Riches Affidavit
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1SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK _____________________________________________ : In the Matter of JAMES RICHES, JONATHAN WEISS, CARMEN COLON, PHILIP DEPAOLO, : MARQUEZ CLAXTON, PETER KILLEN, EMMANUEL GONZALEZ, Jr. and RAFAEL : MARTINEZ ALEQUIN Petitioners, : For an Order Convening a Summary : Judicial Inquiry Pursuant to New York City Charter § 1109
:
-against-
:
NEW YORK CITY COUNCIL and CHRISTINE QUINN, Speaker of the New York City Council,
: :
Index No. 08 / 106116
AFFIDAVIT OF PETITIONER JAMES RICHES IN SUPPORT OF HIS APPLICATION FOR A SUMMARY JUDICIAL INQUIRY PURSUANT TO SECTION 1109 OF THE NEW YORK CITY CHARTER
Respondents _____________________________________________: State of New York : County of New York )
) ss.
JAMES RICHES, a citizen and tax-payer in New York City, being duly sworn, deposes and says: 1.
I submit this affidavit in support of my request for a court-ordered summary
judicial inquiry, pursuant to New York City Charter § 1109, into various acts by the New York City Council and Speaker Christine Quinn that constitute violations or neglect of duty in relation to the property, government and affairs of the City of New York. 2.
I make this request in my capacity as a citizen and tax-payer of the City of New
York, and am fully familiar with the facts and circumstances set forth herein. As a citizen and tax-payer I am concerned about integrity in this city’s government, and the accountability of
office holders, and the responsible and accountable use of public funds. In addition, New York City Charter § 1109, specifically grants me, together with any four other tax-payers, the authority to make this application to the court for a summary judicial inquiry “into any alleged violation or neglect of duty in relation to the property, government or affairs of the city.” A.
City Council Speaker Quinn and the City Council’s Practice of Appropriating Public Funds to Fictitious Organizations 3.
New York City Council Speaker Quinn violated or neglected her duties to the City
and its taxpayers and citizens by contriving to introduce into or continue in those budgets for the fiscal years of July 1, 2006 through June 30, 2007 (hereinafter referred to as the “2007 Budget”) and July 1, 2007 through June 30, 2008 (hereinafter referred to as the “2008 budget”) appropriations to dozens of fictitious organizations. The New York City Council violated or neglected its duties by recommending the addition or continuation of such appropriations to fictitious entities in the 2002 through 2008 budgets, by including such appropriations in its estimate of financial needs of the City Council or recommendations for changes to the mayors’ preliminary budget, by adopting executive budgets for those years containing appropriations to non-existent entities, or by amending the executive budget for those years to include appropriations to non-existent entities. 4.
I am aware that the New York Post reported on April 3, 2008 that the New York
City Council, in a process controlled by Speaker Quinn’s office, “set aside in 2007 and 2008" $4.7 million in appropriations to thirty fictitious organizations. New York Post, April 3, 2008, a true and correct copy of the web edition of which is attached to the Verified Petition in this matter as Exhibit D. The New York Post also reported that according to sources these funds were later used at Speaker Quinn's discretion “to reward groups that were loyal to her, and to fund
favored council members' pet projects”, and, to “thank or pay off politically important allies or cooperative council members”. Id. 5.
I am further aware that at a news conference on April 4, 2008, Speaker Quinn
admitted the existence of a practice of appropriation of funds to fictitious organizations (the “Practice”). New York Times, April 4, 2008, a true and correct copy of the web edition of which is attached to the Verified Petition in this matter as Exhibit A. Speaker Quinn has stated the practice began in 2001, under the leadership of then Council Speaker Peter Vallone Sr., and continued under the leadership of Speaker Gifford Miller. Id. The New York Times reported that documents provided to it by Council Speaker Quinn’s office indicate that since 2001, about $17.4 million was appropriated to fictitious organizations. Id. In the 2002 fiscal year budget five fictitious groups received appropriations. The Practice appears to have escalated from the 2004 budget and on, peaking in the 2007 fiscal year budget with $4.5 million was allocated to 18 fictitious groups. Id. 6.
I am further aware that the New York Daily News has reported that Speaker Quinn
stated at the news conference on April 3, 2008, that she was aware that for years money had been hidden in New York City budgets by such means as allocating excessive money to a program that would not use its whole appropriation, creating thereby reserve accounts for discretionary allocation after the budget is adopted. New York Daily News, April 4, 2008, a true and correct copy of the web edition of which is attached to the Verified Petition in this matter as Exhibit E. Speaker Quinn stated she became aware of such excess appropriations and the holding of such unexpended funds in reserve accounts in the spring of 2007 during her second budget process, and ordered it stopped. New York Times, April 4, 2008, Verified Petition, Exhibit A. She stated
further that not until the fall of 2007 did she learn that money was being set aside through appropriations to fictitious organizations, and that the resulting practice of holding funds in reserve was ongoing. Id. 7.
