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The law firm was thrust into the spotlight last week after Newsday reported that attorney Lawrence Reich was allowed to earn a $61,459 New York State pension and state health benefits after five school districts reported him as a full-time employee, even though he worked part time for the districts and was a partner at the firm.

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A small-town law firm founded in 1937, Ingerman Smith grew into a legal powerhouse, representing more than one-third of all the school districts on Long Island and racking up millions of dollars in fees.

"It's a seller's market for good legal services," said former Brentwood superintendent Mike Cohen, who used the firm extensively. "They gave great advice, but the meter was always running."

Cohen said that for a district like Brentwood, "going through the [legal] bill every month was a major task.

"On any given day, something happened where you had to talk to the attorneys and they billed for every phone call," he said.

Records show that Ingerman Smith was aware of the arrangement. On Aug. 29, 1995, firm partner Daniel Greenberg wrote a letter to Harborfields thanking the district for accommodating the arrangement.

A federal grand jury opened an investigation into financial practices at five Long Island districts. Those districts were ordered Friday to provide all their records involving financial dealings with Reich and Ingerman Smith.

Calls to the law firm for comment were not returned.

Former New York State Sen. Bernard Smith founded the firm with attorney Percy Ingerman. Starting out in Northport, it expanded to Westchester and Rockland counties in 1997; the firm moved to Hauppauge in 2005.

Today, there are 24 attorneys with the firm, according to its Web site. Its roster includes former prosecutors and village and town officials. One attorney, Peter Johnson, is also deputy Smithtown assessor, earning $89,120 a year there, records show.

Like many Long Island law firms, Ingerman Smith has contributed to political campaigns. State records show it has contributed $7,975 to local and state politicians since 1999.

The firm specializes in educational law and has enjoyed long relationships with school districts. Since 1999, 40 school districts have paid the firm nearly $14 million, according to district records.

And one former superintendent, Baldwin's Kathy Weiss, went to work for the firm as an independent investigator, Cohen said.

Baldwin was one of the five school districts that reported Reich as a full-time employee. It also provided him with health benefits. The other districts were Bellmore-Merrick High School, Copiague, East Meadow and Harborfields.

Fees LI districts paid

The Ingerman Smith law firm was paid more than $13 million between 1999 and 2004 by these Long Island school districts, according to records

[CLARIFICATION: The Brentwood school district started using the law firm of Ingerman Smith in the 2004-05 school year. The district wasn't included in a chart in Newsday yesterday that listed payments to the firm by districts from the 1999-2000 school year to the 2003-04 school year. Pg. A15 ALL 2/18/08]

Port Jefferson $819,489

Patchogue-

Five school districts falsely reported him as a full-time employee, but he worked part time, Newsday reported Friday.

As a result, he was able to earn a public pension of nearly $62,000 and health benefits for life.

At the same time, the districts paid his law firm more than $2.5 million in fees. Now the feds are investigating, Newsday reported yesterday.

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Lawrence Reich, the private attorney who was reported as a full-time employee of five school districts at the same time, must pay back $83,624 to the state for receiving a pension to which he was not entitled, the New York State comptroller's office said yesterday.

Reich's attorney, Peter Tomao of Garden City, said Reich was deciding whether to appeal the decision.

"We are disappointed that the comptroller is taking this position, and we are reviewing our options," he said, adding, "Mr. Reich has always maintained that he acted completely within the law."

Newsday reported in February on Reich's employment arrangement, which enabled him to earn a pension of nearly $62,000 a year and health benefits for life. Records show that at the same time he was reported as an employee, the school districts paid his law firm, Ingerman & Smith, more than $2.5 million in legal fees.

The story sparked investigations by the New York State attorney general, Internal Revenue Service, Federal Bureau of Investigation and the Nassau district attorney. In addition, state Comptroller Thomas DiNapoli launched a review of all attorneys in the state pension system.

In March, DiNapoli ruled that Reich was not entitled to the pension. Yesterday, the office said Reich was entitled to a pension of $4,575 a year because he had worked for the state Education Department from 1966 to 1978. The comptroller's office also revoked pension memberships or rescinded the pension credits of five other attorneys, three from an East Syracuse law firm and two from a Queens law firm. The law firms previously reached settlements with the state attorney general's office.

Lawrence Reich Private attorney Must pay back: $83,624 Has two wasy to repay, as described in leter from state comptroller.

I elect to reimburse the New York State and Local Retirement System for the overpayment of my retirement allowance as follows:

Please check one only:

Enclosed is a lump sum payment in the amount of $83,624.59. Make check payable to the New York State and Local Retirement System. Please note, "Pension Recovery," and your registration number on your check.

Suspension of your allowance until the amount of pension owed is recovered from your benefit. Your retirement allowance will be restored, once recovery of the overpayment has been made. It is anticipated that recovery would be completed as of November 30, 2026.

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FIGHTING PENSION CHEATS: DiNapoli forms unit, outlines tougher rules

Peddie, Sandra. Newsday, Combined editions [Long Island, N.Y] 26 Sep 2008: A.14.

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DiNapoli's announcement came seven months after Newsday reported that five school districts simultaneously falsely reported private attorney Lawrence Reich as a full-time employee, entitling him to a public pension of nearly $62,000 and health benefits for life.

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Saying that "every dime counts, every nickel matters," State Comptroller Thomas DiNapoli yesterday announced tougher reporting rules and a new compliance unit to weed out pension cheats.

"I want to make sure that only the individuals who deserve a state pension get a state pension," DiNapoli said at a news conference in Mineola.

