CUOMO SECURES AGREEMENTS WITH TWO MAJOR INVESTMENT FIRMS IN ONGOING NEW YORK STATE PENSION FUND INVESTIGATION

Markstone Capital Adopts Cuomo's Public Pension Fund Reform Code of Conduct; Agrees to Return $18 Million to New York State Common Retirement Fund

Wetherly Capital Group and its Broker-Dealer DAV/Wetherly Financial Will Exit Placement Business and Return $1 Million to the Common Retirement Fund

Cuomo Has Now Collected $120 Million for the Pension Fund and the State

 

NEW YORK, NY (February 8, 2010) - Attorney General Andrew M. Cuomo today announced agreements with Israeli venture capital firm Markstone Capital Group LLC ("Markstone"), and California-based placement agent firm Wetherly Capital Group LLC and its broker-dealer DAV/Wetherly Financial ("Wetherly") to resolve their roles in Cuomo's investigation into pay-to-play practices involving the New York State Common Retirement Fund ("CRF"). 

Both firms will adopt Cuomo's Public Pension Fund Reform Code of Conduct.  Markstone will return $18 million to the CRF and Wetherly will return $1 million associated with CRF investments. Wetherly has also agreed to exit the placement agent business.

"Markstone and Wetherly are the eighth and ninth firms to adopt our Code of Conduct, which ends pay-to-play political contributions and the selling of access to public pension money nationwide," said Attorney General Cuomo. "New York's taxpayers deserve rigorous protection against political influence in our public pension funds. I commend these firms for furthering our reform efforts and returning a combined $19 million to the state pension fund through our agreements."

Attorney General Cuomo's Code of Conduct bans investment firms from hiring, utilizing, or compensating placement agents, lobbyists, or other third-party intermediaries to communicate or interact with public pension funds to obtain investments. To avoid pay-to-play schemes, the Code prohibits investment firms (and their principals, agents, employees, and family members) from doing business with a public pension fund for two years after the firm makes a campaign contribution to an elected or appointed official who can influence the fund's investment decisions. This provision also bars all firms currently doing business with the pension fund from making such campaign contributions. Investment firms must also disclose any conflicts of interest to public pension fund officials or law enforcement authorities, to increase transparency and avoid abuse in the management of public pension funds.

Markstone

Beginning in November 2002, Markstone founding partner Elliott Broidy gave gifts, political contributions, and other benefits valued in excess of $1 million, to top decision-makers at the CRF, as well as their friends and family members, with the intent to influence Office of the State Comptroller officials to invest in Markstone Capital Partners, L.P., Markstone's first private equity fund. Ultimately, Markstone was awarded a $200 million investment by the CRF, which was subsequently increased to $225 million and finally to $250 million. Markstone received approximately $18 million in management fees from the CRF associated with its investment.

In December 2009, Broidy resigned his management position at Markstone and pled guilty to a felony charge of rewarding official misconduct, pursuant to a plea and cooperation agreement with the Attorney General's office. 

Ambassador Dan Gillerman, Chairman of Markstone stated, "Markstone is pleased that we have reached an agreement with the Attorney General today. This enables us to move forward with our core business, investments in Israeli companies, which has generated strong returns since the fund's inception. We support the Attorney General's effort and will adopt the Attorney General's Code of Conduct. Markstone is committed to the highest ethical standards and to transparency in fundraising. In addition, this code provides strong controls and constitutes an essential element in making us a stronger company for the years to come. We are proud of our work investing in Israel, which is a thriving market in the midst of a volatile global environment. We aim to continue providing our investors with substantial returns through active ownership."

Wetherly

Wetherly represented three California-based private equity firms before the CRF: Ares Management LLC ("Ares"); Freeman Spogli & Co. ("Freeman Spogli"); and Levine Leichtman Capital Partners ("Levine Leichtman"). Wetherly agreed to introduce these firms to the CRF in exchange for placement fees in the form of a percentage of the CRF's investments. In each instance, Wetherly split its placement fees with Henry "Hank" Morris, then-Comptroller Alan Hevesi's paid political adviser. The three private equity firms were not informed about Wetherly's arrangement with Morris. 

In all, the three private equity firms paid Wetherly in excess of $1.3 million in placement fees. Wetherly paid approximately $140,000 of this amount to unlicensed placement agent Julio Ramirez, Jr., who had secured the relationship with Morris, and approximately $500,000 to Morris himself, leaving Wetherly with approximately $660,000.

In May 2009, Ramirez pled guilty to a securities fraud charge under the Martin Act, pursuant to a plea and cooperation agreement with the Attorney General's office. 

Wetherly-Related Investments

In December 2003, the CRF committed $50 million to Ares. Subsequently, Ares paid $637,500 in placement fees to Wetherly, of which Wetherly paid $225,000 to Morris.  In January 2004, the CRF committed $50 million to Freeman Spogli. Subsequently, Freeman Spogli paid Wetherly $500,000 in placement fees, of which Wetherly paid $200,000 to Morris.

In March 2005, the CRF indirectly invested $20 million with Levine Leichtman through Aldus Equity. Levine Leichtman then paid Wetherly $200,000 in placement fees. Subsequently, Wetherly paid Searle & Co. ("Searle"), the broker-dealer with which Morris was affiliated at that time, forty percent of its fee, of which Searle passed on ninety-five percent to Morris.

In September 2009, the Attorney General announced an agreement to resolve Levine Leichtman's role in the investigation.

A Wetherly spokesperson said:  "The principals at Wetherly Capital embrace and endorse the Attorney General's reforms and continue to support all efforts to increase transparency in the solicitation of investments from public pension funds.  Throughout this entire investigation, Wetherly and its principals have cooperated fully and voluntarily with the Attorney General and his staff.  To that end, Wetherly has agreed to return $1 million in proceeds from previous transactions to the New York Common Retirement Fund.  With that, we are very pleased to have this matter resolved."  

Today's announcement brings to nine the number of investment firms that have signed the Attorney General's Public Pension Fund Reform Code of Conduct.  In addition to Markstone and Wetherly, those firms are: The Carlyle Group; Riverstone Holdings LLC; Pacific Corporate Group Holdings, LLC; HM Capital Partners I; Levine Leichtman Capital Partners; Access Capital Partners; and Falconhead Capital.