Though Council Speaker Quinn has maintained her ignorance of the practice and
has stated that the Practice continued because of insubordination of staff, these assertions are questionable. In the first place, the numerous fictitious organizations were given names that are vague in character, and which the Daily News has gone so far as to describe as “cutesie”. New York Daily News, April 4, 2008, Verified Petition, Exhibit E. The fictitious organization names include: Coalition of Informed Individuals1 Senior Citizens for Equality2 Association of Community Partners3 Community Development for Stronger Neighborhoods4 American Association of Concerned Veterans5 Magic Mountain Fund6 Education First7 8.
In the second place, the Daily News also reported former Council staffers as
saying that the earlier practice, dating as far back as 1988, of inflating the budgets of existing programs to make cash available for later use was a common one. Id. It is said to have dated as far back as 1988. See New York Times, April 4, 2008, Verified Petition, Exhibit A. A former 1
New York Times, April 4, 2008, Verified Petition, Exhibit A. Id. 3 New York Post, April 4, 2008, a true and correct copy of the web-edition of which article is attached to the Verified Petition in this matter as Exhibit B. 4 New York Post, Editorial, April 4, 2008, a true and correct copy of the web version of which article is attached to the Verified Petition in this matter as Exhibit C. 5 New York Post, April 3, 2008, Verified Petition, Exhibit D. 6 New York Daily News, April 4, 2008, a true and correct copy of the web edition of which article is attached to the Verified Petition in this matter as Exhibit E. 7 Id. 2
high-ranking City Hall official stated this inflating of certain budget items was “very transparent. Everyone knew it would happen.” Daily News, April 4, 2008, Verified Petition, Exhibit E. The extra step of making appropriations to wholly fictitious organizations represented only an extension of the earlier practice, though it crossed the line from plausibly deniable inflation to outright misrepresentation. 9.
Speaker Quinn’s denial of knowledge of and responsibility for the practice is
furthermore questionable because, as Dick Dadey of the Citizens Union has pointed out, whether it be the earlier practice of excess appropriations or the later Practice of making appropriations to wholly fictitious organizations, the holding of reserve funds creates a substantial fund under the exclusive discretionary control of the Speaker. Id. The Practice, therefore, gives the Speaker influence over individual Council members, making them dependent on the Speaker for valuable “member items”, or funds that a member can deliver to favored and politically significant community organizations in their districts. As the New York Post commented, “very often the member item is granted or withheld as a means of controlling how individual council members vote.” New York Post Editorial, April 4, 2008, a true and correct copy of the web edition of which article is attached to the Verified Petition in this matter as Exhibit C. 11.
At least some of the groups funded through the fictitious organizations used funds
for political purposes. One such group was the Donna Reid Education Fund. New York Times, April 17, 2008, a true and correct copy of which article is attached to the Verified Petition in this matter as Exhibit F. Two former staff of City Councilman Kendal Stewart of Brooklyn, Asquith Reid and Joycinth Anderson, have been indicted for embezzlement of over $145,000 in City Council funds, including allegedly about $14,000 funneled through two fictitious entities, the
New York Foundation for Community Development, and American Association of Concerned Veterans. Out of the $145,000 allegedly embezzled, $21,000 was allegedly used for political fliers and events for a political club that the indictment said was controlled by Councilman Stewart. Id. The Times reported that campaign finance records show that Asquith Reid and several family members were active contributors to Councilman Stewart’s campaigns. Id. 12.
Finally, Speaker Quinn’s statement that she had ordered the Practice stopped is
questionable, because her alleged order in the spring of 2007 to cease using “holding accounts” could not have explicitly addressed, or have been intended to include, the Practice of making appropriations to non-existent, fictitious entities. She said she only became aware of the appropriations to fictitious organizations in the fall of 2007. New York Times, April 4, 2008, Verified Petition, Exhibit A. The only confirmation of her account of having ordered any halt to any practice in the spring of 2007, moreover, leaves it unclear whether any clear directive was actually given. Her chief of staff, Charles Meara, was reported by the Times as only recalling her “noting” in one meeting that they “would no longer use the reserve system”. New York Times, April 5, 2008, a true and correct copy of the web edition of which article is attached to the Verified Petition in this matter as Exhibit G. Council Speaker Quinn’s office has not been able to offer any other corroboration of her account, despite her assertion at her news conference on April 3, 2008 that “[t]here were many people in the numerous meetings with myself and the finance staff during the budget process, with many people in the room who can confirm that.” 13.
