Sunday, January 31, 2010


Recently I was successful in a hearing where an elderly claimant was disqualified from receiving benefits through misconduct. In order to protect the attorney/client privilege, I will not reveal the specific facts but the administrative law judge properly held that the claimant's failure to follow on three occasions the employer's request to obtain documents, under circumstances where the employee had no control over obtaining the documents, was "not so egregious so as to constitute disqualifying misconduct within the New York State Labor Law". The judge further stated:

"Although an employer may discharge an employer for any legal reason, not every reason to discharge rises to the level of misconduct within the meaning of the Unemployment Insurance Law. It is well settled that absent misconduct, an employee will be entitled to benefits despite the fact that the employer may have fired the employee for valid reasons. (See, Matter of Clum, 51 AD3d 1171 (3d Dept 2008); Matter of DeGrego, 39 NY2d 180 (Ct. App. 1976, affg 46 AD2d 253, revg A.B. Case No. 192293.)"

On a personal note, and although this is purely based on conjecture, some employers may be utilizing the "misconduct" card in order to terminate employment for non-legal reasons.

Saturday, January 30, 2010


This issue has come up several times in recent consultations. I found an excellent discussion on this from the Privacy Rights Clearinghouse/UCAN and here is a cite to their discussion - you may have to cut and paste the cite into your browser:

Friday, January 29, 2010


I have been advised that some attorneys representing claimant's have been asking for consultation fees or advance fees for representation at a hearing but here are the Appeal Board Rules regarding attorney fees:

"Section 460.6 Representative's fee.
(a) When an attorney represents a claimant outside New York City at a board or administrative law judge hearing, the board or administrative law judge shall ascertain whether or not such attorney is appearing for claimant on a fee basis. If benefits are allowed by the board or administrative law judge decision, the board or administrative law judge shall require such attorney, following the mailing of the decision, to submit a written statement of his claim for compensation for such service, setting forth in detail:
(1) the total benefits allowed;
(2) the time spent in providing representation;
(3) the legal and factual complexities involved; and
(4) any other factors which may be deemed relevant to the board's determination of the fee that should be allowed.
When such claim is submitted to an administrative law judge, he shall forward such application, together with his recommendation, to the board for appropriate action. When such claim is submitted to the board, action shall be taken thereon by a board member.
(b) When an attorney or registered agent represents a claimant in New York City at a board or administrative law judge hearing, the board or administrative law judge shall ascertain whether or not such attorney or registered agent is appearing for claimant on a fee basis. If benefits are allowed by the board or administrative law judge decision, the board or administrative law judge shall require such attorney or registered agent, following the mailing of the decision, to submit a written statement of his claim for compensation for such service, setting forth in detail:
(1) the total benefits allowed;
(2) the time spent in providing representation;
(3) the legal and factual complexities involved; and
(4) any other factors which may be deemed relevant to the board's
determination of the fee that should be allowed.
When such claim is submitted to an administrative law judge, he shall forward such application, together with his recommendation, to the board for appropriate action. When such claim is submitted to the board, action shall be taken thereon by a board.
(c) If a claimant, an attorney or a registered agent is dissatisfied with the fee set by the board, such person may apply to the board for reconsideration of the fee. Such application must be made in writing within 15 days of the mailing of the notice of the fee approval. In its discretion, the board may accord the parties an opportunity to be heard. The chairman of the board shall designate a member of the board, an administrative law judge, or any other person to hold such hearing. If the hearing is held before an administrative law judge or an individual who is not a member of the board, such designee shall conduct the hearing and submit a report to the board including his recommendation as to the fee. As soon as practicable after the receipt of the application and on the documents submitted or after the conclusion of the hearing, the board shall issue a decision setting forth the fee awarded and the reason(s)therefor.
d) No attorney or registered agent shall receive any money from a claimant, as payment of a fee for representing such claimant, until the board has approved the fee to be allowed. If an attorney or registered agent shall have received a fee payment prior to the approval of the board, he shall promptly remit to the claimant any amount received which is in excess of the amount allowed by the board. If the attorney or registered agent shall fail to make such remittance, the claimant may submit an application to the board for an order or restitution. The chairman of the board shall then designate a member of the board, an administrative law judge, or any other person to hold a hearing, upon due notice to all parties including the corporate surety, for the purpose of considering the application. If the hearing is held before an administrative law judge or an individual who is not a member of the board, such designee shall conduct the hearing and submit a report to the board, including his recommendation on the application. Thereafter, the board shall issue an order on the application. Such order shall be deemed the order of the board when signed by any member of the board and when duly mailed and filed in the Department of Labor. A copy of said order shall be mailed to all parties in these proceedings, including the corporate surety."

Thursday, January 28, 2010


You are a small business owner operating in corporate form. You are being sued. You can't afford an attorney. What do you do?

As a general rule, you can only appear by an attorney. CPLR 321 (a) provides:

"Attorneys. (a) Appearance in person or by attorney. A party,
other than one specified in section 1201 of this chapter, may prosecute
or defend a civil action in person or by attorney, except that a
corporation or voluntary association shall appear by attorney, except as
otherwise provided in sections 1809 and 1809-A of the New York city
civil court act, sections 1809 and 1809-A of the uniform district court
act and sections 1809 and 1809-A of the uniform city court act, and
except as otherwise provided in section 501 and section 1809 of the
uniform justice court act. If a party appears by attorney such party may
not act in person in the action except by consent of the court."

Thus, unless the action against the small business owner operating in corporate form is a defendant in a small claims or a commercial claim transaction in one of the lower courts, an attorney must be retained. If you fall within the exceptions, you may appear pro se. Sometimes, the clerks of the lower courts are not aware of these exceptions so I would advise small business corporate owners to get a copy of the above statute and a copy of the relevant exception and bring it with them when they file an answer.

Wednesday, January 27, 2010


By now you may have already read about Eric Favetta, a 31-year-old PetSmart employee, who said he was fired for "theft of services" after bringing his dog to work during an overnight shift he'd picked up as a favor to his manager. This story has had a happy ending - PetSmart offered him back his job. But sometimes, and I have witnessed this recently, an employer alleges misconduct for minor infractions under the guise of discrimination or changes the terms of employment that forces X employer to quit: in other words, the employer may believe that X employee should be terminated because of age, sexual orientation, race, religion, whatever, and that is against the law. So employer creates situations that causes X employee to be placed in a position where employee has no alternative but to quit or cause employee to be placed in a position where it is impossible for X employee to follow policy, directives, etc., and then is terminated for misconduct. Be forewarned. Discrimination is hard to prove, and in NY, there is a double benefit for the employer to engage in such conduct as a ruling of misconduct or voluntary separation without cause results in lack of unemployment benefits and, if the employer is denied benefits, that might be used as evidence for the employer in a subsequent discrimination suit or complaint, viz., there is no discrimination and either the Department of Labor and/or an Adminsistrative Law Judge and/or the Appeals Board and/or the Appellate Division, Third Department has ruled the employer quit or was engaged in misconduct.

Tuesday, January 26, 2010


Yesterday was the first day of four Mondays and Tuesdays devoted to the Mortgage Foreclosure Information Fairs held at Nassau Supreme Court lobby. The Nassau County Bar Association has an information booth there to answer foreclosure questions of the 350 homeowners expected to attend each day by invitation of the Court. I will be attending February 2 from 10-12 at the booth. There are several housing counseling agencies available for intakes.

Monday, January 25, 2010


Recently, I saw an article which I will repost here which I will discuss later in terms of how, when you have a deductible hobby, you may be deemed "self -employed" and thus ineligible for unemployment benefits:

"Ten Tips For Deducting Your 'Hobby', Robert W. Wood, Here's how to keep Uncle Sam from claiming your small side business is really a hobby.

Will the IRS pay for your hobby? The short answer is: No. But the more nuanced answer is: "Yes, Uncle Sam will sometimes subsidize your hobby." If, that is, you make it into enough of a real business.

If you want to avoid any IRS hassles, my standard advice is to keep business and personal pursuits purely separate.

But that doesn't work for everyone. We live in a multipurposing culture. When we travel for business, we try to make it a vacation, too, by tacking on extra days at the end or squeezing in some golf or sightseeing between meetings. When we buy a new car, we want it to handle both family trips and office commutes. Today's economic and time demands make multipurposing even more compelling.

Moreover, Do What You Love, The Money Will Follow, isn't just the title of a classic self-help book by psychologist Marsha Sinetar: It's a way of life, and a much talked about one these day. Guy Kawasaki lectures about it, and many others write, blog, speak and even proselytize it.

What does all that have to do with tax law? It raises the question: If you are passionate about something you do, can you treat it as a business on your tax returns?

This is not an idle question. If you lose $20,000 a year in the "business" of breeding, training and caring for whippets, then you can report that loss on a Schedule C and write if off against your salary on your Form 1040. Assuming your combined state and federal income tax rate is 40%, your whippet breeding will really only cost you $12,000, and Uncle Sam and your state will have subsidized your passion.

