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

Employee organization leave

Employee organization leave
§46 of Chapter 283 of the Laws of 1972

Providing employees of the State with Employee Organization Leave to participate in "union activities" as an elected or appointed officer of an employee organization certified or recognized for the purposes of collective bargaining has been an issue since the adoption of the Taylor Law.

In response to demands that State employees elected to a leadership position of an employee organization representing state employees be provided with "paid organization leave," the State agreed to provide for “Employee Organization Leave” and enacted §46 of Chapter 283 of the Laws of 1972 to this end.

This law provides that a State employee organization may obtain approval for paid full or part-time leaves of absence of its representatives provided it agrees to fully reimburse the State for the salary and other compensation paid to the individual and, in addition, reimburse the State for all employer contributions for fringe benefits made by the State on behalf of the individual, while he or she is on Employee Organization Leave. The individual would be continued as a State employee, on the State’s payroll, during this time. 

A "leaves for union activities" article set out in a Taylor Agreement typically provides  that  in the event an employees is  granted a leave of absence with full salary from his or her regular position for certain employee organization purposes, the employee organization shall reimburse the State the employee's salary and the employer's contributions for employee benefits while he or she is on such leave "consistent with provisions promulgated by the Department of Audit and Control and in accordance with the provisions of Section 46 of Chapter 283 of the Laws of 1972."

Another element affecting State employees on Employee Organization Leave: The State Ethics Commission has advised that “State employees on Employee Organization Leave or State employees on leave without pay who serve as employee organization representatives for CSEA … who have terminated their State service and are now employed by CSEA are subject to the "revolving door" provisions of the Public Officers Law and the corresponding restrictions on post-employment activities” [see Advisory Opinion #90-a ]. Presumably this opinion would be applied with respect to State employees on employee organization leave serving with other employee organizations.

Failure to honor a known policy of the employer can constitute disqualifying misconduct for the purpose eligibility for unemployment insurance benefits

Failure to honor a known policy of the employer can constitute disqualifying misconduct for the purpose eligibility for unemployment insurance benefits

New York City Dept. of Citywide Admin. Servs. (Commissioner of Labor), 2016 NY Slip Op 06526, Appellate Division, Third Department

The New York City Taxi and Limousine Commission [TLC] had a “limited-use policy”  permitting its employees limited personal use of TLC's office and technology resources as long as such use does not interfere with official duties and responsibilities.

TLC received an anonymous complaint that an individual [Employee] was using TLC's resources to conduct his campaign for election to the City Council. TLC requested the New York City Department of Investigation [DOI] to investigate Employee’s campaign-related activities during his employment. Employee then advised TLC that he was taking a leave of absence from his position pursuant to a directive requiring him to do so upon, among other things, publicly declaring his intent to seek elected public office.

Upon completing its investigation, DOI concluded that Employee had misused TLC's resources prior to taking a leave of absence and so advised TLC. TLC terminated Employee, prompting him to apply for unemployment insurance benefits.

The Department of Labor subsequently determined that Employee was disqualified from receiving benefits because his employment was terminated for misconduct and found that Employee had made a willful misrepresentation on his application for benefits insofar as he claimed that he had been discharged for lack of work. The Department charged Employee with an overpayment of $4,050 in benefits, reduced his right to receive future benefits by eight effective days and imposed a civil penalty of $607.50.

Ultimately, the Unemployment Insurance Appeal Board upheld the Department's initial determination and penalties imposed pursuant to that determination. Employee appealed the Board’s decision.

The Appellate Division affirmed the Appeal Board’s decision, explaining "Whether a claimant has engaged in disqualifying misconduct is a factual question for the Board to resolve and its determination will not be disturbed if supported by substantial evidence," noting that “It is well settled that failure to abide by a known policy of the employer can constitute disqualifying misconduct.”

The court’s decision noted that evidence in the record, including the report detailing the findings of DOI's investigation, established the Employee’s use of TLC's resources, such as his work computer and telephone, to further his political campaign efforts “was extensive” and  telephone calls made from his office telephone were unrelated to Employee's employment.

Although Employee denied that he used his work computer and the telephone at TLC to pursue his campaign efforts, including soliciting contributions for his campaign, at the hearing, the Appellate Division observed that this “presented issues of credibility within the exclusive province of the Board” to resolve and the Board was entitled to credit the competing evidence presented at the hearing and reject Employee's exculpatory claims.