Speaker Quinn’s explanation of disobedience by her staff has been called in
question by well informed observers. According to the Times, numerous former and current City Council officials have said that Speaker Quinn “had during her tenure taken an unusually active
role in overseeing the budget.” New York Times, April 5, 2008, Exhibit G. According to the Times, this left them “wondering how she could not have known or, if she had truly objected to the practice...” Id. The Daily News reported Councilman Charles Barron of Brooklyn stating, “If you believe it was some staffers who did it and [Speaker Quinn] knew nothing about it, I’ll sell you the Brooklyn Bridge.” New York Daily News, April 4, 2008, Verified Petition, Exhibit E. B.
The Practice of Making Appropriations to Fictitious Entities Constitutes a Violation or Neglect of Duty by the City Council and Speaker Quinn 14.
The appropriation of funds to fictitious entities violates § 100 (c) of City Charter
which requires the City budget to be itemized. Itemization presupposes the actual existence of the entity to which the appropriation is made. The creation of reserve accounts in the name of fictitious grantees, moreover, violates the intent and frustrates the statutory scheme of City Charter § 100 - 110 and § 225 - § 258 to create a unified, accountable annual budgeting process. Without itemization, actual budgetary priorities are obscured. Without itemization, comparison of items with similar appropriations for preceding years, public hearings and discussion concerning the necessity of proposed expenditures, and meaningful examination by the City Council of priorities are all frustrated. Making appropriations to fictitious entities enables the implementation of priorities at odds with those for which the Mayor and Council members were elected, and for which they go on record as supporting. The voting public is frustrated in its ability to hold office holders to account for policy. 15.
By creating a substantial discretionary fund under the effective control of the
Council Speaker, moreover, the Practice is inherently corrupting. By turning the public annual budget process into a misrepresentation of actual policy, and creating an unaccountable funding
process subject to the sole discretion of the Speaker, the Practice of making appropriations to fictitious entities leads to improper influence by the Speaker over the voting of individual Council members, diminishing in the process their responsiveness to the policy preferences and needs of their own constituencies. 16.
The City Council’s recommendations of changes to preliminary expense budgets
that included appropriations to fictitious organizations for the fiscal years 2002 through 2008, its amendment of the executive budgets in those years to include appropriations to fictitious organizations, or its adoption of final budgets in those years that included such appropriations, constitute a violation of New York City Charter § 100 (c), and a violation of the Council’s duty to the tax-payers of New York City as a trustee over the property, funds and effects of the city under Charter § 1110. Appropriations to non-existent entities frustrates the orderly and efficient management of public expenditures. It constitutes a waste of public funds in so far as the additional appropriations require taxation in excess of the actual foreseen and declared cost of the services and non-personal service items to be obtained. 17.
It is furthermore possible that at least some individual members of the New York
City Council from 2001 through 2007 cast votes in favor of, or otherwise advocated the approval of resolutions recommending changes to preliminary expense budgets, the amendment of an executive budgets, or the adoption of final budgets, with knowledge that such recommendations, amendments and adopted budgets contained appropriations to fictitious organizations. 18.
City Council Speaker Christine Quinn, at very least violated the public’s trust and
neglected her duty as a trustee under New York City Charter § 1110 by failing to recognize the appropriation to fictitious non-existent entities from 2006 through 2007. In her capacity as
Speaker of the City Council, in collecting, sorting, and prioritizing the requests of members and recommendations of committees and drafting the resolution upon which the City Council voiced its recommendations for changes to the preliminary expense budget, or, in collecting, sorting, prioritizing member and committee requests and negotiating amendments to the executive budget, Speaker Quinn played a central role in the budget process, brokering agreements and articulating the final position of the City Council. At a minimum, she should have known of the Practice of making appropriations to fictitious organizations. 19.
It is furthermore possible that Speaker Quinn knew the content of the agreements
she brokered and the resolutions she drafted, and so knowingly made false or deceptive statement, in violation of her duties as a trustee of the city’s property, funds and effects under City charter § 1110. Speaker Quinn’s shaping of City Council recommendations for changes to the preliminary expense budget or her shaping and negotiating amendments to the executive budget so as to include appropriations to fictitious entities, if done for the purpose of creating hidden discretionary funds, also constitutes a violation of duty and a violation of the public trust by violating or evading the provisions of the City Charter § 100 (c) requiring appropriations to be itemized, § 249 giving the mayor control over the executive budget § 255 giving the mayor veto over amendments to the executive budget. 20.
The New York Times reported New York City Comptroller William C. Thompson
as stating that “[t]he allegations reported today in the New York Post raise serious concerns. If there were any attempts to subvert the New York City Charter or to hide money in nonexistent organizations, these actions would represent a breach of the public trust.” New York Times, April 4, 2008, Verified Petition, Exhibit A.
C.
The Court Should Convene a Summary Inquiry to Investigate the Practice of Appropriation to Fictitious Organizations in the New York City budget. 21.
In order to determine the origins of the Practice, the extent to which office holders
and staff knew about the Practice, who participated in its perpetuation and administration, and the effect of the practice on public policy and legislation, I hereby request, in my capacity as a taxpayer, that the court issue an order for a summary inquiry into the Practice, pursuant to New York City Charter § 1109. 22.