Read All Comments In Pictures: Convincing Uncle Sam To Subsidize Your Hobby

But you can only write off that loss if you are in the business of breeding--meaning the IRS believes you're in it to make a profit. If your whippets are a hobby, you can't claim a loss from breeding. You must still report any income from whippet sales, but you can only deduct your expenses from whippet breeding to the extent of those sales. Moreover those expenses must be claimed as miscellaneous itemized deductions, usable only to the extent they exceed 2% of your adjusted gross income.

Before you decide to turn your nondeductible hobby into a deductible business, be aware that this is an area of intense scrutiny by the IRS--so much so that last year it issued a new manual to help its agents ferret out taxpayers improperly writing off the costs of hobbies.

With that said, here are 10 tips for getting a more favorable business tax treatment for a pursuit you enjoy.

1. Match income and loss.

The IRS is unlikely to question whether you're engaged in a business if your income from an activity exceeds your expenses. If you make $20,000 breeding, showing and selling whippets but offset it with $20,000 of expenses, you net out at zero. You're still deducting all your expenses, but you're not offsetting them against other income--say, your salary or income from a medical practice. That makes the IRS less likely to complain.

2. Keep good records.

It matters whether you conduct yourself in a businesslike manner. If you keep good records, hold yourself out as running a business, etc.--that will help, no matter how unsuccessful you are at making a profit. Good record keeping is particularly important.

3. Show a profit three years in five.

If you can manage to eke out a profit three years out of every five (or two years out of seven, if your activity is horse breeding), the IRS will presume you're in business to make a profit. That presumption is worth a lot since you probably won't have to mud wrestle with the IRS over a more amorphous "facts and circumstances test" that looks at all the details of how you conduct your hobby/business. In fact, if you meet this presumption, the IRS can still argue that your activity is not engaged in for profit, but the burden shifts to the IRS to prove that the activity is not engaged in for profit. There have been tax cases where taxpayers have beat the IRS in court even though they made a profit only once in 10 or 15 years. But those are tough cases.

4. Plan income and expenses.

Our tax system is annual, and so are profit-and-loss determinations. You may have more control than you think over when you receive income and especially when you incur expenses. That control can help you make a profit three years out of five. You can legitimately bunch expenses by, for example, buying all your equipment in one year, rather than spreading your purchases over two, or by going to more whippet shows in one year than the other. You're less likely to be able to legitimately time your income, but you can sometimes time big payments by delaying sending an invoice, etc. (See "When You Have Income But No Cash.")

5. Delay a profits determination.

A special tax rule allows you to elect to defer the determination of profit motive until the fourth year of your "business," or sixth year in the case of an activity involving horses. To make this election you file a Form 5213, thereby postponing the determination of whether you've met the three-out-of-five-years profit presumption. The idea of the election is to give you time to ramp up and achieve a profit.

Warning: Most advisers don't recommend making this election. Why? It seems to invite audit by flagging the profit-motive issue. Plus, it has the effect of extending the IRS statute of limitations beyond the normal three years, so the IRS can examine all the years in question after the deferral period has passed. (For more about the IRS statute of limitations, click here.)

6. Do it full-time.

Most of the time the IRS goes after a taxpayer who writes off his or her "hobby" against other income from a regular job. If you work 40 hours a week in an office and raise chinchillas on the side, does that mean you have no profit motive and chinchillas are just a hobby? No, you can still have a business that is part-time. In fact, you can have multiple part-time businesses. Nevertheless, the IRS is more likely to consider an activity a business if you do it full-time.

7. Write a business plan.

This may sound silly, but the IRS looks for businesslike activity. One of the auditors' checklist items is a business plan. Write one up, whether or not you stick to it. Revise it periodically. Try to look business-like in all things. For example, the plan might include project goals, start-up costs, advertising, projected results, and parameters for discontinuing an unsuccessful venture.

8. Hire experts and become one.

The more expert you become in a field, and the more you engage other experts, the more business-like you'll look. If you have advanced degrees or otherwise have expertise in the activity, it looks less hobby-like. (If you don't have a degree, but do extensive research on an area, keep records of that research to prove the time and effort you've invested in it.) Similarly, if you hire an expert consultant to help you grow prize orchids, raise toucans, or race mopeds, you'll have one leg up on the ladder to convincing the IRS of your business status.

9. Don't enjoy it too much.

Another oddity relates to pleasure and enjoyment. Despite societal preoccupation with doing what you love, the IRS looks for elements of personal pleasure or recreation as one indication your "business" is really a hobby. If you enjoy what you do too much, it looks more like an avocation, and it may be treated as one.

10. Combine activities.

If a stand-alone activity produces losses, it may be more at risk of being treated as a hobby by the IRS. Yet if it can be combined with a profitable activity, the IRS might have no problem with it. The IRS says that your characterization of what constitutes a single activity will be accepted unless it's artificial and cannot reasonably be supported by the facts and circumstances. That means you can't combine your profits from your main work as a tech consultant with your losses from breeding whippets and report them as a single business activity. But if you have a profitable sideline selling handcrafted dog collars and have started up an unprofitable sideline boarding dogs, you may be able to combine the two on a single Schedule C, making it more likely that you'll show that profit three years out of five.

The bottom line.

As I noted at the start, my standard advice is to keep your business and personal life separate. But especially if you find yourself generating income from something that starts out as a hobby, it can make financial sense to consider becoming more businesslike and treating it as a business on your tax return. Just be sure you don't end up chasing tax benefits at the expense of turning an activity you once loved into a daily grind!

Robert W. Wood is a tax lawyer with a nationwide practice ( The author of more than 30 books including Taxation of Damage Awards & Settlement Payments (4th Ed., 2009), he can be reached at This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional."

Sunday, January 24, 2010


From the Nassau County Bar Association:

"The Surrogates Court is on the cusp of converting to a new computer system, a conversion mandated by OCA. Consequently, there will be necessary disruptions in the court's schedule in the coming months.

From Monday, February 22 through Friday, March 5, the court will be open and receiving papers but will not be able to use our computers. OCA will use this time to do their computer work on the transition from our current system to the new system "UCMS." We will put a mechanism in place to deal with emergency needs for orders to show cause, certificates, etc.

From Monday, March 8 through Friday, March 19, the court will be closed. This will be the time when the actual conversion and training of staff will take place. We have not yet been told how we can accommodate emergency requests or applications, but I am sure that we will be able to do so. For more info contact Michael P. Ryan, Esq. - 516-571-2082."

Saturday, January 23, 2010


What if you engaged in misconduct at the request of your employer? A recent consultation revealed that the employer requested the employee to engage in a minor criminal act (resulting in no arrest but a criminal violation and fine) but then discharged the employee for misconduct. A review of a case revealed the following:

"A breach of trust resulting in termination of employment constitute misconduct, even though the impropriety (falsifying records to signify usual closing time of a store rather than an actual earlier closing) is sanctioned by claimant's immediate supervisor, who also disregards the employer's interest. (A.B. 53,843-55; A-750-1408)"

But in the consultation, the act was allegedly sanctioned by the owner - would that lead to a different result? In any event, bear in mind the following whenever an employer requests an employee to commit a criminal act. Section 593.4 of the Law provides:

"Criminal acts. No days of total unemployment shall be deemed to occur during a period of twelve months after a claimant loses employment as a result of an act constituting a felony in connection with such employment, provided the claimant is duly convicted thereof or has signed a statement admitting that he or she has committed such an act. Determinations regarding a benefit claim may be reviewed at any time. Any benefits paid to a claimant prior to a determination that the claimant has lost employment as a result of such act shall not be considered to have been accepted by the claimant in good faith. In addition, remuneration paid to the claimant by the affected employer prior to the claimant's loss of employment due to such criminal act may not be utilized for the purpose of establishing entitlement to a subsequent, valid original claim. The provisions of this subdivision shall apply even if the employment lost as a result of such act is not the claimant`s last employment prior to the filing of his or her claim."

Friday, January 22, 2010


If you do do not repay your unemployment overpayments due to fraud, there is a tax effect. From the IRS website:

"Topic 203 - Failure to Pay Child Support, Federal Non–Tax Debts, State Income Tax Obligations and Unemployment Compensation Debts

The Department of Treasury's Financial Management Service (FMS), which issues IRS tax refunds, has been authorized by Congress to conduct the Treasury Offset Program. Through this program, your refund or overpayment may be reduced by FMS and offset to pay any past–due child support, Federal agency non–tax debts, state income tax obligations or certain unemployment compensation debts owed a state (namely debts for compensation that was paid due to fraud or for contributions due to a state fund that were not paid due to fraud).

You can contact the agency with which you have a debt, to determine if your debt was submitted for a tax refund offset. You may call FMS at the number below for an agency address and phone number. If your debt was submitted for offset, FMS will take as much of your refund as is needed to pay off the debt and send it to the agency you owe. Any portion of your refund remaining after offset will be issued in a check to you or direct deposited for you.