The Attorney General's Public Pension Fund Reform Code of Conduct:

• Bans Placement Agents: Investment firms are prohibited from using Placement Agents, Lobbyists, or any other third-party intermediary to communicate or interact with Public Pension Funds for any purpose. The prohibition does not apply to the use of consultants and investment banks to otherwise directly assist investment firms by, for example, preparing marketing materials or performing due diligence;
• Bans "Pay to Play": Prohibits investment firms (and their principals, agents, employees and family members) from doing business with a public pension fund for two years after the firm makes a campaign contribution to any elected or appointed official who can influence a public pension fund's investment decisions. The prohibition also applies to candidates for such positions, but does not apply to contributions of $300.00 or less to elected officials or candidates for whom the person making the contribution can vote;
• Increases Transparency: Requires rigorous, ongoing disclosure of information relating to campaign contributions, the identities, responsibilities and qualifications of investment fund personnel and any payments by investment firms to third parties in connection with public pension fund matters. Also requires investment firms to promptly publish such information on their websites;
• Imposes Higher Standard of Conduct: Holds investment firms to a higher standard of conduct that avoids even the appearance of impropriety. The Code prohibits (1) improper relationships between pension fund officials and an investment firm's personnel or agents, (2) "revolving door" employment by investment firms of former public pension fund officials and employees, and (3) improper gifts by investment firms to public pension fund employees and officials;
• Enhances Conflicts of Interest Policies: Investment firms are required to promptly disclose and cure any actual, potential and apparent conflicts of interest to public pension fund officials or law enforcement authorities where appropriate.
• Ensures Ongoing Compliance: Investment firms must certify annually to the Office of the Attorney General (and any public pension fund that asks) that they are in compliance with the Code of Conduct.
• Violations of the Code constitute grounds for either termination of an existing investment, disqualification from doing further business with the public pension fund for up to ten years, or both.

Attorney General Cuomo's investigation with respect to the CRF has led to a number of criminal charges to date, including charges against Morris and former CRF Chief Investment Officer David Loglisci, former Liberal Party Chair Raymond B. Harding, and investment advisor Saul Meyer. Meyer, Harding, hedge fund manager Barrett Wissman, and unlicensed placement agent Julio Ramirez, Jr. have pled guilty to Martin Act securities fraud charges for conduct related to the pension fund. Morris and Loglisci are presumed innocent until they are proven guilty in court. As noted above, Elliott Broidy has pled guilty to a felony charge of rewarding official misconduct.

With today's announcement, nine investment firms have now agreed to return approximately $90 million to the CRF. Payments from individuals bring that total to over $120 million for the CRF and the State. Cuomo also issued subpoenas in May 2009 to investment firms and their agents after his investigation found that forty to fifty percent of agents obtaining investments from New York pension funds were unregistered.

The investigation is being conducted by Stacy Aronowitz, Deputy Chief of the Public Integrity Bureau, and Assistant Attorneys General Emily Bradford, Rachel Doft, Noah Falk, and Amy Tully, under the supervision of Ellen Nachtigall Biben, Special Deputy Attorney General for Public Integrity, and Linda A. Lacewell, Special Counsel to the Attorney General, and with the assistance of Richard Jackson, Assistant Solicitor General.

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CUOMO ANNOUNCES GUILTY PLEA OF PROCESS SERVER COMPANY OWNER WHO DENIED THOUSANDS OF NEW YORKERS THEIR DAY IN COURT

William Singler's American Legal Process failed to legally notify individuals that they faced lawsuits, resulting in default judgments against them without the chance to defend themselves

On Friday, Attorney General Andrew M. Cuomo announced that William Singler, owner of Long Island based American Legal Process (ALP), pled guilty to scheme to defraud for failing to provide proper legal notification to thousands of New Yorkers facing primarily debt related lawsuits.

The fraud caused many to default and have costly judgments entered against them without the chance to respond or defend themselves in court.

Singler pleaded guilty in Nassau County Supreme Court to one count of Scheme to Defraud in the First Degree (class E felony). He is expected to be sentenced on March 24 by the Hon. Alan L. Honorof. A lawsuit filed by Cuomo against ALP and Singler earlier this year seeking damages, penalties and injunctive relief remains pending.

"Singler broke the law and then lied to cover it up," said Attorney General Cuomo. "It is not a victimless crime, but one that impacted lives and caused financial hardship for thousands of New Yorkers. Many had their bank accounts frozen, their wages garnished, and liens put on their homes, all because they were denied their day in court."

ALP was primarily hired by lawyers representing plaintiffs in debt collection lawsuits to serve court papers on defendants. However, Singler admitted that ALP process servers, with his knowledge, failed to properly serve the court papers on defendants named in the lawsuits. Further, Singler stated that even though he knew that many of the process servers had failed to properly serve the court papers in accordance with state law, he submitted false affidavits of service stating, under oath, that the court papers had indeed been served.

Attorney General Cuomo thanked the New York State Unified Court System, especially its Internal Audit Unit, for their help in the investigation, which included the review of hundreds of court files and more than 100,000 records of affidavits of service.

Carolyn Coffey, an attorney with MFY Legal Services, said: "MFY commends Attorney General Cuomo for prosecuting ALP and for taking actions to help protect the due process rights of New Yorkers. We hope that the Attorney General's office will continue to investigate process servers and law firms that have made a mockery of our justice system by engaging in 'sewer service.' Thousands of New Yorkers are denied their day in court because of improper service. It's an abuse that must end."

Attorney General Cuomo has also filed a lawsuit against ALP and Singler. According to court papers, between January 2007 and October 2008, ALP claimed to have served 98,000 summons and complaints throughout New York State to residents alleged to owe debt. The Attorney General's investigation revealed that thousands of legal documents were not properly served or served at all. Furthermore, the suit alleges that ALP attempted to cover up its unlawful business practices by filing false affidavits of service. According to the criminal and civil complaints, ALP's conduct included:

• Instances in which ALP process servers claim to have made process-serving attempts in more than one place at the exact same time. In one particular case, a process server claimed to have been at four different addresses at precisely the same moment
• Instances in which an ALP process server claimed to have made process-serving attempts that would have required him to drive more than 10,000 miles in a single day
• Instances in which ALP process servers claim to have served individuals with the summons and complaint before they had even received those documents from Singler and ALP

Additionally, Cuomo is seeking have an estimated 100,000 default judgments against consumers who were not legally served by ALP thrown out. His office has filed suit against 35 law firms and two debt collectors that relied on ALP to notify consumers that they faced debt-related lawsuits. In addition to seeking to vacate all of the default judgments where the sole evidence that the defendant received notice of the suit is an ALP affidavit, the lawsuit asks the court to:

• Order the law firms and debt collectors to inform the New York State Unified Court System of each action in which they used ALP to serve legal process and in which a default judgment was granted
• Notify all the parties in those actions of the existence of this lawsuit and their right to be heard
• Notify the court of the amount of any default judgments taken in any of the relevant actions, as well as whether the debtor paid any amount to satisfy the default judgment.

Additionally, where a default judgment is ultimately vacated, the lawsuit asks the court to direct that proper restitution be made to any debtor who made payment on an improperly obtained default judgment.

