New York State Comptroller Thomas P. DiNapoli announced the following audits have been issued during the week ending October 29, 2016

New York State Comptroller Thomas P. DiNapoli announced the following audits were issued during the week ending October 29, 2016 

Source: Office of the State Comptroller

Links to material posted on the Internet highlighted in COLOR.

School DistrictAudits

Caledonia-Mumford Central School District – Online Banking

Caledonia-Mumford

Genesee Valley Board of Cooperative Educational Services– Purchasing

Genesee Valley BOCES

Heuvelton Central School District – Payroll

Heuvelton

Syracuse City School District – Claims Audit Process

Syracuse

Your Home Public Library – Financial Management

Your Home Public Library

 Other audit reports published 

Gingerbread  Learning Center, Inc. – claimed reimbursement for ineligible expenses.

Gingerbread is a not-for-profit organization that provides center-based (full-day, half-day and integrated) preschool programs and Preschool Special Education Services, formerly known as the Special Education Itinerant Teacher (SEIT) program, to children ages three through five years. State Education Department (SED) contracts with Gingerbread to provide these programs to children throughout Staten Island and neighboring boroughs. The State Comptroller said that Gingerbread claimed nearly $1 million in expenses that did not qualify for reimbursement from taxpayers, including bonuses that were never paid to staff, liquor store purchases and holiday parties. The audit report is posted on the Internet at http://www.osc.state.ny.us/audits/allaudits/093017/14s79.pdf.

The Attorney General and the State Comptroller encourage anyone with information on alleged public corruption activities to contact the Attorney General’s Office at 1-800-996-4630 or the Comptroller’s office by dialing the toll-free fraud hotline at 1-888-672-4555; to file a complaint online at investigations@osc.state.ny.us; or to mail a complaint to: Office of the State Comptroller Investigations Unit, 110 State Street, 14th floor, Albany, NY 12236.

Arizona man convicted of theft of over $130,000 in NYS pension benefits intended for his deceased mother

Arizona man convicted of theft of over $130,000 in NYS pension benefits intended for his deceased mother

Source: Office of the State Comptroller

Links to material posted on the Internet highlighted in color.

On October 28, 2016, New York State Comptroller Thomas P. DiNapoli and Attorney General Eric T. Schneiderman announced the conviction of John H. Eydeler III, 66, a resident of Glendale, Arizona, on his guilty plea to Grand Larceny in the Second Degree, a Class C felony.  

Eydeler admitted to stealing pension payments from the New York State and Local Employees Retirement System intended for his mother, Dorothy Eydeler, a retired nurse who died in October of 1998. Today, he was sentenced to a five-year term of probation and a judgment in the amount of $131,038.60.

“My office has exposed more than $2.75 million in pension fraud in recent years, and we aggressively pursued prosecution in each case,” said State Comptroller Thomas P. DiNapoli. “If you’re stealing from the retirement system, we will track you down no matter where you live and make sure you pay it back. I thank Attorney General Schneiderman for his prosecution of this case and others through our Operation Integrity partnership.”

“The New York pension fund cannot serve as a personal piggy bank for those looking to scam the system,” said Attorney General Schneiderman. “I will continue to work with Comptroller DiNapoli to protect our pension system and send a message that fraudsters who steal from the state will be punished.”

Eydeler concealed his mother’s death in 1998 from the New York State and Local Employees Retirement System. As a result, between October 1998 and January 2010, over $130,000 in pension benefits were deposited into a bank account in the name of Eydeler’s deceased mother. Eydeler then diverted these monies to himself by claiming to have power of attorney for his mother and writing checks to himself every month for over a decade. Eydeler altered his scheme to conceal the theft, and used the monies to prop up a small automotive repair business that he owned in Glendale, Arizona.

In August 2016, the Attorney General filed an indictmentagainst Eydeler charging him with Grand Larceny in the Second Degree, a Class C felony.  Eydeler pleaded guilty to the indictment on October 12, 2016. Today, he was sentenced by the Honorable Stephen W. Herrick in Albany County Court to a five-year term of probation. Eydeler also confessed to a judgment being entered against him for the entire restitution amount of $131,038.60.

This case is the latest joint investigation under the Operation Integrity partnership of the Comptroller and the Attorney General, which to date has resulted in dozens of convictions and more than $11 million in restitution.

 

The Comptroller’s investigation was conducted by the Comptroller’s Division of Investigations, working with the New York State and Local Retirement System.

The Attorney General’s investigation was conducted by Investigator Mitchell Paurowski and Deputy Chief Antoine Karam.  

The Investigations Bureau is led by Chief Dominick Zarrella. This case was prosecuted by Assistant Attorney General John R. Healy of the Criminal Enforcement and Financial Crimes Bureau.  The Criminal Enforcement and Financial Crimes Bureau is led by Bureau Chief Gary T. Fishman and Deputy Bureau Chief Stephanie Swenton.