FMS will send you a notice if an offset occurs. The notice will reflect the original refund amount, your offset amount, the agency receiving the payment, and the address and telephone number of the agency. FMS will notify the IRS of the amount taken from your refund. Contact the agency shown on the notice if you believe you do not owe the debt or you are disputing the amount taken from your refund. If a notice is not received contact FMS at 800–304–3107 or TDD 866–297–0517. The available hours are Monday through Friday 7:30AM to 5:00PM CT. Contact the IRS only if your original refund amount shown on the FMS offset notice differs from the refund amount shown on your tax return.

If you filed a joint return and you're not responsible for the debt, but you are entitled to a portion of the refund you may request your portion of the refund by filing Form 8379, Injured Spouse Allocation. Attach Form 8379 to your original Form 1040, Form 1040A, or Form 1040EZ or file it by itself after you are notified of an offset. If you file a Form 8379 with your return, write "INJURED SPOUSE" at the top left corner of the Form 1040, 1040A, or 1040EZ. IRS will process your allocation request before an offset occurs. If you file Form 8379 with your original return, it may take 11 weeks for Electronic Filed returns or up to 14 weeks from the date of filing if you file a paper return, to process your return."

Thursday, January 21, 2010


Since we have been discussing overpayments, you should be aware of this statute and the very wide definition of wilfully:

"§ 594 Labor Law. Reduction of benefits for false statement.

A claimant who has wilfully made a false statement or representation to
obtain any benefit under the provisions of this article shall forfeit
benefits for at least the first four but not more than the first eighty
effective days following discovery of such offense for which he otherwise
would have been entitled to receive benefits. Such penalty shall apply only
once with respect to each such offense.

For the purpose of subdivision four of section five hundred ninety of
this article, the claimant shall be deemed to have received benefits for
such forfeited effective days.

The penalty provided in this section shall not be confined to a single
benefit year but shall no longer apply in whole or in part after the
expiration of two years from the date on which the offense was committed. A
claimant shall refund all moneys received because of such false statement
or representation made by him."

Now according to the Department of Labor:

"Not every false statement subjects a claimant to the penalties provided in sub. sec. 594. A claimant may provide information (s)he believes to be true, which ultimately proves to be incorrect. In such instances no penalty applies. However, if it is established that the claimant was aware of the true situation, but gave false information, or purposely failed to fully disclose the facts, a determination of wilful misrepresentation should be made. As the courts have held, "'wilful' as used here does not imply a criminal intent to defraud but means 'knowingly' , 'intentionally' , 'deliberately' to make a false statement. (Matter of Vick, 12 AD 2d 120)"

Wednesday, January 20, 2010


Here is a portion of another Appellate Division case in which overpayments are discussed:

IN RE MEISTER, 43 A.D.3d 1243 [3d Dept 2007], 2007 NY Slip Op 06786, 841 N.Y.S.2d 727

Appeal from a decision of the Unemployment Insurance Appeal Board, filed May 5, 2006, which, among other things, ruled that claimant was ineligible to receive unemployment insurance benefits because she was not totally unemployed.

Before: Peters, J.P., Spain, Carpinello, Mugglin and Rose,
JJ., concur.


The Board assessed a recoverable overpayment of $5,778.75 against claimant under the provisions of Labor Law § 597. A majority of this assessed overpayment was attributable to claimant's January 2005 claim (see Labor Law § 597 [3]). To the extent that $1,316.25 was attributable to her November 2002 claim, the Board specifically found that her certifications of no work "constitute[d] willful misrepresentations" such that the entire sum could be recouped under Labor Law § 597 (4) (see e.g. Matter of Volvo [Ross], 57 NY2d 116, 127-128 [1982]; Matter of Kansu [Commissioner of Labor], 36 AD3d 1185, 1187 [2007]), and the forfeiture penalty under Labor Law § 594 was also proper (see e.g. Matter of Small [Commissioner of Labor], 23 AD3d 873, 874 [2005]).

Ordered that the decision is affirmed, without costs.

Tuesday, January 19, 2010


At the Department of Labor website, there is not too much information on overpayments. Here is from the FAQ entitled "After You've Applied For Unemployment: Frequently Asked Questions":

"Q: If I repaid an overpayment will it appear on my form 1099-G?

A: Yes, provided the repayment was received by the Department of Labor during that tax year. If you did not receive any unemployment compensation during the previous calendar year, but repaid an overpayment of benefits, the Form 1099-G is sent to you as the information may be helpful to you in filing your return. Please note that only cash repayments are reported on Form 1099-G. Benefits taken from your claim to repay an overpayment are not cash repayments and are not included in the form."

Monday, January 18, 2010


Next in this discussion is a review of the two regulations promulgated by the Department of Labor regarding overpayments. These are found in ARTICLE 1, REGULATIONS OF THE INDUSTRIAL COMMISSIONER, PART 470 - GENERAL PROVISIONS
(Statutory authority: Labor Law, § 530; Article 18):

§ 470.4 Overpaid unemployment insurance benefits

The Commissioner of Labor shall, as provided for in section 18 of the State Finance Law, waive the assessment of interest and late charges on debts owed which occurred as a result of overpayment of unemployment insurance benefits.

§ 470.5 Setoff against unemployment insurance benefits

Established and outstanding overpaid unemployment insurance benefits shall be collected from a claimant's weekly benefit award as a setoff.

Priority of liquidation. In the event that more than one overpayment is established against an individual claimant, setoff amounts will be debited to such overpayments in chronological order.

Willful overpayment. A setoff of 100 percent of the weekly benefit amount will apply to one or more established and outstanding overpayments attributable to an individual claimant so long as at least one of such overpayments is determined to have been willful.

Non-willful overpayment. A setoff of 50 percent of the weekly benefit amount will apply to one or more established and outstanding overpayments attributable to an individual claimant so long as none of such overpayments are determined to have been willful

Sunday, January 17, 2010


Now in order to help us understand what happens in the event of an overpayment, let us first look at the statute, New York Labor Law Section 597:

" 597. Initial determination. 1. Issuance. The validity of the claim
and the amount of benefits payable to the claimant shall be determined
in accordance with the regulations and procedure established by the
commissioner and, when such determination is issued by the commissioner,
it shall be deemed the initial determination of the claim.
2. Obtaining information necessary for determinations. (a) When filing
an original claim, each claimant shall furnish to the commissioner all
information which the commissioner shall require concerning his or her
prior employment.
(b) Whenever a claimant's base period includes a completed calendar
quarter for which a wage data report is not due or has not been received
and the claimant provides information as required by the commissioner,
the commissioner shall determine such claimant's entitlement and benefit
rate using the information the claimant provided for such quarter.
However, in those instances where the claimant is unable to provide such
information to the commissioner's satisfaction, the commissioner may
request the employer to provide the amount of remuneration paid to such
individual. The commissioner shall notify each base period employer upon
the establishment of a valid original claim, of such claim. If an
employer provides new or corrected information in response to the
initial notice of monetary entitlement, adjustments to the claimant's
benefit rate and adjustments to the employer's experience rating account
shall be prospective as of the date such information was received by the
(c) Notwithstanding paragraph (b) of this subdivision, adjustments to
the claimant's benefit rate and adjustment to the experience rating
charges to the employers' accounts will be retroactive to the beginning
of the benefit claim in the following circumstances:
(i) the new or corrected information results in a higher benefit rate,
(ii) the new or corrected information results in the claimant's
failure to establish a valid original claim, or
(ii) the amount of the previously established benefit rate was based
upon the claimant's willful false statement or representation.
3. Limitation on review of determinations. Any determination regarding
a benefit claim may, in the absence of fraud or wilful
misrepresentation, be reviewed only within one year from the date it is
issued because of new or corrected information, or, if the review is
based thereon, within six months from a retroactive payment of
remuneration, provided that no decision on the merits of the case has
been made upon hearing or appeal. Such review shall be conducted and a
new determination issued in accordance with the provisions of this
article and regulations and procedure prescribed thereunder with respect
to the adjudication and payment of claims, including the right of
4. Effect of review. Whenever a new determination in accordance with
the preceding subdivision or a decision by a referee, the appeal board,
or a court results in a decrease or denial of benefits previously
allowed, such new determination or decision, unless it shall be based
upon a retroactive payment of remuneration, shall not affect the rights
to any benefits already paid under the authority of the prior
determination or decision provided they were accepted by the claimant in
good faith and the claimant did not make any false statement or
representation and did not wilfully conceal any pertinent fact in
connection with his or her claim for benefits."

Saturday, January 16, 2010


Many times I am asked by Claimants who have been determined to have received overpayments if the Department of Labor will sue them for it. So far, this is the only case I have found on point and I welcome comments from others:

83 N.Y.2d 296, 632 N.E.2d 434, 610 N.Y.S.2d 125 (1994).
March 22, 1994
3 No. 49 [1994 NY Int. 038]
Decided March 22, 1994
This opinion is uncorrected and subject to revision before publication in the New York Reports.

