This Week in New York State Government
Governor:
Governor Andrew M. Cuomo announced the New York State Department of Taxation and Finance stopped 252,000 bogus refund claims in 2014, saving taxpayers $450 million. Already this year, the Department has stopped $331 million in fraudulent and erroneous refund claims—a trend projecting the total savings to taxpayers will exceed $500 million in 2015.
The Department automatically reviews each return it receives using sophisticated analytic technology to stop questionable refund claims. The Fraud Analysis and Selection Team, a group of highly-trained staff monitoring tax returns for fraud, detects patterns in tax return data that indicate fraud schemes or identity theft. The findings are used not only to thwart refund fraud, but also to improve the data analytics so such schemes are automatically caught in the future.
Of the 10 million returns it processes annually, the Department of Taxation and Finance identifies hundreds of thousands of questionable returns due to errors or outright fraud. When criminal activity is suspected, the case is investigated and, where appropriate, referred to criminal prosecutors.
Governor Cuomo Announces Repeal of 57 Nuisance Fees
Governor Andrew M. Cuomo announced the repeal of 57 nuisance fees as part of the 2015-16 State Budget. By repealing these fees, the Budget eliminates excess bureaucracy while still retaining the necessary functions that those fees originated from. Businesses and individuals across New York State will save approximately $3 million annually as a result of this action.
“These nuisance fees created unnecessary red tape and placed an undue burden on businesses, while at the same time resulted in no significant revenues for the state,” Governor Cuomo said. “This action will eliminate unnecessary costs and paperwork, helping to allow these businesses to reinvest and grow in New York.”
The fees being repealed include such items as a $20 license fee that is collected annually from farm product dealers, a $34 fee for the inspection of both seed potato plants and seed potato tubers, and a $50 fee paid by new trucking companies.
To see the full list of fees repealed in the Enacted Budget, please click here.
Governor Cuomo Vetoes 184 Legislative Additions to the 2015-16 Enacted Budget
Governor Andrew M. Cuomo submitted 184 vetoes in accordance with Article VII of the State Constitution, eliminating pages of unnecessary language from the 2015-16 Enacted Budget.
The vetoes include 30 reappropriations for items that had previously been fully paid out. Thirty one additional reappropriations with remaining undisbursed balances under $1,000 are also vetoed – twenty of which are Community Projects Fund grants with undisbursed balances of $100 or less. For many of these items, the original appropriation was created many years ago.
An additional 42 reappropriations are more than seven years old and are vetoed because there have been no disbursements during the period. Fifty one reappropriations in the State Operations bill and five reappropriations in the Aid to Localities bill pertain to functions that are fully supported by new appropriations in the Enacted Budget and are therefore deemed unnecessary.
Thirteen reappropriations are duplicates, two have been vetoed previously and therefore cannot be reappropriated, one item is a new appropriation improperly characterized as a reappropriation, and six items are unconstitutional alterations of the Executive’s reappropriations. One capital reappropriation is vetoed because the associated projects have been completed.
Finally, two reappropriations added by the legislature are vetoed because the organization for which the appropriation is made is now defunct.
The full list of vetoes is available here.
Governor Cuomo Announces Dramatic Increase in Tickets for Texting While Driving
Governor Andrew M. Cuomo announced that tickets issued to motorists for texting while driving increased 35 percent statewide from 2013 to 2014, as police continue to crack down on distracted drivers. Improving safety on the roads is a priority for Governor Cuomo, who has spearheaded several initiatives targeted at reducing distracted driving, including texting while driving.
Statewide, police agencies handed out 75,353 tickets in 2014 for texting while driving, compared to 55,673 in 2013. The biggest increase was in New York City, where tickets jumped from 31,835 in 2013 to 47,914 in 2014 – an increase of 50 percent. Since 2011, when New York State first enacted tough new driving while texting laws, tickets have increased more than 700 percent. Only 9,015 tickets were given statewide in 2011.
Under current New York State law, motorists caught texting and driving face up to a $450 fine and five points on their license. Probationary and junior drivers could face a 120 day suspension for a first offense, and can lose their license for one year if a second offense is committed within six months.