In addition, noted the court, Employee inaccurately represented that he was unemployed due to a lack of work when applying for unemployment insurance benefits although he had previously been made aware of DOI's investigation of him.

Accordingly, the Appellate Division said that it found “no reason to disturb the Board's imposition of a recoverable overpayment or forfeiture penalty based upon the [Employee’s] willful misrepresentations.”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06526.htm

Medical Marijuana in the workplace: what an employer in New York State needs to know

Medical Marijuana in the workplace: what an employer in New York State needs to know

Source: NYMUNIBlOG, Kyle Sturgess

New York’s Compassionate Care Act, Chapter 90 of the Laws of 2014, provided for the use of medical marijuana in New York State.

Harris Beach, PLLCattorneys Roy Galewski and Jim Beyer will conduct a webinar focusing on “Medical Marijuana in the New York Workplace” and addressing “Common Disability Accommodation Issues” on October 27, 2016 at 8:00 a.m.

Harris Beach invites interested readers to click on https://www.harrisbeach.com/wp-content/uploads/2016/07/LaborSeriesInvite2016.pdfto register for this webinar.

Challenging the termination of a probationary teacher

Challenging the termination of a probationary teacher

Lewandowski v Clyde-Savannah Cent. Sch. Dist. Bd. of Educ., 2016 NY Slip Op 06594, Appellate Division, Fourth Department

A probationary teacher [Teacher] commenced an Article 78 proceeding seeking a court order annulling the Clyde-Savannah Central School District Board of Education's [Board] decision to discontinue her probationary appointment on the grounds that the Board’s decision was arbitrary and capricious, and an abuse of discretion. Teacher also asked the court to direct the Board to reinstate her to her probationary teaching position with back pay.

The Board moved to dismiss Teacher’s petition on the ground that she had failed to serve a notice of claim as mandated by §3813.1 of the Education Law. §3813.1 required that Teacher serve the notice of claim within three months after the claim arose. Supreme Court granted the Board’s motion to dismiss and Teacher appealed.

The Appellate Division sustained the lower court’s ruling, explaining that the service of a notice of claim is a "condition precedent to bringing an action against a school district or a board of education" and such service was required here. Further, said the court, Teacher had not commenced a special proceeding in the nature of mandamus seeking to vindicate a judicially enforceable right conferred on her by the law and thus her cause of action “is not exempt from the notice of claim requirement.”

Significantly, Lewandowski, a probationary employee, had not attained tenure in her position.  In contrast, the Appellate Division, in Sephton v Board of Education of the City of New York, 99 AD2d 509, held that “the ‘tenure rights’ of teachers are ... considered a matter in the public interest and therefore Section 3813 is not applicable to cases seeking to enforce such rights.”

Further, New York courts have distinguished between proceedings “which on the one hand seek only enforcement of private rights and duties and those on the other in which it is sought to vindicate a public interest; the provisions of subdivision 1 of section 3813 are applicable as to the former but not as to the latter” (see Union Free School Dist. No. 6 of Towns of Islip and; Smithtown v New York State Div. of Human Rights Appeal Bd., 35 NY2d 371, rearg denied 36 NY2d 807).

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06594.htm

The employer and individual employees of the employer may be named defendants in an action alleging unlawful discrimination under a "condonation theory"

The employer and individual employees of the employer may be named defendants in an action alleging unlawful discrimination under a "condonation theory"

Emengo v State of New York, 2016 NY Slip Op 06734, Appellate Division, First Department

Benedict O. Emengo filed a  CPLR Article 78 petition in Supreme Court alleging that he was adversely treated by his employer, the New York State Insurance Fund and certain NYSIF administrator* [NYSIF] because his color, national origin and that although he was well-qualified for promotion to positions he sought, was refused promotion to these positions.

Supreme Court granted NYSIF’s motion to dismiss Emengo’s petition but the Appellate Division unanimously modified, on the law, certain of Emengo’s causes of action dismissed by the lower court.

The Appellate Division said the Emengo’s allegations that one administrator told him that “he was an ‘immigrant’ who ‘should be content’ with his current job title, ‘since, as an immigrant, he would never be promoted beyond’ his current title” and that another administrator “was previously found to have discriminated against black NYSIF** employees” constitute sufficient evidence of discriminatory animus.