In 1988, petitioner was originally found qualified for and began to receive unemployment insurance benefits. The initial determination was overruled by the Unemployment Insurance Appeal Board in December 1989, however, and a notice of determination was sent to petitioner informing her that she was required to repay a total of $2,112 in benefits which had been erroneously overpaid to her. This overpayment was not found to be due to any willful misrepresentation or other violation on the part of petitioner. Petitioner chose not to appeal the Board's determination.

In January 1991, petitioner again applied for and was found qualified to receive unemployment benefits. However, when she began receiving benefits in February 1991, respondent, in accordance with longstanding policy, paid petitioner only 50% of the benefits for which she was eligible, setting off the remaining 50% to recover the previous overpayment. An offer by petitioner to repay the prior overpayment in lesser installments was rejected by respondent.

Petitioner commenced this hybrid declaratory judgment and article 78 proceeding seeking, inter alia, a declaration that respondent's method of recoupment violated Labor Law § 597(4), and that the recoupment policy constituted a "rule" within the meaning of the State Administrative Procedure Act (SAPA) such that respondent was required to propose and promulgate the policy pursuant to the requirements of that Act. Supreme Court dismissed the petition and petitioner appealed. The Appellate Division affirmed (193 AD2d 907), holding that a 1983 amendment to Labor Law § 597(4) restored respondent's common-law right of setoff and that petitioner had no basis to challenge the method by which respondent exercised that right. This Court granted petitioner leave to appeal, and we now reverse.

As to petitioner's first argument on this appeal, that respondent's method of recoupment contravenes Labor Law § 597(4), we agree with the Appellate Division that the 1983 amendment to that statute restored respondent's common-law right of setoff to recoup funds erroneously paid to claimants. We have previously held that, under proper circumstances, an administrative agency possesses a common-law right of recoupment to recover erroneous payment of public funds (see, Matter of Leirer v Caputo, 81 NY2d 455; Matter of Daleview Nursing Home v Axelrod, 62 NY2d 30; see also, Matter of Mayflower Nursing Home v Office of Health Sys. Mgt. of Dept. of Health, 88 AD2d 192, affd 59 NY2d 935), consistent with the strong public policy of this State to recover public funds improperly received (see, Matter of Cortlandt Nursing Home v Axelrod, 66 NY2d 169, 182, cert denied 476 US 1115). Prior to 1983, Labor Law former § 597(4) totally abrogated respondent's right to recoup benefits overpaid through no fault of the recipient, specifying that a new determination resulting in a loss of eligibility for benefits:

shall not affect the rights to any benefits already paid under the authority of the prior determination or decision provided they were accepted by the claimant in good faith and the claimant did not make any false statement or representation and did not wilfully conceal any pertinent fact in connection with his claim for benefits. In 1983, the Legislature repealed this provision (L 1983, ch 415), substituting present Labor Law § 597(4) which provides:

[w]henever a new determination * * * results in a decrease or denial of benefits previously allowed, the commissioner shall have a right of action for recovery of moneys paid pursuant to the prior determination or decision.

Petitioner urges that the legislative grant of a "right of action" in the revised section 597(4) merely authorizes recovery of overpayments through a civil suit, and thus provides no warrant for respondent's method of recoupment by setoff. However, although respondent's statutory remedy to recoup overpaid funds may thus be limited to a civil suit as petitioner contends, we conclude that the Legislature's repeal of the previous ban on recoupment, in conjunction with its statutory recognition of a valid claim against any overpayment, effectively restored respondent's common-law right of setoff to recoup those erroneously paid funds. Here, where the fact and amount of overpayment to petitioner were determined and made definite by a fair adjudicative procedure (cf., Matter of Leirer v Caputo, supra, at 459-460), this right of recoupment may properly extend to the recapture of funds through setoff by respondent in this case.

Although respondent had a right of setoff to recover overpayments of benefits to petitioner, we disagree with the view of the majority at the Appellate Division that petitioner has no standing to challenge the manner in which respondent exercises that right. Respondent argued successfully before the Appellate Division that, since respondent could have withheld 100% of the second award of benefits until the overpayment was recouped, petitioner was not aggrieved by respondent's policy to retain only 50% of those benefits. We agree with the partially dissenting opinion of Justice Yesawich at the Appellate Division that the existence of the right of setoff must be seen as distinct from the particular manner in which the administrative agency here chose to implement that right. In the absence of any applicable statutory exception, the procedure chosen by the agency to implement its right of setoff is circumscribed by the rulemaking requirements of SAPA. It follows that if under SAPA respondent's 50% recoupment policy required the promulgation of a rule, petitioner, to whom the policy is being directly applied, has standing to challenge respondent's noncompliance with SAPA, notwithstanding that a more stringent policy might have been implemented.

Section 102(2)(a)(i) of SAPA defines a "rule" as "the whole or part of each agency statement, regulation or code of general applicability that implements or applies law, or prescribes a fee charged by or paid to any agency or the procedure or practice requirements of any agency *** ". In Matter of Cordero v Corbisiero (80 NY2d 771), we adopted for purposes of determining what constitutes a "rule" under SAPA the criterion for constitutional filing purposes articulated in Matter of Roman Catholic Diocese of Albany v New York State Dept. of Health (66 NY2d 948) embracing "a fixed general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers" (id., at 951). Respondent's 50% setoff policy for nonwillful overpayments is a rigid, numerical policy invariably applied across-the-board to all claimants without regard to individualized circumstances or mitigating factors, and as such falls plainly within the definition of a "rule" for SAPA purposes. The policy cannot be characterized as concerning only the internal management of the agency (see, SAPA § 102[2][b][i]), as the recoupment undertaken thereby directly and significantly affects that segment of the public over which respondent exercises direct authority (cf., Krauskoph v Perales, 139 AD2d 147, affd 74 NY2d 730 for reasons stated below). We therefore conclude that the policy, in its present form and manner of application, is subject to the rulemaking procedures set forth in SAPA (see, SAPA § 202).

Respondent's setoff of 50% of petitioner's benefits having been accomplished pursuant to an administrative rule not properly promulgated under SAPA, petitioner is entitled to a determination and recovery of the amount of benefits which would not have been set off had petitioner's individual facts and circumstances at the time the benefits were payable been considered by respondent. Accordingly, the order of the Appellate Division should be reversed, with costs, respondent's 50% setoff policy declared invalid and the case remitted to Supreme Court with directions to remand to respondent for further proceedings in accordance with this Opinion.

Order reversed, with costs, respondent's 50% setoff policy declared invalid and case remitted to Supreme Court, Albany County, with directions to remand to respondent for further proceedings in accordance with the opinion herein. Opinion by Judge Levine. Chief Judge Kaye and Judges Simons, Bellacosa, Smith and Ciparick concur. Judge Titone took no part."

Friday, January 15, 2010


Yesterday, I was a Volunteer Lawyer at the Nassau County Mortgage Foreclosure Clinic and was faced with the following general categories of clients seeking advice:

1) Clients in default of mortgage foreclosure action.

2) Clients just served with mortgage foreclosure actions.

3) Clients not in default of mortgage but seeking advice on loan modification.

All of them had this in common: none of them first sought the assistance of a certified housing counselor for a loan modification. HUD-approved housing counseling agencies are available to provide you with the information and assistance you need to avoid foreclosure. As part of President Obama's comprehensive Homeowner Affordability and Stability Plan (HASP), you may be eligible for a special Making Home Affordable loan modification or refinance, to reduce your monthly payments and help you keep your home. If you need help understanding the Making Home Affordable programs, find a counseling agency in your area that will provide you with free foreclosure prevention services. If you are eligible for the loan modification or refinance program, the counselor will work with you to compile an intake package for your servicer. Foreclosure prevention counseling services are provided free of charge by nonprofit housing counseling agencies working in partnership with the Federal Government. These agencies are funded, in part, by HUD and NeighborWorks® America. There is no need to pay a private company for these services.

Thursday, January 14, 2010


Yesterday, I was a Volunteer Attorney again and I note the following:

1) Several homeowners did not seek our assistance but went into conferences themselves. We are volunteering our advice at no cost to homeowners. Ask for help - the bank's lawyer may sometimes be of help, sometimes not - but the bank's lawyer is not your attorney but the bank's attorney.

2) Many homeowners are seeking loan modifications on their own. There are certified home counselors to assist you in seeking loan modifications also volunteering at the conferences. You can also get referrals for housing counselors from the Nassau County Bar Association, where I will be this afternoon at the Mortgage Foreclosure Clinic, along with housing counselors.

Again, ask for help.