Section 1109 authorizes designated elected officials and any five tax payers to
petition the Supreme Court for “[a] summary inquiry into any alleged violation or neglect of duty in relation to the property, government or affairs of the city [to be] conducted under an order to be made by any justice of the supreme court ... Such inquiry shall be conducted before and shall be controlled by the justice making the order or any other justice of the supreme court in the same district. Such justice may require any officer or employee or any other person to attend and be examined in relation to the subject of the inquiry. Any answers given by a witness in such inquiry shall not be used against such witness in any criminal proceeding, except that for all false answers on material points such witness shall be subject to prosecution for perjury. The examination shall be reduced to writing and shall be filed in the office of the clerk of such county ... as the justice may direct, and shall be a public record.” 23.
A summary judicial inquiry is a civil proceeding which investigates governmental
abuses and shines the spotlight of public scrutiny on the City Council and the Speaker’s actions. The judge who presides over the inquiry defines the scope of the investigation, and can require the Speaker, members of the Council, staff, or other officials to respond in order to determine the nature and the extent of the Practice, the responsibility of various officials involved in the budget process, and the impact of the Practice on the workings of government in the City. 24.
I respectfully urge the court to convene such an inquiry in order to seek answers to
the following questions, among others:
•
When did the practice of making appropriations to fictitious organizations begin?
•
Why was the Practice begun?
•
Who was involved in the decision to make fictitious appropriations?
•
Who came up with the names of the fictitious organizations?
•
What organizations were funded out of the funds not spent by the fictitious organizations? Under what authority was this done?
•
Who identified the funds available for re-allocation, and under what authority?
•
How was it decided which organizations would be funded, and who made the decision?
•
Did the persons ordering the transfer of funds know that the unspent funds had been appropriated to fictitious organizations?
•
Were other members of the City Council beyond the Speaker aware that the organizations receiving the original appropriations were fictitious?
•
What, if anything, did Mayor Bloomberg or the Mayor’s office of Management and Budget know about the Practice?
•
In the Mayor’s review of the budget, what inquiry was made into the nature of the fictitious organizations?
•
What, if anything, did the Comptroller or his office know about the Practice?
•
What inquiry was made by the Comptroller into the allocations to fictitious entities?
25.
The witnesses that should be examined include:
•
City Council Speaker Christine Quinn
•
Former City Council Speaker Gifford Miller
•
Former City Council Speaker Peter Vallone, Sr.
•
Former City Council finance director Michael Koegh
•
Former City Council deputy finance director Staci Emanuel
•
Current Council Speaker chief of staff Charles Meara
•
Special Counsel to the Speaker Wayne Kwadler
•
Mayor Michael Bloomberg
•
Former Mayor Rudolph Giulliani
•
New York City Comptroller William C. Thompson
•
Former Comptroller Allan Hevesi
26.
Together with my co-petitioners, I have chosen to invoke § 1109 in this case
because it is a unique mechanism for lifting the veil of secrecy that surrounds intricate political dealings surrounding discretionary allocations of public funds. A summary inquiry should hold the City Council and the Speaker and other officials accountable for their involvement in the Practice and bring to light the facts surrounding this matter and that are necessary to assess the effectiveness of proposed reforms. 27.
The fact that other investigations related to this matter may be ongoing does not
detract from the need for the creation of a public record under Charter § 1109. I am aware that Speaker Quinn has stated that upon allegedly first becoming aware of the Practice of making appropriations to fictitious organizations, in the fall of 2007, she reported it to the United States Attorney for the Southern District and the New York City Department of Investigations. However, facts discovered in the United States Attorney for the Southern District investigation are not made public when there is no criminal indictment, or more broadly than the facts necessary for such indictment. Similarly, findings of the New York City Department of Investigations that do not result in Formal Disciplinary Proceedings are not reported to the public, and in the event of Informal Proceedings, are expunged from the record.
28.
New York City Charter § 1109 provides the only appropriate mechanism for
bringing the full facts surrounding the City Council’s Practice of making appropriations to fictitious entities to public light. Only a summary judicial inquiry as provided under § 1109 will have independence from control by the political actors who have participated in, colluded with, tolerated or allowed the Practice over the years. Only through a fully independent inquiry, and through the establishment of a public record, can the public know for certain the scope and depth of the questioning, and the adequacy of the answers. City Charter § 1109 and its predecessors were designed to create a foundation of fact upon which meaningful reform and confidence in the integrity of government can be rebuilt. The systemic and ongoing Practice of making appropriations to fictitious entities has created precisely the kind of breach in the public trust § 1109 was intended to address. 29.
Accordingly, for all the foregoing reasons, I respectfully urge the court to grant our
application and order a summary judicial inquiry under City Charter § 1109 into the practice of appropriations to fictitious organizations, the exercise of influence in their unchecked reallocation, and all who have participated, or colluded in, or condoned the Practice.
