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Riches v. New York City Council

April 15, 2010

IN RE JAMES RICHES, ET AL., PETITIONERS-APPELLANTS,
v.
NEW YORK CITY COUNCIL, ET AL., RESPONDENTS-RESPONDENTS.



Petitioners appeal from an order and judgment (one paper) of the Supreme Court, New York County (Joan B. Lobis, J.), entered July 24, 2008, which dismissed this proceeding for a summary judicial inquiry pursuant to New York City Charter § 1109.

The opinion of the court was delivered by: Freedman, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

John W. Sweeny, Jr., J.P., John T. Buckley, James M. Catterson, Rolando T. Acosta and Helen E. Freedman, JJ.

106116/08

We affirm the motion court's dismissal of this matter as a proper exercise of discretion.

Eight citizens bring this proceeding, pursuant to Section 1109 of the New York City Charter, requesting that Supreme Court conduct a summary judicial inquiry concerning the City Council's practice of allocating funds to non-existent entities during its initial budgeting process. Section 1109 provides that upon application, a Supreme Court Justice may conduct an inquiry for the purpose of alerting the public to a "violation or neglect of duty" by government officials. The circumstances giving rise to this application arose when local newspapers, including the New York Post, the New York Times, and the Daily News, published the findings of an investigation conducted by the New York City Department of Investigation concerning allocation of funds by the City Council to fictitious organizations or entities, which respondents call "holding codes," for the purpose of making supplemental allocations to existing organizations.

The motion court made findings that the City Council's practice of holding funds in reserve for community programs had been in existence since 1988. During this time funds allocated to these reserve accounts were disbursed during the fiscal year through contracts with City agencies. Starting in 2001 and continuing through 2007, a total of $17.4 million had been budgeted that way, but instead of being put into reserve or holding accounts, the funds were allocated to "holding codes" or fictitious organizations. City Council Speaker Christine Quinn announced that she had ordered this practice stopped in the spring of 2007, but when she discovered that it continued in the fall of 2007 in spite of her directive, she alerted investigators from the United States Attorney's Office and the New York City Department of Investigation. On April 15, 2008, a federal grand jury sitting in the Southern District of New York, after looking into the practice, returned an indictment against two staff members of a New York City Council member for conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with an alleged scheme to embezzle money from a real organization, the Donna Reid Memorial Education Fund, to which the City Council had appropriated funds.

Petitioners contend that the practice of allocations to non-existent organizations, which has now been publicly disclosed and discontinued, constituted a violation or neglect of duty in relation to the property, government or affairs of the City of New York because it violated Charter § 100(c) which requires that the budget be itemized for each program, person or institution and be so described in the preliminary and final budget. According to petitioners, this practice also violated the City Council's duty as trustee of the property, funds and effects of the city as set forth in New York City Charter § 1110 and allowed the Speaker to broker agreements for future allocations.

Petitioners seek to examine Mayors Giuliani and Bloomberg, Speakers Vallone, Miller and Quinn, former City Council finance director Michael Koegh, deputy finance director Staci Emanuel, current Council Speaker chief of staff Charles Meara, special counsel to the Speaker Wayne Kwadler and Comptrollers William Thompson and Allan Hevesi to inquire of them concerning their knowledge of and acquiescence in the practice of allocating City Council funds to "fictitious" organizations for the purpose of making later allocations to needy organizations.

Section 1109 of the City Charter, under which petitioners make this request, states as follows: "A summary inquiry into any alleged violation or neglect of duty in relation to the property, government or affairs of the city may be conducted under an order to be made by any justice of the supreme court in the first, second or eleventh judicial district on application of the mayor, the comptroller, the public advocate, any five council members, the commissioner of investigation or any five citizens who are taxpayers, supported by affidavit to the effect that one or more officers, employees or other persons therein have knowledge or information concerning such alleged violation or neglect of duty. Such inquiry shall be conducted before and shall be controlled by the 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 within the first, second or eleventh judicial district as the justice may direct, and shall be a public record [emphasis added].

The dissent would find, for the first time since the passage of the predecessor to section 1109 of the New York City Charter (section 1534 of the Greater New York Charter and later section 109 of the New York City Charter) in 1873, that a Supreme Court Justice's denial of that application was an abuse of discretion.

Respondents City Council and Speaker Quinn moved to dismiss the proceeding on the grounds that the purpose of the charter provision was to expose municipal corruption or closely related matters and that the dispute here is primarily political. They also contend that the underlying facts, namely the allocation of funds to fictitious organizations, are undisputed and have received extensive publicity. Respondents further contend that appropriate organs of government are addressing the matter, that the total amount involved for all of the seven years involved (2002-2008) amounted to just $17.4 million, and that the City Charter provision asking a judge to conduct such an inquiry is unconstitutional. Respondents aver that a summary inquiry would likely frustrate ongoing criminal investigations.

City respondents contend that the history of this Charter provision, originally enacted in 1873 as a special remedy in the reform charter and incorporated as Section 1534 into the Greater New York Charter, was designed to root out corruption after the Boss Tweed era and specified various acts including wrongful diversion or misapplication of funds, or betrayals of trust, as potential subjects of inquiry. The provision was restated in 1936 as section 1109 of the current City Charter in a more general statement namely, "alleged violation or neglect of duty."

The City maintains that the original purpose of and scope of the provision remains the same as it was before the language change. The purpose stated in the 1917 case of Matter of Mitchel v Cropsey, (177 App Div 663, 670 [1917]), was to expose corruption and wrongful diversion of funds, and not to investigate the propriety of legislative issues. City respondents insist that petitioners have not alleged that funds were actually misapplied, but merely that the budgeting process frustrated certain provisions of the City Charter. They contend that section 1109 was intended to be a vehicle for exposing more venal acts.

While petitioners contend that the 1936 language change stating "any alleged violation or neglect of duty" expanded the scope of inquiry beyond simply exposing corruption, they also argue that the current claims involving "misappropriation of funds" constitute corruption because it gave the Speaker the ability to control Council member votes by granting or withholding of funds to members' districts. Whether the post-1936 language expanded the scope of the provision, as petitioners claim, or is merely a reiteration of the original purpose, as the City and motion court argue, is not pertinent here because our decision does not turn on an analysis of the change.

The City respondents also contend that the provision is flawed in that it assigns an unorthodox and unconstitutional role to Supreme Court Justices by imposing a "public trust" upon justices in violation of NY Constitution article VI, ยง 20(b)(1), which provides that a justice of the Supreme Court may not hold any other public office, with certain inapplicable exceptions. Section 1109 asks justices, based on simple affidavits, to engage in a non-justiciable procedure to create a public record without reaching any findings. The City claims that the justice then becomes an investigator or commissioner and is thrust into a political role or a role that belongs to another branch of government. Respondents invoke Matter of Richardson (247 NY 401 [1928]), wherein the Court of Appeals found that a statute ...


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