  
The Attorney General and the State Comptroller encourage anyone with additional information on this matter or any other alleged public corruption activities to contact the Attorney General’s Office at 1-800-996-4630 or the Comptroller’s office by dialing the toll-free fraud hotline at 1-888-672-4555; to file a complaint online at investigations@osc.state.ny.us; or to mail a complaint to: Office of the State Comptroller Investigations Unit, 110 State Street, 14th floor, Albany, NY 12236.

Guidelines used to determine if an entity is a “public body that is performing a governmental function” for the purposes of the Open Meetings Law

Guidelines used to determine if an entity is a “public body that is performing a governmental function” for the purposes of the Open Meetings Law

Thomas, et al. v New York City Dept. of Educ., 2016 NY Slip Op 06989, Appellate Division, First Department

The New York City Department of Education [DOE] appealed an order and judgment handed down by Supreme Court, New York County, granting a petition filed by Michael P. Thomas [Thomas] seeking a determination that DOE violated the Open Meetings Law by denying the general public, including Thomas, access to meetings of a New York City public schools School Leadership Team [SLT].

The State’s Education Law requires each New York City public school to have a “school-based management team” [SBMT]. DOE implemented this mandate by establishing SLTs in every school. SLTs have from 10 and 17 members, made up of school parents, teachers, staff, and administrators, and may also include “representatives of Community Based Organizations.” SLTs must meet at least once a month “at a time that is convenient for the parent representatives” and notice of the meeting must be provided in a manner “consistent with the open meetings law.” Its basic mission is to help formulate “school-based educational policies” and ensure that “resources are aligned to implement those policies.”

Thomas, a retired DOE mathematics teacher, asked for permission to attend a meeting of the SLT. Ultimately his request was denied on the ground that although the SLT Bylaws permits “school community members to attend its meetings,” Thomas was “not a member of the school community.” Thomas, wishing to “challenge that policy in court” decided that he needed to be “denied entrance onsite” in order to “have standing.” He attempted to gain entrance to a meeting of a SLT and on presenting himself to security at a DOE school for this purpose, was denied admittance to the SLT meeting.

Thomas contended that the SLT was a “public body” and its refusal to permit him to attend the meeting violated the Open Meetings Law. Supreme Court granted the petition finding that “SLT meetings entail a public body performing governmental functions,” and are thus “subject to the Open Meetings Law.” DOE appealed.

The Appellate Division agreed with Supreme Court’s ruling and sustained its granting Thomas’ petition. The court held that DOE violated the Open Meetings Law by denying the general public, i.e., Thomas, access to a meeting of a New York City public school's SLT. Citing Perez v City Univ. of N.Y., 5 NY3d 522, the Appellate Division said that in enacting the State’s Open Meetings Law, “the Legislature sought to ensure that public business be performed in an open and public manner and that the citizens of this state be fully aware of and able to observe the performance of public officials and attend and listen to the deliberations and decisions that go into the making of public policy.”

In the words of the Appellate Division, the Open Meetings Law provides that “[e]very meeting of a public body shall be open to the general public.” As to the meaning of the term “public body” it is defined in the law as “any entity, for which a quorum is required in order to conduct public business and which consists of two or more members, performing a governmental function for the state or for an agency or department thereof.” In addition, the term “meeting” is defined or described as “the official convening of a public body for the purpose of conducting public business.”

In Smith v The City University of New York, 92 NY2d 707, the court said “… a formally chartered entity with officially delegated duties and organizational attributes of a substantive nature . . . should be deemed a public body that is performing a governmental function.” In contrast, in Jae v Board of Education of Pelham Union Free School District, 22 AD3d 581 [leave to appeal denied, 6 NY3d 714 ] the court held that an entity which is “advisory in nature” and “d[oes] not perform governmental functions” will not be deemed to be a “public body” for purposes of the Open Meetings Law.

The Appellate Division rejected DOE’s argument that the SLTs do not perform “governmental functions” characteristic of public bodies under the Open Meetings Law, but rather merely “serve a collaborative, advisory function.” The court explained that “[i]t cannot be disputed that SLTs are established pursuant to state law and are a part of DOE's “governance structure.” The court further opined that it cannot be disputed that SLTs have decision making authority to set educational and academic goals for a school through the CEP, and indicated that “[t]he notion that SLTs merely serve an advisory role is not supported by the regulatory history.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06989.htm

Administrative Law Judge decisions posted on the Internet by the New York City Office of Administrative Trials and Hearings

Administrative Law Judge decisions posted on the Internet by the New York City Office of Administrative Trials and Hearings

Video tape introduced as evidence of employee’s use of unauthorized force

New York City Admin. for Children’s Services v Patterson, OATH Index No. 904/16

A juvenile counselor, Allen Patterson, employed by the New York City Administration for Children’s Services was served with five disciplinary charges setting out 23 specifications of misconduct pursuant to §75 of the Civil Service Law.

Among these charges and specifications were allegations that Patterson used unauthorized force against four different juvenile residents, made false and misleading statements and used profane and threatening language towards a supervisor.