Governor Cuomo last week announced the latest Operation Hang Up initiative, which continues through Wednesday. Law enforcement agencies statewide are targeting distracted drivers through special patrols. Funding to police agencies for Operation Hang Up and other special initiatives is provided by the Governor’s Traffic Safety Committee (GTSC). The GTSC provides grants to the New York State Police and local police agencies to combat distracted driving, drinking and driving, speeding and other targeted enforcement activities.
Governor Cuomo Announces $443,000 in Awards For Eight Adirondack Communities
Governor Andrew M. Cuomo announced $443,000 in smart growth grants awarded by New York State to eight Adirondack communities for sustainable revitalization and economic development projects. Funds will go toward general revitalization efforts as well as to help refurbish historic properties and develop recreational trail connections to sustain and enhance tourism.
This is the third round of smart growth funding through the Environmental Protection Fund to support Adirondack Park communities, building on the success of two rounds (in 2007 and 2010) that focused on planning projects. Previous funding supported locally led plans to establish direct links between Department of Environmental Conservation trail systems and community trails, as well help underutilized hamlets use historic resources to attract visitors. This year’s awards focus on implementing projects, both regional and local, that are supported by prior planning and are now ready to move forward.
The Department of Environmental Conservation administers the smart growth grants in partnership with the Adirondack Park Agency and the New York State Department of State. The program has provided direct support to municipalities and not-for-profit organizations for parkwide initiatives – such as the Common Ground Alliance and Adirondack Partnership – that are promoting critical, shared priorities of local residents, municipalities, not-for-profit organizations and state agencies, including economic development, broadband and sustainable recreation and tourism.
Governor Cuomo Announces $438,000 to Support Anti-Poverty Programs in Rochester Area
Governor Andrew M. Cuomo announced that $438,000 is available to support new AmeriCorps programs that combat poverty and fight inequality in the Rochester area. Programs that receive funding will complement the work of the Governor’s Rochester Anti-Poverty Task Force by increasing access to critical services for individuals in need, including child care, health care, job training and youth mentoring, as well as promoting quality education, anti-hunger and anti-homelessness efforts throughout Monroe County.
Applications for funding will be accepted by the New York State Commission on National and Community Service – New Yorkers Volunteer (NYS CNCS).
A bidders’ conference will be held on Tuesday, April 14 at the SUNY Rochester Educational Opportunity Center (Multi-Purpose Room), 161 Chestnut St., Rochester, between 10 a.m. and 12 p.m. To register for the bidders’ conference, view the RFP and for additional information, visit the NYS CNCS website, newyorkersvolunteer.ny.gov. Proposals are due by 5 p.m. on May 4, 2015.
Since 1994, more than 72,000 AmeriCorps members in New York have completed more than 110 million hours of service. NYS CNCS, a Governor-appointed commission, uses the power of AmeriCorps to address some of the State’s most challenging issues, and encourages citizens to make a difference in the lives of their neighbors. The State’s AmeriCorps members have changed the lives of New Yorkers by improving schools, fighting poverty, coming to the aid of the sick, preserving the environment, and supporting veterans and military families.
Governor Cuomo Announces 59% Growth in NY Craft Beer Industry in One Year
Governor Andrew M. Cuomo announced the craft beer industry in New York State grew 59% from 2013 to 2014, with a total economic impact estimated at $3.5 billion. These results, according to a research report prepared for the New York State Brewers Association and the New York Wine and Grape Foundation, are another example of the incredible growth the industry has been seeing. The report can be viewed here.
The report, prepared by Stonebridge Research Group, finds significant growth in the craft beer industry since the 2012 passage of New York Farm Brewery legislation and with continued support from the Governor. The number of craft breweries has more than doubled from 2012 to 2015, from 95 breweries in 2012 and 207 in January, 2015. Craft beer production is up 54% from 2011 to 2013, to 859,535 barrels.
The craft beer industry is creating large ripples in the state’s economy. Craft beer accounts for 6,552 direct industry jobs, according to the report, while supporting another 4,814 jobs in related industries. It is responsible for more than $2.9 billion in direct and indirect revenue within the state, and another $554 million in direct and indirect wages, making up the nearly $3.5 billion in total economic impact on the state.
Tourists and New Yorkers alike are flocking to craft breweries and brewpubs. Their visits support more than 3,000 jobs that pay more than $77 million in annual wages and generate more than $450 million in revenue, the report says.
Governor Cuomo Announces Earth Week 2015
Governor Andrew M. Cuomo proclaimed April 19-25 Earth Week, emphasizing the administration’s environmental commitments to New York’s natural resources, as well as promoting cleaner and healthier communities that are more resilient to the impacts of climate change. Beginning tomorrow, families are encouraged to participate in Earth Week events scheduled at environmental centers across the state.
“New Yorkers are blessed with some of the most beautiful and most scenic outdoor locations in the world, and Earth Week is a reminder that each of us has a role in protecting and preserving New York’s environment and natural resources for future generations,” Governor Cuomo said. “Alongside the new reality of severe weather, it is more important than ever before to protect and make more resilient these parks and sites. Today, we reaffirm our commitment to these endeavors and encourage all New Yorkers to do their part to look after our environment.”
The Department of Environmental Conservation and Office of State Parks, Recreation and Historic Preservation are holding dozens of events across the state in celebration of Earth Week. The public can connect to nature by partaking in hikes, observing natural wildlife, tree plantings and a variety of exhibits aimed at educating New Yorkers on the importance of sustaining the environment. A full list of family events can be found here.
Governor Andrew M. Cuomo announced the installation of the world’s first ever 450mm Immersion Scanner has begun at the SUNY Polytechnic Institute’s Albany NanoTech Complex. Developed by Nikon Corporation, this first of its kind tool will accelerate the development of the next generation computer chips used in a variety of consumer and commercial applications.
A team including more than 50 engineers from the U.S. and around the world will be involved in the installation. The SUNY Polytechnic-led transition to 450mm is a technological leap for the semiconductor industry. With applications ranging from cell phones, tablet computers, defense, green energy, and many more, 450mm will produce more than double the number of chips processed on today’s 300mm wafers, leading to lower costs and far faster, more reliable computer chip technologies. The scanner can be viewed here.
New York is the first to establish this next generation of computer chip technology, which is the result of Governor Cuomo’s 2011 announcement that G450C partners, including Intel, IBM, GLOBALFOUNDRIES, TSMC and Samsung, would invest over $4.8 billion to build the world’s first 450mm wafer and equipment development environment at SUNY Poly’s NanoTech Complex.
Governor Cuomo Announces Communities Unite for Discounted Solar Installation
Governor Andrew M. Cuomo announced communities across the state have come together to bring clean and affordable solar power to their localities at a discounted cost of up to 20 percent. With 26 campaigns launching through Reforming the Energy Vision, communities can obtain solar installations as a large group rather than an individual household—making it cheaper for everyone involved. In addition, the program is helping remove many of the obstacles that inhibit solar options, such as feasibility studies and finding the right contractor.
A recent study by the University of Connecticut and Yale University demonstrates the neighborhood effect solar power can have: if your neighbor installs solar, you’re much more likely to do so as well.
The New York State Energy Research and Development Authority has partnered with 26 community campaigns across the state to encourage more New Yorkers to sign on to the Community Solar NY program. The solarize campaigns are located in Long Island, the Capital Region, the Finger Lakes, Central New York, Southern Tier, North Country, and the Bronx. They are managed by community partnerships that include local municipalities, planning organizations, sustainability groups, state legislators, business groups, and Native American tribes, among others.
The 26 current solarize campaigns can be found here.
Comptroller:
Comptroller DiNapoli Proposes Option to Help State & Local Governments Pay for Retiree Health Care
State Comptroller Thomas P. DiNapoli announced legislation to create an optional investment pool to help the state and local governments fund retiree health insurance and other post employment benefits (OPEB). DiNapoli estimates the unfunded OPEB liability of New York state to be $68.2 billion and an additional $68.3 billion for local governments outside of New York City that have reported data.
When a public employee retires, the individual is often eligible for benefits including a pension and health insurance. While pension costs are pre-funded and invested to help pay for these future benefits, most governments, including New York state, do not set aside funds for retiree health insurance and instead fund it on a “pay-as-you-go” basis or out of pocket. The funding mechanism DiNapoli is proposing would give public employers another option to help fund these benefits for present day employees.