Wednesday, January 13, 2010


Yesterday I received a favorable decision on a hearing where a determination of voluntary separation without good cause was reversed and the Claimant will now be receiving benefits. The Claimant was laid off but the Employer offered other positions. The Claimant probably could have received benefits by just applying for benefits then but attempted to maintain employment by trying the other positions until the Claimant realized that the offered positions were completely unsuitable due to lack of skill, health, change in duties, etc. The judge also noted that the Claimant also suffered a "substantial change" in hours and rate of pay and thus the Claimant had "good cause to have resigned under the New York State Unemployment Insurance Law"

Tuesday, January 12, 2010


By clicking on the title above, is an instruction sheet from the Nassau County Lawyers Project regarding certain Landlord/Tenant matters. Today I just want to discuss an issue regarding an Order To Show Cause to stay the 72 hour notice of eviction. I have seen situations where Tenants have not filed the required bond with the clerk, waiting until the hearing date to see if they can get additional time, thinking that they should not waste the bond money if Tenant does not get the additional time needed. In such situations, there is no automatic stay until you go to court, have a hearing, and the court may not grant the stay. My advice: when you seek the Order To Show Cause, post the bond, make sure the Sheriff is served, and keep a certified copy of the stay or a sealed copy of the Order To Show Cause in case any one from the Sheriff's Department tries to evict.

Monday, January 11, 2010


Just a reminder of another free clinic at the Nassau County Bar Association which is tonight, Monday, January 11, 2010; 7:00 – 9:00 p.m. Learn about laws affecting: Pets and rental housing, co-ops, condos, defenses to eviction proceedings, Protecting individuals with service animals, Including the family pet in your estate plan, Your rights in a dangerous dog proceeding, Veterinary Malpractice and Negligence, The Pet Lemon Law, Animal Custody and Visitation in Divorce, Animal Cruelty and Abuse, Evacuation plans for your pets. Animal Cruelty and Abuse. Spay/Neuter Laws. Animal Custody and Visitation in Divorce Evacuations plans for your pets. Register or more info at Nassau County Bar Association, 15th & West Streets, Mineola, NY 11501, 516-747-4070.

Sunday, January 10, 2010


Just a reminder of two things: on January 13, I will again be a Volunteer Lawyer at Nassau County Supreme Court for any Mandatory Settlement Conferences scheduled for that date at 11am. Housing counselors from Nassau County are in attendance as well to assist in the conferences and to assess eligibility for loan modifications. And on January 14, Nassau residents caught in the growing mortgage foreclosure crisis can have their questions answered by attorneys, including myself, at a free clinic sponsored by the Nassau County Bar Association at the NCBA headquarters, 15th and West Streets, Mineola, NY. Attorneys have volunteered to provide one-on-one guidance, advice and direction to any Nassau County homeowner who is concerned about foreclosure matters or is already in the foreclosure process involving property in Nassau County. Attorneys have volunteered to review individual foreclosure issues with Nassau homeowners, help them sort things out, and give advice or refer them to agencies and programs, right in the same room, that may be able to help. This is not legal representation. The attorneys will help the homeowner find out if indeed, they need a credit counselor or a lawyer, and get them in touch with available resources. In addition to meeting one-on-one with a volunteer attorney, housing counselors from the Nassau County Homeownership Center and representatives from Nassau/Suffolk Law Services -- which provides free legal services for those who meet certain income guidelines -- will be on hand to provide assistance. Reservations are required by calling the Bar Association at 516-747-4070 between 9:30 a.m. - 4:30 p.m.

Saturday, January 9, 2010


I am still focusing one what is happening in mortgage foreclosure proceedings and about another case in which a mortgage agreement was voided. The following is from an article from the January 8, 2010 New York Law Journal which was forwarded to me from the Nassau County Bar Association:


Judge Faults Lack of Counseling to Homeowner, Saying She Lacked Capacity to Enter Into Mortgage

Mark Fass


A Queens judge has voided a mortgage agreement between a mortgage company and an elderly homeowner suffering from chronic paranoid schizophrenia, ruling that the company failed to uphold its obligation to counsel the woman regarding the loan as required under the National Housing Act of 1996.

"There is no evidence that [Hermina] Brunson understood the terms of the mortgage or the Counseling Certificate that she signed," Supreme Court Justice Charles J. Thomas (See Profile) wrote in Matter of Doar, 31393/07. "Under the circumstances of this case any responsible counselor would have unearthed Ms. Brunson's mental illness and her delusions regarding her house and determined that [she] lacked the capacity to enter into the mortgage, or, at the very least, that further counseling was needed." (The decision appeared on page 42 of the print edition of yesterday's Law Journal.)

Justice Thomas voided the $375,000 mortgage agreement between Ms. Brunson and Financial Freedom Senior Funding Corp., a California-based specialist in reverse mortgages.

However, the judge ordered Ms. Brunson's Article 81 guardian to reimburse the loan company for expenses it paid related to her ownership rights, such as taxes and water charges.

The action was initiated in 2007 by New York City's Commissioner of Social Services, Robert Doar, who sought to block a foreclosure action initiated by Financial Freedom.

At the time, Financial Freedom was a subsidiary of IndyMac Bank, the Southern California bank seized by the FDIC in 2008. The company is now owned by IndyMac's successor, OneWest Bank.

Ms. Brunson, who purchased the eastern Queens single-family home in 1974, entered into two mortgage agreements with Financial Freedom, a $300,000 reverse mortgage in 2001 and a $375,000 reverse mortgage in 2003. The second mortgage paid off the first, leaving only the second mortgage outstanding.

A "reverse mortgage" is a home loan that does not require payments until the borrower moves out of the mortgaged property, thereby enabling the borrower to pull out maximum equity while retaining the property.

In the present motion, Ms. Brunson's guardian contended that she has lacked legal capacity since at least 2000, when she was treated at Queens' Creedmore Psychiatric Hospital for chronic schizophrenia.

Ms. Brunson also signed the agreements under physical and emotional duress from her brother, the guardian contended.

Justice Thomas agreed and, citing the National Housing Act, voided Ms. Brunson's outstanding debt.

Justice Thomas found that Financial Freedom failed to establish that it had satisfied the act's counseling provision, which requires a lender to advise a prospective mortgagor regarding her rights and responsibilities under a Housing and Urban Development-guaranteed reverse mortgage.

"This [counseling] certification was not meant to be perfunctory or a mere rubber stamp for the banking and mortgage industry," Justice Thomas wrote. "It was intended to secure that the rights of elderly homeowners were protected. The mortgagee is entrusted with the responsibility of conducting an inquiry of the applicant's understanding of the mortgage agreement."

Here, however, Financial Freedom's counseling was indeed, at best, a "rubber stamp," the judge concluded.

"While the certificate indicating that a Rosa Colarte certified that the homeowners had received counseling was submitted into evidence, there was no evidence as to the qualifications of Ms. Colarte or the counseling itself. The certificate states that the counseling was not face to face but over the phone and that the total time was 45 minutes," Justice Thomas wrote.

"Under these circumstances the court finds that Hermina Brunson was incapable of understanding the agreements that she signed on April 21, 2003 and that Financial Freedom is charged with the responsibility to determine, and were in a position to know of her incapacity."

Thomas J. Rossi of Rossi & Crowley in Douglaston represented Financial Freedom.

"I respectfully disagree with Judge Thomas," Mr. Rossi said. "There was no proof elicited at the trial that the mortgagor had any notice of any alleged incompetency with the borrower. I will discuss with my client their appellate rights."

Robert A. Isler of Isler & Isler in Syosset represented the guardian. He did not return a call for comment.

Barbara J. Monroe of the city's Human Resources Administration appeared on behalf of the Commissioner of Social Services.

@|Mark Fass can be reached at"

Friday, January 8, 2010


This was my experience at my first day of being a Volunteer Lawyer through the Nassau County Bar Association at the mandatory settlement conferences in Supreme Court:

1. Very few homeowners attended the conferences that were scheduled.

2. Out of the few that attended:

a. All of them were in default in the foreclosure action (no answer filed).

b. All of them had attempted loan modifications on their own with the assistance of counselors (Housing counselors from Nassau County are in attendance at the conferences as well to assist in loan modifications - these are free services.)

c. All of them had problems communicating with the bank and/or loan servicer in their attempts to obtain a loan modification.

d. Most of them had substantial income, assets, and substantial expenses. It appeared that in many circumstances, the value of the mortgage exceeded the value of the house and there were, in some cases, very high second mortgages.

e. Most involved the primary residence. But there are owners of "investment property", people who hoped to make money from "flipping" foreclosed houses, now in foreclsure themselves.

f. Besides myself, there was one other attorney.

Again, please note that the next Mortgage Foreclosure Consultation Clinic at the Nassau County Bar Association is on January 14 at 15th & West Streets, Mineola, NY 11501 Call ahead for times, etc. at (516) 747-4070.

