Council Using Public Funds For Slush Fund Defense

The City Council is negotiating with an outside law firm to represent council employees in connection with a probe into the council's finances, prompting an outcry from at least one council member.

Using public funds, the council already has hired the law firm of Sullivan & Cromwell to represent the council in the investigation, and a criminal defense lawyer, Lee Richards III, has been hired to represent the council speaker, Christine Quinn.

A spokeswoman for Ms. Quinn, Maria Alvarado, declined to name the firm in negotiations with the council or say how many employees have been asked to provide information to the U.S. attorney's office and the Department of Investigation.

When asked to explain how the council is allowed to bill the city for the outside legal help, Ms. Alvarado said in an e-mail message that city funds could be used for a city purpose.

"The City purpose in this case is to make sure the facts are determined fully, fairly, and reliably, and that we cooperate fully in the ongoing investigation," she wrote.

A council member who is running for mayor, Tony Avella, said the city should not pay for lawyers to defend a public official or employee who broke the law.

"Who is checking to see if anyone did anything illegal before we are funding their lawyers?" he said. "We shouldn't be paying for them if they did something illegal. Then it's up to them to get their own counsel. This is a very backwards process here."

Mr. Avella said he has been sued in his capacity as a council member and was represented by lawyers in the city's Law Department, but said the Law Department interviewed him before agreeing to represent him.

The U.S. attorney and the Department of Investigation are examining the council's practice of stashing money behind fictitious groups in the city's budget to create a slush fund for the speaker. Since 2001, more than $17 million has been hidden behind fake organizations in the budget, with $4.7 million set aside on Ms. Quinn's watch.

Federal prosecutors indicted two council aides last week for allegedly stealing about $145,000 from a city-funded community organization called the Donna Reid Memorial Education Fund. The aides worked for a council member from Brooklyn, Kendall Stewart. Some $14,000 the city gave the group had been funneled through two phantom nonprofits listed in the budget.

The council has entered into a $95,000 one-year contract with Sullivan & Cromwell that began October 23, 2007. As of February 7, when the last payment was made to the law firm, the council had spent $94,633.25 on legal fees, a source said.

The council is paying $450 for every hour of work performed by an attorney, $155 for every hour of work by a legal analyst, and $125 for every hour of work by a paralegal or professional support staff member, a source said.

It is possible that the legal fees could balloon even further, if council members begin hiring their own lawyers in connection with the investigation and bill the city for the cost.