The criminal case is being prosecuted by Assistant Attorney General Cydney Kelly under the supervision of the Richard Ernst, Deputy Bureau Chief of the Criminal Prosecutions Bureau, and Gail Heatherly, Bureau Chief of the Criminal Prosecutions Bureau. The investigation was handled by Investigator Sandra Migaj, under the supervision of Deputy Chief Investigator James Domres. The pending civil lawsuits are being handled by Assistant Attorney General James Morrissey, in conjunction with Dennis Donnelly, George Danyluk, Aric Andrejko and Dan Johnson of the Internal Audit Bureau of the New York State Unified Court System.

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Our partner, Jarred I Kassenoff, appeared in yesterday's New York Times Real Estate Section responding to a reader's question.

Here's the piece in its entirety:

 

 

 

December 20, 2009 

Getting Back Security Deposits

By JAY ROMANO

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ATTORNEY GENERAL CUOMO ANNOUNCES $24 MILLION MEDICAID FRAUD SETTLEMENT WITH THREE HOME HEALTH AGENCIES

Companies to Pay for Employing Untrained Home Health Aides

Case Part of AG Cuomo's 'Operation Home Alone'

NEW YORK, N.Y. (December 17, 2009) - Attorney General Andrew M. Cuomo and U.S. Attorney Benton J. Campbell today announced a settlement with three home health agencies resolving Cuomo's lawsuit against one of them and three whistleblower lawsuits that alleged the agencies defrauded the Medicaid program. This is the largest settlement Cuomo's Medicaid Fraud Control Unit has reached with the home health industry in New York State.

The settlement arises from the agencies' use of hundreds of home health aides who had received little or no required training. The agencies sent these aides daily into the homes of New York's elderly, frail and indigent to provide sensitive medical care. As a result, these aides caused Medicaid to be billed for millions of dollars for services they were not qualified to provide.

Under the terms of the settlement, B&H Health Care Services, Inc., known as Nursing Personnel Home Care ("Nursing Personnel"), a Brooklyn-based licensed home care service agency, along with Excellent Home Care Services, LLC ("Excellent") of Brooklyn, and Extended Nursing Personnel CHHA, LLC ("Extended") of Manhattan, both certified home health agencies, will return $23,963,100 to Medicaid, a program jointly funded by the state and federal governments. Of this amount, the State of New York will receive a total of $14,377,860.

"The size of this settlement underscores the seriousness of the allegations and the importance of vigorous oversight of the Medicaid program and the medical care of our loved ones," said Attorney General Cuomo. "Being treated at home is an important option for many New Yorkers, and the companies that provide this service at taxpayer expense have an obligation to ensure that the health care workers they employ are qualified for the job."

"This settlement reflects this Office's commitment to investigate allegations of fraud committed on the Medicare or Medicaid programs, especially when the alleged fraud could impact the standard of care received by New Yorkers in need of medical assistance," said Benton J. Campbell, U.S. Attorney for the Eastern District of New York.

"Our nation's Medicare and Medicaid patients deserve nothing less than quality health care they can depend on," said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. "When home health agencies cut corners to avoid compliance with legal training standards, they seriously undermine the integrity of the care they provide."

Medicaid requires home health aides - who primarily care for elderly patients, administer medication, and provide services such as catheter care, colostomy care and wound care - to successfully complete a training program licensed by the Department of Health or the State Education Department. All such aides must receive a minimum of 75 hours of training, including sixteen hours of supervised practical training conducted by a registered nurse.

Attorney General Cuomo's "Operation Home Alone" has exposed a statewide range of fraudulent practices and schemes in the home health care industry by home health and personal care aides, the schools that train them, and the agencies that recruit and employ them. During the course of Cuomo's industry-wide investigation, MFCU uncovered certain HHA training schools that sold fraudulent HHA certificates to individuals who had not received the required training. The investigation revealed that Nursing Personnel employed hundreds of HHAs with fraudulent certificates from the bad training schools. These HHAs were then assigned to work for Extended and Excellent and were sent daily into the homes of New York's elderly, frail and indigent to provide sensitive medical care. The services provided were paid for by the Medicaid program.

The settlement is the result of a joint investigation led by Attorney General Cuomo's Medicaid Fraud Control Unit, the Civil Division of the United States Department of Justice, the United States Attorney for the Eastern District of New York, and the Office of Investigations for the U.S. Department of Health and Human Services' Office of Inspector General. The investigation included allegations from two
whistleblowers, who filed "whistleblower" complaints under the New York State and federal False Claims Acts, which authorize persons who have uncovered fraud against the government to file a civil action against the alleged wrongdoer and come forward with information about the false claims to the Attorney General's Office or the Department of Justice. The False Claims Acts provide an incentive to whistleblowers, who may share in a portion of money recovered by the government on their claims. The Acts also provide protection against job retaliation for whistleblowing.

To date, the investigation has resulted in the convictions of aides operating with false credentials, schools that sell the false credentials, and licensed agencies that employ these unqualified aides. Other prosecutions are pending.

The settlement resolves allegations that Nursing Personnel, Extended and Excellent knowingly presented, or caused to be presented, false claims to Medicaid for reimbursement for home health care services provided by home health aides who had obtained HHA certificates without obtaining the requisite training. In addition to the payment of the settlement amount, all three agencies will be subject to the terms of a corporate integrity agreement entered into with the New York State Office of the Medicaid Inspector General on their continuing efforts to employ policies and procedures to ensure that all future home health aides ("HHAs") are properly certified. Nursing Personnel must also employ an outside monitor who will report to OMIG and Cuomo's office.

Today's settlements were initiated by lawsuits filed under the whistleblower provisions of the False Claims Act, which allow private citizens to file suit on behalf of the United States for fraud and share in any recovery. Maurice Keshner will receive approximately $1,693,343 from New York's recovery from Nursing Personnel. Deborah Yannicelli will receive approximately $994,080 from New York's recovery from Extended and Excellent.

Along with the rigorous enforcement of current laws through initiatives like "Operation Home Alone," Attorney General Cuomo succeeded in persuading the legislature to pass legislation creating a statewide registry of certified home health aides to be developed and maintained by the state Department of Health. The registry will enhance the State's ability to oversee the industry, provide potential employers with the ability to screen home health aides, and help to detect and deter fraud. A registry already exists for nurse aides that work in nursing homes. By creating a registry for home health aides, the state extends the same protections that exist in the nursing homes to care-dependent persons being cared for in their homes.

New Yorkers are urged to report cases of suspected fraud to the Attorney General's toll-free Medicaid Fraud Hotline, at 1-866-NYS-FIGHT (697-3444).