In support of certain of the charges and specifications, Children’s Services introduced video and audio recordings of exchanges between Patterson and the juveniles in the course of the disciplinary hearing.

OATH Administrative Law Judge Noel Garcia found that although Children’s Services did not prove some of the specifications set out in the several Charges it filed against Patterson, it did prove 15 of those specifications.

Finding that Pattersonconsistently exhibited a pattern of behavior that violated agency rules and that portions of Patterson’s testimony at the administrative disciplinary hearing was not credible, Judge Garcia recommended termination of Patterson’s employment, which recommendation was adopted by the appointing authority.

The decision is posted on the Internet at:

http://archive.citylaw.org/wp-content/uploads/sites/17/oath/16_cases/16-904.pdf

Employee found guilty of disrespectful conduct and disruptive and threatening behavior

New York City Admin. for Children’s Services v Yu, OATH Index No. 1924/16

At a disciplinary hearing conducted pursuant to §75 of the Civil Service Law Oath Administrative Law Judge Alessandra F. Zorgniotti found that Laureen Yu engaged in disrespectful conduct towards her supervisor and exhibited disruptive and threatening behavior that caused other employees to feel unsafe.

Yu was alleged to have failed to be courteous and considerate of her fellow employees; sent discourteous text messages and e-mails to certain colleagues; failed to obey lawful orders; engaged in threatening behavior; violated a number of Children’s Services rules prohibiting rude, threatening, insubordinate, and disruptive conduct; and conducted herself “in a manner prejudicial to good order” while at work.

Judge Zorgniotti, noting that Yu had been formally disciplined on five prior occasions for similar misconduct, recommended that Yu be terminated from her employment.

The decision is posted on the Internet at:

http://archive.citylaw.org/wp-content/uploads/sites/17/oath/16_cases/16-1924.pdf

Licensed Practical Nurse alleged to have orally and physically abused patient

NYC Health and Hospitals Corp. (Henry J. Carter Specialty Hospital and Nursing Facility) v Johnson, OATH Index No. 1415/16

OATH Administrative Law Judge Noel Garcia found that the Health and Hospitals Corporation failed to prove that Fiona Johnson, a licensed practical nurse, used profane language or was orally and physically abusive towards a patient.

In this administrative disciplinary action brought pursuant to §7:5 of the Personnel Rules and Regulations of the Corporation  Judge Garcia found that the Hospital did not present reliable evidence as to the patient’s injury nor did it prove that Johnson was the person who committed the misconduct alleged. In contrast, said the ALJ, Johnson credibly testified about her interactions with the patient in which she denied any wrongdoing.

The ALJ also explained that the uncorroborated and unreliable “double hearsay” testimony was insufficient to establish that Johnson made threatening remarks towards an employee and a potential witness.

Judge Garcia recommended the charges against Johnson be dismissed and that she be paid for lost wages and benefits that resulted from her pre-hearing suspension without pay. The appointing authority adopted the ALJ’s recommendation.

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Adverse Personnel Decisions:  A766-page E-book focusing challenging penalties imposed following administrative disciplinary action, adverse performance ratings, probationary terminations and the denial of unemployment insurance benefits initiated by officers and employees of New York State as an employer and its political subdivisions. For more information click on http://nypplarchives.blogspot.com/

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Distinguishing between employees and independent contractors

Distinguishing between employees and independent contractors

Yoga Vida NYC (Commissioner of Labor), 2016 NY Slip Op 06940, Court of Appeals

On October 25, 2016 this LawBlog posted summaries of two decisions by the Appellate Division, Third Department: Cole (Niagara Falls Housing Authority--Commissioner of Labor), 2016 NY Slip Op 06281 and Devore v DiNapoli, 2016 NY Slip Op 06934, both addressing whether an individual was an employee or an independent contractor of the entity for which services were provided [see http://publicpersonnellaw.blogspot.com/2016/10/determining-existence-of-employer.html].

Coincidentally, on October 25, 2016 the Court of Appeals handed down its decision in Yoga Vida NYC (Commissioner of Labor), another case involving a contest between an employer, Yoga Vida, contending certain individuals providing instruction in yoga were independent contractors while the Unemployment Insurance Appeal Board determined that those individuals were employees of Yoga Vida.

Yoga Vida operated a yoga studio offering classes taught by both staff instructors and non-staff instructors. It classified its non-staff instructors as independent contractors. The Commissioner of Labor issued a determination that Yoga Vida was liable for additional unemployment insurance contributions based on its finding that the non-staff instructors were employees and not independent contractors. Yoga Vida challenged the ruling and an Administrative Law Judge [ALJ] sustained Yoga Vida's objection, concluding that the non-staff instructors were independent contractors.

The Commissioner of Labor appealed the ALJ's decision to the Unemployment Insurance Appeal Board and the Board reversed the ALJ’s decision, sustaining the Department’s initial determination that Yoga Vida was liable for additional unemployment insurance contributions at issue.