Thursday, January 7, 2010


Yesterday was my first day as Volunteer Lawyer in Nassau County for mandatory mortgage settlement conferences. Before I describe my thoughts, I repeat an article from the December 30, 2009 New York Times which was sent to me yesterday from the Nassau County Bar Association:

"New York Times

December 30, 2009

Billions to Fight Foreclosure, but Few New Loans

They milled about the hallways of the cavernous State Supreme Court building in Jamaica, Queens — 42 homeowners whispering, studying old bills, waiting for a court officer to call their names and wave them, one by one, through a door.

There, in a dusty, high-ceilinged room with a steam radiator that never stopped wheezing, they took a seat across a table from a lawyer for a mortgage company. Then their work began: trying to persuade a stranger not to foreclose on their home.

The Obama administration’s plan to rescue Americans from foreclosure plays out day after day in rooms like this. On this day, as on most, nothing happened. One lawyer, visibly bored, put in a brief, token appearance. A few others seemed barely familiar with their cases. Another asked for more records, hinting that maybe next month the lender might talk about a settlement.

Ismail Ali, a silver-haired immigrant from Guyana, hoped to save his home in Ozone Park. “If it takes you another three months to evaluate me, and I keep paying, will I get a new mortgage?” he asked, almost pleading.

The lawyer shrugged, not unsympathetically. “I can’t answer that for you,” he said.

Ten months ago President Obama announced a $75 billion program to keep as many as four million Americans in their homes by persuading banks to renegotiate their mortgages. Lenders have accepted more than one million applications and cut three-month trial deals with 759,000 homeowners. But they have converted just 31,000 of those to the permanent new mortgages that are the plan’s goal.

In New York City, where 20,000 homeowners faced foreclosure this year, a recent study by the Center for NYC Neighborhoods found that lenders have offered new or trial mortgages to just 3 percent of the homeowners who have sought help.

Big mortgage companies — servicers, in the parlance of the industry — stand at the heart of this program. Many of the servicers that have agreed to participate are subsidiaries of the nation’s largest banks — Wells Fargo, Bank of America and JPMorgan Chase.

They say their performance is improving. “We ourselves stated that we fell short of our customer service goals,” said Mary Coffin, executive vice president for loan servicing at Wells Fargo. “Now we are doing three modifications for every foreclosure.”

But a drove of critics, including homeowners, nonprofit loan counselors, legal services lawyers and court officials, say these companies are also at the heart of the problem. Servicers, they say, pile delay upon delay, and too often steer homeowners into new mortgages with onerous terms. Some companies have insisted that homeowners waive their right to sue before getting a new mortgage, even though the Obama plan prohibits such demands.

Administration officials have vowed to shame servicers into action. And New York State lawmakers, like their counterparts in a few other states and cities, have tried to slow the headlong hurtle toward foreclosure by requiring lenders to negotiate with troubled borrowers in court.

Leonard N. Florio, a court-appointed referee, oversees such sessions in that dusty room in Queens. He is a chatty man and punctilious about not taking sides. But as he watched Mr. Ali, the Ozone Park homeowner, load his piles of bills and receipts back into his shopping bags, he could not help noting a pattern.

“I have yet to see an attorney for a servicer cut a deal,” he said. “Update this, update that. I mean, what’s the holdup?”

Loan servicers argue that homeowners are as often to blame: Many cannot show proof of income, and fail to make payments even on modified mortgages. And millions are in bigger trouble than the public realizes, burdened with monthly payments so exorbitant that even a reduced mortgage payment will not save their home.

The servicing companies make money either way. The Obama program pays them $1,000 for each loan modified, and another $1,000 per year for three more years if the borrower avoids foreclosure. On the other hand, the companies make large sums charging late and legal fees on overdue mortgage payments, and sometimes it is cheaper to foreclose than to cut the mortgage payment.

These same companies turned billions of dollars in profits during the fat years of the bubble. Four years ago, lenders strung banners from storefronts in Jamaica and Cypress Hills and Bedford-Stuyvesant, promising “You will not be turned down!” A no-documents-needed mortgage was easily obtained, often accompanied by the flimsiest of appraisals.

Now the lenders toss up daunting hurdles. Homeowners say they send and resend thick piles of documentation, only to be told that their papers have been misplaced, or that their pay stubs are out of date. Housing counselors dial a dozen times just to get a servicer on the phone.

“It’s a constant Catch-22: They never give you their name,” said Gerald Carter, a counselor with the Parodneck Foundation in New York City, which receives city and state money to advise homeowners. “You call back and say, ‘No, I was talking to Bob last time,’ but Bob wouldn’t give his last name — not even an employee ID number. So you start over.”

Last month, the Legal Aid Society of New York sued the federal government and a mortgage servicer, Aurora Loan Services, on behalf of four Queens homeowners. Aurora, which has a $116 billion loan portfolio, was a subsidiary of Lehman Brothers before that firm went bankrupt; it offered loans with interest rates just a bit lower than subprime rates, which are typically a few percentage points higher than rates on conventional mortgages.

The lawsuit charges that Aurora, and by implication many other servicers, systematically denied homeowners access to the federal rescue program. And, the lawsuit asserts, the Obama plan provides far too few safeguards for homeowners.

“The servicers ignore their obligations, and are throwing unaffordable agreements at people and setting them up for another default,” said Oda Friedheim, a staff lawyer with the Legal Aid Society.

Asked to respond, an Aurora spokeswoman e-mailed a statement saying the company tries to prevent foreclosure for its customers.

Tom Vellucci, 54, is one of the four plaintiffs in the lawsuit, and a soldier in this army of the potentially dispossessed. Once a maintenance man for an insurance company, with a modest home in Floral Park, Queens, he lost his health and then his job. When a tenant stopped paying rent, he fell behind on his mortgage. A so-called rescue firm offered to negotiate better terms and wheedled Mr. Vellucci and his wife, Maria, out of $8,000 in fees.

When the inevitable foreclosure notice arrived in March, the Velluccis called Aurora Loan Services and asked for a break. The company, he said, responded by piling on legal fees and giving them a four-month trial agreement that did not reduce their monthly payment.

The Velluccis say they drained their savings making payments. Then the couple asked Aurora if they could revise their mortgage terms under the Obama rescue plan. They say the company refused, saying their mortgage was not eligible because it was owned by investors.

Aurora makes a similar statement about investor-owned mortgages on its Web site. These claims are not true. The Obama program requires companies to make an effort to modify such mortgages.

Sitting on a bench in the Queens courthouse, where he has become a regular, Mr. Vellucci ran his fingers through thick black hair and shook his head. “We kept trying to pay on faith, all faith, so we could prove we were honest people,” he said. “Now all we look like is stupid.”

Phyllis Caldwell, chief of the Treasury Department’s Home Ownership Preservation Office, is not inclined toward tough talk about servicers, perhaps because the Obama plan, which she oversees, lacks enforcement teeth. Asked about Aurora’s refusal to consider modifying investor-owned mortgages, she suggested a reporter call the program’s compliance unit.

“If it is reported in The New York Times and someone chooses to audit it, that’s important,” she said.

She sees a brighter day coming. “We are holding the servicers accountable to report to us,” she said. “They are being much more transparent.”

For now, however, the Velluccis and thousands like them dangle perilously close to calamity.

Born in Italy, Mr. Vellucci and his wife migrated here as teenagers. They raised children, bought a house, lived their dream in Technicolor. Then his kidney gave out and their economic slide began. After court on this day, he would go for dialysis. The couple hope the lawsuit might give them one more shot at the Obama plan.

“I don’t sleep at night, I don’t sleep at all,” he said, rising slowly. “I tell Maria, ‘If we lose the house, I want to stop my dialysis.’ I want to die, honestly.”

This article has been revised to reflect the following correction:

Correction: December 31, 2009

An article on Wednesday about the slow pace of negotiations to forestall foreclosures under a federal program misstated, in some copies, the surname of a counselor with the Parodneck Foundation, which receives New York City and State money to advise homeowners. He is Gerald Carter, not Clark."

