D.A. to Long Beach City Council: Waive attorney-client privilege amid payout probe

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Nassau County District Attorney Madeline Singas’s office last week called on the City Council to waive the city’s attorney-client privilege, saying that investigators have been unable to corroborate claims that city officials had relied on the advice of former attorneys when it came to calculating questionable payments.

Singas launched the criminal investigation into the city’s payout practices more than a year ago in conjunction with State Comptroller Tom DiNapoli’s office after council members questioned whether separation payments to employees shortly before and after the elections in November 2017 had exceeded city code and contracts.

The U.S. attorney’s office for the Eastern District of New York is also investigating the payouts.

A preliminary draft audit issued by DiNapoli’s office in August found that the city had overpaid 10 current and former employees more than $500,000 in separation payouts, including former City Manager Jack Schnirman, who is now the Nassau County comptroller, in the 2017-18 fiscal year. It also noted that the city had failed to take corrective action in response to two prior audits in 1992 and 1996, which found questionable leave payments that were inconsistent with city code -- 30 percent of unused sick days at the time of separation and 50 vacation days -- or contracts.

The state recommended that the city recoup any overpayments identified in its report. Schnirman returned a $52,000 overpayment to the city in September after the draft audit determined he had been overpaid for his accrued sick time.

Schnirman and other city officials have long maintained that they had relied on the advice of a former corporation counsel when it came to payout calculations for accrued time, based on a legal interpretation of the city's code. 

In a Nov. 26 letter, Assistant District Attorney Christine Maloney, chief of Singas’s public corruption bureau, told the council, Acting City Manager John Mirando and the city’s outside legal counsel — former federal prosecutor Anthony Capozzolo, hired last year to represent the city in the case — that investigators were unable to conclude the probe into payouts that occurred under Schnirman “without knowing what, if any guidance, was provided to the city and its employees by members of its legal staff.”

“We request that you consider waiving the city’s attorney-client privilege as to any advice given by attorneys, employed by the city, as to separation payouts,” Maloney wrote. “This will aid in moving the investigation forward.”

Some council members have questioned the city’s cooperation with the investigation. At Tuesday’s meeting, the council voted 3-0 to formally retain a new outside law firm, Ingerman Smith LLP, for $265 per hour to represent the city during the investigation and help recoup overpayments. The council tabled a measure, however, to waive the attorney-client privilege and terminate Capozzolo’s services, saying that Ingerman Smith would determine whether the privilege should be waived following discussions with Singas’s office, and would communicate with Capozzolo during a transition period.

“It’s my hope that with this new change, the city can help the D.A. in moving the investigation forward and to conclusion,” Councilman Scott Mandel said after the meeting.

"Now that the city has secured independent outside legal counsel, they can interface with the district attorney's office to determine what their information needs are and report back to the City Council on what steps need to be taken to meet those needs," added council Vice President John Bendo.

Capozzolo and city officials have said that they have cooperated fully with investigators. Acting Corporation Counsel Greg Kalnitsky sent a letter to the council in response to Maloney's request, saying that the city had already indicated that it would disclose the requested materials by way of a court-ordered limited waiver, as it had with other agencies.

"We never indicated that we would oppose any application by the NCDA and promptly made ourselves available to appear before the grand jury judge," Kalnitsky wrote, "but for other reasons unknown to us, the NCDA never pursued the option of obtaining a court order to obtain privileged materials. Nor did the NCDA ever even request that we consider waiving the privilege prior to reaching out to you all directly."

Kalnitsky added that a “blanket” waiver might expose the city to “massive” liability in other ongoing litigation and have “devastating collateral consequences.”

"It is critical that the City Council understand the implications of providing a blanket waiver," he wrote. "Once there is a blanket waiver of the attorney-client privilege an attorney may disclose the contents of confidential communication between themselves and their client freely and without consequence."

Maloney said in response that the request for the waiver pertained only to separation payouts. She added that the waiver would not be based on Capozzolo’s performance, and that she did not believe he had obstructed the investigation. Singas said in August that her investigation had “been delayed by a lack of cooperation by some critical witnesses and the unavailability of certain records that may be material to our review,” though her office quickly clarified her comments to say that the city and Capozzolo had been cooperative.

Attorneys for the city have maintained that the former corporation counsel, the late Joel Asarch, included language in the city’s Code of Ordinances in 1997 to protect exempt employees that “capped” vacation time at 50 days, but “entitled” them to 30 percent of their accrued sick time.

“That is, that the express ‘entitlement’ of 30 percent was interpreted to mean that exempt employees shall be entitled to no less than 30 percent,” Kalnitsky told the Herald last year. “There was nothing restricting the city manager from providing employees with more than the minimum entitlement than that which was promised by statute.”

In 1997, Asarch also allowed Civil Service Employees Association members and non-union employees to take an additional 25 unused vacation days, according to a memo obtained by the Herald. However, the city code was never updated to reflect the additional vacation time for non-union employees, while the CSEA contract was, Kalnitsky said.

In his letter, Kalnitsky said that by reaching out directly to the council, knowing that they are represented by another attorney, Maloney may have violated New York state’s code of professional conduct for attorneys. Maloney, however, denied those claims, saying that she informed Capozzolo of her intentions to contact the council directly and that he did not object. Additionally, she said that she did not contact Kalnitsky — who did not receive a payout — because he is considered a witness in the case.

Maloney maintained that the city had already waived its attorney-client privilege protection regarding separation payouts when Kalnitsky “voluntarily disclosed” the memo authored by Asarch.

“We are seeking such a waiver because our investigation has shown that employees and former employees of the City of Long Beach have claimed that they may have relied on the advice of attorneys in corporation counsel’s office when making decisions about separation payouts,” Maloney wrote. “Without obtaining such attorney-client communications or testimony regarding those communications, we are unable to corroborate or refute these narratives."