Attachment:

• Nursing Personnel State Settlement Agreement - Signed
• Extended Home Care State Agreement Final
• Excellent State Settlement Agreement - Signed Final

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ATTORNEY GENERAL CUOMO ANNOUNCES INTERIM COURT ORDER SHUTTING DOWN ALL ACTIVITIES OF THE "UNITED HOMELESS ORGANIZATION"

NEW YORK, NY - - Yesterday, Attorney General Andrew M. Cuomo announced his office has obtained an interim court order shutting down the New York City-based not-for-profit group United Homeless Organization, Inc. ("UHO"). The court order requires UHO to immediately halt all charitable solicitations from the public by any means and freezes UHO's assets, including bank accounts and vehicles.

Last month Attorney General Cuomo filed a lawsuit against UHO, its founder and president Stephen Riley, and its director Myra Walker, alleging that Riley and Walker used the organization to dupe the public into donating cash to fund services for the homeless, when the money was instead used for personal expenses.

"Today's court order prevents UHO from further exploiting the trust and good will of New Yorkers," said Attorney General Cuomo. "But this organization's bad behavior shouldn't undermine the public's willingness to donate to legitimate charities. As my office continues to aggressively monitor the activities of UHO and other charities, New Yorkers should feel even more confident in giving this holiday season."

According to the lawsuit filed in New York Supreme Court, New York County, Riley and Walker had UHO workers set up tables across the city with plastic jugs to collect cash donations, telling sympathetic passersby that donated funds would be used for services for the homeless. However, Cuomo's investigation revealed that money collected went directly to Riley and Walker, was kept by the people working for UHO, or was used to continue the fraud, instead of funding charitable programs or services. The lawsuit charges Riley, Walker, and UHO with engaging in a scheme to defraud and violating New York State's not-for-profit and charitable solicitation laws.

The order was issued by Justice Barbara R. Kapnick of New York Supreme Court. The next court date is scheduled for January 11, 2010.

Attorney General Cuomo's lawsuit charged that UHO:

- Uses donations for personal expenses
According to Cuomo's lawsuit, UHO employees (also called "table workers" or "members") pay Riley and Walker a fixed daily fee for the right to use the UHO tables, jugs, aprons, and other paraphernalia. After paying the fee, the workers then pocket any daily cash donations they receive. In turn, Riley and Walker use the fees collected from workers for their own living and travel expenses, while claiming in annual reports to the Attorney General's office that they received no income from UHO. In addition, Riley has misappropriated UHO assets, including four UHO vehicles that he transferred to his own name.

- Solicits donations with false and misleading solicitations
UHO workers encourage donations with false and misleading statements that the funds will "help the homeless," "feed the homeless," and otherwise go to "charities and different churches" or to support pantries, shelters, and detox centers. In fact, Cuomo's investigation revealed that UHO does not operate any shelters, soup kitchens, or food pantries. It does not purchase food, clothing, or other essential items for distribution to the homeless, or provide social workers or any social services to assist the homeless or fund other charities' efforts on behalf of the homeless. The Attorney General's investigation also found that Riley and Walker failed to secure a public solicitation license for UHO. Despite this, workers are given UHO's incorporation receipt to display at their tables to mislead the public into believing it is a permit.

- Fails to maintain records of money collected and paid out
UHO fails to maintain any records of the hundreds of thousands of dollars of funds collected and pocketed by UHO workers at the tables. In addition, more than fifty percent of the cash withdrawn from UHO's bank account in 2007 and 2008 lacked any documentation explaining the purpose for which the funds were spent. Since UHO failed to properly book its revenues and expenses, it filed false and misleading financial reports with the Attorney General's office.

- Has no governance or financial oversight
UHO is operated by Riley and Walker without any board or financial oversight, which New York State law requires of all charities. Riley and Walker are the only directors on UHO's board, despite legal requirements that New York State not-for-profits have three directors. UHO has not held an election for directors since its incorporation in 1993.

The lawsuit also charged UHO, Riley, and Walker with engaging in a scheme to defraud in connection with charitable solicitations and making false filings with the Attorney General. The lawsuit further charged Riley and Walker with violations of New York's Not-For-Profit Corporation Law for breaches of fiduciary duty in connection with UHO's governance, and for wasting and misappropriating UHO's assets. In addition, the lawsuit charged Walker and Riley with failing to properly administer charitable assets.

The case is being handled by Assistant Attorneys General Patricia Northrop and Carolyn Ellis, Chief of the Charities Bureau Jason Lilien, and Senior Trial Counsel for Social Justice Kathryn Diaz.

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ATTORNEY GENERAL CUOMO ANNOUNCES A SETTLEMENT WITH DELLA SUZUKI TO STOP DECEPTIVE ADVERTISING CAMPAIGN

Plattsburgh dealership's ads misled consumers with offers of zero-percent financing and "guaranteed credit approval," with unreadable foot notes contradicting the offers

PLATTSBURGH, N.Y. -- Attorney General Andrew M. Cuomo today announced that his office reached a settlement with a Plattsburgh-area car dealership stopping it from deceiving customers through false advertisements.

Under a Consent Judgment entered in Clinton County Supreme Court, Della North, Inc. will pay costs and penalties of $7,000 to the state and cease running deceptive advertisements for its Della Suzuki dealership, located on Route 3 in Plattsburgh. The company must also maintain copies of all its advertisements for two years for inspection by the Attorney General's Office.

"Businesses that try to deceive consumers through obscure footnotes and misleading offers are doing a disservice to the public and creating an unfair marketplace," said Attorney General Cuomo. "My office will continue to monitor this company's advertisements to ensure that they are fair and honest."

The Attorney General's investigation found that Della was engaging in advertising that violated federal and state laws, as well as the Attorney General's Automobile Advertising Guidelines.

Attorney General Cuomo's Office found that Della Suzuki's print advertisements specifically:

• Misled consumers by appearing to offer both "0%" financing and a specified low purchase price, when in fact a higher purchase price was charged for vehicles financed at "0%"
• Misled consumers by claiming "Guaranteed Credit Approval ... Everyone is Approved" and that zero-percent financing was available, only to then significantly limit or contradict the offers in nearly-unreadable 6-point font footnotes
• Did not list any APR for financing offers and failed to list the number of payments for the offer

Attorney General Cuomo urges any consumer who believes they are a victim of fraudulent or deceptive business practices to contact his office at 800-771-7755. Auto advertising guidelines for dealers are available online at www.oag.state.ny.us/bureaus/consumer_frauds/pdfs/AdGuidelinesForDealers.pdf

The matter was handled by Assistant Attorney General Glen Michaels under the Supervision of Assistant Attorney General-in-Charge of the Plattsburgh Regional Office Robert Glennon and Deputy Attorney General for Regional Affairs J. David Sampson.

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Dear Lucas,

This time of year gives us a special opportunity to join with our loved ones for a celebration of everything we have to be thankful for.  And New Yorkers have a lot to celebrate: our families, our friends, our traditions, even a World Series title.

