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Millions shifted to unregistered charities with ties to Council members

May 5, 2008

The City Council has secretly moved millions of taxpayer dollars to unregistered charities through ghost groups that often have ties to the lawmakers themselves, a Daily News investigation has found.

This latest budgetary sleight of hand allows the Council to get around the city’s requirement that nonprofits receiving public funds must be registered charities.

For years, the so-called “fiscal conduits” haven’t been listed in public records even though they were paid fees with taxpayer funds to handle the distributions.

Three fiscal conduits listed on an internal 2007 Council budget document do not show up on the list of discretionary funds released to the public that year. The three - Graybeards Ltd., East New York Kidspower and Grace Gravesend - were used to move money to the smaller groups.

The Peninsula Performing Art Conservatory got $3,500 through Graybeards. Peninsula has filed federal tax returns and maintains a Web site, but the contact number listed on the site has been disconnected, and e-mail sent to the organization was not returned.

Misuse of City Council funds is the focus of a growing probe by the city Department of Investigation and Manhattan U.S. Attorney Michael Garcia.

Two Council aides have been charged with embezzling $145,000 from a nonprofit organization that got Council funds, and The News has documented four Council members giving money to nonprofits where relatives work or sit on boards.

Speaker Christine Quinn has admitted the Council would park funds in fictitious groups for distribution to real nonprofits later.

And it was only last year that, for the first time, Quinn began requiring that fiscal conduits be listed publicly. She also capped the fees they collect.

“We agree that we need to strengthen the accountability in the budget process overall, as well as with fiscal conduits,” Quinn spokeswoman Maria Alvarado said. The Council is working with city lawyers to “strengthen the rules for the small groups” that get funds through fiscal conduits, she said.

A prime example of a “fiscal conduit” is a nonprofit run by the wife of Councilman Erik Dilan called the North Brooklyn Community Council.

Internal documents obtained by The News show that in fiscal 2005, the North Brooklyn Community Council handed Council funds to other groups. At the time, Jose Luna, the brother of one of Dilan’s then-Council staffers, Jannitza Luna, served on North Brooklyn’s board of directors. In January 2005, Jannitza Luna became its executive director.

By 2006 Luna was given the power “to sign contracts and amendments to contracts and to review claims” for North Brooklyn. Last year, she married Dilan. Starting with the year Luna began running North Brooklyn, Dilan began sponsoring Council funds for the group. In the public record, he pumped $187,000 in member items into the group.

Source: NY Daily News

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