steadfastly maintains it gave the auditors all the information it had, most of the files lacked the documentation to support that ESD had actually exercised due diligence and taken steps to verify the reported amounts. 

For example, on 31 of the worksheets provided, ESD workers made notations indicating they had compared their data with information contained on corroborating state tax forms. Yet, those forms were present for only a very few companies.  In one case where information was available, auditors found ESD used a higher wage amount than was actually paid according to the tax forms. This resulted in at least $187,062 in excess tax credits being authorized to this company for 2012.

In addition, 11 of the worksheets were for credits based on promised investments and each indicated that ESD staff had reviewed company invoices to support investments made. However, ESD provided auditors with complete corroborating support for only eight of the 39 tax credits, accounting for just $417,000 (less than 9 percent) of the $4.84 million.

For four of the 34 tax credits for which ESD provided supporting worksheets, auditors found that ESD adjusted the original annual job creation commitment numbers after the fact to align with the lower job creation totals that the companies had actually attained. As a result, the three companies involved received a total of $358,329 in tax credits to which they would otherwise not have been entitled.

For two of the revisions, ESD could not provide evidence from the company justifying the need for the revision – including one company whose 2012 job commitment was reduced from 600 to 363 for no apparent reason. Another company subsequently closed operations after being authorized to receive $556,446 in tax credits.

Auditors also found no evidence that ESD took steps to determine whether companies shifted employees from related companies and counted them as new jobs to the state.

DiNapoli’s auditors found that ESD does not require companies to provide evidence that new jobs met the 35-hour work week criterion, nor does it even collect this data. Instead, ESD accepts companies’ annual performance report certification that the reported employees worked at least 35 hours a week as sufficient validation.

Auditors visited four companies and reviewed various records. At one company, two of the seven new employees – the chief executive officer and the chief financial officer – did not work 35 hours per week in 2013 and 2014. At the second company, a range of 33 to 40 employees, whom the company listed as new hires, actually worked part-time in 2012 and 2013 and did not meet the 35-hour per week work criterion.

DiNapoli recommended ESD:

1. Obtain sufficient corroborating documentation to support that all program participants meet the eligibility requirements for job growth and investments before receiving tax credits;

2. Ensure that all tax credit calculations are correct before issuing any credits;

3. Limit modifications to annual job growth and investment requirements to only unforeseen justifiable circumstances; 

4. Ensure project files contain all required documentation to support that companies met eligibility requirements before being accepted into the program;

5. Establish and use specific, objective and quantifiable criteria for ranking program applications; and

6. Increase program transparency by including complete and accurate information in quarterly reports.

DiNapoli’s auditors noted that ESD officials were not forthcoming in responding to requests for project files and for other information related to the sampled companies and the program in general.

ESD officials disagreed with the audit’s findings. Their full response is contained in the audit. DiNapoli’s auditors noted that ESD officials did not respond to some of the preliminary findings, addressing certain specific findings and ignoring others. ESD officials also avoided addressing the audit’s overall conclusions.

DiNapoli has cited numerous concerns that ESD provides limited public reporting on the results of economic development programs and often cannot verify if programs are achieving desired results.

In May 2015, DiNapoli released an auditof ESD’s $211 million campaign to promote economic development and tourism in the state and found it delivered no tangible results. His office has also released a series of audits on the state’s minority- and women-owned business enterprises that found inaccurate and significantly inflated reporting.

Read the report Performance of the Excelsior Jobs Program, or go to: http://www.osc.state.ny.us/audits/allaudits/093016/15s15.pdf