Local Government Consultants and Conflicts - New York Lawyers and Their Pensions

According to a New York Times article last week, hundreds of lawyers in New York State who have done consulting work for local school districts allowed themselves to be listed as part-time employees and allowed themselves to be enrolled in the school districts' pension systems. According to an article in the New York Law Journal, Attorney General Andrew Cuomo said that the pension deals were also used by special districts, towns, and villages. Not only lawyers were involved in this, but "predominately lawyers."

Allowing yourself to be placed on a payroll and/or given a pension when you have not been an employee is fraudulent. It is illegal, and who would know this more than lawyers with municipal practices?

It is also unethical, a form of using one's position to obtain special consideration. However, in this case, it was done not by government officials, but by government consultants.

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Government consultants are often left out of ethics codes, but even the City Ethics Model Code, which has a separate provision for consultants, does not include them under the special consideration and other conflicts provisions. I will need to rethink this omission.

Lawyers are often used extensively by local governments. Town and city attorneys are often not employees, but are independent lawyers paid by the hour. Should they not have to follow the same ethics rules as officials and employees? Should they not have the same responsibilities? Since they represent many others, they will likely have many more conflicts to disclose and to deal with responsibly. This is true of other sorts of consultants, as well.

The first lawyers caught in the act have said that the law is not clear. The managing partner of one firm is quoted in the New York Law Journal as saying, "The rules and regulations covering the area of employment in this area are at best confusing and not universally applied. Our hope is that the review by the attorney general and comptroller will result in clarity for the future to guide our clients and all municipal entities."

The president of another firm said, "We believe there was nothing improper with our lawyers being placed on the payrolls."

The Attorney General thinks otherwise. He said that lawyers can legitimately be employees of local government units, but he said the rules are clear when people qualify as bona-fide employees and when they are independent contractors. "You're an employee," Cuomo said. "You have an office, a desk, a telephone. You go there. ... This is not a discrete area of the law. This is a very well-known issue. ... It's well litigated."

Cuomo says that what's come out so far is the tip of the iceberg. "In many ways, this situation is the public integrity version of death by a thousand cuts. Ten thousand governments. Little scams. Chronic widespread corruption and fraud. And in the end, the taxpayers bleed millions of dollars." At least one lawyer and one firm have settled. It will be interesting to see what happens, and how honorably New York lawyers deal with this matter.

One last thought. There's a curious question in this sort of case: if you're fraudulently on the payroll or slated for a pension, do ethics codes apply to you as an employee, even when you never were one? Here's the argument:  As an employee, at least in name, you used your position to give yourself a pension you didn't deserve because you weren't an employee. Try to get your mind around that one!

Robert Wechsler
Director of Research-Retired, City Ethics

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