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A two-year investigation by a special inspector general appointed by Chief Judge Judith S. Kaye of the New York Court of Appeals has concluded, after auditing about 2,500 court files, that the most lucrative court appointments often go to a select group of well-connected individuals, who are often lawyers. Inspector General Sherrill R. Spatz has referred cases involving about 10 lawyers and 10 judges to professional disciplinary authorities for further inquiry, according to a source close to investigation. Commenting upon the report released Monday, Chief Administrative Judge Jonathan Lippman said he was “distressed and surprised” that the report uncovered instances in which “cronyism, politics and nepotism” had played a role in the appointment process. “It’s not a pretty picture,” he added, but the report should create the foundation for “serious, significant reform.” Proposals by a panel appointed by Chief Judge Kaye to remedy the situation are expected later this week. The panel is headed by Sheila L. Birnbaum of Skadden, Arps, Slate, Meagher & Flom in New York. Chief Judge Kaye appointed Spatz and created Birnbaum’s panel, the Commission on Judiciary Appointment, in January 2000, following publication of a letter written by Democratic party officials in Brooklyn that provided a rare glimpse into the connection between politics and court appointments. The two party officials, Arnold J. Ludwig and Thomas J. Garry, had complained in a letter, which ultimately was reported in newspapers, that they were being frozen out of appointments despite their “unquestioned” loyalty to the party. In its other major findings, the report cited instances in which nonlegal work was billed at expensive hourly rates, and times when lawyers were hired when none were needed. It also found spotty compliance with Office of Court Administration filing requirements. With respect to guardianship cases, the report asserted that many of the recipients of “multiple and lucrative” appointments had “connections to judges, political parties or court-system personnel.” Spatz, and her team of two lawyers and 10 auditors, concentrated their review of guardianship cases in State Supreme Court in Manhattan, where they uncovered cases of well-connected lawyers winning appointments. In one case, a lawyer who had “regularly” been a special master for a judge was appointed by that judge as a guardian in 10 cases and earned $275,000 despite an apparent lack of qualifications. The report noted, for instance, that the lawyer, who had claimed 15 years of experience in elder law, admitted when interviewed by the inspector general’s staff that his experience was limited to the representation of elderly relatives. In another case, two attorneys, both counsel to a county political leader, received more than 110 appointments in guardianship and receiver matters. They were paid about $400,000 for that work, the report stated. Similarly, an attorney who was married to a high-level managerial employee of the court system received appointments in 120 guardianship and receiver cases and was paid a total of about $360,000. The report cited a judge having appointed “a high-ranking local bar association official with whom the judge was friendly” as counsel to an alleged incompetent person. It did not specify names or identify individual cases, but the reference was to Michael Miller, the president-elect of the New York County Lawyers’ Association, who was appointed by Acting Justice Diane S. Lebedeff in Matter of Gerald J. Friedman, 50064/99 (NYLJ, Nov. 30). Neither Miller nor Justice Lebedeff’s attorney, Ben Rubinowitz of Gair, Gair & Conason in New York, responded to a request for comment. In their examination of 417 receivership cases in Brooklyn over five years, the auditors discovered that Ludwig & Garry, whose two principals wrote the letter that touched off the inquiry, was hired as counsel by the receiver in a disproportionate number of cases. The firm was hired as counsel in 189 cases, most of them mortgage foreclosure proceedings, or 74 percent of the cases in Brooklyn where a lawyer was retained by the receiver. The firm was awarded fees of $464,554 for this work, or 78 percent of the total approved by Brooklyn judges to counsel for receivers for the five years ending Dec. 31, 1999. Neither Garry nor Ludwig had any comment, according to their attorney. The report noted that in receivership matters requiring little expertise, Brooklyn receivers who were “recognized experts” nonetheless hired counsel. The report suggested that there was a “financial” motive, because receivers are paid on a percentage basis, which might not amount to much money. But, the report pointed out, counsel to the receiver is paid on an hourly basis. The report also noted that even though counsel are often retained in mortgage foreclosure cases, most “routine” cases “do not necessarily require the appointment of counsel.” It also found instances in which a paralegal who was appointed a receiver hired his own firm for counsel, and “a few” cases in which the receiver hired either himself or his firm as counsel. The report also uncovered a case in Nassau County that reflected how “court appointees in Nassau Surrogates Court frequently have ties to the court and each other.” The report referred to a case where a retired Nassau County Court judge was appointed as guardian ad litem and a retired surrogate was appointed as special referee to oversee discovery. The retired County Court judge, according to the report, in turn hired as his counsel both his daughter and the Nassau County deputy public administrator. All told, about $1.5 million was paid in handling the estate, which was valued at $80 million. The former County Court judge was paid $424,500; his daughter, $44,000; the former surrogate, $192,500; and the deputy public administrator, $215,000, the report said. The report cited several examples of fiduciaries billing at hourly legal rates for pedestrian tasks. One guardian and an employee of a guardian’s law firm billed $850 for a visit to a nursing home to celebrate their ward’s birthday. Another guardian received over $65,000, billing at hourly rates for visiting an eyeglass store, attending a holiday party and inventorying the incompetent person’s wardrobe. Compliance with OCA’s reporting requirement varied. In Brooklyn, the auditors found that only 20 percent of the time did receivers file certifications that they were not closely related to any judge, and that they did not have other appointments which might yield more than $5,000 compensation within one year. The auditors also reported that they did not find any reports by judges regarding fee awards they approve, which are required by OCA rules. In Manhattan, guardians filed forms making the required disclosures in 59 percent of the cases audited. And judges filed reports of their fee approvals in 76 percent of the cases.

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