But this Thanksgiving, we're coming together during challenging circumstances for many of our fellow citizens. That's why it's so important that we not only reflect on what we have to be thankful for, but also reflect on those among us who are not so fortunate -- and the work that needs to be done to improve the lives of all New Yorkers.   

Thank you for all you do to help those in need and for your friendship and support over the past year.

Happy Thanksgiving from my family to yours,

 

Andrew

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ATTORNEY GENERAL CUOMO'S OFFICE SUES SMITHTOWN NISSAN FOR DECEIVING CUSTOMERS ABOUT SALE PRICES

Dealership regularly inflated prices on contracts beyond what was agreed upon ~Cuomo urges Smithtown customers who believe they were defrauded to contact his office

 

HAUPPAUGE, N.Y. (November 23, 2009) - Attorney General Andrew M. Cuomo today announced that his office has filed suit against Smithtown Nissan for surreptitiously altering contract prices after agreeing to a different price and terms with the consumer.

The Attorney General's office received dozens of complaints about Smithtown Nissan alleging deceptive practices, such as secretly adding unwanted and costly options to sales contracts or simply charging more for the car than what had been agreed to by consumers. The complaints alleged that the dealership, located at 535 Middle County Road in St. James and owned by Joseph O. Rubio, led them to believe they were paying one price for a vehicle, but ended up charging them much more.

The investigation also determined that Smithtown Nissan is in violation of a 2004 agreement with the Attorney General's Office that prohibited it from engaging in deceptive business practices.

"Based on this owner's history, this appears to be a new twist on an old scam," said Attorney General Cuomo. "Consumers agreed to pay one price and then received a rude awakening when they found the contract terms had been changed without their consent."

The Attorney General's investigation also found that the dealership often failed to provide customers with copies of their contracts, as required by state law. The dealership engaged in other deceptive practices at the expense of unsuspecting consumers, including adding undisclosed extended warranties, service contracts, options, and fees without consent. The dealership ignored repeated inquiries from customers seeking to cancel the added-on services and extended warranties.

Cuomo's office is seeking a court order to bar Smithtown from such practices, recover restitution for defrauded consumers, and obtain penalties and costs to the state. He urges any consumer who believes they were defrauded by Smithtown Nissan to contact his Suffolk Regional Office at 631-231-2401.

The matter is being handled by Acting Assistant Attorney General-In-Charge of the Suffolk Regional Office Alan Berkowitz.

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In Matter of Borkan v. State of N.Y., the Department of State declined to renew a private investigator's (PI) license. When he contested the outcome, and filed a special proceeding pursuant to CPLR Article 78, the New York County Supreme Court transferred the case to the Appellate Division, First Department.

The AD1 was of the view there was enough evidence the guy lacked "good character and integrity."

As part of a settlement reached with the New York State Attorney General (AG), a not-for-profit corporation created for the purpose of preventing "cruelty to children" was dissolved.

Apparently, the PI engaged in conduct which falsely suggested the entity, which he controlled, was associated with a police department or other state agency. He also inappropriately distributed badges, identification cards and parking placards with New York's seal.

The AG further found the corporation didn't engage in any legitimate child protective work yet the PI solicited contributions as if it did.

In view of those facts, the appellate court didn't perceive the license declination as "shocking." Nor could it find a basis to disturb the Department of State's decision.

The AD1 really poked that private eye.

To download a copy of the Appellate Division's decision, please use this link: Matter of Borkan v. State of N.Y. 

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In Matter of People of State of New York v. Applied Card System, Inc., former Attorney General Eliot Spitzer, pictured right, filed suit on behalf of New Yorkers who had been solicited for credit cards by Cross Country Bank (CCB).

CCB targeted "sub-prime credit market" consumers -- those who normally wouldn't "qualify for credit under traditional underwriting guidelines and principles."

The then Attorney General alleged that, in violation of New York law, CCB had "misrepresented the credit limits that sub-prime consumers could obtain and that it failed to disclose the effect that its origination and annual fees would have on the amount of initially available credit."

CCB informed customers they would be automatically pre-approved for a credit limit "up to" $2,500, when that number was often as low as $350. CCB supposedly told its customers there would be no late fees or collection calls, but later "clarified that such fees would be imposed and such calls made in certain instances."

There was also deceptive conduct relating to coverage for "death, disability, unemployment, or family leave," in a benefits program, and a "re-aging process" for "severely delinquent cardholders to bring their accounts current through a series of payments." (CCB failed to explain the late charges that would still accrue during that process.)

CCB countered it complied with the Federal Truth-in-Lending Act (TILA) and, according to the Fair Credit and Charge Card Disclosure Act of 1988 (FCCCDA), TILA overrode "any provision of the law of any State relating to the disclosure of information in any credit or charge card application," and preempted New York's Executive Law and Consumer Protection Act.

The Albany County Supreme Court found the Attorney General's claims weren't overridden by TILA and "permanently enjoined [CCB] from engaging in future fraud, deception, and false advertising." On appeal, the Appellate Division, Third Department, affirmed.

When the case reached the New York State Court of Appeals, that court found FCCCDA and TILA only overrode "those state laws that relate to 'disclosure of information,'" including annual percentage rates, annual fees, minimum finances and transaction charges, grace periods, late fees, over-the-limit fees, and the like. New York laws, on the other hand, addressed a credit card company's duty to "refrain from fraud, deception, and false advertising when communicating with New York customers."

Since the Attorney General's claims didn't "relate to the disclosure of credit information" but sought to address an "affirmative deception," our state's unfair trade practices law was unaffected by the federal statutes.

A lone dissenter, Judge Read, thought FCCCDA and TILA "set out comprehensive requirements and established a singular federal mechanism to add to or modify these requirements." Therefore, Read believed New York was prohibited from imposing any of its consumer protections laws on a nationwide industry.

You gotta give the court credit for that.

For a copy of the Court of Appeals' decision, please use this link: Matter of People of State of New York v. Applied Card System, Inc.

 

 

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (0)

Andrew Cuomo is having a breakfast at the Regency Hotel on Tuesday, January 13, 2009, at 8 AM.

The suggested minimum contribution is $1,000.

Here's the text of an e-mail we received from Cuomo's campaign staff:

                                                     # # #

Dear Friends,

As we welcome 2009, New York State Attorney General Andrew Cuomo invites you to attend a breakfast to celebrate a "New Year for New York". Please join us from 8:00am to 9:30am on Tuesday, January 13, 2009 at the Regency Hotel located at 540 Park Avenue to support Andrew's re-election campaign. The invitation is attached HERE. To RSVP, please contact Diana Doukas by phone at (212) 238-3270, by email at Diana@AndrewCuomo.com, or via fax at (212) 238-3100.