Respectfully submitted,
JAMES RICHES Sworn to before me this ___ day of April, 2008 ______________________ Notary Public
:
-against-
:
NEW YORK CITY COUNCIL and CHRISTINE QUINN, Speaker of the New York City Council,
: :
Index No. 08 / 106116
AFFIDAVIT OF PETITIONER JAMES RICHES IN SUPPORT OF HIS APPLICATION FOR A SUMMARY JUDICIAL INQUIRY PURSUANT TO SECTION 1109 OF THE NEW YORK CITY CHARTER
Respondents _____________________________________________: State of New York : County of New York )
) ss.
JAMES RICHES, a citizen and tax-payer in New York City, being duly sworn, deposes and says: 1.
I submit this affidavit in support of my request for a court-ordered summary
judicial inquiry, pursuant to New York City Charter § 1109, into various acts by the New York City Council and Speaker Christine Quinn that constitute violations or neglect of duty in relation to the property, government and affairs of the City of New York. 2.
I make this request in my capacity as a citizen and tax-payer of the City of New
York, and am fully familiar with the facts and circumstances set forth herein. As a citizen and tax-payer I am concerned about integrity in this city’s government, and the accountability of
office holders, and the responsible and accountable use of public funds. In addition, New York City Charter § 1109, specifically grants me, together with any four other tax-payers, the authority to make this application to the court for a summary judicial inquiry “into any alleged violation or neglect of duty in relation to the property, government or affairs of the city.” A.
City Council Speaker Quinn and the City Council’s Practice of Appropriating Public Funds to Fictitious Organizations 3.
New York City Council Speaker Quinn violated or neglected her duties to the City
and its taxpayers and citizens by contriving to introduce into or continue in those budgets for the fiscal years of July 1, 2006 through June 30, 2007 (hereinafter referred to as the “2007 Budget”) and July 1, 2007 through June 30, 2008 (hereinafter referred to as the “2008 budget”) appropriations to dozens of fictitious organizations. The New York City Council violated or neglected its duties by recommending the addition or continuation of such appropriations to fictitious entities in the 2002 through 2008 budgets, by including such appropriations in its estimate of financial needs of the City Council or recommendations for changes to the mayors’ preliminary budget, by adopting executive budgets for those years containing appropriations to non-existent entities, or by amending the executive budget for those years to include appropriations to non-existent entities. 4.
I am aware that the New York Post reported on April 3, 2008 that the New York
City Council, in a process controlled by Speaker Quinn’s office, “set aside in 2007 and 2008" $4.7 million in appropriations to thirty fictitious organizations. New York Post, April 3, 2008, a true and correct copy of the web edition of which is attached to the Verified Petition in this matter as Exhibit D. The New York Post also reported that according to sources these funds were later used at Speaker Quinn's discretion “to reward groups that were loyal to her, and to fund
favored council members' pet projects”, and, to “thank or pay off politically important allies or cooperative council members”. Id. 5.
I am further aware that at a news conference on April 4, 2008, Speaker Quinn
admitted the existence of a practice of appropriation of funds to fictitious organizations (the “Practice”). New York Times, April 4, 2008, a true and correct copy of the web edition of which is attached to the Verified Petition in this matter as Exhibit A. Speaker Quinn has stated the practice began in 2001, under the leadership of then Council Speaker Peter Vallone Sr., and continued under the leadership of Speaker Gifford Miller. Id. The New York Times reported that documents provided to it by Council Speaker Quinn’s office indicate that since 2001, about $17.4 million was appropriated to fictitious organizations. Id. In the 2002 fiscal year budget five fictitious groups received appropriations. The Practice appears to have escalated from the 2004 budget and on, peaking in the 2007 fiscal year budget with $4.5 million was allocated to 18 fictitious groups. Id. 6.
I am further aware that the New York Daily News has reported that Speaker Quinn
stated at the news conference on April 3, 2008, that she was aware that for years money had been hidden in New York City budgets by such means as allocating excessive money to a program that would not use its whole appropriation, creating thereby reserve accounts for discretionary allocation after the budget is adopted. New York Daily News, April 4, 2008, a true and correct copy of the web edition of which is attached to the Verified Petition in this matter as Exhibit E. Speaker Quinn stated she became aware of such excess appropriations and the holding of such unexpended funds in reserve accounts in the spring of 2007 during her second budget process, and ordered it stopped. New York Times, April 4, 2008, Verified Petition, Exhibit A. She stated
further that not until the fall of 2007 did she learn that money was being set aside through appropriations to fictitious organizations, and that the resulting practice of holding funds in reserve was ongoing. Id. 7.