In state fiscal year (SFY) 2013-14, the state’s total unfunded OPEB liability is estimated at $54.3 billion for state agencies and $13.9 billion for the State University of New York (SUNY). Together, New York state and SUNY paid $1.5 billion for retiree health insurance in SFY 2013-14, which is half of what is needed to fully fund the OPEB liability. Costs for retiree health insurance are expected to grow as the workforce ages, people live longer and health care costs continue to increase. Current estimates project at least 6 percent annual increases for health insurance premiums – which means OPEB costs will double within 12 years.
DiNapoli’s proposal (A.5525/Abbate) would:
- Authorize the creation of irrevocable OPEB trusts, not part of the New York State Common Retirement Fund, so that New York state and its local governments can, at their option, help fund their OPEB liabilities;
- Establish an OPEB investment fund in the sole custody of the State Comptroller for the investment of OPEB assets of the state and participating eligible local governments;
- Designate the president of the Civil Service Commission as the trustee of the state’s OPEB trust and the governing boards as trustee for local governments; and
- Allow school districts to transfer certain excess reserve balances to an OPEB trust once it is established.
Under DiNapoli’s proposal, there is no limit on how much or how little a government can deposit into the trust.
New York State Comptroller Thomas P. DiNapoli and New York City Comptroller Scott M. Stringer called on the Securities and Exchange Commission to compel fossil fuel industry companies— by enforcement or other action —to enhance disclosure of the material risks climate change poses to their business and what steps they are taking to meet those challenges. DiNapoli, Trustee of the New York State Common Retirement Fund, and Stringer, Chief Investment Advisor of the New York City Retirement Systems, manage more than $330 billion in assets for more than 1.7 million current and retired state, city, and municipal government employees and their beneficiaries.
In response to investors’ repeated calls for more information, many fossil fuel companies have admitted that climate change is real and that their products produce emissions that contribute to it. But when asked how laws and regulations to prevent climate change may affect their business models, many companies such as ExxonMobil have said that there will be no impact.
In their letter to Commissioner Mary Jo White, the Comptrollers note that volatility in the fossil fuel industry will likely continue and that SEC action now “will ensure that investors have the benefit of company analysis of the potential impact of large and growing risks on future company performance.”
Climate change has spurred calls for significant reductions in carbon emissions and to embrace alternative energies but fossil fuel companies have shown little evidence they’re adjusting their business models to meet these changes. Few companies have explained how they will address the risks that rising sea levels and extreme weather pose to coastal refineries, port facilities, off-shore oil rigs or other critical infrastructure. Regulatory actions such as carbon pricing that have gone into effect in the northeastern U.S., California and Europe have the potential to limit development of fossil fuel reserves, yet companies have largely not disclosed realistic plans to address these risks.
The full text of the Comptrollers’ letter is available here.
Comptroller DiNapoli’s Halt $25.3 Million in Suspicious Tax Refunds
New York State Comptroller Thomas P. DiNapoli announced his office stopped $25.3 million in questionable or fraudulent personal income tax refunds from being paid so far in 2015.
DiNapoli’s office has audited and approved 5.1 million state refunds totaling $4.7 billion. More than 368,000 refunds totaling $386.9 million are expected to be paid in the coming days.
DiNapoli’s office audits New York state bills prior to payment, including personal income tax refunds. The Comptroller’s auditors work with the Department of Taxation and Finance to stop questionable refunds and to ensure timely payment of legitimate refunds. The $25.3 million stopped by DiNapoli’s office had been approved for payment but DiNapoli’s auditors found red flags and halted payments.
In addition, the Comptroller issued a separate report summarizing the results of his office’s audit of refunds during the period January 1, 2014 through December 31, 2014. During that year, DiNapoli’s auditors stopped 13,380 questionable refunds totaling about $55.6 million. Of the $55.6 million in questionable refunds, DiNapoli’s auditors estimated their efforts produced $34 million in savings.
To see the 2014 Annual Report on Personal Income Tax Refunds, please click here.
Comptroller DiNapoli Releases State Audits
New York State Comptroller Thomas P. DiNapoli announced the following audits have been issued:
State Education Department (SED): Whitestone School for Child Development, Compliance with the Reimbursable Cost Manual (2014-S-38)
For the three fiscal years ended June 30, 2013, auditors identified $154,563 in reported costs that did not comply with SED requirements and recommended such costs be disallowed. These ineligible costs included $115,296 in personal services costs and $39,267 in other than personal service costs.