We are taking this opportunity to both reconnect with our friends after the holiday season and talk about important issues that will affect New Yorkers in the New Year.  

Please email Diana Doukas at Diana@AndrewCuomo.com or call at (212) 238-3270 if you have any questions or would like to learn more about Andrew Cuomo's re-election campaign.  

Thank you very much for your support! We wish you all the best in 2009.

 

Sincerely, 

 

Andrew Cuomo 2010

www.AndrewCuomo.com

# # #

Posted by Lucas A. Ferrara, Esq. at 10:00 AM | Permalink | TrackBacks (0) | Comments (5)

Here's an invitation we received from New York State Attorney General Andrew Cuomo.

(In view of everything going on, we just may want to down a few martinis before the main event.) 

Posted by Lucas A. Ferrara, Esq. at 10:00 AM | Permalink | TrackBacks (0) | Comments (0)

In Day Wholesale, Inc. v. State of New York, Day Wholesale asked a court to stop New York State's enforcement of an amended version of Tax Law section 471-e.

This law required all non-Indians to pay a tax on cigarettes purchased on Native American reservations and also implemented a process by which Indians who purchased cigarettes for their own use would be exempt from the tax.

Although the law was scheduled to take effect on March 1, 2006, the Department of Taxation and Finance (DTF) failed to "take any action or promulgate any rules or regulations necessary to implement the statute." Despite that omission, the New York State Attorney General prohibited Philip Morris from selling cigarettes to Day Wholesale -- "a wholesale dealer of cigarettes" who operated on land owned by Seneca Nation of Indians -- until there was compliance with the law and tax stamps were placed on cigarettes.

After the Erie County Supreme Court granted Day Wholesale's request for a preliminary injunction, the government appealed to the Appellate Division, Fourth Department, which affirmed.

The AD4 found DTF failed to take all necessary measures to implement the law. Since a coupon system identifying exempt purchasers had not been developed by the statute's effective date, the law's enforcement had to be stayed.

How will the Court of Appeals smoke out this issue?

To download a copy of the Appellate Division's decision, please use this link: Day Wholesale, Inc. v. State of New York

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (3)

Got an invitation to attend a reception honoring Attorney General Andrew Cuomo.

Cuomo will be at Beacon Restaurant on Tuesday, June 10, 2008, from 5:30 PM to 8:30 PM.

There's a slight catch. The event isn't gratis.

Attendees are expected to fork over a minimum of $1000 for the privilege of being in Andrew's presence.

$10,000 gets you a private hour with the A.G. (That's about twice what the "ladies" were charging former Governor Spitzer for the same amount of time. A bit pricey, wouldn't you agree?)

Here's a copy of the actual invite.

To download a copy of the invitation, please use this link: Cocktails with Cuomo

Posted by Lucas A. Ferrara, Esq. at 3:25 PM | Permalink | TrackBacks (0) | Comments (2)

In Academy Street Associates, Inc. v. Spitzer, Academy Street Associates, Inc. (Academy) brought a case to force Elliot Spitzer -- then the Attorney General of the State of New York (A.G.) -- to accept a proposed amendment to a condominium offering plan.

When the New York County Supreme Court dismissed Academy’s claim as untimely, an appeal to the Appellate Division, First Department, ensued.

Even though Academy had originally sought declaratory relief, the action was really a special proceeding (pursuant to CPLR Article 78) seeking to compel a state official to perform his or her legal duties. While such a case could be brought, a four-month “time-bar” or “statute of limitations” period applies and the clock starts to tick the moment the state official fails to perform that function.

In this case, the A.G. had a 30-day period to respond to Academy’s proposed amendment. When the A.G. failed to act within that timeframe, Academy then had four-months to file its Article 78 case. Since almost a year had elapsed before it filed suit, the action was untimely, and AD1 was left with little choice but to affirm the lower court’s decision.

Although Academy argued that the A.G. should not be permitted to assert the “statute of limitations” defense -- as Academy had been repeatedly assured that the proposed amendment was being processed -- the AD1 did not believe those representations “[rose] to the level of affirmative wrongdoing so as to equitably estop [the Attorney General] from asserting the statute of limitations defense.”

With that, Academy’s case was quickly rendered academic.

To download a copy of the Appellate Division’s decision, please use this link: Academy Street Associates, Inc. v. Spitzer 

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (0)

We've been tracking the status of Lopez Torres v. New York State Board of Elections, a dispute which has made it way to our nation's highest court.

In a brief filed with the United State Supreme Court, on August 17, 2007, Andrew M. Cuomo, Attorney General of the State of New York, has argued that any dysfunction with regard to the selection of New York State Supreme Court Justices is not due to any infirmity with the state's Election Laws, but with the party system itself.

Cuomo notes in his brief, as follows:

If the system has been hijacked by party leaders to serve their own interests rather than the party's, it is up to the party members to reign in those leaders. The solution is not, as the lower courts did here, to invalidate the statutes on their face and replace the Legislature's chosen nomination system with an entirely different one.

Andrew, you gotta be kidding!

The ugly reality, of course, is that rank-and-file party members are powerless to combat the whim of entrenched politicians and the established power structure. And, the current convention-based system has been rendered more of a rubber-stamping "exercise" rather than a truly open, deliberative, and "democratic" selection process.

Direct primary elections are the only way to ensure that the people of our great state are afforded a true voice in the selection of judicial officers. Neither nominating conventions controlled by "party hacks," or, an appointive system controlled by "insiders" who are equally suspectible to "corruptive" influences is an acceptable alternative.

For a copy of the State Attorney General's brief, please use this link: Reply Brief for Petitioner Attorney General of the State of New York as Statutory Intervenor

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For our other blog posts on this topic, please use this link: Lopez-Torres

Posted by Lucas A. Ferrara, Esq. at 12:00 PM | Permalink | TrackBacks (0) | Comments (4)

While the interests of landlords and tenants frequently diverge, the relationship can get quite contentious when the former decide to  convert existing residential structures into condominiums or cooperatives. Owners often have a financial incentive to evict existing tenants so that the units can be sold at market rates, while tenants would prefer to remain in their apartments to avoid the cost and inconvenience of having to move. They also seek an opportunity to become “owners” themselves, hoping to profit from purchasing their units at “insider” prices.

According to a recent New York County Civil Court decision there are an array of protections available to tenants in buildings undergoing a conversion.

In 322 West 57th Owners LLC v. Penhurst Productions, the owner wanted to convert his rental building into a condominium and submitted an “offering plan” to the New York State Department of Law for formal review. In furtherance of that process, and in order to prepare the units for sale to the general public, the owner refused to renew the leases of some twenty-three unregulated tenants who resided in the building.

When these tenants refused to vacate, the owner commenced summary holdover proceedings in the New York County Civil Court to remove them from the premises on the grounds that their leases had expired. The tenants asked that the court dismiss these cases because of the protections afforded them by the “Martin Act.”