The court also held that Emengo had “sufficiently alleges that each individual defendant was an ‘employer’ for purposes of his claims, broadly asserting that each individual defendant was a high-ranking manager with, at least inferentially, supervisory powers, including the power to promote, discipline and terminate employees.”

The Appellate Division also noted that Emengo had alleged that “there was a long-standing policy of refusing to promote black NYSIF employees above the title of Supervising Insurance Field Investigator, that all of the individual defendants were at least aware of this policy, that all of the individual defendants were aware that [Emengo] was being refused promotions in accordance with this policy, and that none of the defendants took any action in response to this conduct.” Citing State Div. of Human Rights v St. Elizabeth's Hosp., 66 NY2d 684, and Patrowich v Chemical Bank, 63 NY2d 541, the court ruled that Emengo had “adequately pleaded employer liability as to all of the individual defendants, under a condonation theory”***within the meaning of Executive Law §296[1][a].

NYSIF agreed that Emengo’s claims against the State of New York and NYSIF "rise or fall with his claims against the six individual defendants," his claims against the State and NYSIF under the State’s Human Rights Law, including his causes of action for retaliation and for aiding and abetting discrimination, should be reinstated.

Emengo has also asked the Appellate Division to reinstate his claims under the New York City Human Rights Law [City HRL]. Supreme Court had dismissed his City HRL claims on the independent ground of sovereign immunity. Emengo, said the Appellate Division, was required on the independent ground of sovereign immunity, whether or not the failed to address this aspect of the Supreme Court’s decision and deemed him to have abandoned his appeal with respect to Supreme Court’s dismissal of his City HRL claims.

* The NYSIF administrators are denominated “John and Jane Doe” in the caption of the decision.

** The decision notes that Emengo “was a black man of Nigerian national origin.”

*** An essential ingredient of condonation is knowledge of the infraction alleged to have been condoned. In Matter of State Div. of Human Rights v St. Elizabeth's Hosp., 66 NY2d 684, the court held that “An employer will be liable for ‘an employee's discriminatory act [where] the employer became a party to it by encouraging, condoning, or approving it.’” Further, said the court, “the term condonation includes … ‘[a]n employer's calculated inaction in response to discriminatory conduct.’”

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2016/2016_06734.htm

Audits of School Districts posted during the week ending October 15, 2016

Audits of School Districts posted during the week ending October 15, 2016

Source: Office of the State Comptroller

[Internet links highlighted in color]

Bradford Central School District – Financial Management (2016M-253)

Purpose of Audit

The purpose of our audit was to evaluate the District's financial management for the period July 1, 2012 through April 15, 2016.

Background

The Bradford Central School District is located in the Towns of Bath, Bradford, Urbana and Wayne in Steuben County and the Towns of Orange and Tyrone in Schuyler County. The District, which operates one school with approximately 275 students, is governed by an elected five-member Board of Education. Budgeted appropriations for the 2015-16 fiscal year totaled approximately $8.8 million.

Key Findings

The Board and District officials have not adopted realistic budgets or effectively managed fund balance and, despite the significant amount of accumulated fund balance, continued to raise the tax levy by an average of 2 percent each year or a total of $350,000 over the last three years.

When unused appropriated fund balance is added back, unrestricted fund balance exceeded the statutory limit by amounts ranging from $1.4 million to $1.9 million or 12.8 to 17.5 percentage points.

Key Recommendations

Ensure budgets include realistic appropriations based on actual needs and planned use of fund balance to avoid levying taxes at a level greater than needed.

Ensure that unrestricted fund balance is in compliance with the statutory limit and develop a plan to use excess fund balance in a manner that benefits District residents.

___________

Corning City School District – Procurement (2016M-222)

Purpose of Audit

The purpose of our audit was to review the District's procurement practices for the period July 1, 2014 through April 26, 2016.

Background

The Corning City School District is located in the Towns of Big Flats and Catlin in Chemung County; the Towns of Dix and Orange in Schuyler County; and the City of Corning and the Towns of Bradford, Campbell, Caton, Corning, Erwin, Hornby and Lindley in Steuben County. The District, which operates eight schools with approximately 4,800 students, is governed by an elected nine-member Board of Education. Budgeted appropriations for the 2015-16 fiscal year totaled approximately $102.5 million.

