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Former Horse Racing Capital Investment Fund Chair Pleads Guilty to Grand Larceny; Comptroller Audit Details Financial Improprieties
Chair, Executive Director Received Thousands of Dollars in Personal Expenses, Other Inappropriate Expenditures
Chair Ran Private Business from Government Office
The former chairman of the State Thoroughbred Racing Capital Investment Fund (CIF) – a now-defunct authority that made loans to the New York Racing Association (NYRA) for capital improvements at its horseracing venues – pleaded guilty on Friday to one count of Grand Larceny in the 3rd degree, charges brought by New York County District Attorney Robert Morgenthau, based in part on findings of a State Comptroller review, Comptroller Alan G. Hevesi announced.

The Comptroller’s review of CIF, released today, detailed significant financial improprieties committed by CIF officials. The findings were shared with the New York County District Attorney’s Office during the course of the D.A.’s ongoing investigation. At the request of the D.A., the release of the review was delayed until the successful conclusion of the criminal investigation.

William A. Levin, who was CIF chair for the past two decades, will pay restitution of $180,000 and a fine of $25,000. The audit also implicated CIF’s former executive director, James DePasquale, who resigned in October, 2003 and subsequently passed away.

Auditors found that

Levin and DePasquale ran up thousands of dollars in inappropriate or improperly-documented expenses.
Levin was running a private business from CIF offices, and used CIF staff to perform work for that business.
DePasquale also used some CIF resources for personal business.
“The Capital Investment Fund was created to aid the horse racing industry, but in fact its two principals turned it into a base for their own business and personal interests,” Hevesi said. “In addition to the gross violation of the public trust by these two individuals, this review is yet another example of how corruption and wrongdoing occur when no one is watching, board oversight is lax and internal financial controls are not in place.”

“I am pleased that District Attorney Robert Morgenthau was able to use our auditors’ findings to advance his work on this case and to pursue these corrupt public officials. I want to thank the District Attorney and his excellent staff for their commitment to fighting public corruption,” Hevesi added. “I also want to recognize and thank the Office of the State Inspector General for its important contribution to the District Attorney’s investigation.”

CIF was established in 1983 to provide four-percent interest loans to NYRA for capital improvements at Aqueduct Racetrack, Belmont Park and Saratoga Race Course, and had its main office in Manhattan. In August, 2005, CIF was replaced by the newly-established Racing Oversight Board. Auditors reviewed CIF’s financial operations for the period from January 1, 2003 through May 31, 2004.

Auditors found many financial irregularities and questionable expenses by CIF officials:

CIF had two oil company credit cards that were used for $8,689 in gasoline purchases by Levin and DePasquale during the audit period. Auditors found no documentation to justify any of these expenses, and noted that any use of the cards by DePasquale would be inappropriate since he had already received per-mile reimbursement that included fuel. Auditors also found $2,558 in non-fuel purchases on one of the cards, with no documentation for the expenses.
Of $5,364 in expenses for office supplies during the audit period, $1,804 (34 percent) was for questionable items including $655 for paper used to print advertising for a bed and breakfast inn and $438 for paper for advertising for a Mexican restaurant, both of which were owned by Levin.
Federal Express shipping charges totaled $15,127 for the audit period. Auditors questioned $2,287 in payments for packages mailed by Levin, DePasquale or CIF’s administrative director to gift shops with which DePasquale’s wife was connected; nine packages from the administrative director to her husband; 18 packages mailed by an individual connected with Levin’s bed and breakfast and other persons who were not CIF employees; and 16 packages to a hair salon, watch repair company and other establishments that were clearly personal in nature.
An analysis of five months of travel expenses by then-Executive Director DePasquale found that he claimed between six and eight trips by car between Belmont and Aqueduct racetracks every weekday and many weekend days, but there was no record of departure or arrival times. Pasquale was reimbursed for the trips at the rate of 32 cents per mile – a total of $10,170 during the five months. CIF officials were unable to provide documentation regarding which capital projects were underway at the two racetracks during the time period. