Claims She Acted Properly
Funding Scam May Hurt Quinn's Hopes

By ARI PAUL

City Council Speaker Christine Quinn's admission April 3 that since 2001 the legislative body had set aside millions of dollars pegged for nonexistent organizations in order to use the money for other purposes raised questions about how the fiscal flim-flam could affect her expected run for Mayor in 2009.

CHRISTINE QUINN: A victim of the fallout?

"It came as a surprise to many people," veteran political consultant George Arzt said in a phone interview. "It is a practice that goes against open government and transparency. And it erodes the public's confidence in what's happening to taxpayer money."

It's No Spitzer Case

But he was unsure that the news would hinder her expected run for Mayor next year, saying that it was not likely to resonate with the public as much as the recent scandals in Albany, which involved state police being used by the Spitzer administration for political gain and the former Governor spending $80,000 on prostitutes before he was forced to resign in disgrace as details about his liaisons emerged.

PETER F. VALLONE: Deception justifiable.

Saying that she was "deeply troubled" by the issue, Ms. Quinn told reporters after the New York Post revealed the phantom allocations that she had been unaware of the problem until last year, when she spoke to Federal investigators and officials in the Department of Investigation. She said the money that was appropriated was used not for nefarious purposes but rather for community programs that Council members supported without having to secure the Mayor's approval.

"I had no knowledge of it; I did not know this was the practice," Ms. Quinn told reporters. "It's something I believe is completely inappropriate and should not have gone on, and will no longer go on."

The New York Times reported that at the time she contacted investigators last fall, they were examining unidentified Brooklyn nonprofit organizations that had received funding from the Council. All told, 18 nonexistent groups were listed as the recipients of $4.5 million in Council funds during fiscal year 2007.

The Speaker said the practice of setting aside money and later allocating it to legitimate groups or unexpected budgetary needs dated back to 1988, when Peter F. Vallone Sr. was in her current job, and continued under his successor in 2002, Gifford Miller. She claimed that she ordered the practice discontinued last spring but that the Council's top financial staffers continued to employ it. Both those aides, Michael Keogh and Staci Emanuel, have since left their positions.

DC 37 Connection

Mr. Keogh, who before coming to the Council was a legislative lobbyist for District Council 37, has since taken a lobbying position with Bolton St. John's, a lobbying firm whose partners include Norman Adler, a former DC 37 political action director who still does work for the union.

The elder Vallone, whose son now holds his Queens Council seat, told The Times that he believed there was nothing wrong with stashing away funds in this manner provided they were ultimately used for legitimate purposes, "like for police overtime, or like to fund six-day library service."

Mayor Bloomberg said he was astonished to learn of the practice and angrily told a reporter he would not have signed off on any budgets that listed nonexistent groups as recipients. Mayoral officials, however, have long used a similar kind of legerdemain to conceal what money they have placed in the budget for collective-bargaining purposes. They do so to make sure that subsequent labor settlements are adequately funded while not tipping the city's hand to unions about how high it is willing to ultimately go to reach contract deals.

Patrick Egan, an assistant professor of politics at New York University, said monetary improprieties had the ability to cause political careers to fizzle. He cited the recent resignation of U.S. Housing Secretary Alphonso Jackson, who is under investigation for giving housing contracts to personal friends.

"You can think of a lot of financial scandals that have brought people down," he said. "It all depends on the context."

Mr. Arzt maintained that it was unclear whether last week's news would still be in the public consciousness next year when the race for the city's top job heats up.

"There's no doubt that her rivals for Mayor will try to exploit this issue, but it's another issue of whether or not it fits in with voters," he said. "I think Chris can get out of it."