Yoga Vida's appeal to the Appellate Division was unsuccessful as the panel, in affirming the determination of the Appeal Board, holded that "[o]verall, despite the existence of evidence that could result in a contrary result, the record contains substantial evidence to support the Board's decision that Yoga Vida had sufficient control over the instructors' work, thereby allowing for a finding of an employer-employee relationship." Yoga Vida next appealed the Appellate Division’s decision to the Court of Appeals.

A majority of the Court of Appeals* overturned the Appellate Division’s ruling, explaining that in this instance the record as a whole did not demonstrate “that the employer exercises control over the results produced and the means used to achieve the result.” In the words of the court, “… the Board's determination that the company exercised sufficient direction, supervision and control over the instructors to demonstrate an employment relationship is unsupported by substantial evidence.”

The Court of Appeals indicated that the record before it showed that:

a. The non-staff instructors make their own schedules and choose how they were paid -- either hourly or on a percentage basis;

b. Non-staff instructors were paid only if a certain number of students attend their classes. In contrast, staff instructors were paid regardless of whether anyone attended a class;

c. Staff instructors could not work for competitor studios within certain geographical areas while the non-staff instructors could teach at other locations and were free to tell Yoga Vida students of classes they would teach at other locations so the students could  follow them to another studio if they wish; and

d. Only staff instructors, as distinct from non-staff instructors, were required to attend meetings or receive training.

The court noted that the “incidental controls” relied upon by the Board in reaching its determination, included:

a.  Yoga Vida satisfying itself that the independent instructors possessed the proper licenses;

b. Published a master schedule on its web site; and

c. Provided the space for the classes conducted by the independent instructors.

These "incidental controls," said the court, do not support the conclusion that the instructors are employees nor does the fact that Yoga Vida generally determined what fee was charged, collected the fee directly from the students, and provided a substitute instructor if the non-staff instructor was unable to teach a class and could not find a substitute, “does not supply sufficient indicia of [Yoga Vida’s] control over the [independent] instructors.”

The Court of Appeals, noting that Yoga Vida received feedback about the instructors from the students, said that this did not support the Board's conclusion that the non-staff personnel were employees. Significantly, the court observed that "[t]he requirement that the work be done properly is a condition just as readily required of an independent contractor as of an employee and not conclusive as to either."

The matter was remitted to the Appellate Division with directions to remand to the matter Commissioner of Labor “for further proceedings in accordance with the memorandum herein.”

* Chief Judge DiFiore and Judges Pigott, Abdus-Salaam and Garcia concur in reversing the Appellate Division’s decision. Judge Fahey dissented and voted to affirm in an opinion in which Judge Rivera concurred. Judge Stein took no part.

The decision is posted on the Internet at:

Top of Form

Bottom of Form

http://www.nycourts.gov/reporter/3dseries/2016/2016_06940.htm

Determining the existence of an employer-employee relationship

Determining the existence of an employer-employee relationship 
Cole (Niagara Falls Hous. Auth.--Commissioner of Labor), 2016 NY Slip Op 06281, Appellate Division, Third Department 

Devore v DiNapoli, 2016 NY Slip Op 06934, Appellate Division, Third Department

The Cole Decision

The Unemployment Insurance Appeal Board [Board] ruled, among other things, that the Niagara Falls Housing Authority [Authority], a nonprofit governmental agency that provides affordable housing for senior citizens and low-income families, was liable for unemployment insurance contributions on remuneration paid to a certain employee [Claimant] and others similarly situated.

According to the decision, People and Possibilities, a nonprofit organization, was created to receive grants and to provide services to the community and acted as a subsidiary and agent of the Housing Authority. Further, the Housing Authority remained the fiscal and administrative agent for People and Possibilities' SNUG program.*

Claimant was retained by the Authority as an outreach worker — and, later, as a field supervisor — for the Authority's SNUG program. After the grant money had been depleted and Claimant’s work with the Housing Authority concluded, Claimant applied for unemployment insurance benefits.

The Department of Labor issued an initial determination finding that Claimant was an employee of the Authority and that the Authority was liable for unemployment insurance contributions based on remuneration paid to Claimant and others similarly situated.  Following a hearing, an Administrative Law Judge sustained the Department's determination and the Authority filed an administrative appeal.

The Unemployment Insurance Appeal Board [Board] agreed with the Administrative Law Judge’s determination that an employer-employee relationship existed between the Housing Authority and Claimant and that the Housing Authority was liable for contributions based on remuneration paid to Claimant and others similarly situated. The Housing Authority then appealed the Board’s ruling.

The Appellate Division sustained the Board’s determination, explaining that “It is well settled that the existence of an employment relationship is a factual issue for the Board to resolve and its decision will be upheld if supported by substantial evidence.” Noting that no single factor is determinative, the court said that "[t]he relevant inquiry is whether the purported employer exercised control over the results produced or the means used to achieve those results, with control over the latter being the more important factor."

Although the Authority contended that it only exercised incidental control over Claimant, the court said that the record demonstrates that prior to being hired, Claimant filled out an application form and was required to submit a résumé, after which he was interviewed by a panel, which included two officials from the Authority, which determined to employ him.