Key Findings

The District's procurement policy does not include procedures for the procurement of professional services.

District officials did not always solicit competition through requests for proposals or obtain or retain quotes or bids.

Key Recommendations

Revise the procurement policy to include clear language addressing the procurement of professional services and require strict adherence to the requirements of the procurement policy.

Solicit competition for professional service contracts and ensure that written or verbal quotes are obtained for purchases that are under bidding thresholds.

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East Moriches Union Free School District – Claims Processing (2016M-273)

Purpose of Audit

The purpose of our audit was to examine claims processing for the period July 1, 2014 through May 31, 2016.

Background

The East Moriches Union Free School District is located in the Town of Brookhaven, Suffolk County. The District, which operates two schools with approximately 730 students, is governed by an elected five-member Board of Education. Budgeted appropriations for the 2015-16 fiscal year totaled approximately $25.8 million.

Key Findings

The claims auditor did not properly identify and report all confirming purchase orders to the Board.

The Treasurer did not supervise an account clerk typist's use of her electronic signature to sign the District’s checks.

Key Recommendations

Properly identify and report to the Board all instances of confirming purchase orders.

Discontinue the practice of allowing the Treasurer's electronic signature to be affixed to checks without direct authorization or supervision.

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Merrick Union Free School District – Financial Condition (2016M-240)

Purpose of Audit

The purpose of our audit was to evaluate the District's financial operations and use of fund balance for the period July 1, 2014 through December 31, 2015.

Background

The Merrick Union Free School District is located in the Town of Hempstead, Nassau County. The District, which operates three schools with approximately 1,480 students, is governed by an elected seven-member Board of Education. Budgeted appropriations for the 2015-16 fiscal year totaled approximately $46.9 million.

Key Findings

The Board adopted budgets that overestimated expenditures by a total of $9.3 million and underestimated revenues by a total of $2.8 million from July 1, 2012 through June 30, 2015.

The District's unrestricted fund balance exceeded the statutory maximum for each of the three years reviewed.

Fund balance appropriated by the Board was not used.

The district did not use its reserve funds during the audit period but instead used operating funds to pay for related costs.

Key Recommendations

Adopt budgets that realistically reflect the District’s operating needs based on historical trends or other identified analysis.

Develop a written plan to reduce the level of unrestricted fund balance to legal limits and consider revising the District’s fund balance policy to require compliance.

Discontinue the practice of appropriating unexpended surplus funds that are not needed and not used to fund District operations.

Ensure that reserve funds are used for their intended purpose.

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Local Government and School Accountability Contact Information:

Phone: (518) 474-4037; Email: localgov@osc.state.ny.us
Address: Office of the State Comptroller, Division of Local Government and School Accountability 110 State Street, 12th Floor; Albany, NY 12236

New York State Comptroller audit reveals the State’s Health Department overpaid certain Medicaid Managed Care premiums

New York StateComptroller audit reveals the State’s Health Department overpaid certain Medicaid Managed Care premiums

Source: Office of the State Comptroller [Internet links highlighted in color]

The state Department of Health (DOH) overpaid managed care organizations nearly $19 million for the state fiscal year 2014-15, in part, because of a flaw in how it calculated premiums, according to an auditreleased on October 13, 2016 by New York State Comptroller Thomas P. DiNapoli. Auditors warned that another $56.8 million was at risk of overpayment over the next three years due to the flaw.

Additionally, DiNapoli’s auditors found DOH, because it had not provided sufficient cost reporting guidance, is missing out on millions in annual savings it is supposed to realize through reforms recommended by the state’s Medicaid Redesign Team. The department also failed to collect $38.6 million in actuarial costs, incurred since 2009, from managed care organizations (MCOs).

For the state fiscal year ended March 31, 2015, New York’s Medicaid program had approximately 7.1 million enrollees and Medicaid claim costs totaled about $53 billion. The federal government funded about 52 percent of New York’s Medicaid claim costs; the state funded about 30 percent; and localities funded the rest.

