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UNITED STATES v. MCGANN

January 13, 1997

UNITED STATES OF AMERICA, Plaintiff,
v.
GERALDINE McGANN, Defendant.



The opinion of the court was delivered by: GLASSER

 GLASSER, United States District Judge:

 This defendant has been before this court since March 22, 1990 when she was named as one among many defendants against whom the government commenced action. The complaint filed on that day was amended on May 11, 1990. The facts of the case and the first opinion addressing many of the issues to which those first complaints gave rise may be found in 791 F. Supp. 354 (E.D.N.Y. 1992) (the "first opinion") familiarity with which is assumed. Another opinion addressing still further the issues in the case may be found in 888 F. Supp. 419 (E.D.N.Y. 1995). Confining the historical background to this defendant, the specific cause of action pertinent to the motion now before the court and which will be hereafter addressed is the charge that she breached her fiduciary duty. In the first opinion that cause of action was held to be barred by the statute of limitations. In footnote 10 on page 368 of that opinion, forgetting the injunction of Sir Francis Bacon that "an overspeaking judge is no well-tuned cymbal," I overspoke and wrote "to the extent that the government seeks to make out separate actions for breach of fiduciary duty against McGann for actions after March 22, 1984, the government should so plead." Understandably, perhaps, the government seized upon that violation of the Baconian injunction and on July 31, 1995 moved to amend the complaint of May 11, 1990 by repleading the cause of action against McGann for breach of fiduciary duty. A comparison of the complaint of May 11th with the complaint as it was sought to be amended will be useful.

 May 11, 1990

 Wrongful Conduct by Geraldine McGann

 86. On or about August 19, 1982, defendant Geraldine McGann became a paid Trustee of the Village. At all relevant times thereafter, she served simultaneously in that capacity and as Special Assistant to Joseph Monticciolo, the H.U.D. Regional Administrator for Region II.

 87. Defendant Geraldine McGann owed a fiduciary duty to H.U.D. not to act in any manner inconsistent with the interests of H.U.D., and not to have any interest that conflicted, directly or indirectly, with the interests of H.U.D.

 88. Defendant Geraldine McGann breached the aforesaid fiduciary duty to H.U.D. in her conduct as a paid Trustee of the Village, including but not limited to the following:

 
(a) On or about December 9, 1982, while acting as a Trustee of the Village, she voted in favor of the Village purchasing property for use in the Section 235 housing program, which purchase was funded in whole or in part with CDBG funds as more fully alleged below;
 
(b) Also on or about December 9, 1982, while acting as Trustee of the Village, she voted in favor of the Village selling land to Ocean Park Properties, Inc., which land was used to construct Phase Two Section 235 housing;
 
(c) In or about February 1983, while acting as a Trustee of the Village, she voted in favor of the Village selling land to Ocean Park Properties, Inc., which land was used to construct Phase Three Section 235 housing;
 
(d) Also in or about February 1983, while acting as a Trustee of the Village, she voted in favor of the Village accepting bids for site improvements respecting property used for Section 235 housing, which improvements were paid for in whole or in part by CDBG funds as more fully alleged below; and

 89. Defendant Geraldine McGann, while acting as a paid Trustee of the Village, voted in matters respecting the expenditure by the Village of H.U.D. funds for the purchase, sale and improvement of the property that was eventually purchased by her son, defendant Daniel McGann, and her daughter-in-law, defendant Eileen McGann.

 90. Defendant Geraldine McGann knew and approved of the manipulation of Phases One and Two of the Section 235 Program by defendants Village, Parente, Brady, McGinty, Masone and Scully, and others known and unknown, as alleged above, and failed to disclose said manipulation to H.U.D.

 91. Defendant Geraldine McGann did these acts, and others, with knowledge that defendants Village, Parente, Brady, McGinty, Masone and Scully, and others known and unknown were illegally manipulating the Section 235 Program in the manner set forth above.

 July 31, 1995

 Wrongful Conduct by Geraldine McGann

 86. On or about August 19, 1982, defendant Geraldine McGann became a paid Trustee of the Village. At all relevant times thereafter, she served simultaneously in that capacity and as Special Assistant to Joseph Monticciolo, the H.U.D. Regional Administrator for Region II.

