Phony Allocations by City Council Reported
The New York City Council has appropriated millions in taxpayer dollars in recent years to organizations that did not exist, Council Speaker Christine C. Quinn disclosed on Thursday.
The maneuver, in which funds were set aside for fictitious groups like the Coalition of Informed Individuals and Senior Citizens for Equality, allowed Council members to spend the money later on community programs they supported without obtaining the mayor’s approval.
The practice dates to at least 2001 and encompasses the tenures of the previous two speakers, Peter F. Vallone Sr., and Gifford Miller, according to Ms. Quinn.
Since 2001, about $17.4 million has been budgeted for dozens of fake community groups, according to documents provided by Ms. Quinn’s office.
“I was obviously deeply troubled when I found out about this information,” Ms. Quinn said at a news conference on Thursday, after The New York Post reported on the practice. “I had no knowledge of it; I did not know this was the practice. It’s something I believe is completely inappropriate and should not have gone on, and will no longer go on.”
Ms. Quinn said she alerted investigators from the United States attorney’s office and the city’s Department of Investigation about the practice last fall.
Ms. Quinn said that the investigators were already involved in a broader inquiry when she contacted them. Sources familiar with the investigation say it involves Brooklyn nonprofit organizations that Council members have financed.
At least one Council member, Kendall Stewart, has been subpoenaed in that probe, though he has told news organizations that he is not a target.
Despite the investigations, Ms. Quinn said she believed that the money allocated to phantom groups was ultimately spent on legitimate programs.
Ms. Quinn said that the practice of appropriating money to fictitious groups grew out of a bookkeeping maneuver dating to at least 1988 in which the Council, during the budget process, established holding accounts to keep money in reserve for community programs or other needs that came up in the middle of a given year.
Ms. Quinn, who became speaker in January 2006, said she found out about this practice, absent the use of ghost organizations, in the spring of 2007 during her second budget process and immediately ordered it stopped.
Then last fall, she said, she found that her finance staff was continuing the practice and learned for the first time the staff was using the names of fictitious organizations to set aside the money.
Her two top finance staffers, Michael Keough and Staci Emanuel, have since left her office. Mr. Keough, now a lobbyist with Bolton St. John’s, a lobbying and consulting firm, declined to comment on Thursday. Ms. Emanuel could not be reached.
Ms. Quinn said her office was cooperating with investigators. Her office has also hired an outside law firm, Sullivan & Cromwell, to assist in gathering documents.
Two sources familiar with the investigation said investigators might be trying to determine whether Council members had traded city expenditures for campaign contributions, jobs or consulting services.
Several former or present staff members with the Council’s finance division have been interviewed about how the financing process works.
Mayor Michael R. Bloomberg said he was not aware of the practice.
“I mean, if I’d known there were fake organizations in there, do you really think I would have signed the budget?” he told a reporter.
Comptroller William C. Thompson Jr. released the following statement: “The allegations reported today in The New York Post raise serious concerns. If there were any attempts to subvert the New York City Charter or to hide money in nonexistent organizations, these actions would represent a breach of the public trust.”
His spokesman, Jeff Simmons, declined to answer questions.
Mr. Vallone, who was speaker from 1988 until the end of 2001, said the practice of using holding accounts to set aside reserve funds is common practice in local, state and federal government. He said a common practice might have been to budget a few extra million for snow removal than was likely to be needed, and then to use the extra money for other projects.
“If the money is used for necessary things to help the people of the city, like for police overtime, or like to fund six-day library service, if it’s used for that purpose, that’s great,” Mr. Vallone said in a telephone interview Thursday. “You can call it a slush fund, but as long as it’s legal and as long it’s necessary, it’s a wonderful thing to do. And it’s all part of the budget negotiation process.”
Though records show that fictitious names were used in his last budget, for the 2002 fiscal year, he said he believed that happened only after he stepped down.
Mr. Miller, another former speaker, could not be reached for comment.
Records provided by the speaker’s office show that at least five fictitious accounts were used in the 2002 fiscal year. The practice appears to have escalated from the 2004 fiscal year and on, peaking in the 2007 fiscal year, under Ms. Quinn, when $4.5 million was allocated to 18 phantom groups.
The revelations may have an impact on Ms. Quinn’s political future. She is widely viewed as planning a bid for mayor next year, and among the platforms she has been establishing since becoming speaker has been creating more transparency in the budget process.
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