Most of New York’s Medicaid recipients receive their services through mainstream Medicaid managed care. Medicaid pays MCOs a monthly premium payment for each enrolled Medicaid recipient and the MCOs arrange for the recipients’ health services. Mainstream managed care provides hospital care, physician services, dental services, pharmacy benefits, and many others. Of the $53 billion in Medicaid costs, MCOs received $17.8 billion in mainstream managed care premiums for nearly 5.2 million Medicaid enrollees.

DiNapoli’s auditors found that the approximate $19 million in premium overpayments largely occurred because DOH incorrectly factored in the cost of certain taxes – a franchise tax imposed on insurance corporations and the Metropolitan Transportation Business Tax (MTA surcharge) – levied against for-profit MCOs into DOH’s rate-setting calculations. This resulted in higher premiums for all MCOs, including those MCOs that did not pay these taxes. In response to the audit, DOH officials told auditors they updated the methodology.

Auditors also reviewed the expenses submitted by one MCO to DOH and determined the MCO claimed certain non-allowable administrative expenses, which also contributed to the overpayments.

DOH’s cost reporting instructions failed to provide clear and specific instructions for reporting some expenses, such as fines and penalties and certain legal expenses. DOH also provided poor reporting guidance that allowed MCOs to misreport non-allowable marketing expenses, contrary to the intent of a policy change initiated from a Medicaid Redesign Team (MRT) proposal. As a result, DOH is not fully realizing the MRT’s estimated $45 million in annual savings from the change.

DiNapoli’s auditors also found that since October 2009, DOH has contracted with Mercer Health and Benefits, LLC to provide actuarial services and guidance in setting all managed care premium rates. As of January 2015, the total cost of the contract was $38.6 million. Under state law, DOH is required to charge the MCOs for those services, but had not done so.

DiNapoli recommended DOH:

1. Modify the rate-setting methodology to ensure that franchise taxes and MTA surcharges are properly factored into the methodology;

2. Determine the extent to which the MCOs’ reported expenses include non-allowable marketing expenses, and assess whether planned cost savings can be achieved under current MCO reporting practices;

3. Revise the Medicaid Managed Care Operating Report (MMCOR) instructions to ensure adequate guidance is given for reporting marketing and facilitated enrollment expenses, fines, and legal costs;

4. Recalculate the administrative cost cap and the base administrative premium rate based on the audit’s findings and apply the recalculations to the premiums paid for the state fiscal year 2014-15 and forward;

5. Recover overpayments;

6. Assess the cost of the current actuary contract, and any future contracts and amendments, to MCOs; and

7. Include MCOs in the future selection of the actuary.

Department officials generally concurred with some of the audit recommendations, and indicated that actions have been and will be taken to address them. DOH’s full response is included in the complete audit.

The complete report is posted on the Internet at: report

Employee’s misuse of employer’s email results in dismissal

Employee’s misuse of employer’s email results in dismissal
Posted by Employment Law News, WK WorkDay - A service provided by Wolters Kluwer Legal & Regulatory U.S.

[Internet links highlighted in color]

Fire Captain terminated after using Department’s internal email system to transmit religious messages

By Dave Strausfeld, J.D.

A fire department captain who was discharged for sending Christian messages to coworkers via the department’s internal email system was unable to prove that his First Amendment free speech rights were violated, held a Washington Court of Appeals, affirming a lower court’s grant of summary judgment. The email system was a nonpublic forum, and limiting its usage to fire department business was reasonable and viewpoint neutral. Judge Lawrence-Berrey filed a separate concurring opinion.

In dissent, Chief Judge Fearing argued the department had opened the email system to religious messages by forwarding newsletters from its health insurer about solving personal problems and living a healthy lifestyle, because the government may not “prefer secular chatter over religious oration” (Sprague v. Spokane Valley Fire Department).

The text of Mr. Strausfeld summary is posted on the Internet at:

http://www.employmentlawdaily.com/index.php/news/fired-for-using-internal-email-system-to-send-religious-messages-fire-captain-loses-free-speech-claim/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CCH-Workday+%28WK+WorkDay%29

Employee’s termination for sending 900 company emails to personal account did not constitute reverse discrimination

By Kathleen Kapusta, J.D.

Sending over 900 company emails to his personal or other outside account, including over 100 containing confidential client information, was a legitimate nondiscriminatory reason for firing a 59-year-old employee, notwithstanding that he was allowed to work at home on the company’s secure network and that an NLRB law judge found some of the employer’s confidentiality rules overbroad.