Further, said the Appellate Division, once hired, Claimant was required to attend training, was required to work 35 hours per week, and was required to fill out and submit weekly time sheets that would have to be approved and signed by his supervisor before receiving remuneration from the Authority.

Other factors considered relevant by the Board in determining the existence of an employer-employee relationship included:

1. Did the claimant did receive fringe benefits?

2. Was the claimant reimbursed for his or her expenses related to the costs of a cell phone, gas, tolls, food and office supplies?

3. Was the claimant provided with office space to use in one of its buildings?

4. Was the claimant required to wear clothing to identify him or her as part of the entity?

5. Was the claimant required to maintain a certain number of clients and to meet with those clients?

6. Was the claimant permitted to subcontract his or her work or employ a substitute to perform his or her work?

7. Was the claimant’s work subject to periodic review and oversight by an entity supervisor?

Considering such factors with respect to the Claimant’s relationship with the Authority, the Appellate Division held that the Board's finding that an employer-employee relationship existed between Claimant and the Housing Authority was supported by substantial evidence and declined to disturbed it.

The Devore v DiNapoli Decision

In Devore v DiNapoli the issue concerned the mirror image of an employer-employee relationship: service provided as an independent contractor.

Cynthia Devore, a medical doctor, provided services as a school physician and medical director for numerous entities since the 1980s. She is also a member of the New York Stateand Local Retirement System. A dispute arose as to whether she was entitled to service credit for certain periods in which she was reported as a part-time employee by Monroe Number 1 BOCES and the Brighton, Greece, Rush-Henrietta, Spencerport and Williamsville Central School Districts [School Districts].

Ultimately the State Comptroller found that Dr. Devore served as an independent contractor for the School Districts for the relevant periods and she appealed.

The Appellate Division said that in "calculating retirement benefits, service credit is available only to employees, not independent contractors”, and “[a]n employer-employee relationship exists when the evidence shows that the employer exercises control over the results produced or the means used to achieve the results.” However, said the court, an employer-employee relationship may also exist under if the putative employer exercised overall “control over important aspects of the services performed other than results or means.” 

Whether sufficient overall control existed is a factual issue for the Comptroller, and his resolution of it will be upheld if supported by substantial evidence in the record. 

The record before the court included Dr. Devore’s testimony, as well as testimony of officials from most of the school districts, all of which specified how the school districts exercised significant control over aspects of Dr. Devore’s work. The only potential inconsistency was while the school districts had all categorized Dr. Devore as an employee by 2006, Dr. Devore had previously executed agreements with the school districts that categorized her as an independent contractor.

However, it is the actual relationships between the parties rather than the labels assigned to their relationships pursuant to a contract or otherwise that determine whether an employer-employee relationship exists.**

As the evidence documenting the significant overall control exercised by the school districts over aspects of Dr. Devore's work faced little challenge from the Retirement System and the System rested at the administrative hearing without presenting any witnesses, the Appellate Division held there was a lack of substantial evidence to support the Comptroller's determination that Dr. Devore worked as an independent contractor for the school districts during the periods that she was classified by them as an employee.

The court then annulled so much of the Comptroller's decision as determined that Dr. Devore was not an employee of Williamsville Central School District from July 1, 2002 to November 2008, Greece Central School District from July 1, 2003 to the present, Rush-Henrietta Central School District from February 1, 2006 to the present, Spencerport Central School District from July 1, 2005 to June 30, 2008, and Brighton Central School District from July 2005 to the present. It then remitted the matter to the Comptroller for further proceedings “not inconsistent with this Court's decision; and, as so modified, confirmed” the Comptroller decision.

* See, also, the decision in Davis (Niagara Falls Hous. Auth.--Commissioner of Labor), 2016 NY Slip Op 06283, Appellate Division, Third Department, in which similar factors were considered in relation to claims for unemployment insurance benefits filed by other employees engaged in the Housing Authority's SNUG program, posted on the Internet at http://www.nycourts.gov/reporter/3dseries/2016/2016_06283.htm

** See NYPPL’s posting captioned “Designating an individual an ‘independent contractor’ rather than an ‘employee’ does not control the relationship of that individual to the employing entity” at http://publicpersonnellaw.blogspot.com/2015/05/designating-individual-independent.html. 

The Cole decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06281.htm 

The Devore decision is posted on the Internet at: http://www.nycourts.gov/reporter/3dseries/2016/2016_06934.htm

Audits issued by the New York State Comptroller

Audits issued by the New York State Comptroller

Source: Office of the State Comptroller

[Internet links highlighted in color]

On October 24, 2016, New York State Comptroller Thomas P. DiNapoli announced the following audits were issued:

State Education Department: Easter Seals New York, Compliance with the Reimbursable Cost Manual (2015-S-27)

For the three calendar years ended Dec. 31, 2013, Easter Seals NY claimed $688,543 in ineligible costs for its rate-based preschool special education programs. The ineligible costs included: $546,263 in personal service costs for personnel that exceeded SED-approved staffing ratios for the programs;  $110,206 in parent agency administration services provided by Easter Seals NY that included executive compensation above the allowed regional median salary; and $32,074 in other than personal service costs that were either not allowable or unsupported by proper documentation.

