Case Name: In the Matter of James Riches et al., Appellants, v. New York City Council et al., Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 2010-04-15
Citations: 75 A.D.3d 33
Docket Number: 
Parties: In the Matter of James Riches et al., Appellants, v New York City Council et al., Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 75
Pages: 33–50

Head Matter:
[899 NYS2d 177]
In the Matter of James Riches et al., Appellants, v New York City Council et al., Respondents.
First Department,
April 15, 2010
APPEARANCES OF COUNSEL
Norman Siegel, New York City, McLaughlin & Stern, LLP, New York City (Steven J. Hyman of counsel), and Philip Van Burén, New York City, for appellants.
Michael A. Cardozo, Corporation Counsel, New York City (Elizabeth I. Freedman, Leonard Koerner, Spencer Fisher and Stephen Kitzinger of counsel), for respondents.

Opinion:
OPINION OF THE COURT
Freedman, J.
We affirm the motion court's dismissal of this matter (2008 NY Slip Op 32030[U]) as a proper exercise of discretion.
Eight citizens bring this proceeding, pursuant to section 1109 of the New York City Charter, requesting that Supreme Court conduct a summary judicial inquiry concerning the City Council's practice of allocating funds to nonexistent entities during its initial budgeting process. Section 1109 provides that upon application, a Supreme Court justice may conduct an inquiry for the purpose of alerting the public to a "violation or neglect of duty" by government officials. The circumstances giving rise to this application arose when local newspapers, including the New York Post, the New York Times, and the Daily News, published the findings of an investigation conducted by the New York City Department of Investigation concerning allocation of funds by the City Council to fictitious organizations or entities, which respondents call "holding codes," for the purpose of making supplemental allocations to existing organizations.
The motion court made findings that the City Council's practice of holding funds in reserve for community programs had been in existence since 1988. During this time funds al located to these reserve accounts were disbursed during the fiscal year through contracts with city agencies. Starting in 2001 and continuing through 2007, a total of $17.4 million had been budgeted that way, but instead of being put into reserve or holding accounts, the funds were allocated to "holding codes" or fictitious organizations. City Council Speaker Christine Quinn announced that she had ordered this practice stopped in the spring of 2007, but when she discovered that it continued in the fall of 2007 in spite of her directive, she alerted investigators from the United States Attorney's Office and the New York City Department of Investigation. On April 15, 2008, a federal grand jury sitting in the Southern District of New York, after looking into the practice, returned an indictment against two staff members of a New York City Council member for conspiracy to commit mail fraud and conspiracy to commit money laundering in connection with an alleged scheme to embezzle money from a real organization, the Donna Reid Memorial Education Fund, to which the City Council had appropriated funds.
Petitioners contend that the practice of allocations to nonexistent organizations, which has now been publicly disclosed and discontinued, constituted a violation or neglect of duty in relation to the property, government or affairs of the City of New York because it violated New York City Charter § 100 (c) which requires that the budget be itemized for each program, person or institution and be so described in the preliminary and final budget. According to petitioners, this practice also violated the City Council's duty as trustee of the property, funds and effects of the City as set forth in New York City Charter § 1110 and allowed the Speaker to broker agreements for future allocations.
Petitioners seek to examine Mayors Giuliani and Bloomberg, Speakers Vallone, Miller and Quinn, former City Council finance director Michael Koegh, deputy finance director Staci Emanuel, current Council Speaker chief of staff Charles Meara, special counsel to the Speaker Wayne Kwadler and Comptrollers William Thompson and Allan Hevesi to inquire of them concerning their knowledge of and acquiescence in the practice of allocating City Council funds to "fictitious" organizations for the purpose of making later allocations to needy organizations.
Section 1109 of the City Charter, under which petitioners make this request, states as follows:
"A summary inquiry into any alleged violation or neglect of duty in relation to the property, government or affairs of the city may be conducted under an order to be made by any justice of the supreme court in the first, second or eleventh judicial district on application of the mayor, the comptroller, the public advocate, any five council members, the commissioner of investigation or any five citizens who are taxpayers, supported by affidavit to the effect that one or more officers, employees or other persons therein have knowledge or information concerning such alleged violation or neglect of duty.
Such inquiry shall be conducted before and shall be controlled by the the justice making the order or any other justice of the supreme court in the same district. Such justice may require any officer or employee or any other person to attend and be examined in relation to the subject of the inquiry. Any answers given by a witness in such inquiry shall not be used against such witness in, any criminal proceeding, except that for all false answers on material points such witness shall be subject to prosecution for perjury. The examination shall be reduced to writing and shall be filed in the office of the clerk of such county within the first, second or eleventh judicial district as the justice may direct, and shall be a public record" (emphasis added).