The new rules require local governments statewide to pass resolutions establishing a minimum workday of no less than six hours. The regulations also call for appointed and elected officials and professionals contracted to perform certain services to keep a 90-day activity log and make public the maximum number of days reported to the system each month.

The new compliance unit, which will be staffed by about 20 people, will monitor who is being reported as employees and how their pension credits are being counted, DiNapoli said.

In addition, the comptroller's office will continue its review, begun last spring, of nearly 20,000 professionals in the state pension system, he said.

After the story, the state attorney general, FBI, IRS, U.S. Education Department's Office of Inspector General, the Nassau district attorney and the comptroller all launched investigations.

Within weeks, New York Attorney General Andrew Cuomo announced his office had uncovered similar cases statewide, saying, "It was a great scam, and it went on for years."

[CORRECTION: The New York state comptroller's office revoked attorney Lawrence Reich's pension. A story Friday misstated which office took action. Pg. A13 ALL 9/30/08] His office has revoked Reich's pension and ordered him to pay back $83,624. Reich's attorney, Peter Tomao, of Garden City, said Reich maintains that he acted properly and disagrees with the comptroller's findings.

Several attorneys have argued that their pensions were proper because the comptroller's office approved them. DiNapoli, who was appointed comptroller in February 2007, said yesterday that his office had "taken on face value" the reporting of local governments. "That's why a compliance unit makes sense," he said.

Newsday also reported that members of elected and appointed boards, which may meet as little as once a month, frequently are given health benefits and credits toward a state pension. In addition, records show that at least 14 special districts and one authority have been reporting private attorneys as public employees.

To date, the comptroller's office has revoked pensions or rescinded pension credits of 35 professionals statewide - most of them attorneys. Auditors decided no action was necessary in 680 cases. In all, the comptroller's office is seeking to recoup $950,000 owed to the state retirement fund, officials said.

Cuomo's office, meanwhile, has reached settlements covering the actions of more than 65 attorneys and collected more than $935,000.

In May, Cuomo hosted a rare legislative hearing on the issue in Farmingdale. Several legislators there said they had received an onslaught of letters, calls and e-mails from constituents upset about the scandal.

A month later, the State Legislature unanimously approved a sweeping package of pension reforms. The new legislation, among other things, increases the penalty for pension fraud and closes the loopholes that have allowed some retirees to collect six-figure salaries on top of six-figure pensions. The bill has been forwarded to Gov. David A. Paterson for his signature.

Pension reforms

The state comptroller's pension reforms include the following changes:

Establishes a 20-person compliance unit to oversee pension reporting.

Requires local governments to set a minimum workday of no less than six hours.

Requires elected and appointed officials, and professionals contracted to perform certain services, to keep a 90-day log of activities each term. No pension credits will be awarded if the log is missing.

Requires governing boards to post online or at the main entrance the maximum number of days each official is reporting to the pension system monthly.

The New York State Comptroller's review of professionals in the state retirement fund has yielded the following

319 local governments have been audited for improper pension reporting

35 professionals, mostly attorneys, have had pensions revoked or pension credits rescinded

680 cases that were reviewed required no action

$950,000 is owed to the state retirement fund

Credit: BY SANDRA PEDDIE.

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School districts need lawyers for a range of services - from board counsel to labor negotiator - and Ingerman Smith grew. Currently, it represents 50 to 60 school districts - nearly half the school districts on Long Island. They bill school districts between $150 and $220 an hour, less than their private clients.

"We firmly believe that what we do is a public service to the kids of Long Island," Gross said.

Then on July 19, 2007, the clubby world of educational law imploded at Ingerman Smith.

That day, Gross said, he got a call from an attorney representing Harborfields Superintendent Janet Wilson, who was then - and is still - embroiled in a lawsuit against the school board because the board had declined to renew her contract a month earlier. The attorney told Gross that Wilson planned to notify the state Employee Retirement System that Reich was listed as a full-time employee at the district, even though he had never worked there full-time.

Partners meet with Reich

Gross, about to leave on a long-planned vacation to Italy, was "very upset." Although he said he believed that Reich's part-time status on several district payrolls was legal, he told his partners to meet with Reich to discuss it further and get to the bottom of it.

They did, the next day. For the first time, Gross said, Reich told them that the issue of his employment arrangement at Harborfields had first come up two years earlier when, in a March 3, 2005, letter from Joseph Dragone, Harborfields' then-assistant superintendent for business, Reich was asked how to "correct the record" of his "employment."

Reich also disclosed to his partners, Venator said, that a state audit had uncovered the problem in July 2007.

The partners viewed the disclosures as a betrayal. No longer did it seem that the critical issue was whether Reich had been a part-time or a full-time employee.

"He had never disclosed any of that to us. When you're a partner in a law firm, or any other kind of business, you have to be able to trust your partners," Venator said.

Reich left for the weekend, and the Ingerman Smith partners held an emergency Saturday meeting in the firm's conference room, under the Gustav Klimt posters.

They decided to tell Reich to notify the state Employee Retirement System of what he had been doing. Gross and Venator said another partner even drafted the two letters Reich sent - on his personal letterhead, not the firm's.

Later that month, Gross, who had recently undergone heart surgery and treatment for colon cancer, returned from Italy. Because Reich had still not received any answer from the state, Gross said, "I said, 'Larry, get on a plane and go to Albany and fix it.'"

By mid-August, tensions were still high. The Ingerman Smith partners decided, Venator said, "One way or another, we have to sever the relationship."

By Sept. 30, Reich took a leave of absence, they said. Each side hired a lawyer, and negotiations followed. Reich left the firm in October.

The firm did not file any kind of complaint or formally notify state authorities. Asked why not, Gross shrugged and said, "Jeez, it's a good question."