State Education Department: Jawonio Inc., Compliance with the Reimbursable Cost Manual (2015-S-49)

For the calendar year ended Dec. 31, 2014, Jawonio claimed $26,975 in ineligible costs for its four rate-based preschool special education programs. The ineligible costs included: $24,611 in personal service costs that consisted of excess severance pay, compensation for work that was not related to the special education programs, excess compensation and fringe benefits, and a non-reimbursable bonus; and $2,364 in other than personal service costs.

State Education Department: Baker Victory Services, Compliance with the Reimbursable Cost Manual (2015-S-57)

Baker Victory, a not-for-profit organization located in Lackawanna, provides a variety of services to the Erie County community, including preschool special education services to children with disabilities. Auditors identified $155,303 in costs the agency claimed that were not in compliance with state rules, including: $85,736 in personal service costs, which consisted of $46,526 in inappropriate bonuses; and $69,567 in other than personal service costs, which included of $53,053 in non-allowable public relations and advertising costs.

Department of Health: COLA – Child Center of New York (2016-BSE4-01)

Each fiscal year, DOH makes COLA payments to not-for-profit contractors with an eligible contract. Of the $15,538 examined for the Child Center, auditors found $5,756 in overpayments for unallowable and unsupported expenses and $1,970 in noncompliant expenses paid outside the applicable budget year. The remaining $7,812 was appropriate and properly supported.

Roswell Park Cancer Institute: Security Over Electronic Protected Health Information (Follow Up) (2016-F-19)

An initial audit report issued in July 2015, concluded that the Roswell Park Cancer Institute had established a highly developed information security program to protect the electronic protected health information (ePHI) it creates, receives, maintains, or transmits. However, auditors identified some improvement opportunities involving certain administrative, physical, and technical safeguards over the Institute’s ePHI. In a follow-up, auditors found the institute has made good progress addressing the issues identified in the initial audit. Of the four recommendations contained in the audit, two have been implemented and two have been partially implemented.

Department of Transportation (DOT): Railroad Bridge Inspection Program (Follow Up) (2016-F-13)

An initial audit report issued in December 2013 determined that DOT was not sufficiently monitoring whether the railroads complied with its bridge and inspection reporting requirements and made recommendations to improve oversight. In a follow-up report, auditors found DOT has made progress in implementing the recommendations identified in the prior audit report.  Of the six prior audit recommendations, one has been implemented, four have been partially implemented and one is no longer applicable.

Vacating an arbitration award based on allegations the award violated public policy

Vacating an arbitration award based on allegations the award violated public policy

Civil Serv. Empls. Assn., A.F.S.C.M.E. Local 1000, A.F.L.-C.I.O. v County of Nassau, 2016 NY Slip Op 06211, Appellate Division, Second Department

In New York City Tr. Auth. v Transport Workers Union of Am., Local 100, AFL-CIO, 99 NY2d 1, the Court of Appeals ruled that "judicial intervention [in a challenge to an arbitration award] on public policy grounds constitutes a narrow exception to the otherwise broad power of parties to agree to arbitrate all of the disputes arising out of their juridical relationships, and the correlative, expansive power of arbitrators to fashion fair determinations of the parties' rights and remedies." The court further explained that the pubic policy exception applies only in "cases in which public policy considerations, embodied in statute or decisional law, prohibit, in an absolute sense, particular matters being decided or certain relief being granted by an arbitrator.”

When an individual’s employment with the Nassau County Sheriff's Department was terminated he filed a grievance pursuant to the disciplinary procedures of the relevant collective bargaining agreement. The arbitrator designated to hear and determine the matter sustained the grievance and reinstated the individual to his former position with back pay.

The Civil Service Employees Association filed a petition pursuant to CPLR Article 75 on behalf of the individual seeking a court order confirming the arbitration award. Supreme Court granted the petition and Nassau Countyappealed the ruling in an effort to have the award judicially vacated.

The Appellate Division affirmed the lower court’s decision, explaining that upon timely application, an arbitration award should be confirmed unless the award is vacated or modified upon a ground specified in CPLR 7511, i.e.,

“(i) corruption, fraud or misconduct in procuring the award; or

“(ii) partiality of an arbitrator appointed as a neutral, except where the award was by confession; or

“(iii) an arbitrator, or agency or person making the award exceeded his power or so imperfectly executed it that a final and definite award upon the subject matter submitted was not made; or

“(iv) failure to follow the procedure of this article [75], unless the party applying to vacate the award continued with the arbitration with notice of the defect and without objection.”

The court then noted the two “judicially determined” exceptions set out in Board of Educ. of Arlington Cent. School Dist. v Arlington Teachers Assn., 78 NY2d 33, whereby an arbitration award may not be vacated “unless it violates a strong public policy” or it “is irrational.”

