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Apr 20, 2010 5:34 PMPublication: The East Hampton Press

Questions abound over East Hampton CPF transfers

Apr 20, 2010 5:34 PM

There has been much uproar in recent weeks over a series of financial transactions between East Hampton’s Community Preservation Fund and its capital and general funds in 2006.

East Hampton Town Supervisor Bill Wilkinson and his budget officer, Len Bernard, reported to Suffolk County District Attorney Thomas Spota a month ago that in April 2006 the CPF received a $10 million loan and used only $1.9 million of that money on CPF purchases. Of the remaining money, $2.1 million was reportedly placed in the town’s operating fund and roughly $6 million was placed in the capital fund.

What tipped Mr. Bernard off to the potential for impropriety was the fact that the town received a short-term note for the $10 million in April, but converted that note to a long-term bond just five weeks later, despite the fact that such bond anticipation notes, or BANs, are usually held for a year before they are converted.

That action prompted the new administration to seek guidance from the district attorney, who last year charged former East Hampton Town Budget Officer Ted Hults with seven felony and two misdemeanor counts related to alleged financial improprieties. Mr. Hults, who has postponed every court date since his June 11, 2009 arraignment, is next due in court tomorrow, April 22.

Mr. Bernard said that Mr. Spota has not given the town any indication of what he plans to do with the new information.

One man, Zachary Cohen, has been documenting the town’s financial downfall on his own time over the past two years, and he recently released a document detailing a series of complicated financial transactions in the years before and after the transfers in question took place, shedding more light on the potential uses of CPF money for questionable purposes since before the beginning of former East Hampton Town Supervisor Bill McGintee’s term.

Many errors in administering the program, he said in his report, were likely because the town had little precedent in the correct way to operate a fund that had been in existence only since 1999.

Mr. Cohen, who was recently named a member of the town’s Budget and Finance Advisory Committee, has a master’s degree in business administration.

Mr. Cohen, whose recent series of three documents contains exhaustive research on the history of CPF transfers in the town, has prepared a level-handed argument both for and against the notion that Mr. Hults acted with malfeasance.

He states in his report that, just one day after the $10 million loan was received, the town transferred $7.8 million into an investment account at the Bank of New York. Of that amount, $1.9 million was used for CPF purchases within a week, leaving $5.7 million in the account.

“If this was a transfer into an investment account, it would be hard to condemn without condemning many prior actions,” he wrote.

As for the $2-plus million that was placed in the operating fund, Mr. Cohen detailed a transaction for more than $1 million for the purchase of the Soffer property at the end of March, 2006, that was paid out of one of the CPF lines in the capital fund. He stated in his report that the money for that purchase was likely loaned to the CPF line in the capital fund by the general fund and then repaid to the general fund when the $10 million BAN was issued. Another payment for debt service for the Community Preservation Fund of more than $1.2 million was apparently made by the town’s special districts fund at the end of March 2006. At the end of April, soon after the BAN was issued, Mr. Cohen said that the CPF shows a transfer to the special districts account for the amount of the interest payment.

“I think the above two debts owed by CPF are the most important elements of an explanation of events (whether as a cover-up of an improper transfer, or explaining an inadvertent double payment),” wrote Mr. Cohen in his report. “However, there are other reasons why the supervisor or budget officer might have thought it was proper to transfer $2.1 million from the CPF to an operating fund.”

Mr. Cohen said, however, that “there was no urgent need for this money by the CPF even though the CPF funds were very low. The few upcoming purchases could have been delayed until after the bond sale. And as it turned out, the CPF was able to pay back its debts on its own with money that came in from the Peconic tax receipts just two days ahead of when the bond was sold. Those facts imply that the town had a need to find extra money for the operating funds and this could have been one scheme to do that.”

Indeed, in the two reports that Mr. Cohen recently released, he details the paper trails of numerous schemes designed to keep the town afloat during years that it was hemorrhaging money, including $16 million in advances from the CPF in 2007, of which only $4.6 million have been repaid.

He added that Mr. Hults had shown a tendency for creative accounting that could easily have been improper, including a double transfer from the CPF to the capital fund for $2.5 million in 2005 for the purchase of the Duck Creek Farm.

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Thank you Mr. Cohen for shedding some light on this absurd mess.

Everyone has been looking at this mess from 10,000 feet. It's good to know someone rolled up their sleeves to look at the details. The auditors should be fired for missing all this activity.

The reality that the Town over spent more money is now blatantly obvious, but the great irony is that the Town is continuing to spend more than it has.

What ever happen to balancing the books in a timely manner? ...more
By voter (33), Amagansett on Apr 21, 10 1:07 PM
1 member liked this comment
Mr. Cohen is willing to share publicly the state of the various Town funds and the state of the various audits.
Interesting that "transparency" is coming from a private citizen and not from our Town Board or Supervisor.
I wonder if we will ever get to hear the whole story. And, since the Budget Officer serves at the pleasure of the Supervisor, I wonder if the Town Board members will even get the full story.
By P.A.B. (23), East Hampton on Apr 22, 10 11:52 AM
Beth Young should be canned. She cannot get any facts correct, nor can her editor, Steve Kotz. Ted Hults is not the party postponing Mr. Hutls' hearings, it is the D.A.'s office. Get your facts correct or don't print anything about the matterat all.

Zach Cohen has done an admirable job, but he is still operating from his own personal view about how CPF should be spent. Mr. Cohen served on the Town's CPF Management and Stewardship Committee to outline the Town's CPFM&S Plan, but ...more
By cruiser (8), East Hampton on Apr 23, 10 8:30 PM
Dear Cruiser: Thank you for the comments, especially the closing sentence about how the use of CPF money is still open to wide interpretations. Hopefully, my view is thoughtful and grounded in the actual words of the law, but I am respectful of other viewpoints. I am not always right, but I am happy if my “wrong” interpretation leads to a good discussion. However, the only time I remember when I stood alone on the Management and Stewardship Committee was on the issue of the Amagansett Life Saving ...more
By Zach Cohen (7), East Hampton on Apr 25, 10 8:39 AM
Dear Mr. Cohen:

Thank you for your clarifications. I'm certain that Beth Young used only those quotes [of yours] that would further implicate Mr. Hults as his only trial to date has been in the kangaroo court of the local newspapers for the past 11 months.

However, there needs to be more open discussion of what the future maintenance and stewardship of preserved properties is going to cost each municipality in real dollars, especially in light of the now apparent loss ...more
By cruiser (8), East Hampton on Apr 25, 10 12:38 PM
The Hampton Classic, Horse Show, Bridgehampton