Accordingly a federal district court in Michigan granted summary judgment against his federal and state law reverse race and gender discrimination claims as well as his age bias claim under the ADEA. His FLSA claim for unpaid overtime also failed (MacEachern v. Quicken Loans, Inc., September 21, 2016, Steeh, G.).

The text of Ms. Kapusta’s summary is posted on the Internet at:

http://www.employmentlawdaily.com/index.php/news/employee-fired-for-sending-over-900-emails-to-personal-account-not-for-reverse-discrimination/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CCH-Workday+%28WK+WorkDay%29

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Other decisions addressing an employee’s alleged misuse of an employer’s electronic equipment include:

Fraser v Nationwide Mutual Insurance Co.

USDC, 135 F. Supp. 2d 623

The court held that an employee using his or her employer's computer equipment for personal business does not enjoy any "right to privacy" barring the employer’s reviewing the employee's e-mail that is stored in its computer system. Federal District Court Judge Anita B. Brody decided that an employer may peruse an employee's e-mail files that are stored in the system without violating either federal or Pennsylvania wiretap laws.

On appeal the USCA, Third Circuit, affirmed the District Court's grant of summary judgment in favor of Nationwide on Fraser's wrongful termination claim but vacated and remand the state claims, and his bad-faith claim and forfeiture-for-competition claim for consideration in light of the Pennsylvania Supreme Court's decision in Hess v. Gebhard and Co., Inc., 570 Pa. 148.

Leo Gustafson v Town of N. Castle, 

45 A.D.3d 766

The employee, an assistant building inspector with the Town of North Castle, was charged and found guilty of falsifying official records with respect to where he was while on duty. The individual was assigned a town vehicle for the purpose of making field inspections in connection with his employment. The vehicle had a global positioning system installed that transmitted information to the town’s computer reporting the vehicle’s location and movements. Based on this information, the Town charged the employee with falsifying town records as to his whereabouts. This, said the Appellate Division, constituted substantial evidence to support the determination that the employee was guilty of falsifying town records.

Ghita v Department of Education of the City of New York

2008 NY Slip Op 30706(U), Supreme Court, New York County, Docket Number: 0110481/2007 [Not selected for publications in the Official Reports]

The employee challenged an arbitrator’s determination terminating his employment with the New York City Department of Education after finding him guilty of downloading a file of pornographic material from his AOL email account and openly viewed such pornographic material from a school computer. Supreme Court rejected the individual’s claim that [1] the arbitrator exceeded his authority under Education Law §3020-a, and [2] the award terminating Ghita's employment is a violation of public policy and New York State Law.

Perry v Comm. of Labor,

App. Div. 3rd Dept., 283 A.D.2d 754

This unemployment insurance claimant challenged a determination by the Unemployment Insurance Appeals Board denying him benefits after finding that his employment was terminated due to his misconduct. The nature of the individual's alleged misconduct: his misuse of his employer's computer equipment. The employee, a human resource specialist, was terminated after his employer discovered that he used his computer terminal to frequently access pornographic websites during working hours.

Fraser v Nationwide Mutual Insurance Co.

USDC, 135 F. Supp. 2d 623

The court held that an employee using his or her employer's computer equipment for personal business does not enjoy any "right to privacy" barring the employer’s reviewing the employee's e-mail that is stored in its computer system. Federal District Court Judge Anita B. Brody decided that an employer may peruse an employee's e-mail files that are stored in the system without violating either federal or Pennsylvania wiretap laws.

As to the issue of the expectation of privacy, the appointing authority may wish to periodically advise its officers and employees that they have no right to privacy with respect to any data retrieved from the employer's computers, servers, video tapes, message tapes or other storage devices, electronic or otherwise.

The full text of the Wilkinson - Casey decision is posted on the Internet at:
http://nypublicpersonnellawarchives.blogspot.com/2008/06/searching-employers-computer-for.html

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A Reasonable Penalty Under The Circumstances - a 618-page volume focusing on New York State court and administrative decisions addressing an appropriate disciplinary penalty to be imposed on an employee in the public service found guilty of misconduct or incompetence. For more information click on http://booklocker.com/7401.html

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