In this instance, said the Appellate Division, the public policy considerations invoked by the Nassau Countyfail to meet the strict standards for overturning arbitration awards on public policy grounds.

Addressing Nassau County’s argument that the arbitrator’s award should be vacated on the ground of fraud or other misconduct, the court said the contention was “without merit.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06211.htm

Owners of for-profit school network to pay $4.3 million to resolve claims of overcharging State and failing to pay taxes

Owners of for-profit school network to pay $4.3 million to resolve claims of overcharging State and failing to pay taxes 

[Internet links highlighted in color]

On October 19, 2016, Comptroller Thomas P. DiNapoli, Attorney General Eric T. Schneiderman  and Acting Tax Commissioner Nonie Manion announced a settlement with K3 Learning, Inc. (f/k/a Metropolitan Preschools, Inc.) and its president and owner Michael C. Koffler, together with his sons, Brian and Daniel Koffler, and his special education preschool, Sunshine Development School (“SDS”), for overcharging the State of New York for services rendered by SDS and for failing to pay millions in personal and corporate income tax.  

Following a coordinated investigation with the Department of Taxation and Finance and an auditand investigation by the Office of the State Comptroller, Koffler and the other parties have agreed to pay the State over $4.3 million to resolve the investigation.

An investigation by the Attorney General’s and Comptroller’s office revealed a complicated leasing arrangement created by Michael Koffler and SDS with the purpose and effect of inflating claims for rent reimbursement to the State of New York.

Specifically, Bridan Realty III, LLC, an entity created and controlled by Michael Koffler, entered into a lease for space for the special education preschool SDS, and then subleased the space to SDS at a substantial mark up.  The investigation revealed no legitimate reason for the mark-up and found that Bridan performed no services for SDS.  Instead, the company was merely a pass-through entity controlled by the Kofflers and used to pay the Kofflers, their credit card bills, their boat expenses, and even partial tuition for Brian’s law school.  Indeed, the sham entity’s name derives from the Koffler sons, Brian and Daniel.

In addition, an auditand investigation by the Office of the State Comptroller found over a million dollars in an additional overcharges stemming from unreasonable high executive compensation for Michael Koffler, unrecoverable expenses – such as lobbying and legal fees –and accounting errors, among other erroneous charges.  As part of the agreement, SDS has agreed to any reimbursement rate adjustments required to fully compensate the State Education Department and the New York City Department of Education for these past overcharges.

The Attorney General, with the help of the Department of Taxation and Finance, found that each of Michael, Brian, and Daniel Koffler, as well as SDS, underreported taxable income on their tax returns.  In the largest tax avoidance finding, Michael Koffler reported millions in losses from various entities on his personal income tax return even though he lacked supportable basis to do so.  Additionally, he failed to report as income various personal and living expenses that were paid by entities under his control. These included payments from an “Executive Account” for rent for his New York City apartment, personal credit cards, various utility and maintenance bills for the Koffler’s vacation home in Westhampton and expenses incurred in Saint Barth’s and Westhampton.

The Comptroller’s examination was conducted by the Division of State Government Accountability and the Division of Investigations.  

Attorney General Schneiderman expresses his thanks to the staff of the New York State Department of Taxation and Finance, especially Stephanie Lane, Tax Auditor II in the Office of Counsel, for identifying the tax issues in the matter and for their important assistance in bringing this investigation to resolution. The Attorney General also thanked the Office of the State Comptroller for its work on the auditof SDS’s re-imbursement overcharges.  

The Attorney General’s investigation was conducted by Special Counsel Nicholas Suplina under the auspices of the Taxpayer Protection Bureau, which is overseen by Bureau Chief Thomas Teige Carroll and Deputy Bureau Chief Scott Spiegelman.  The Taxpayer Protection Bureau, which enforces the New York State False Claims Act including tax claims made thereunder, is a bureau in the Criminal Division, which is overseen by Chief Deputy Attorney General Jason Brown. 

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.

Decision Squibs for the week ending October 21, 2016

Decision Squibs for the week ending October 21, 2016

Places of Public Accommodation: The Delaware Supreme Court overturned a Delaware Human Relations Commission’s award of damages, attorney’s fees, and costs holding that for the purpose of Delware’s Equal Accommodations Law a prison was not a place of "public accommodation." Ovens v Danberg,  Delaware Supreme Court, Docket #123, 2016, posted on the Internet at:
 http://courts.delaware.gov/Opinions/Download.aspx?id=247660

Employer-Employee: In CalPortland Company v Federal Mine Safety and Health Review Commission, USCA, District of Columbia, Docket #16-1094 held that the Commission could not order  a mine owner to temporarily reinstate an individual who has never been employed by that owner or operator pending a final order on the individual’s underlying discrimination complaint that was then pending before the Commission. The decision is posted on the Internet at: 
http://law.justia.com/cases/federal/appellate-courts/cadc/16-1094/16-1094-2016-10-20.html 