The dissent would find, for the first time since the passage of the predecessor to section 1109 of the New York City Charter in 1873 (Laws of 1873, chapter 335, § 109, later section 1534 of the Greater New York Charter and section 889 of the New York City Charter), that a Supreme Court justice's denial of that application was an abuse of discretion.
Respondents City Council and Speaker Quinn moved to dismiss the proceeding on the grounds that the purpose of the Charter provision was to expose municipal corruption or closely related matters and that the dispute here is primarily political. They also contend that the underlying facts, namely the allocation of funds to fictitious organizations, are undisputed and have received extensive publicity. Respondents further contend that appropriate organs of government are addressing the matter, that the total amount involved for all of the seven years involved (2002-2008) amounted to just $17.4 million, and that the City Charter provision asking a judge to conduct such an inquiry is unconstitutional. Respondents aver that a summary inquiry would likely frustrate ongoing criminal investigations.
City respondents contend that this Charter provision, originally enacted in 1873 as a special remedy in the reform charter and incorporated as section 1534 into the Greater New York Charter, was designed to root out corruption after the Boss Tweed era and specified various acts including wrongful diversion or misapplication of funds, or betrayals of trust, as potential subjects of inquiry. The provision was restated in 1936 (NY City Charter § 889, subsequently renumbered as section 1109 of the current City Charter) in a more general statement, namely, "alleged violation or neglect of duty."
The City maintains that the original purpose and scope of the provision remains the same as it was before the language change. The purpose stated in the 1917 case of Matter of Mitchel v Cropsey (177 App Div 663, 670 [1917]) was to expose corruption and wrongful diversion of funds, and not to investigate the propriety of legislative issues. City respondents insist that petitioners have not alleged that funds were actually misapplied, but merely that the budgeting process frustrated certain provisions of the City Charter. They contend that section 1109 was intended to be a vehicle for exposing more venal acts.
While petitioners contend that the 1936 language change stating "any alleged violation or neglect of duty" expanded the scope of inquiry beyond simply exposing corruption, they also argue that the current claims involving "misappropriation of funds" constitute corruption because it gave the Speaker the ability to control council member votes by granting or withholding funds to members' districts. Whether the post-1936 language expanded the scope of the provision, as petitioners claim, or is merely a reiteration of the original purpose, as the City and motion court argue, is not pertinent here because our decision does not turn on an analysis of the change.
City respondents also contend that the provision is flawed in that it assigns an unorthodox and unconstitutional role to Supreme Court justices by imposing a "public trust" upon justices in violation of NY Constitution, article VI, § 20 (b) (1), which provides that a justice of the Supreme Court may not hold any other public office, with certain inapplicable exceptions. Section 1109 asks justices, based on simple affidavits, to engage in a nonjusticiable procedure to create a public record without reaching any findings. The City claims that the justice then becomes an investigator or commissioner and is thrust into a political role or a role that belongs to another branch of government. Respondents invoke Matter of Richardson (247 NY 401 [1928]), wherein the Court of Appeals found that a statute allowing the Governor to use a Supreme Court justice as a "standing commissioner" to investigate charges against public officials was unconstitutional because it imposed another "public trust" (id. at 419).
While several courts have addressed the issue of section 1109's constitutionality, and no court has found it to be unconstitutional, that too is not the basis for our determination here.
The parties agree that, before the current matter, 12 applications were made pursuant to section 1109 or its predecessors. It appears that the inquiry only went forward in one case, Matter of Leich (31 Misc 671 [Sup Ct, Kings County 1900]). With the exception of Leich and Matter of Green v Giuliani (187 Misc 2d 138 [2000]), in the other reported cases, either the nisi prius court or the appellate court found that proper exercise of discretion mandated dismissal of the application. For example, in Matter of Greenfield v Quill (189 Misc 91 [1946]), the court declined to conduct an inquiry concerning whether the respondent could at the same time receive a salary as a council member and receive a salary and expenses as an officer of the Transport Workers Union, since the court had no power to oust a council member and the fact of the two salaries was known. In Matter of Larkin v Booth (33 AD2d 542 [1969]), this Court specifically questioned whether the denial of an ex parte application made under section 1109 was even appealable, but went on to determine that since there was no factual dispute concerning the making of a contract between the New York City Commission on Human Rights and the Metropolitan Life Insurance Company as landlord, the court did not abuse its discretion in denying the application (see also Matter of Larkin, 58 Misc 2d 206 [1968] [holding that whether to grant order for a summary inquiry is purely within the discretion of the court]; Matter of City of New York [Seligman], 179 Misc 505, 511 [1942] [holding that a summary inquiry was a "matter of sound judicial discretion"]). The court in Seligman was asked to inquire into the private use by city officials and public employees of property owned by the City of New York, but found that such inquiry was unnecessary because two extensive investigations had been undertaken, one by the New York City Commissioner of Investigation and one by a Bronx County grand jury.