The Martin Act -- part of New York’s General Business Law -- regulates the conversion of buildings to cooperative or condominium ownership, and has three main steps:

1. the owner must submit a plan for filing with the Attorney General and distribute this plan to the current building tenants;
2. the Attorney General reviews the plan and accepts it for filing, thus allowing the owner to enter into purchase contracts for the units; and
3. once the owner has obtained the requisite number of contracts, the plan is declared effective by the Attorney General.

In “non-eviction” conversion plans, all “tenants in occupancy” on the date the Attorney General accepts the plan for filing hold an “exclusive right to purchase” and may not be evicted on the expiration of their tenancies, and, are further protected against unconscionable rent increases. Here, the tenants argued that as “tenants in occupancy,” the owner could only evict them for non-payment of rent or other “good cause.”

Finding that these tenants were in actual possession and occupying their units at the time the conversion plan was accepted for filing, the Civil Court concluded that the tenants qualified for the Martin Act’s protection and dismissed the 23 proceedings.

According to news reports, 322 West 57th Owners LLC will next be converting these dismissals into an appeal. So, stay tuned.

For a copy of the New York County Civil Court’s decision, please use this link: 322 West 57th Owners LLC v. Penhurst Productions

Posted by Jonathan H. Newman, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

New York's "Lemon Law" compels car manufacturers to repair or replace vehicles which have warrantied defects during the first 18,000 miles or within the first two years of ownership (whichever first occurs).  If, within those parameters, there have been a "reasonable number of attempts," or the vehicle has been out-of-service for a prolonged period of time, the consumer may request a replacement vehicle or refund of the purchase price.

A consumer satisfies this "reasonable number of attempts" standard if the same defect has been subject to repair "four or more times" and "continues to exist," or if the vehicle has been out of service for a total of thirty or more days (also known as the "days-out-of-service presumption").  In response, the manufacturer may demonstrate that the defect "does not substantially impair" the car's value or that the problem was caused by "abuse, neglect or unauthorized modifications or alterations of the motor vehicle."

In Matter of DaimlerChrysler Corp. v. Spitzer, DaimlerChrysler, General Motors, and Saturn objected to the State's interpretation of the law and argued that a purchaser was required to demonstrate that the defect was not corrected after the fourth repair attempt and that the problem continued up to the time the consumer's case was heard. Luckily, the state's highest court didn't buy that analysis:

We do not read the repair presumption as requiring a consumer to establish that the vehicle defect continued to exist until the trial or hearing date. Rather, the plain language of the provision obligates a consumer to demonstrate that the vehicle was subject to repair at least four times and that the same defective condition remained unresolved after the fourth attempt. Therefore, once a consumer has met the four-repair threshold, the presumption arises regardless of whether the manufacturer later remedies the problem. After four attempts, it is presumed that the manufacturer has been given a reasonable number of opportunities to fix the vehicle. The determination of whether a reasonable number of attempts took place for a consumer to recover does not turn on whether the car was ultimately repaired. If the Legislature intended to condition recovery on such a requirement, it easily could have said so.

Clearly, the manufacturers' interpretation of the law would have crippled consumers by requiring them to keep their cars in a defective state in order to preserve their rights.  Since public safety and the interests of innocent purchasers would have not been served by such a reading of the statute, we applaud the outcome of this case.

For a copy of the Court of Appeals's decision in Matter of DaimlerChrysler Corp. v. Spitzer, please click on the following link: http://www.courts.state.ny.us/reporter/3dseries/2006/2006_09322.htm

For additional information about New York's Lemon Law, please click the following link: http://www.oag.state.ny.us/consumer/cars/newcarlemon.html

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*General Business Law § 198-a

By the way, just in case you were wondering, the Online Etymology Dictionary (OED) suggests that the term "lemon" -- normally associated with a yellowy citrus fruit -- may have derived from British slang (from around 1906) meaning "to pass off a sub-standard article as a good one."

For a link to the OED entry, please click here:  http://www.etymonline.com/index.php?term=lemon

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

Here's a case that will turn your stomach.

What would you say if we told you that the New York State of Court of Appeals refused to penalize merchants  who sold "expired" foodstuffs and other aged items to unsuspecting members of the public?

Well, we didn't want to believe it either.  But, sure enough, there's actually a decision from our state's highest court, refusing to characterize the sale of outdated merchandise as a "deceptive or misleading" business practice.

In Matter of Food Parade, Inc. v. Office of Consumer Affairs of County of Nassau, Food Parade doing business as Greenfield Shoprite (Shoprite) was fined $3,600 by the Nassau County Department of Consumer Affairs for offering to sell some 144 expired products (which included vitamins, baby formula, nasal decongestant, and tanning oil). Shoprite appealed the agency's decision claiming no wrongful act had been committed--since the items were "plainly marked as outdated." The Nassau County Supreme Court agreed and canceled the agency's fine.  Incredibly, both the Appellate Division, Second Department, and the New York State Court of Appeals affirmed that outcome.

The appellate courts were of the opinion that the merchant's conduct was not a "deceptive or unconscionable trade practice," as defined by the governing Nassau County statute, with our state's highest court discounting the arguments presented by the local Department of Consumer Affairs, in part, as follows:

The agency argues that in displaying expired products for sale, the supermarket misled consumers by making an "implied representation" that the items were unexpired. That could well be true if the items were undated. Here, however, the dates were expressly represented, and a contrary conclusion as to the age of the items cannot be drawn by implication, so as to form the basis for a penalty. In short, the agency cannot ascribe to Shoprite an implied representation at odds with what undisputedly appears in writing.

While the local law may have been self-limiting in scope, we believe the courts could have relied upon state law--such as the General Business Law--which discourages "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service."

Are we to assume products are not fresh and that they are unfit for use when offered for sale by our local grocer or supermarket? Frankly, such a standard strikes us as nonsensical and works to reinforce questionable business practices.  As Judge Graffeo noted in a dissenting opinion:

Under state law, when a retailer places a product on the shelf for sale to a consumer, it impliedly warrants that the product is fit for its intended uses (see UCC 2-314[2][c]). It was therefore not irrational for the County to conclude that, when a product may not actually be fit for its intended uses because it has expired, its placement on the shelf alongside unexpired products, and without any statement alerting consumers that its fitness cannot be guaranteed, amounts to a misleading practice. A reasonable consumer would presume that a retailer would not continue to display items on its shelves that may no longer be effective, even if used appropriately.

We believe Judge Graffeo got it right.