Lack of Mutual Assent: Marjorie Johnson, J.D., writing in Employment Law Daily, reports that although two employees continued working after they received a new Alternate Dispute Resolution policy which required that employment disputes be resolved through binding arbitration, there was no showing of mutual assent as they voiced their objections to the ADR policy and amended their previously filed EEOC charges to allege that the new policy was retaliatory. In an unpublished opinion labeled “Not Precedential”, the Third Circuit vacated a district court’s orders of dismissals of their separately filed discrimination claims and remanded for further proceedings. Scott v Education Management Corp., USCA, Third Circuit, No. 15-2177. Posted on the Internet at: http://www2.ca3.uscourts.gov/opinarch/152177np.pdf

Appealing Supreme Court’s denial of a party’s motion

Appealing Supreme Court’s denial of a party’s motion

Hamilton v Alley, 2016 NY Slip Op 06564, Appellate Division, Fourth Department

William E. Hamilton challenged his termination as a tenured school district administrator by bringing a CPLR Article 78 in Supreme Court. Supreme Court denied Hamilton’s motion to amended his petition. He appealed the Supreme Court’s action and the Appellate Division modified the Supreme Court order denying his amended petition in part by granting Hamilton’s motion to amend the petition in part.*

Hamilton next asked Supreme Court “for leave to renew his amended petition.” Supreme Court denied Hamilton’s motion explaining that he had failed to offer new facts “that were unavailable” when the court initially denied the amended petition.

Hamilton then challenged the Supreme Court’s denial of his subsequent motion for leave to renew the amended petition but in this instance the Appellate Division dismissed his appeal.

The Appellate Division explained that Hamilton’s motion, “purportedly seeking leave to renew,” was actually a motion seeking “leave to reargue.” However, said the court, “no appeal lies from an order denying leave to reargue," citing Hill v Milan, 89 AD3d 1458.

* See Matter of Hamilton v Alley, 137 AD3d 1564

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06564.htm

An employer may seek summary judgment in human rights action by offering a legitimate, nondiscriminatory reason rebutting allegations of unlawful discrimination

An employer may seek summary judgment in human rights action by offering a legitimate, nondiscriminatory reason rebutting allegations of unlawful discrimination  

Tibbetts v Pelham Union Free School Dist., 2016 NY Slip Op 06699, Appellate Division, Second Department

§296(1)(a) of the New York State Human Rights Law provides that "[i]t shall be an unlawful discriminatory practice . . . [f]or an employer . . . because of an individual's . . . disability . . . to discharge from employment such individual."

To establish a prima facieviolation of §296(1)(a), a plaintiff must show that (1) he or she is a member of a protected class; (2) he or she was qualified to hold the position; (3) he or she was terminated from employment or suffered another adverse employment action; and (4) the discharge or other adverse action occurred under circumstances giving rise to an inference of discrimination.

Jennifer Tibbetts sued the Pelham Union Free School District to recover damages for alleged employment discrimination on the basis of disability in violation of Executive Law §296. Tibbetts, a probationary music teacher, alleged that she was injured in a slip-and-fall accident and was unable to work for approximately a week while she recovered from her injuries. She alleged that the accident left her disabled, and approximately two weeks after she returned to work, she was terminated because of her disability.

Supreme Court, Westchester County granted Pelham’s motion for summary judgment, dismissing Tibbetts’ complaint. Tibbetts appealed the Supreme Court’s ruling.

Sustaining the lower court’s decision, the Appellate Division said that Pelham had submitted evidence that it terminated Tibbetts’ employment “due to an unusually large number of documented complaints from parents about her interactions with students,” which began shortly after she was appointed to her position and continued throughout the course of her employment. Pelham also submitted evidence that it had no notice of Tibbetts’ alleged disability at the time that she was terminated.

Considering Supreme Court’s granting Pelham’s motion for summary judgment, the Appellate Division explained that “… a defendant, upon offering legitimate, nondiscriminatory reasons for the challenged action, is also required to demonstrate the absence of a triable issue of fact as to whether its explanation for its termination of the plaintiff's employment was pretextual.” In the court’s opinion Pelham had satisfied both requirements.

The Appellate Division found that Pelham had met its burden on its motion for summary judgment of offering legitimate, nonpretextual reasons for terminating Tibbetts’ employment. Rejecting Tibbetts’ contention that “the temporal proximity between the alleged onset of her disability and her discharge” supports an inference of discrimination in this action, the court said that Pelham had demonstrated that it had no knowledge of her alleged disability at the time that she was dismissed from her position.

As Tibbetts failed to raise a triable issue of fact as to whether Pelham’s explanation for her termination "was false, misleading, or incomplete" and her affidavit “was based on speculation and presented what appear to be feigned issues of fact designed to avoid the consequences of her earlier deposition testimony,” the Appellate Division concluded that “Supreme Court properly granted [Pelham’s] motion for summary judgment dismissing the amended complaint insofar as asserted against it.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06699.htm