Department of Motor Vehicles (DMV): Controls over Cash Advance Accounts (2014-S-65)
DMV has designed effective internal controls over accounts to ensure that funds are properly accounted for and payments are only made for appropriate business purposes. Tests showed these controls have generally operated as intended. However, auditors also found that DMV’s three cash advance accounts are overfunded in comparison to their apparent business needs.
Department of Transportation (DOT): Collection of Lease and Permit Revenues (Follow-up)
(2015-F-1)
An initial report, issued in March 2013, determined DOT was not collecting all unpaid lease and permit fees. At the time of the audit, DOT was owed $6 million in lease and permit revenues, including $2.4 million between two and six years past due and another $1.4 million at least six years past due. DOT needed to improve communications between and guidance given to the units that issue permits and that bill permit holders. In a follow-up report, auditors determined that DOT implemented each of the four recommendations from the initial report.
Department of Transportation: Review of Real Property Holdings for Disposal (Follow-up) (2015-F-2)
An initial report, issued in March 2012, determined DOT was not reviewing its real property holdings to identify properties for sale or disposal. Auditors identified 18 potential surplus properties with an estimated value of $7.1 million that may no longer have been needed for transportation purposes and could have been disposed of or sold to generate revenue for the state. In a follow-up report, auditors determined DOT implemented each of the five recommendations from the initial report.
Tuition Assistance Program: DeVry College (2014-T-2)
DeVry was overpaid $758,293 because school officials incorrectly certified students as eligible for TAP awards. Incorrect certifications include 14 students who received awards but had not demonstrated their academic preparedness for TAP awards. Twelve of these students did not have certificates of graduation, or the recognized equivalent of such a certificate, from a U.S. high school. The two other students had completed online study from a private school located in another state. Additional incorrect certifications include four students who did not meet the full-time requirements and three students who were not in good academic standing.
City University of New York (CUNY): Time and Attendance Practices for Public Safety Staff (2013-S-65)
Inadequate internal controls over time and attendance for public safety officers were identified. The overtime process could result in the payment of unauthorized and excessive overtime cost
Comptroller DiNapoli Releases Municipal Audits
New York State Comptroller Thomas P. DiNapoli announced his office completed the following audits:
Village of Endicott – Budget Review (Broome County)
The significant revenue and expenditure projections in the tentative budget for the general, electric, library and parking funds are reasonable. The water and sewer funds’ tentative budgets are not balanced and include deficits of $257,000 and $155,000. Village officials plan to raise water and sewer rates to make up the difference. The village’s tentative budget exceeds the property tax levy limit.
Village of Hempstead – Budget Review (Nassau County)
The significant revenue and expenditure projections in the preliminary budget are reasonable. However, based on the 2015-16 proposed budget, the village will have exhausted 91 percent of its taxing authority. The village’s ability to rely on real property taxes as an increased revenue source in the future is limited. The village’s preliminary budget complies with the property tax levy limit.
City of Lackawanna – Police and Fire Department Work Hours (Erie County)
Police department overtime costs and overtime hours have steadily increased over the last several years. In addition, fire department time and attendance records were not always accurately maintained.
Town of Willing – Justice Court Operations (Allegany County)
The prior town justice did not accurately record and report money to the Justice Court Fund in a timely manner. Additionally, the prior justice did not prepare monthly bank reconciliations, properly account for bail money held by the court or accurately report fines and surcharges to the Department of Motor Vehicles.
Town of Wright – Financial Operations (Schoharie County)
The board did not properly manage the town’s general fund balance from 2011 through 2014. As a result, the board accumulated general fund balance while raising taxes. However, beginning with the 2015 budget, the board plans to reduce the general fund balance to benefit taxpayers.
Comptroller DiNapoli Releases School Audits
New York State Comptroller Thomas P. DiNapoli announced his office completed the following audits:
Alfred-Almond Central School District – Financial Software Access and Monitoring (Allegany County)
Although a previous audit recommended that the district adopt policies and procedures that restrict users’ financial software application permissions to only those functions that are necessary for their job duties, the district did not act on this recommendation. As a result, auditors identified 24 user accounts that had inappropriate or unnecessary access rights or permissions. Auditors also confirmed that the former district treasurer attempted to manipulate her paid leave accruals by adding 60 unauthorized sick days valued at approximately $10,000. District officials notified auditors that they discovered through an informal review of leave records that the former treasurer attempted to manipulate her paid leave records. District officials corrected the leave records, and the former treasurer did not receive any undue benefit.
