Long Island Lawyer To Pay More Than $249K To Settle Pension Abuse Allegations

As a former practicing lawyer and school board trustee, we’ve paid a lot of attention to an alleged pension abuse scandal first reported last year by the Long Island newspaper Newsday. Some lawyers working in private practice for school district clients claimed that they were employees of the districts, or had the districts report them as employees, and they thereafter claimed entitlement to a state-guaranteed defined benefit pension plan. See a prior post at  http://www.financialfraudlaw.com/content/are-lawyers-private-practice-who-represent-school-districts-entitled-claim-pension-benefits-, which contains some background and links to other sources. 

Now, Long Island attorney Lawrence W. Reich has agreed to pay more than $240,000 to the State of New York and the state pension system to end New York State Attorney General Andrew Cuomo’s investigation into his nearly 30 years of allegedly improper employment arrangements with six Long Island school districts where he was on the payrolls from 1978 through 2006, at times simultaneously. According to Cuomo, for the entire period, Reich worked as outside retained counsel and was not entitled to benefits reserved for public-sector employees. The settlement includes reimbursing the state pension system all pension funds he received as a result of his employment arrangements with the districts, totaling $180,565.74, plus an additional payment of $60,000.00 to the state.
 
According to Cuomo, as part of Reich’s settlement agreement he is also agreeing to forfeit all pension credits he accrued as a result of being on the payrolls of the six school districts. In addition, Reich is withdrawing his demand for a hearing with the state pension system and is waiving any rights he has with respect to certain determinations made by the state pension system regarding him. According to Cuomo, these terms ensure that Reich no longer has any rights to pension payments in connection with his arrangements at the school districts going forward.

“This lawyer epitomized the systemic waste and abuse in a state public pension system that routinely paid out millions in public funds to private-sector professionals who weren’t entitled to them,” said Cuomo. “His claims defied logic; at one point he was reported working full time for five school districts simultaneously. In fact, he never should have claimed himself as a legitimate employee of any one of them to begin with. Taxpayers have rightfully grown increasingly frustrated with the rampant waste and abuse and my office will continue working to put a stop to these schemes.”
 
According to Cuomo: Reich applied for membership with the state pension system in 1966, while he was a full-time employee at the New York State Department of Education. In 1978, Reich went into private practice, and worked full-time as an attorney in private practice at various firms in Long Island. While Reich was in private practice, he was improperly listed as an “employee” at the Baldwin Union Free School District from 1978 through 2006, at the Bellmore-Merrick Central School District from 1984 through 2006, at the East Meadow Union Free School District from 1985 through 2001, at the Copiague Union Free School District from 1988 through 2006, at the Freeport Union Free School District from 1990 through 1991, and at the Harborfields Union Free School District from 1995 through 2006. Reich’s placement on the payrolls of those school districts often occurred upon his explicit request, so that he could accrue additional credits with the state retirement system to which he was not entitled.
 
Cuomo also asserted that: At all times, Reich was providing services to those school districts as an independent contractor and not as an employee as defined by law. Therefore, he was not entitled to the pension benefits he accrued in connection with his placement on those school districts’ payrolls.
 
Before the Attorney General’s investigation began, Reich was receiving approximately $62,000 annually in pension from the state pension system. As a result of the settlement, Reich now is only entitled to receive approximately $4,400 annually from the state pension system in connection with his prior full-time employment with the New York State Department of Education.