Though Council Speaker Quinn has maintained her ignorance of the practice and
has stated that the Practice continued because of insubordination of staff, these assertions are questionable. In the first place, the numerous fictitious organizations were given names that are vague in character, and which the Daily News has gone so far as to describe as “cutesie”. New York Daily News, April 4, 2008, Verified Petition, Exhibit E. The fictitious organization names include: Coalition of Informed Individuals1 Senior Citizens for Equality2 Association of Community Partners3 Community Development for Stronger Neighborhoods4 American Association of Concerned Veterans5 Magic Mountain Fund6 Education First7 8.
In the second place, the Daily News also reported former Council staffers as
saying that the earlier practice, dating as far back as 1988, of inflating the budgets of existing programs to make cash available for later use was a common one. Id. It is said to have dated as far back as 1988. See New York Times, April 4, 2008, Verified Petition, Exhibit A. A former 1
New York Times, April 4, 2008, Verified Petition, Exhibit A. Id. 3 New York Post, April 4, 2008, a true and correct copy of the web-edition of which article is attached to the Verified Petition in this matter as Exhibit B. 4 New York Post, Editorial, April 4, 2008, a true and correct copy of the web version of which article is attached to the Verified Petition in this matter as Exhibit C. 5 New York Post, April 3, 2008, Verified Petition, Exhibit D. 6 New York Daily News, April 4, 2008, a true and correct copy of the web edition of which article is attached to the Verified Petition in this matter as Exhibit E. 7 Id. 2
high-ranking City Hall official stated this inflating of certain budget items was “very transparent. Everyone knew it would happen.” Daily News, April 4, 2008, Verified Petition, Exhibit E. The extra step of making appropriations to wholly fictitious organizations represented only an extension of the earlier practice, though it crossed the line from plausibly deniable inflation to outright misrepresentation. 9.
Speaker Quinn’s denial of knowledge of and responsibility for the practice is
furthermore questionable because, as Dick Dadey of the Citizens Union has pointed out, whether it be the earlier practice of excess appropriations or the later Practice of making appropriations to wholly fictitious organizations, the holding of reserve funds creates a substantial fund under the exclusive discretionary control of the Speaker. Id. The Practice, therefore, gives the Speaker influence over individual Council members, making them dependent on the Speaker for valuable “member items”, or funds that a member can deliver to favored and politically significant community organizations in their districts. As the New York Post commented, “very often the member item is granted or withheld as a means of controlling how individual council members vote.” New York Post Editorial, April 4, 2008, a true and correct copy of the web edition of which article is attached to the Verified Petition in this matter as Exhibit C. 11.
At least some of the groups funded through the fictitious organizations used funds
for political purposes. One such group was the Donna Reid Education Fund. New York Times, April 17, 2008, a true and correct copy of which article is attached to the Verified Petition in this matter as Exhibit F. Two former staff of City Councilman Kendal Stewart of Brooklyn, Asquith Reid and Joycinth Anderson, have been indicted for embezzlement of over $145,000 in City Council funds, including allegedly about $14,000 funneled through two fictitious entities, the
New York Foundation for Community Development, and American Association of Concerned Veterans. Out of the $145,000 allegedly embezzled, $21,000 was allegedly used for political fliers and events for a political club that the indictment said was controlled by Councilman Stewart. Id. The Times reported that campaign finance records show that Asquith Reid and several family members were active contributors to Councilman Stewart’s campaigns. Id. 12.
Finally, Speaker Quinn’s statement that she had ordered the Practice stopped is
questionable, because her alleged order in the spring of 2007 to cease using “holding accounts” could not have explicitly addressed, or have been intended to include, the Practice of making appropriations to non-existent, fictitious entities. She said she only became aware of the appropriations to fictitious organizations in the fall of 2007. New York Times, April 4, 2008, Verified Petition, Exhibit A. The only confirmation of her account of having ordered any halt to any practice in the spring of 2007, moreover, leaves it unclear whether any clear directive was actually given. Her chief of staff, Charles Meara, was reported by the Times as only recalling her “noting” in one meeting that they “would no longer use the reserve system”. New York Times, April 5, 2008, a true and correct copy of the web edition of which article is attached to the Verified Petition in this matter as Exhibit G. Council Speaker Quinn’s office has not been able to offer any other corroboration of her account, despite her assertion at her news conference on April 3, 2008 that “[t]here were many people in the numerous meetings with myself and the finance staff during the budget process, with many people in the room who can confirm that.” 13.
Speaker Quinn’s explanation of disobedience by her staff has been called in
question by well informed observers. According to the Times, numerous former and current City Council officials have said that Speaker Quinn “had during her tenure taken an unusually active
role in overseeing the budget.” New York Times, April 5, 2008, Exhibit G. According to the Times, this left them “wondering how she could not have known or, if she had truly objected to the practice...” Id. The Daily News reported Councilman Charles Barron of Brooklyn stating, “If you believe it was some staffers who did it and [Speaker Quinn] knew nothing about it, I’ll sell you the Brooklyn Bridge.” New York Daily News, April 4, 2008, Verified Petition, Exhibit E. B.