It is clear that the Charter provision's use of the word "may" when it states that a "summary inquiry . . . may be conducted . by any justice of the supreme court" gives the Supreme Court justice discretion to determine when such an inquiry is called for or appropriate. Implicit in the use of "may" is that the court has such discretion. As noted above, in Matter of Larkin v Booth (33 AD2d 542 [1969], supra), this Court questioned whether denial of an application made pursuant to section 1109 is even appealable. Where, as here, a Supreme Court justice declines to conduct such an inquiry and articulates reasons for refusing to do so, the decision should not be reviewed except in a case where there is a clear abuse of discretion.
The Supreme Court Justice here furnished several legitimate reasons for denying the application. First, the practice of reserving funds in the name of nonexistent organizations had been acknowledged and had received extensive publicity. Second, as did the court in Seligman (179 Misc at 510-511), the court found that the ongoing investigation of the practice by two governmental agencies was sufficient to safeguard the public interest. The court also found that the practice of reserving funds was not the type of transgression that the Charter provision was designed to address (see Mitchel, 177 App Div at 670).
Because the Southern District investigation was ongoing, the United States Attorney had sought to intervene here to seek a 90-day stay of any inquiry until its work was done. Respondents did not oppose a stay, but since it was exercising its discretion to deny the inquiry, the motion court found it unnecessary to decide that issue.
The dissent, while acknowledging that there were other ongoing investigations, opines that those investigations have not answered all of the questions that petitioners wanted to pose to the various witnesses. The dissent also avers that the other investigations do not guarantee the type of exposure that this inquiry would feature. The allegedly unanswered questions include which individuals knew about the practice, when the information became available, and whose influence determined where the $17 million over the seven-year period actually went. Petitioners also want a sworn statement that the practice has ceased. However, it is not clear what purpose would be served at this time in requiring sworn testimony from a host of past city officials about prior allocations of a small percentage of funds to legitimate community organizations. Such an inquiry would only be a source of unnecessary publicity and likely involve undue interference with the City Council's prerogative of maintaining responsibility for its own budget.
For the foregoing reasons, we affirm on the basis that the Supreme Court exercised its discretion appropriately in denying the application for a summary inquiry.
Accordingly, the order and judgment (one paper), of the Supreme Court, New York County (Joan B. Lobis, J), entered July 24, 2008, dismissing this proceeding for a summary judicial inquiry pursuant to New York City Charter § 1109, should be affirmed, without costs.
In Matter of Mitchel v Cropsey (177 App Div 663 [1917], supra), and most recently in Matter of Green v Giuliani (187 Misc 2d 138 [2000]), courts have upheld the constitutionality of the Charter provision. In Mitchel, the Second Department found that section 1534 was generally constitutional'even though it conferred nonjudicial functions upon Supreme Court justices, but it also found that it could not be used to infringe upon legislative functions or for citizens to investigate the propriety or wisdom of legislative questions. That case attempted to challenge the wisdom of a contract that the Board of Estimate and Apportionment entered into on behalf of the City of New York with the New York Central Railroad Company that would alienate lands belonging to the City.
In Green, the trial court granted an application by the Public Advocate pursuant to section 1109 for an inquiry concerning the source of information that the Mayor disclosed in public statements about an individual shot by a police officer. The petitioner claimed that the Mayor had obtained the information concerning the victim from court records that had been sealed and should not have been made available. The court found that the question of how the information had been obtained had not been answered and, relying on Mitchel and Matter of Davies (168 NY 89 [1901]), upheld the constitutionality of the provision as applied to matters involving a judicial purpose (187 Misc 2d at 142-143). The court proceeded to describe other judicial functions that were not of a determinative nature, such as presiding over a grand jury investigation. That decision was not appealed and the issue that was the subject matter of the inquiry was resolved without the inquiry going forward. Similarly in Matter of Leich (31 Misc 671 [1900]), a trial court upheld the constitutionality of section 1534, finding that the immunity conferred was adequate, and ordered public officials to testify.