Have you ever watched how people shop?  While most consumers don't bother looking at labels or expiration dates, some individuals--like senior citizens--have considerable difficulty reading or finding the information. And, frankly, they shouldn't have to bother. The onus should be on the merchant to ensure that products offered for sale are "fit" for consumption and may be safely utilized. Allowing the sale of expired products (without full and complete disclosures) furthers no cognizable public purpose we can identify.

By the way, what do you think the chances are that the Judges of the Court of Appeals would knowingly purchase expired medications or dine on expired foodstuffs?  

For a copy of the Court of Appeals's decision in Matter of Food Parade, Inc. v. Office of Consumer Affairs of County of Nassau, please click on the following link:
http://www.nycourts.gov/reporter/3dseries/2006/2006_07601.htm

For a copy of the Appellate Division's decision in this case, please click on the following link: http://www.nycourts.gov/reporter/3dseries/2005/2005_05300.htm

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (0)

After nine days without power, New York City's residential customers impacted by the recent outage may file claims seeking to recover damages "for actual losses of food spoiled due to lack of refrigeration," up to a maximum of $350. While all claims must be "itemized," losses in excess of $150 are typically required to be accompanied by proof (like cash register tapes, store or credit card receipts, canceled checks, identifying price labels or UPC bar codes from merchandise, and photographs of spoiled items). As a goodwill gesture, though, Con Edison has recently announced that it is waiving its "proof" requirement for the victims of the July 2006 outage. (Isn't that gracious?)

Considering the relatively low compensation being offered, we think the utility's form requires needless information and detail. Con Edison knows full well who was impacted by the outage. Why compound the inconvenience customers experienced--many living nine days without services like air conditioning, elevators or refrigerators--with tedious paperwork that requires them to identify each food item by type, quantity ("pounds, ounces, dozen"), and cost?

And, in our opinion, reimbursement of up to $350 is an insult. Consumers should be fairly and adequately compensated for their losses. Even Attorney General Elliot Spitzer has called for change. In a press release, dated July 24, 2006, Spitzer demanded a hike in compensation levels. In fact, his office recommended an increase in the monies payable to consumers back in March 2000, to no avail.

We believe enough is enough and call for legislative action. With about $12 billion in annual revenues and $25 billion in assets, Con Edison can afford to cut the victims of the July 2006 outage a bigger break.

For a copy of Con Edison's "Residential Claim for Food Spoilage," please click on the following link:
http://coned.com/customercentral/brochures/residential_claim.pdf

For a copy of the Attorney General's press release, dated July 24, 2006, please click on the following link:
http://www.oag.state.ny.us/press/2006/jul/jul24b_06.html

For a copy of the Attorney General's March 2000 report, entitled "Con Edison's July 1999 Electric Service Outage," please click on the following link:
http://www.oag.state.ny.us/telecommunications/blackout/coned.pdf

Posted by Lucas A. Ferrara, Esq. at 8:25 AM | Permalink | TrackBacks (0) | Comments (2)

In our local papers, including today's New York Times, Kevin Burke, Chairman and Chief Executive Officer of Con Edison, has published a full-page open letter addressed to the hundreds of thousands of Queens residents who were recently without power for some nine days. Interestingly, Mr. Burke deliberately skirted words of apology, regret, or remorse. Rather, he expressed an "awareness" of the hardships faced and "gratitude" for our neighbors' "patience and strength." Burke assured that the utility would work to restore public "trust and confidence" and offered the following action plan:

Moving forward, I promise you that we will find out what caused this extraordinary series of events in our system, and we will repair, rebuild and improve the damaged infrastructure.

Well, Mr. Burke, it seems that you won't need to look very far to uncover the outage's cause.

In a press release dated July 24, 2006, Attorney General Elliot Spitzer noted that the problems which precipitated the recent blackout were identical to those which plagued our City back in July of 1999; some seven years ago. In March of 2000, the AG's office identified the effects that intense heat had on the utility's underground cables and offered thirteen specific recommendations, none of which appear to have been implemented by the company since the report's original release. In particular, the AG suggested that Con Edison:

- develop a test for detecting equipment vulnerable to heat stress, overload or other sudden failure;

- establish a protocol for power grid management that includes mandatory reporting to local and state officials;

- improve crisis communications with customers, government and the public, including more accurate reporting of customer power loss and the time needed to bring customers back on line; and

- increase the amount the company pays customers for food and perishables ruined by lack of refrigeration, and compensate customers for appliances damaged by power outages.

With about $12 billion in annual revenues and $25 billion in assets, Con Edison is supposedly one of the nation's largest investor-owned energy companies providing electric, gas and steam service to more than 3 million customers in New York City and Westchester County. In view of the expansive breadth and scope of the company's reach, the utility's failure to heed the warnings of the late 1990's is completely indefensible and cause for concern. It strikes us as a deliberate act of neglect, omission or disregard that warrants pubic rebuke and reproach. And, unlike our City's Mayor--who recently suggested that the utility deserved our "thanks"--we believe there should be formal hearings and the utility's management held accountable (criminally and/or civilly) for the mishap. At a minimum, some penalty or sanction of a substantial nature should ensue.

We're sorry, but expressing "gratitude" and proffering vague assurances that significant infrastructure problems will be addressed in the future (when they have been ignored in the past), just doesn't cut it.

For a copy of the Attorney General's press release, dated July 24, 2006, please click on the following link:
http://www.oag.state.ny.us/press/2006/jul/jul24b_06.html

For a copy of the Attorney General's March 2000 report, entitled "Con Edison's July 1999 Electric Service Outage," please click on the following link:
http://www.oag.state.ny.us/telecommunications/blackout/coned.pdf

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The text of Mr. Burke's open letter follows:

To the Residents of Northwest Queens

The recent power outage in Queens was a painful ordeal for residents and businesses in the area. I am deeply aware of the many hardships you faced--disruption of daily routine, enduring the heat without air conditioning and the uncertainty as to when everyday life would resume. I am grateful for your patience and strength which were severely tested during the outage. While you endured, Con Edison worked hard to restore service, and we will strive to restore your trust and confidence in us.

I am proud of the men and women of Con Edison who work long hours under difficult conditions to serve New Yorkers every day. We thank the crews from other utilities that came to our aid when we needed it most. We also thank the City of New York, especially the Office of Emergency Management and the Police Department, and the Red Cross for providing much needed support services to residents in the area.

Moving forward, I promise you that we will find out what caused this extraordinary series of events in our system, and we will repair, rebuild and improve the damaged infrastructure.

In a crisis affecting thousands, it's easy to forget the Con Edison employees are committed to delivering energy safely and reliably every day. It is a commitment we take seriously.

Sincerely,
s/
Kevin Burke
Chairman and Chief Executive Officer
Con Edison

Continue reading "SHAME ON YOU, MR. BURKE!" »

Posted by Lucas A. Ferrara, Esq. at 5:59 PM | Permalink | TrackBacks (0) | Comments (0)