Beacon City School District – Budget Review (Dutchess County)
The significant revenue and expenditure projections in the preliminary budget are reasonable. The district’s preliminary budget complies with the property tax levy limit.
Charlotte Valley Central School District – Budget Review (Delaware County)
The significant revenue and expenditure projections in the preliminary budget are reasonable. The district’s preliminary budget complies with the property tax levy limit.
Chenango Valley Central School District – Budget Review (Broome County)
The significant revenue and expenditure projections in the preliminary budget are reasonable. The district’s preliminary budget complies with the property tax levy limit.
East Moriches Union Free School District – Budget Review (Suffolk County)
The significant revenue and expenditure projections in the tentative budget are reasonable, except for appropriations for tuition fees for high school students, charter school tuition fees and social security and Medicare taxes. In addition, revenues from tuition payments received from other districts may be overestimated. The district’s preliminary budget complies with the property tax levy limit.
Eldred Central School District – Budget Review (Orange County)
The significant revenue and expenditure projections in the preliminary budget are reasonable. However, the district’s proposed budget for health insurance is $164,625 higher than supporting documentation for health insurance estimates. The district’s preliminary budget complies with the property tax levy limit.
Fabius-Pompey Central School District – Budget Review (Onondaga County)
The significant revenue and expenditure projections in the preliminary budget are reasonable. The district’s preliminary budget complies with the property tax levy limit.
Green Tech High Charter School – Resident Tuition Billing (Albany County)
Auditors found $306,175 in school district billings were not paid in a timely manner because resident school districts denied payment due to lack of proof of residency or other enrollment issues.
Niagara-Wheatfield Central School District – Financial Condition (Niagara County)
A delay in state aid reimbursements for the Tuscarora Indian School has caused cash flow problems for the district. Without the aid, the district used general fund resources and cash flow borrowing to finance operations. The district has also issued a significant amount of short-term cash flow borrowing during the past three fiscal years.
Attorney General:
Attorney General Eric T. Schneiderman and State Comptroller Thomas P. DiNapoli announced the sentencing of Ronald Foust and Jeffrey Clark, former employees of the City of Rensselaer Department of Public Works, for teaming with DPW Commissioner Thomas Capuano to divert $46,000 from the city by pocketing the cash from scrap metals acquired as part of their jobs with the city.
Foust pleaded guilty to Fourth Degree Grand Larceny and was sentenced to five years of probation. Clark pleaded guilty to Attempted Fourth Degree Grand Larceny. Each must repay one-third of what was stolen. The sentencing took place in Rensselaer County Court before Judge Andrew Ceresia.
According to documents filed in court, surveillance videos from a local scrap yard showed Foust and Clark cashing in items discarded by city residents. Foust and Clark later implicated their supervisor Thomas Capuano, the Commissioner of the Rensselaer Department of Public Works, in the scheme.
The Sanitation Division within the City’s Department of Public Works collects the city’s metals, including refrigerators, stoves, and copper coil that city residents leave on their curbs for home pick-up. The Sanitation Division then takes collected items to Rensselaer Iron, a scrap yard in Rensselaer County where the city has an account. In exchange, Rensselaer Iron writes a check to the city for the value of the metal turned in.
Attorney General Eric Schneiderman sent a letter to the New York State Board of Elections (“BOE”), urging board members to immediately close a loophole in NYS law that allows individuals and corporate interests to contribute virtually unlimited amounts to political campaigns across the state. The letter comes just one day before the BOE is scheduled to consider the loophole at a public meeting in Albany.
Last month, Attorney General Schneiderman called on state lawmakers to close the LLC loophole as part of a comprehensive ethics and campaign finance reform package. However, as the A.G.’s letter explains, “with the prospects for real reform on hold indefinitely, the BOE must not squander this chance for progress.”
In his letter to the BOE, Attorney General Schneiderman also notes that the LLC loophole allows donors to conceal their identity through multiple business entities and, as a result, “defeats the transparency and accountability that are the bedrock principles of the existing campaign finance system.”
To read the full letter, please click here.