The Practice of Making Appropriations to Fictitious Entities Constitutes a Violation or Neglect of Duty by the City Council and Speaker Quinn 14.
The appropriation of funds to fictitious entities violates § 100 (c) of City Charter
which requires the City budget to be itemized. Itemization presupposes the actual existence of the entity to which the appropriation is made. The creation of reserve accounts in the name of fictitious grantees, moreover, violates the intent and frustrates the statutory scheme of City Charter § 100 - 110 and § 225 - § 258 to create a unified, accountable annual budgeting process. Without itemization, actual budgetary priorities are obscured. Without itemization, comparison of items with similar appropriations for preceding years, public hearings and discussion concerning the necessity of proposed expenditures, and meaningful examination by the City Council of priorities are all frustrated. Making appropriations to fictitious entities enables the implementation of priorities at odds with those for which the Mayor and Council members were elected, and for which they go on record as supporting. The voting public is frustrated in its ability to hold office holders to account for policy. 15.
By creating a substantial discretionary fund under the effective control of the
Council Speaker, moreover, the Practice is inherently corrupting. By turning the public annual budget process into a misrepresentation of actual policy, and creating an unaccountable funding
process subject to the sole discretion of the Speaker, the Practice of making appropriations to fictitious entities leads to improper influence by the Speaker over the voting of individual Council members, diminishing in the process their responsiveness to the policy preferences and needs of their own constituencies. 16.
The City Council’s recommendations of changes to preliminary expense budgets
that included appropriations to fictitious organizations for the fiscal years 2002 through 2008, its amendment of the executive budgets in those years to include appropriations to fictitious organizations, or its adoption of final budgets in those years that included such appropriations, constitute a violation of New York City Charter § 100 (c), and a violation of the Council’s duty to the tax-payers of New York City as a trustee over the property, funds and effects of the city under Charter § 1110. Appropriations to non-existent entities frustrates the orderly and efficient management of public expenditures. It constitutes a waste of public funds in so far as the additional appropriations require taxation in excess of the actual foreseen and declared cost of the services and non-personal service items to be obtained. 17.
It is furthermore possible that at least some individual members of the New York
City Council from 2001 through 2007 cast votes in favor of, or otherwise advocated the approval of resolutions recommending changes to preliminary expense budgets, the amendment of an executive budgets, or the adoption of final budgets, with knowledge that such recommendations, amendments and adopted budgets contained appropriations to fictitious organizations. 18.
City Council Speaker Christine Quinn, at very least violated the public’s trust and
neglected her duty as a trustee under New York City Charter § 1110 by failing to recognize the appropriation to fictitious non-existent entities from 2006 through 2007. In her capacity as
Speaker of the City Council, in collecting, sorting, and prioritizing the requests of members and recommendations of committees and drafting the resolution upon which the City Council voiced its recommendations for changes to the preliminary expense budget, or, in collecting, sorting, prioritizing member and committee requests and negotiating amendments to the executive budget, Speaker Quinn played a central role in the budget process, brokering agreements and articulating the final position of the City Council. At a minimum, she should have known of the Practice of making appropriations to fictitious organizations. 19.
It is furthermore possible that Speaker Quinn knew the content of the agreements
she brokered and the resolutions she drafted, and so knowingly made false or deceptive statement, in violation of her duties as a trustee of the city’s property, funds and effects under City charter § 1110. Speaker Quinn’s shaping of City Council recommendations for changes to the preliminary expense budget or her shaping and negotiating amendments to the executive budget so as to include appropriations to fictitious entities, if done for the purpose of creating hidden discretionary funds, also constitutes a violation of duty and a violation of the public trust by violating or evading the provisions of the City Charter § 100 (c) requiring appropriations to be itemized, § 249 giving the mayor control over the executive budget § 255 giving the mayor veto over amendments to the executive budget. 20.
The New York Times reported New York City Comptroller William C. Thompson
as stating that “[t]he allegations reported today in the New York Post raise serious concerns. If there were any attempts to subvert the New York City Charter or to hide money in nonexistent organizations, these actions would represent a breach of the public trust.” New York Times, April 4, 2008, Verified Petition, Exhibit A.
C.
The Court Should Convene a Summary Inquiry to Investigate the Practice of Appropriation to Fictitious Organizations in the New York City budget. 21.
In order to determine the origins of the Practice, the extent to which office holders
and staff knew about the Practice, who participated in its perpetuation and administration, and the effect of the practice on public policy and legislation, I hereby request, in my capacity as a taxpayer, that the court issue an order for a summary inquiry into the Practice, pursuant to New York City Charter § 1109. 22.
