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Long Beach City Council hires new attorney amid state audit

Outside legal counsel to respond to state comptroller's report


After failed attempts by the City Council to hire a new attorney to respond to a scathing state draft audit, three council members agreed on Nov. 7 to retain the Hauppauge-based law firm Ingerman Smith at a rate of $250 per hour.

The move came days before a reply to the state was due on Nov. 11, and after Council President Anissa Moore, Vice President John Bendo and Councilman Scott Mandel voted at a special meeting last month to rescind the city’s Sept. 23 response to the audit issued by State Comptroller Tom DiNapoli’s office in August. Bendo and Mandel maintained that council members were excluded from the response process, which was not endorsed by the council and was instead part of an attempt, they claimed, by city officials to control the outcome of the state’s final report amid two criminal investigations into the city’s payout practices.

The city initially had a month to make recommendations to the state about the audit’s findings. Though the council requested an extension after it rescinded the response, Bendo and Mandel were at odds with Moore over how to proceed after that decision. Bendo and Mandel wanted to hire attorney John Gross, of Ingerman Smith, to write what they described as an independent report on the state’s findings, while Moore had expressed concerns about Ingerman Smith’s experience in municipal law. She had recommended that the city instead either hire a forensic accounting firm, or accept the state’s findings and work on a corrective action plan.

On Nov. 7, however, the three council members directed Acting City Manager John Mirando to hire Ingerman Smith, which regularly represents school districts, colleges, universities and municipal agencies.

Gross said Wednesday that he had requested a 35-day extension to respond to the audit. A spokeswoman for the state comptroller’s office said it was considering that request.

“We do things very carefully … but there’s obviously no way one can turn that around over a weekend,” Gross said, adding that drafting a new response required extensive legal research. “… [I]t will take us a bit of time to put together a draft response that will have to be vetted and submitted to the comptroller.”

The state’s preliminary report 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. It 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. The state recommended that the city recoup any overpayments identified in its report.

The city’s initial response stated, in part, that employees — including police, fire and Civil Service Employees Association workers — had received $3.1 million in questionable separation payments and “drawdowns” over the past decade, and that attempting to recoup such funds would present significant legal challenges, which city officials claimed DiNapoli’s office overlooked and did not address in the audit.

Bendo and Mandel cited a conflict of interest in the city’s response. They said that an outside attorney, former federal prosecutor Anthony Capozzolo, who wrote the report — hired more than a year ago, under former Acting City Manager Mike Tangney, to represent the city amid the criminal investigation — was retained at a rate of $450 per hour without their knowledge, and was working with some of the employees who received payouts that are now the subject of investigation. The city has strongly denied any conflicts, and maintained that the response did not require council approval.

To date, the city has paid Capozzolo more than $90,000 for his services, council members said. He continues to represent the city amid county and federal probes into the city’s payout practices, but is no longer involved in the response to the audit, officials said.

The council had intended to hire Gross before it rescinded the city’s first response, and Moore had signed a retainer agreement with Ingerman Smith, according to Gross. But city officials said that Moore did not have the authority to sign such an agreement, and a planned special meeting to hire Gross in September was scrapped after she withdrew support.

The initial attempt to hire Gross also drew criticism from some non-union staff at City Hall who are attempting to unionize, saying that Gross is also representing the city in that ongoing labor relations case and that Mandel had a conflict of interest by attempting to hire Ingerman Smith, a firm he worked with 16 years ago. Mandel and Gross denied any conflicts.

The city’s acting corporation counsel, Greg Kalnitsky, said that the city was not legally obligated to respond to the draft audit.

“This whole thing was done under a shroud of secrecy, keep in mind, from council members who were excluded from this,” Mandel said at the Nov. 6 council meeting, when asked why the city needed to hire another attorney. “The only thing we know was there was an attorney who was retained for one scope of work — that attorney’s scope was apparently expanded and he drafted and put in, with help of other staff, a response. I can’t go by that response and I need — I can only speak for myself — an independent set of eyes to protect the city to review that response, review what the audit was and to guide us.”

Bendo echoed those sentiments.

“The council members, quite frankly, were the only ones in this whole process that did not have legal counsel to consult with,” he said. “Some conversations with the law firms that we talked with, they said, ‘You guys need a lawyer.’”

Mandel said he expected Gross to look into payouts identified in Capozzolo’s response as well.

“I think they’re looking at everything — I don’t think they’re going to disregard [the findings in the initial response], and they’re going to look at any and all available resources in generating their own report,” Mandel told the Herald. “I’m hoping now that we have independent new counsel, that first and foremost we get the courtesy of another extension, and a thorough investigation and report can be issued to the state without excluding the City Council in the process.”