July 10, 2006
Hon. Alan G. Hevesi
New York State Comptroller
110 State Street
Albany, New York 12236
Re: Report Number 2006M-57 - Yonkers audit).
Dear Comptroller Hevesi:
The final audit of the Yonkers Public Schools, City of Yonkers, Yonkers Industrial Development Agency and Yonkers Baseball Development Inc. issued on July 6, 2006 is a thorough examination of a complex series of transactions. Unfortunately, the audit's recommendations have apparently fallen on deaf ears in Yonkers. The Mayor has called your conclusions just plain wrong and stated there was no intention of implementing any of your suggestions. Journal News, July 7, 2006. This response supports the conclusion that further remedial measures are called for.
Based on the audit's findings, at the very least the following actions would seem to be necessary and proper to insure the protection of public assets and the restoration of public confidence:
1) A referral to the New York State Attorney General's Office for necessary actions to insure the dissolution of Yonkers Baseball Development Inc. and restitution of the $670,000 illegally loaned the corporation by the Yonkers IDA.
See, Business Corporation Law - 1101, 1102, 1103 which provides for an action by the Attorney General to seek judicial dissolution of a corporation formed under the BCL. Such an action should seek dissolution of the corporation, a full accounting of all financial transactions and a declaration that contracts entered into by the corporation are null and void.
See also, Executive Law - 63-c authorizing the attorney general to commence an action where any money, funds, credits or other property, held or owned by the state, or held or owned officially or otherwise for or in behalf of a governmental or other public interest, or by a board, officer, custodian, agency, or agent of the state, or of a city, county, town, village or other division, subdivision department or portions of the state, has heretofore been, or is hereafter, without right obtained, received, converted, or disposed of.
2) A referral to the Westchester County District Attorney's Office to determine whether criminal actions have occurred. (Please note that while concerns were expressed that a special prosecutor should have been sought by the previous Westchester District Attorney to investigate this matter due to her husband's apparent business relationship with several parties involved in the transactions under review, no such conflicts appear to exist with the present District Attorney.)
At the very least, the facts presented in your audit regarding the actions of the Yonkers official or officials who effectuated the duplicate payment of $670,000 to the Yonkers IDA sufficiently implicates Penal Law -195.20 Defrauding the Government and/or Penal Law - 195.00 Official Misconduct to require additional investigation and possible action by the District Attorney's Office or appropriate authorities.
Numerous documents have been provided to the Comptroller's office, and other authorities, demonstrating that the types of transactions examined in this audit were not isolated occurrences. They are but one example of what appears to be a common practice in Yonkers of shuffling money between legally separate entities without following the rules or exercising the proper controls that exist to protect against the misuse of public funds. This audit was the first substantive step by any outside authority to objectively examine these practices. Now the appropriate authorities must take the necessary additional steps to: 1) hold accountable those public officials responsible for inappropriate or illegal acts, and; 2) guarantee remediation of all inappropriate and illegal acts. Only then can the public have some reassurance that such practices, or worse, will not occur in the future.
Very truly yours,
Debra S. Cohen
cc: New York State Attorney General Eliot Spitzer
Westchester County District Attorney Janet DiFiore
NY Business Corporation Law -
1101.
Attorney-general's action for judicial dissolution
(a) The attorney-general may bring an action for the dissolution of a
corporation
upon one or more of the following grounds:
(1) That the
corporation
procured its formation through fraudulent misrepresentation or concealment of a material fact.
(2) That the
corporation
has exceeded the authority conferred upon it by law, or has violated any provision of law whereby it has forfeited its charter, or carried on, conducted or transacted its
business
in a persistently fraudulent or illegal manner, or by the abuse of its powers contrary to the public policy
of the state has become liable to be dissolved.
(b) An action under this section is triable by jury as a matter of right.
(c) The enumeration in paragraph (a) of grounds for dissolution shall not exclude actions or special proceedings by the attorney-general or other state officials for the annulment or dissolution of a corporation for other causes as provided in this chapter or in any other statute of this state.
NY Executive Law - 63-c
. Action by the people for illegal receipt or disposition of public funds or other property
. 1. Where any money, funds, credits, or other property, held or owned by the state, or held or owned officially or otherwise for or in behalf of a governmental or other public interest, by a domestic, municipal, or other public corporation, or by a board, officer, custodian, agency, or agent of the state, or of a city, county, town, village or other division, subdivision, department, or portion of the state, has heretofore been, or is hereafter, without right obtained, received, converted, or disposed of, an action to recover the same, or to recover damages or other compensation for so obtaining, receiving, paying, converting, or disposing of the same, or both, may be maintained by the state in any court of the state, or before any court or tribunal of the United States, or of any other state, or of any territory of
the United States, or of any foreign country, having jurisdiction thereof, although a right of action for the same cause exists by law in some other public authority, and whether an action therefor in favor of the latter is or is not pending when the action in favor of the state is commenced. The attorney-general shall commence an action, suit or other judicial proceeding, as prescribed in this section, whenever he deems it for the interests of the state so to do; or whenever he is so directed, in writing, by the governor.
2. Upon the commencement by the state of any action, suit or other judicial proceeding, as prescribed in this section, the entire cause of action, including the title to the money, funds, credits, or other property, with respect to which the suit or action is brought, and to the damages or other compensation recoverable for the obtaining, receipt, payment, conversion or disposition thereof, if not previously so vested, is transferred to and becomes absolutely vested in the state.
3. Any court of the state in which an action is brought by the state, as prescribed in this section, may direct, by the final judgment therein, or by a
subsequent order, that any money, funds, damages, credits, or other property, recovered by or awarded to the plaintiff therein, which, if that action had not been brought, would not have vested in the state, be disposed of, as justice requires, in such a manner as to reinstate the lawful custody thereof, or to apply the same or the proceeds thereof to the objects and purposes for which they were authorized to be raised or procured; after paying into the state treasury out of the proceeds of the recovery all expenses incurred by the state in the action.
4. Any corporation, board, officer, custodian, agency, or agent, in behalf of any city, county, town, village, or other division, subdivision, department, or portion of the state, which was not a party to an action, brought as prescribed in this section, and which claims to be entitled to the custody or disposition of any of the money, funds, damages, credits, or other property, recovered by, or awarded to the plaintiff, by the final judgment in the action, or any of the proceeds thereof, and not disposed of as prescribed in subdivision three, may bring a special proceeding against the attorney-general at any time after the actual collection of the money and its payment into the state treasury, or the actual receipt of the property by the state, in the supreme court, county of
Albany, seeking disposition of the money or other property.
NY
Penal Law
- 195.00 Official misconduct
A public servant is guilty of official misconduct when, with intent to obtain a benefit or deprive another person of a benefit:
1. He commits an act relating to his office but constituting an unauthorized exercise of his official functions, knowing that such act is unauthorized; or
2. He knowingly refrains from performing a duty which is imposed upon him by
law or is clearly inherent in the nature of his office.Official misconduct is a class A misdemeanor. NY
Penal Law
- 195.20 Defrauding the government
A person is guilty of defrauding the government when, being a public servant or party officer, he:
(a) engages in a scheme constituting a systematic ongoing course of conduct with intent to defraud the state or a political subdivision of the state or a governmental instrumentality within the state or to obtain property from the state or a political subdivision of the state or a governmental instrumentality within the state by false or fraudulent pretenses, representations or promises
and
(b) so obtains property with a value in excess of one thousand dollars from such state, political subdivision or governmental instrumentality.Defrauding the government is a class E felony.
