The New York Daily News by NANCIE L. KATZ - July 20, 2008
The city has launched a probe of top court officials in the Bronx accused of improperly investing $20 million left behind by New Yorkers who died without wills, the Daily News has learned. City Controller William Thompson has blasted Public Administrator John Raniolo for "financially irresponsible decisions" that tied up the assets of 37 estates and that taxpayers now have to cover through city payouts. Sources close to Thompson said the matter had been referred to the city Department of Investigation. "There's concern about the making and the magnitude of the investments," the source said. "Where is the due diligence here? It's mind-boggling." A DOI spokeswoman confirmed the agency was "aware of the matter" but declined further comment.
Even though heirs couldn't get at their money, Surrogate Judge Lee Holzman let politically wired lawyers and accountants collect $2.1 million in fees. Lawyer Michael Lippman, who helped get Holzman elected twice, took $1.9 million in fees before filing legally required affidavits saying what he did to earn them. Heirs have been trying to get their loved ones' estates closed for years, yet Holzman never asked Lippman to provide explanations as to why the cases lingered so long. One began as far back as 1990, another in 1995. Lippman told The News he considered the investments legal and that he did nothing wrong. The public administrator is supposed to put assets in secure investments such as Treasury bills. In 2005, former Public Administrator Esther Rodriguez handed the money to broker JB Hanauer & Co., which put the money in investments called auction-rate securities.
Auction-rate securities offer a slightly higher yield than the more conservative investments the public administrators are allowed to make, but the bonds depend on auctions by banks to be cashed. The market for auction-rate securities froze in February because of the credit crisis. Raniolo continued the practice after Rodriguez resigned in disgrace in 2006. Eric Siber, Hanauer's director of marketing and sales, said he considered the securities "relatively liquid." On Friday, JB Hanauer indicated that $825,000 of the $20million might be released to the public administrator this week. Hanauer broker Jason Reback has been investing for Bronx public administrators for more than 15 years. Both Raniolo and Judge Holzman said they were unaware federal authorities had suspended Reback for 10 days in 2005 for unauthorized trades. Reback did not return calls. email@example.com
NY Daily News Editor's note: Sunday's News exposed how a Bronx judge mishandled dozens of inheritances, allowing cronies to reap lucrative legal fees and leaving taxpayers on the line for millions.