State of New York

Supreme Court, Appellate Division

Third Judicial Department

Decided and Entered: June 25, 2015 519954 

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In the Matter of the Claim of

MICHAEL V. CARDILLO,

Appellant.

MEMORANDUM AND ORDER

COMMISSIONER OF LABOR,

Respondent.

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Calendar Date: May 5, 2015

Before: Garry, J.P., Rose, Devine and Clark, JJ.

__________

Brian De Vito, Rutherford, New Jersey, for appellant.

Eric T. Schneiderman, Attorney General, New York City (Gary

Leibowitz of counsel), for respondent.

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Appeal from a decision of the Unemployment Insurance Appeal

Board, filed January 2, 2014, which, upon reconsideration,

adhered to its prior decision ruling, among other things, that

claimant was disqualified from receiving unemployment benefits

because he lost his employment as the result of an act

constituting a felony in connection with such employment.

Claimant worked as a portfolio manager at a hedge fund for

approximately six years. In October 2009, the principal of the

hedge fund and certain individuals who were employed and/or did

business with the fund were arrested and charged with securities

fraud arising from insider trading activities. As a result, the

hedge fund ceased operations and, on November 2, 2009, claimant

was informed that he was no longer employed. Two days later,

members of the Federal Bureau of Investigation sought his

cooperation in its investigation of those individuals thought to

be involved in the insider trading activities. Claimant agreed
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to cooperate in the investigation. 

In January 2010, claimant applied for and received

unemployment insurance benefits totaling $21,375, which consisted

of regular unemployment insurance benefits, emergency

unemployment compensation benefits (see Pub L 110-252, tit IV,

§ 4001 et seq., 122 US Stat 2323) and federal additional

compensation benefits (see 26 USC § 3304). On January 3, 2011,

however, he pleaded guilty to securities fraud and conspiracy to

commit securities fraud in satisfaction of a federal court

criminal information. Thereafter, the Department of Labor issued

initial determinations finding that claimant was disqualified

from receiving benefits under Labor Law § 593 (4) because he lost

his employment as the result of an act constituting a felony, and

it charged him with a recoverable overpayment with respect to

those benefits that he had received. Following extended

proceedings, an Administrative Law Judge sustained the initial

determinations and the Unemployment Insurance Appeal Board

affirmed the Administrative Law Judge's decision. The Board

granted claimant's subsequent application to reopen and adhered

to its prior decision. Claimant now appeals.

We affirm. Labor Law § 593 (4) provides, in relevant part, 

that a claimant who "loses employment as a result of an act

constituting a felony in connection with such employment" shall

be disqualified from receiving unemployment insurance benefits

during the 12-month period following the cessation of such

employment (see Matter of DiMaio [Commissioner of Labor], 12 AD3d

756, 757 [2004]). Claimant argues that the above provision does

not apply because his employment ended due to the closure of the

hedge fund, not his commission of a felony. We are not

persuaded. The Court of Appeals has stated that "a felony is 'in

connection with' employment for purposes of Labor Law § 593 (4)

if it results in breach of a duty, express or implied, [that] the

claimant owes the employer" (Matter of Sinker [Sweeney], 89 NY2d

485, 488 [1997]). Here, by pleading guilty to securities fraud

and conspiracy to commit securities fraud, claimant clearly

violated a duty that he owed to the hedge fund, regardless of the

actions of its principal, to conduct business in a fair and

honest manner. Moreover, the fact that claimant was not actually

convicted until after his employment ended does not render Labor
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Law § 593 (4) inapplicable, given that the allegations of

wrongdoing specified in the federal court information that formed

the basis for his plea clearly involved activities that claimant

engaged in while working for the hedge fund (see Matter of Powers

[Hartnett], 177 AD2d 833, 834 [1991]). Accordingly, we find no

reason to disturb the Board's decision disqualifying claimant

from receiving benefits based upon Labor Law § 593 (4), nor its

resulting imposition of a recoverable overpayment. We have

considered claimant's remaining contentions and find them to be

unavailing.

Garry, J.P., Rose, Devine and Clark, JJ., concur.

ORDERED that the decision is affirmed, without costs.

ENTER:

Robert D. Mayberger

Clerk of the Court