NY Prosecutors Call for Greater Scrutiny of Nonprofits in Wake of Political Scandals

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September 18, 2013; New York World

Some of New York State’s top prosecutors testified at the Moreland Commission to Investigate Public Corruption on Tuesday to discuss measures to curb bad behavior by legislators, and nonprofits figured centrally in testimony.

Among other things, U.S. Attorneys Preet Bharara and Loretta Lynch and Manhattan District Attorney Cyrus Vance Jr. called for more oversight of nonprofit organizations. This article states “Investigations by federal prosecutors have exposed, through subpoenas and wiretaps, the seedy underbelly of Albany deals exempt from disclosure under current law, and politicians’ personal relationships with nonprofit organizations receiving state funding.”

Lynch presented a list of corruption cases prosecuted by her Eastern District attorneys, including the successful convictions of former Senate majority leader Pedro Espada and state senator Shirley Huntley, and the cases now pending against former Senate minority leader John Sampson and Assemblyman William Boyland, Jr., and stated that the Espada and Huntley cases specifically, “illustrate certain weaknesses in…the oversight of nonprofit agencies.”

Both Huntley and Espada have been convicted of embezzlement.

“In both cases, the boards of the nonprofits were packed with cronies of the corrupt politician, and had neither the expertise to run the organizations nor the will to override their political patron,” said Lynch, “The audit function was so lacking as to be virtually nonexistent.”

Further, she said, Espada’s extraordinary influence made it very hard to build a case because employees of the nonprofit in question often refused to cooperate with federal prosecutors. Lynch said that audits performed in a cursory fashion and complicit board members are standard among the nonprofits involved in these corruption cases.

Also cited was the practice of filtering funds and business to politicians in exchange for favorable treatment. Sen. William Boyland, for instance, is being charged with securing a sham consulting job with the nonprofit hospital while securing state grants for the hospital. Imprisoned Sen. Carl Kruger had such arrangement between Medisys and a consulting firm at which he  was a partner.

Vance agreed with Lynch’s call for more scrutiny of nonprofits. “I think that’s proven to be a vulnerable area in terms of fraud,” he said, specifically naming the  “the possibility that relatives or friends can benefit” from politicians’ grants to nonprofit organizations.—Ruth McCambridge