Wednesday, January 6, 2010


Recently, on a LinkedIn legal group, I was involved in a discussion over a post made on JD Supra:

"Can my (private) employer fire me for filing for bankruptcy?
3 January 2010
The answer is No. It is plainly stated in the bankruptcy code that:
11 U.S.C. 525 . . .
(b)No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt— (1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

This may beg the question what a prospective employer can do when confronted with an applicant who has filed bankruptcy. Some commentators take the position that the answer whether discrimination on this basis is allowed is no. However, almost all of the cases that have interpreted this provision have ruled that it only applies to the debtor's current employer. In re Hardy, 209 B.R. 371, 374-376 (Bankr. E.D. Va. 1997); In re Merriweather, 185 B.R. 235 (Bankr.S.D.TX 1995); In re Briggs, 143 B.R. 438 (Bankr.E.D.MI 1992). But see In re McNeely, 82 B.R. 628 (Bankr. S.D. Ga. 1987)(applying Section 525(b) to service purchaser/independent contractor relationship). None of these cases are binding though, so the question is an open one. There are some other considerations if you are applying for a new job and concerned over this particular potential ramification of filing for bankruptcy. First, the ambiguity noted above may be enough to stop any employer from taking the chance of violating the law. Typically employers, and especially their counsel, like to take the safe road. Second, the percentage of employers that truly take action based on a credit report, even if they do check it, might be less than you think (I personally have never heard of someone not getting a job due to a prior bankruptcy). Third, an employer may prefer that a person had filed for bankruptcy and eliminated their debt, as opposed to continuing on with a significant debt load. They could be concerned about those with a greater incentive to steal. Who do you think is more of a risk to employ, a person who is probably debt free or someone struggling to carry a significant debt load? Finally, the pros and cons of a decision to file bankruptcy should be carefully weighed with competent counsel. There is wisdom in a multitude of counselors.
Contact: George E. Bourguignon, Jr.
(413) 746-8008"

I now realize that in a new job application, questions of disclosure would arise depending on the wording of the job application. Non-disclosure of the bankruptcy, if disclosure was required on the application and later discovered, may lead to a termination of employment (and remember that New York is an "employment at will" state) and an objection to the employee's filing for unemployment benefits may arise due to the failure to disclose. One Appeals Board case has held that a deliberate falsification of an application for employment constitutes misconduct within the meaning of the Unemployment Insurance Law if there is present injury or prejudice to the employer's interest. (A.B. 39,840-53; A-750-1244).

Tuesday, January 5, 2010


As I posted earlier, on December 15, 2009, NYS Governor David Paterson signed a new law that requires any lender or settler seeking to foreclose on a mortgage and the mortgage holder to participate in a settlement conference before the Court. Anticipating an influx of additional activity, the Court has asked the Nassau County Bar Association to help provide pro bono legal representation to homeowners during these settlement conferences. The mandatory court settlement conferences are being held in Nassau Supreme Court five sessions a week, at 11 a.m. and 2 p.m. on Wednesdays and Thursdays, and 9:30 a.m. on Fridays. Volunteer attorneys represent the homeowners for that day only. Housing counselors from Nassau County are in attendance as well to assist in loan modifications. I will be a volunteer lawyer tomorrow at the 11am session.

Monday, January 4, 2010


I am posting this again and this applies to any type of litigation - contact an attorney early and be prepared. This morning, I received several calls from Claimants who have hearings coming up in the next few days, and yet, did not have any of the information needed to even discuss their case. If you wait until the last moment, if you do not keep records, then my recommendation is to ask for an adjournment so that you can get counsel and have that counsel be adequately prepared. If you are able to get someone who will represent you but will not have the time to review the case and research the issues, then in my opinion, you will not be adequately represented. Even the Appeals Board, in their List of Organizations, Attorneys & Registered Representatives, state "You can either represent yourself or seek representation, but if you are securing counsel:
Do NOT wait for a hearing date to contact an attorney". There is much at stake at these hearings - the right to receive your benefits - and you are trying to convince an administrative law judge that you are entitled to benefits, notwithstanding the position of the Department of Labor and/or your employer, as the case may be. This type of work takes preparation. This is also from the Appeals Board website:

"Can the hearing be adjourned (delayed)?

Yes, the hearing can be adjourned but only if the judge decides there is good reason under the law for it. Call, fax or mail your request for adjournment to the Administrative Law Judge Section as soon as you know you want it. Give the reason why you can’t come to the hearing. You should get an answer: yes or no. If you don’t get an answer, you should come to the hearing."

Sunday, January 3, 2010


Recently, I read the following article from the New York Times which I thought was interesting as several Claimants consulted with me as they were denied benefits on the grounds of misconduct, namely theft. Just about every case I researched has held that theft on the job is misconduct, with two rare exceptions:

1. (a) Discharge for pilfering is not disqualifying when such conduct stems from a psychiatric disorder manifested by a compulsion to steal.

(b) A claimant discharged under such circumstances is incapable of employment in the absence of medical evidence that he is no longer suffering from the psychiatric disorder. (A.B. 191,103; A-750-1773)

(So actually in this case, the Claimant was still denied benefits because the Claimant was unable to work)

2. A corporate officer and stockholder who loses his employment when the corporation is closed by the Internal Revenue Service in an attempt to collect unpaid social security and income taxes withheld from the wages paid to its employees, is not subject to disqualification for misconduct when the money was appropriated not for his personal use but for operating expenses to forestall bankruptcy. (A.B. 235,415; A-750-1827)

In any event, here is the New York Times article:

"December 30, 2009
Shoplifters? Studies Say Keep an Eye on Workers


Gift cards are just so easy — so easy for dishonest employees to exploit, that is.

At the Saks flagship store in Manhattan, a 23-year-old sales clerk was caught recently ringing up $130,000 in false merchandise returns and siphoning the money onto a gift card.

“Gift card fraud is spiking,” said Joshua Bamfield, author of the Global Retail Theft Barometer, an annual international survey of retailers. “To employees, this is like currency. It’s almost as good as the U.S. dollar.”

After all, walking out with a little card in the wallet is a whole lot easier than lugging a big-screen TV out the back of a store.

Employee fraud involving gift cards appears to be growing sharply as retailers struggle to contain overall theft, now estimated at $36 billion a year in the industry, or 1.51 percent of retail sales, according to a leading national study. Even as total sales have been falling, employee theft and shoplifting have been rising across the United States, industry experts say, with occasional arrests making headlines.

Many of the gift card crimes are straightforward, frequently involving young sales clerks and smaller amounts than the Saks theft. Among the variations of such crimes, cashiers often do fake refunds of merchandise and then, with the amount refunded, use their registers to electronically fill gift cards, which they take. Or sometimes when shoppers buy gift cards, cashiers give them blank cards and then divert the shoppers’ money onto cards for themselves.

A 20-year-old cashier at a Best Buy on Staten Island was arrested two weeks ago and accused of fraudulently ringing up gifts cards for $600. A Kmart employee, 22, was arrested the same week in Hazlet, N.J., and accused of stealing more than $1,500, partly by diverting false refunds and layaway plans onto gift cards.

Other schemes are slightly more complex: early this year, a 20-year-old worker at a Sears in Milford, Conn., was charged with manipulating the store’s computers to divert more than $35,000 onto gift cards that were fraudulently activated.

Retail experts say they can only estimate what portion of their theft losses can be traced to employees, to shoplifting and to vendors, but they view their own store workers as the leading culprits. The national study, based on information obtained from 106 retail chains that responded to a questionnaire, said employees were responsible for 43 percent of the stores’ unexplained losses, versus 36 percent for shoplifting.

The study, known as the 2008 National Retail Security Survey, showed that employee theft rose slightly that year to $15.5 billion.

“The retail industry has come to the realization that, as the Pogo comic strip said, ‘We have met the enemy, and he is us,’ ” said Richard C. Hollinger, the survey’s principal author and a professor of criminology at the University of Florida.

The most common type of employee theft is “sweethearting,” in which cashiers fail to ring up or scan goods that friends or relatives present at the register, Professor Hollinger said. Stealing from the till remains a problem, too. But with gift cards continuing to grow in popularity, they are an increasingly easy target.

Whatever method employees use to steal, their take is more substantial than that of the average shoplifter. Mr. Bamfield’s global study of retail theft found that larcenous employees averaged $1,890 in theft, compared with $438 for shoplifters.

“I’m sure there are employees who steal because they feel aggrieved over a wage freeze or the way they’re treated,” said Mr. Bamfield, director of the Center for Retail Research, based in Nottingham, England. But “it’s very easy to be tempted in a retail environment. You have merchandise, you have cash, you have friends who want cellphones and iPods.”

Retail professionals emphasized that only a small percentage of employees steal. Officials at Wal-Mart, Target, Macy’s and Best Buy declined to discuss employee theft, a subject many companies find embarrassing, saying that industry associations were better positioned to discuss it.

In some cases, employee theft is part of a bigger problem: organized crime. Casey Chroust, executive vice president for retail operations at the Retail Industry Leaders Association, said that organized criminals often pressure or pay retail employees to slip them gift cards or tell them when and where security guards are patrolling.

Detective David Hill, a retail theft specialist with the Montgomery County Police Department in Maryland, said two areas he aimed to focus on were organized retail crime and gift card fraud. He said he was investigating a 20-year-old cashier who wrote down shoppers’ credit card numbers and then used them to fill more than $13,000 in gift cards — at $200 a pop.

“For us, gift cards are harder to track than a stolen credit card,” Detective Hill said. “If you go to make a purchase with a gift card, you don’t have to show ID.”

Several years ago, retailers complained to eBay that people were auctioning a dozen or two $200 or $500 gift cards from Best Buy or Home Depot. It is one thing for a shopper to return a $300 power drill, refund it for a $300 gift card and auction that on eBay, retailers say, but it is far more suspicious when someone auctions 20 gift cards.