Attorney General Eric T. Schneiderman announced a $10 million settlement of a lawsuit filed against the auditing firm Ernst & Young LLP (“Ernst & Young”) over its involvement in a financial statement fraud at the now-defunct investment bank, Lehman Brothers Holdings, Inc. That money will be distributed as restitution to investors in Lehman securities, along with some $99 million being paid by Ernst & Young to settle a private federal class action that relied in part on facts uncovered by the Attorney General’s investigation. No other law enforcement authority has brought an enforcement action in connection with the 2008 collapse of Lehman. Moreover, the settlement resolves the first lawsuit brought against an auditor of a public company under New York’s securities laws. The case also resulted in an important decision by the Appellate Division’s First Department, which confirmed the Attorney General’s power to obtain disgorgement of professional fees received by a firm, in this case Ernst and Young’s fees.
Under the terms of the settlement, Ernst & Young will pay $10 million—most of which will go to investors, with the remaining settlement funds to be used to reimburse New York State for investigation and litigation costs.
The Attorney General’s case, People v. Ernst & Young LLP, filed in Manhattan Supreme Court pursuant to the Martin Act and Executive Law § 63(12) in December 2010, concerned Ernst & Young’s role, as Lehman’s auditor, in an alleged fraud involving Lehman’s use of “Repo 105” transactions. Repo 105s were transactions in which Lehman transferred to various overseas counterparties investment grade securities in return for cash, with the binding understanding that Lehman would repurchase the same securities within a very short time, often just a few days. As alleged in the Attorney General’s lawsuit, Lehman, with Ernst & Young’s approval and complicity, treated the Repo 105s as sales, which enabled Lehman to temporarily remove tens of billions of dollars of securities from its balance sheet without requiring Lehman to disclose the Repo 105 transactions as financings on its financial statements. The Repo 105s served no legitimate business purpose. As alleged in the suit, Lehman used the funds derived from the transactions to pay down billions of dollars of liabilities, which had the effect of temporarily and misleadingly reducing Lehman’s leverage ratios, an important metric for analyzing Lehman’s liquidity and financial health.
The lawsuit charged that Ernst & Young’s assent to Lehman’s failure to include any indication in its financial statements about the Repo 105 transactions was fraudulent and deceptive under the Martin Act and Executive Law § 63(12), as was allowing Lehman to the use the Repo 105s to manipulate its balance sheet and leverage ratios.
Attorney General Eric T. Schneiderman announced settlements totaling $970,000 with four current Domino’s Pizza franchisees, who together own 29 stores across New York State, as well as with one former franchisee who owned 6 stores. With stores located in Cortland, Dutchess, Erie, Genesee, Monroe, Nassau, New York, Onondaga, Ontario, Orange, Rockland, Suffolk, and Westchester counties, the franchisees admitted to a number of labor violations, including minimum wage, overtime or other basic labor law protections. In light of these agreements – which follow similar settlements last year with the owners of 26 other Domino’s stores statewide – Attorney General Schneiderman also called on the Domino’s Pizza corporation and Chief Executive Officer Patrick Doyle to exercise increased oversight of Domino’s franchisees’ pay practices.
The agreements followed investigations by the Attorney General’s Office into the franchisees, covering the time period from 2008 through 2014. All investigated franchisees admitted to the violations of law outlined in the settlement agreements. The admitted violations varied by location and time period, and included the following:
- Some stores paid delivery workers below the tipped minimum wage applicable to delivery workers under New York law.
- Some stores failed to pay overtime to employees who worked over 40 hours in a week, and others under-paid overtime, because they did not combine all hours worked at multiple stores owned by the same franchisee, or because they used the wrong formula to calculate overtime for tipped workers, unlawfully reducing workers’ pay.
- Delivery workers who used their own cars to make deliveries were not fully reimbursed for their job-related vehicle expenses.
- Delivery workers who used their own bicycles to make deliveries were typically not reimbursed for any expenses related to maintaining their bicycles, nor were they provided with protective gear as required by New York City law.
- Some stores violated a state requirement that employers must pay an additional hour at minimum wage when employees’ daily shifts are longer than 10 hours.
- Some stores also violated a state requirement that employers must pay restaurant workers for at least three hours of work when those employees report to work for a longer shift but are ultimately sent home early because of slow business or other reasons.