Section 1109 authorizes designated elected officials and any five tax payers to
petition the Supreme Court for “[a] summary inquiry into any alleged violation or neglect of duty in relation to the property, government or affairs of the city [to be] conducted under an order to be made by any justice of the supreme court ... Such inquiry shall be conducted before and shall be controlled by the justice making the order or any other justice of the supreme court in the same district. Such justice may require any officer or employee or any other person to attend and be examined in relation to the subject of the inquiry. Any answers given by a witness in such inquiry shall not be used against such witness in any criminal proceeding, except that for all false answers on material points such witness shall be subject to prosecution for perjury. The examination shall be reduced to writing and shall be filed in the office of the clerk of such county ... as the justice may direct, and shall be a public record.” 23.
A summary judicial inquiry is a civil proceeding which investigates governmental
abuses and shines the spotlight of public scrutiny on the City Council and the Speaker’s actions. The judge who presides over the inquiry defines the scope of the investigation, and can require the Speaker, members of the Council, staff, or other officials to respond in order to determine the nature and the extent of the Practice, the responsibility of various officials involved in the budget process, and the impact of the Practice on the workings of government in the City. 24.
I respectfully urge the court to convene such an inquiry in order to seek answers to
the following questions, among others:
•
When did the practice of making appropriations to fictitious organizations begin?
•
Why was the Practice begun?
•
Who was involved in the decision to make fictitious appropriations?
•
Who came up with the names of the fictitious organizations?
•
What organizations were funded out of the funds not spent by the fictitious organizations? Under what authority was this done?
•
Who identified the funds available for re-allocation, and under what authority?
•
How was it decided which organizations would be funded, and who made the decision?
•
Did the persons ordering the transfer of funds know that the unspent funds had been appropriated to fictitious organizations?
•
Were other members of the City Council beyond the Speaker aware that the organizations receiving the original appropriations were fictitious?
•
What, if anything, did Mayor Bloomberg or the Mayor’s office of Management and Budget know about the Practice?
•
In the Mayor’s review of the budget, what inquiry was made into the nature of the fictitious organizations?
•
What, if anything, did the Comptroller or his office know about the Practice?
•
What inquiry was made by the Comptroller into the allocations to fictitious entities?
25.
The witnesses that should be examined include:
•
City Council Speaker Christine Quinn
•
Former City Council Speaker Gifford Miller
•
Former City Council Speaker Peter Vallone, Sr.
•
Former City Council finance director Michael Koegh
•
Former City Council deputy finance director Staci Emanuel
•
Current Council Speaker chief of staff Charles Meara
•
Special Counsel to the Speaker Wayne Kwadler
•
Mayor Michael Bloomberg
•
Former Mayor Rudolph Giulliani
•
New York City Comptroller William C. Thompson
•
Former Comptroller Allan Hevesi
26.
Together with my co-petitioners, I have chosen to invoke § 1109 in this case
because it is a unique mechanism for lifting the veil of secrecy that surrounds intricate political dealings surrounding discretionary allocations of public funds. A summary inquiry should hold the City Council and the Speaker and other officials accountable for their involvement in the Practice and bring to light the facts surrounding this matter and that are necessary to assess the effectiveness of proposed reforms. 27.
The fact that other investigations related to this matter may be ongoing does not
detract from the need for the creation of a public record under Charter § 1109. I am aware that Speaker Quinn has stated that upon allegedly first becoming aware of the Practice of making appropriations to fictitious organizations, in the fall of 2007, she reported it to the United States Attorney for the Southern District and the New York City Department of Investigations. However, facts discovered in the United States Attorney for the Southern District investigation are not made public when there is no criminal indictment, or more broadly than the facts necessary for such indictment. Similarly, findings of the New York City Department of Investigations that do not result in Formal Disciplinary Proceedings are not reported to the public, and in the event of Informal Proceedings, are expunged from the record.
28.
New York City Charter § 1109 provides the only appropriate mechanism for
bringing the full facts surrounding the City Council’s Practice of making appropriations to fictitious entities to public light. Only a summary judicial inquiry as provided under § 1109 will have independence from control by the political actors who have participated in, colluded with, tolerated or allowed the Practice over the years. Only through a fully independent inquiry, and through the establishment of a public record, can the public know for certain the scope and depth of the questioning, and the adequacy of the answers. City Charter § 1109 and its predecessors were designed to create a foundation of fact upon which meaningful reform and confidence in the integrity of government can be rebuilt. The systemic and ongoing Practice of making appropriations to fictitious entities has created precisely the kind of breach in the public trust § 1109 was intended to address. 29.
Accordingly, for all the foregoing reasons, I respectfully urge the court to grant our
application and order a summary judicial inquiry under City Charter § 1109 into the practice of appropriations to fictitious organizations, the exercise of influence in their unchecked reallocation, and all who have participated, or colluded in, or condoned the Practice.
Respectfully submitted,
JAMES RICHES Sworn to before me this ___ day of April, 2008 ______________________ Notary Public
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