“The online marketplace provides an outlet for people with fraudulently obtained merchandise or gift cards,” said Joseph J. LaRocca, senior asset protection adviser with the National Retail Federation. “They used to sell these things on a street corner or a local pawnshop. But in today’s world, they put them online for a national or international distribution, and that brings a much bigger customer base and commands a higher price. We know goods sold on the street, they get 30 cents on the dollar. Goods sold on the Internet get 70 to 80 cents, with gift cards getting about 80 cents.”

Many retailers have loss-prevention specialists who monitor online auctions of gift cards to ferret out thieves. Bowing to retailers’ concerns, eBay now bars sellers from auctioning cards over $500 in value or more than one gift card a week. Paul Jones, eBay’s director of global asset protection, said his company was committed to working with retailers and law enforcement to combat gift card fraud.

Many retailers have embraced technology to fight employee theft. Data mining programs can now detect whether a particular cashier is refunding far more items than other cashiers, a strategy often used to fill fraudulent gift cards. When such trends are detected, store officials often review video, taken by overhead cameras, to see whether a cashier repeatedly did refunds with the same friend or relative.

One company, StopLift, based in Cambridge, Mass., has even developed software that, when used with overhead cameras, can detect when cashiers engage in sweethearting, by not running merchandise over the scanner or by letting acquaintances take merchandise without paying. The software then alerts managers.

Professor Hollinger says the rate of theft is greatest among retailers with high turnover rates and many part-time workers, who may be less loyal and under more financial pressure than full-time workers.

He also found higher theft among younger workers. “Older workers know they have a lot more to lose — promotional opportunities, health insurance, 401(k)’s and pensions,” Professor Hollinger said."

Saturday, January 2, 2010


As a follow up to yesterday's blog, here is an interesting post from attorney Don A. Murray, Esq.:

"Will a Desk Appearance Ticket Case Give Me a Criminal Record?

It is important to realize that getting a Desk Appearance Ticket simply means that you have been arrested for something and therefore does not result in a criminal record. There are essentially only two ways to get a criminal record: Either you are found guilty after a trial or you yourself stand up on the record in court and plead guilty.

If neither of those things has happened, then you don't have a criminal record.

What most people really mean by asking this question is whether the ultimate OUTCOME of the case will give them a criminal record. And the answer to that question will depend on what the outcome of the case is.

If it is your goal to have your day in court and have the case go to a trial, then the outcome will obviously depend on the verdict after trial. If you are found guilty of a crime you will have a criminal record. If you are not found guilty of a crime, you will not have a criminal record.

Many people who are given desk appearance tickets, however, have some sense that they might like to try to resolve the case without having to go to trial.

Many cases that begin in the Desk Appearance Ticket process in New York end up negotiated in such a way that they are either dismissed and sealed as a result of an Adjournment in Contemplation of Dismissal, or are negotiated to a plea to a non-criminal offense and sealed.

In neither of the above two situations are people left with criminal records. In the case of the ACD resolution, the case is dismissed and sealed. Therefore, there is no criminal record. The criminal justice system, in fact, can't do anything more favorable for the accused, once the case is dismissed and sealed, than it could do for someone who is actually found not guilty at a trial. The same dismissal and sealing that happens after a not guilty verdict happens when the ACD dismissal kicks in.

In the case of a negotiated plea to a "violation offense", the person is left without a criminal record because a "violation" is by definition in New York State, NOT a crime. Pleading guilty to a violation is much like pleading guilty, in New York, to speeding. It does not give you a criminal record.

People are also frequently concerned about the related issue of the level of information that they can be required to disclose, or that can be recovered in future background checks for jobs.

And this is where things can get tricky.


In the case in which a person receives an ACD, and the case is actually dismissed, the criminal justice system considers the case eliminated. As far as the New York criminal justice system is concerned, the person's record is as pure and clean as the day he was born. A "rap sheet" generated in Albany after the ACD dismissal date will NOT include the case. The "rap sheet" will make the person appear to have no criminal history whatsoever.

Therefore, if such a person is subjected to a "normal" background check where Albany is contacted for a rap sheet, the person or organization conducting this normal background check will not see the case and the person will appear utterly clean.

But this does not mean that the information about the case is erased or that the information is not kept somewhere in some government database. There will be certain situations when the Government, for example, will be able to access this information.

For example, if a person wants to obtain a gun license in New York City, the police department will conduct a background check on the person. For this purpose, the police are authorized to penetrate this "sealed" database and they will have access to the information about any dismissed and sealed case.

Furthermore, there may be other situations in which the Government (Federal and State) might be able to access the information. Applying for top secret security clearance might be one such situation.

People need to be conscious that in this day of electronically stored information, any information, once stored, is likely to be recoverable by someone with sufficient motivation, time, and resources.

The entire issue of what is sealed can also be rendered moot if you are under some obligation to reveal the information in order to get some sort of license or clearance. There are increasing numbers of situations in which people are required to answer the broad question "Have you ever been arrested?"

If you have been given a Desk Appearance Ticket, then the truthful answer to this question is "Yes" regardless of the outcome of the case. The fact that the truth may be difficult for most people to verify doesn't make the truth any different. Some lawyers have suggested that the purpose of the ACD is to restore the person his situation "prior to arrest" and therefore this frees a person to claim that he has never been arrested. Personally, I disagree with this position.

As powerful as the Legislature is, the Legislature cannot legislate fiction into fact. If the Legislature passed a law that 2 + 2 = 5, it would be the poor math student indeed who attempted to rely on "the law".

A person who relies on this lawyer argument that he has "never been arrested" because the ACD "made it go away" may have the advantage of being able to explain why he lied. But it makes it no less a lie. The prospective employer or person conducting the background check may "understand" intellectually this argument, but still may nevertheless feel deceived and treat the candidate accordingly. Therefore, I advise people to err on the side of telling the truth to such a question when they have had a case dismissed by way of an ACD.

The good news is that in most situations, people are not authorized to ask the question about having ever been arrested. More typically the question will involve prior convictions.


In the case of the person who pleads guilty to a "violation" offense as part of some settlement negotiated by a lawyer, the person does not have a criminal record, but may face additional scrutiny and exposure of the existence of this non-criminal offense.

By operation of law in New York, the vast majority of "violation" offenses are sealed. This might tempt you to believe that they are therefore as difficult to expose as cases sealed by way of ACD. This is not the case.

The automatic sealing provisions that apply to most violations are different from those that apply to the ACD. The "sealing" that occurs in the ACD situation is more comprehensive and applies to the rap sheet and the court records available on a county by county basis.

The "sealing" that occurs in the context of violations is not quite as comprehensive. Violation convictions that are sealed are not supposed to appear on rap sheets, just the way ACD cases are excluded. But for the purposes of local court records kept in the courthouses around the state, violation records are not sealed and available. Locating these records may be difficult and inconvenient since it would require a search to be made locally and individually by county. Most background checking organizations simply request information from the rap sheet from Albany.

In the end, the most important thing to remember whether a person resolves a case with an ACD or by way of a negotiated plea to a violation offense, the person DOES NOT HAVE A CRIMINAL RECORD.

While the level of access that different people may have, legally or otherwise, may vary, the lack of a criminal record will remain a fundamental truth."

Friday, January 1, 2010


A recent consultation revealed that the client was arrested and given an appearance ticket to appear at district court. It appeared that the charge was for a violation or at most a misdemeanor. The client was unemployed. I suggested that the client, in lieu of paying an attorney, seek free legal assistance from such organizations as Nassau/Suffolk Law Services, Legal Aid Society of Nassau County or other charities which could assist him. But also note the following about the differences with criminal charges, courtesy of Crotty Saland, LLP:

"Article 10 of the New York State Penal Law defines the following terms:

(1) Offense - Generally, an offense is conduct that is punishable by a term of imprisonment.

(2) Violation - A violation is an offense, not including a traffic infraction, where the potential sentence cannot be greater than fifteen days jail. It is important to note that a violation is not a crime. Therefore, if you plead guilty to a violation you will not have a criminal record as a result of that particular plea.

(3) Misdemeanor - Like a violation, a misdemeanor is an offense that does not include a traffic violation. A potential sentence for a misdemeanor exceeds the fifteen days of a violation, but cannot be greater than one year in jail. Misdemeanors are described as "A" misdemeanors, "B" misdemeanors and "unclassified" misdemeanors. While "A" misdemeanors are punishable by up to one year, "B" misdemeanors are punishable by up to ninety days jail.

(4) Felony - A felony is an offense where the punishment may exceed the one year maximum associated with misdemeanors. Felonies are range from an "E" felony to an "A" felony.

(5) Crime - Again, a violation is not a crime. A crime is either a misdemeanor or a felony. If you have been convicted of a violation such as disorderly conduct, Penal Law 240.20, you would not have a criminal record as a result of that particular plea or conviction."

Since this was the client's first arrest, he would probably be able to plea for an ACD, or Adjournment In Contemplation Of Dismissal, which is an agreement to dismiss or seal the case if you stay out of trouble. Of course, any arrest brings up an issue with disclosure in job applications.