- Some stores took a “tip credit” without tracking tips, and assigned delivery workers to kitchen or other untipped work for more time than legally permitted. Employers may only take a “tip credit” and pay a lower minimum wage to tipped restaurant employees if those employees earn enough in tips and spend most of their time – at least 80 percent –performing tipped work.
Speaker:
Assembly Speaker Carl Heastie announced that he has appointed an Assembly Majority workgroup to undertake an examination and make recommendations regarding ongoing efforts to improve and strengthen the Assembly’s rules, operations, and legislative processes, and to promote transparency, and public participation.
The Assembly has undertaken several initiatives to modernize operations and improve access to information. This includes an ongoing effort to revamp the Assembly website to make it more interactive and user-friendly, including posting of bill information (including floor roll call), archived video of session, committee hearings and press conferences, as well as floor transcripts. Additionally, the Assembly is continuing the advancement of the paperless chamber project, which will soon result in the use of electronic documents to age bills. Other initiatives include expanding the role of members to ensure a more participatory process in the overall operations of the chamber.
Heastie has appointed Assembly members J. Gary Pretlow and Brian Kavanagh to lead the workgroup.
The members of the workgroup will make recommendations to the Speaker on ways to further strengthen the rules and operations of the House. The following Assembly members will participate in the workgroup:
- Michael Blake
- Vivian E. Cook
- Deborah Glick
- Shelley Mayer
- Francisco Moya
- Steven Otis
- Crystal Peoples-Stokes
- Phil Ramos
- Sean Ryan
- Rebecca Seawright
Senate:
In recognition of Sexual Assault Awareness Month, New York State Senators Catharine Young (R-C-I, Olean), Rich Funke (R-C-I, Fairport), Robert Ortt (R-C-I, North Tonawanda), and Thomas Croci (R, Sayville) announced that they succeeded in securing an additional $4.6 million in funding in the 2015-16 State Budget to help victims of rape and sexual violence.
The Senators led a bipartisan group of members from the Republican and Independent Democratic Conferences in efforts to secure a total of nearly $6.5 million in state funding for rape crisis services for victims and programs that prevent sexual assault.
Rape crisis centers provide victims and survivors of sexual assault with access to a multidisciplinary team of experts who serve as advocates that can offer crisis intervention, counseling, and the options of forensic evidence collection and police reports. Victims and survivors have reported that when a rape crisis advocate is present, they experience less distress from contact with the police and medical personnel, as well as fewer psychological and physical health issues.
In February, fourteen Senators wrote to Senate Majority Leader Dean G. Skelos to request a restoration of proposed budget cuts and a substantial increase in funding to rape crisis services and sexual violence prevention programs. The Executive Budget had proposed $1.88 million for the state’s Office of Victim Services rape crisis program.
The enacted budget reflected the Senators’ efforts by including $4.6 million on top of the Executive proposal to increase access to critical services for vulnerable victims in more New York communities.
Senate: Joint Senate Task Force on Heroin and Opioid Addiction Announces Forums
The New York State Senate announced the schedule for the first round of forums being held by the bipartisan Joint Senate Task Force on Heroin and Opioid Addiction. The Task Force will meet in Yorktown, Rochester, Lewiston, Albany and additional communities to examine the issues created by increased heroin abuse that is causing hundreds of deaths in communities across the state.
The Task Force is co-chaired by Senator Terrence Murphy (R-C-I, Yorktown); Senator Robert Ortt (R, North Tonawanda), Chairman of the Senate Committee on Mental Health; and Senator George A. Amedore, Jr. (R-C-I, Rotterdam), Chairman of the Senate Committee on Alcoholism and Drug Abuse. The forums will provide an opportunity for Senators to solicit input from stakeholders and experts and use the information collected to develop recommendations for legislative action.
Recent opiate statistics show a pressing and urgent need to find a solution to this statewide epidemic. Deaths in New York from opiate overdoses are increasing with 34 suspected opiate deaths in Erie County so far this year — 13 of which occurred in just one recent week. And in New York City, the most recent statistics available showed that for the second straight year heroin deaths surpassed homicides with 420 people dying from heroin overdoses compared to 335 homicides in 2013.
The first four forums are being held this spring and will be followed by additional forums in other communities this fall.