 87. Defendant Geraldine McGann owed a fiduciary duty to H.U.D. not to act in any manner inconsistent with the interests of H.U.D., and not to have any interest that conflicted, directly or indirectly, with the interests of H.U.D. Pursuant to this fiduciary duty, defendant Geraldine McGann was obligated to avoid even the mere appearance of impropriety or of conflict between the interests of H.U.D. and her interests or the interest of her friends, relatives, associates or other employees of H.U.D.

 88. Defendant Geraldine McGann breached her fiduciary duty to H.U.D. in her conduct as a paid Trustee of the Village, including but not limited to the following:

 
(a) On or about December 9, 1982, while acting as a Trustee of the Village, she voted in favor of the Village purchasing property for use in the Section 235 housing program, which purchase was funded in whole or in part with CDBG funds as more fully alleged below;
 
(b) Also on or about December 9, 1982, while acting as Trustee of the Village, she voted in favor of the Village selling land to Ocean Park Properties, Inc., which land was used to construct Phase Two Section 235 housing;
 
(c) In or about February 1983, while acting as a Trustee of the Village, she voted in favor of the Village selling land to Ocean Park Properties, Inc., which land was used to construct Phase Three Section 235 housing;
 
(d) Also in or about February 1983, while acting as a Trustee of the Village, she voted in favor of the Village accepting bids for site improvements respecting property used for Section 235 housing, which improvements were paid for in whole or in part by CDBG funds as more fully alleged below; and
 
(e) At numerous different times relevant to this action, she reviewed and approved for payment vouchers submitted by contractors for improvements to Section 235 property, which improvements were paid for in whole or in part by CDBG funds as more fully alleged below.
 
(f) On or about March 26, 1984, in communications with H.U.D. concerning her alleged breaches of her fiduciary duty to H.U.D., she made affirmative misrepresentations, made statements which were deceptive, told half-truths which were misleading, and breached her affirmative duty to H.U.D. to make full and complete disclosure about, and not make material omissions about, prior wrongful conduct of the defendants in connection with H.U.D.-related matters, including her own prior breaches of fiduciary duty to H.U.D. Each of these March 26, 1984 misrepresentations, deceptive statements, misleading half-truths, material omissions, and failures to make full and affirmative disclosure of the following facts constituted new breaches of her fiduciary duty to H.U.D.:
 
(1) the other defendants had manipulated Phases One and Two of the Village's Section 235 program, as described above;
 
(2) she had reviewed and/or approved the list of Phase Three purchasers in connection with the Village's Phase Three selection;
 
(3) defendants Daniel and Eileen McGann had received a Phase Three house due to her procurement and arrangement;
 
(4) she secretly drafted the Village's earlier 1984 response to H.U.D.'s inquiries concerning the Village's alleged manipulation of the Section 235 program;
 
(5) the Village's earlier 1984 response to H.U.D. inquiries referred to in (f)(4) above was false, deceptive, misleading, and omitted material information in failing to fully describe the defendants' manipulation of the Section 235 program as set forth above;
 
(7) she wrote a letter dated February 17, 1984 asking that the Village minutes be changed to indicate that she had abstained from voting on H.U.D.- related matters when the Village minutes correctly documented that she had not abstained;
 
(8) she induced, and caused Mayor Parente to induce, Harold Scully to write a letter to H.U.D. on or to about March 16, 1984 which falsely stated that the Village minutes indicating that she had voted on H.U.D.-related matters were inaccurate when, in fact, they were accurate;
 
(g) On or about May 3, 1984, she caused the false and misleading February 17, 1984 letter referred to in (f)(7) above to be submitted to the Village Board and to be reflected in the Village Board minutes;
 
(h) On numerous occasions after March 22, 1984, while acting as a Village Trustee, she voted on, and failed to abstain from voting on, numerous H.U.D.-related matters, including, but not limited to, one vote on September 11, 1986, one vote on April 7, 1987, two votes on June 16, 1988, and one vote on August 18, 1988;
 
(i) On or about May 18, 1989, she caused Village Board records to be changed to wrongly indicate that on June 16, 1988 she had not voted on ...

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