Long Beach outside counsel unveiled

Nearly lost in the uproar over a state audit of Long Beach in August was the abrupt appearance of a former federal prosecutor secretly hired by the city with taxpayer dollars a year earlier to handle probes into questionable payments to current and retired employees.

Anthony Capozzolo, a former assistant U.S. Attorney,  suddenly stepped forward to respond to a letter from Nassau District Attorney Madeline Singas to the City Council and then-acting city manager Rob Agostisi on Aug. 29, the same day a draft audit by State Comptroller Thomas DiNapoli was delivered to Long Beach officials.

Until then, city management had sidestepped public questions about whether Long Beach was using an outside attorney to look into the payments. The city council never voted to hire Capozzolo and at least three council members say they were never told he was working for the city until he responded to Singas.

Remember back in July 2018 — about three months after residents learned that excessive payments were made to retiring and current employees without enough money in the budget to cover the costs --   State Sen. Todd Kaminsky (D-Long Beach) asked the city council to hire an outside investigator, maybe a former federal prosecutor, to look into the payouts.

But also remember,  then-City Council president Anthony Eramo shut Kaminsky down, cutting him off after three minutes and saying the state probes were sufficient.  The city didn’t want to spend taxpayer dollars for another investigator, Eramo said.

By then, Capozzolo, who charges $450 an hour for his time, had been on retainer for the city for two months, according to his retainer agreement.

Fast forward more than a year to Aug. 6, 2019, when a resident asked at a city council meeting about rumors that Long Beach had, in fact, hired a counsel in relation to the separation payouts. "Is this city paying for any outside lawyers…in connection or association with the various investigations underway by the state comptroller, the district attorney or the U.S. attorney’s office," he asked.

“Not that I’m aware of, no,” replied Agostisi, who had been the corporation counsel when Capozzolo was hired.

By then, Cappozzolo had billed the city for more than $92,000, according to invoices obtained by citizens investigating the payouts.

Capozzolo wrote in his retainer agreement, dated May 25, 2108, that his law firm Lewis Beach Kaufmann Middlemiss PLCC was pleased to furnish legal services to the City of Long Beach in connection with a grand jury subpoena. A copy of the retainer agreement blacked out the issuer of the subpoena. He said he would provide a courtesy discount of $450 an hour for his time and $375 an hour for any associate who works on the case.

The agreement was signed by then Acting City Manager Michael Tangney. Tangney, Agostisi and former City Manager Jack Schnirman, now the Nassau County Comptroller, were among the employees who received questionable separation or “drawdown” payments for unused time.

The Long Beach Herald reported on Aug. 29 that city officials said they did not tell the city council about  Capozzolo’s hiring because the investigation was confidential. The Herald also reported that Greg Kalnitsky, the city’s assistant corporation counsel, did not answer directly when asked if hiring outside counsel required City Council approval. The Herald quoted him as saying “Hiring an attorney qualifies as professional services…and would not require any type of competitive procurement pursuant to NYS General Municipal Law.” (Not mentioned was that the state comptroller has long advised municipalities to seek competitive proposals even for professional services.)

City officials have pointed out that the city charter calls for contracts to be signed by the city manager. But city charter also calls for contracts to be approved by the city council. Only the indemnification section is pretty clear on the hiring of outside counsel. In that section, the charter says the corporation counsel “shall provide” representation or outside counsel to defend employees, officers or volunteers in any civil, state, federal or agency proceedings that involve their city duties.

This defense is only withheld, the charter section says, if the employee is charged with a misdemeanor or greater crime. To date, no charges have been brought in the separation investigations.

But Capozzolo also issued a 23-page response to the state comptroller, not on behalf of individual employees, but as a lawyer representing the city as a whole.

He wrote, “Please consider this letter as a response by the City of Long Beach (the “City”) to a Report of Examination (the “Report”) provided to the City of Long Beach, Examination Number 2019M-68 by the Office of the New York State Comptroller (“Comptroller” or “Office”).

Again, the full Council had not authorized Capozzolo’s response nor reviewed it. The City Council majority has since rescinded the Capozzolo response, but has yet to issue another one.

Perhaps of interest are two recent appellate court decisions—one federal and the other state--that found loan guarantee contracts in the Town of Oyster Bay were not valid because the town board had not approved them.

To support that conclusion, both appellate courts cited a 1941 New York Court of Appeals decision  about a City of Long Beach contract dispute.

New York’s highest court found in Seif v City of Long Beach that only the City Council could authorize the employment of special counsel to represent the city.

It doesn't define special counsel.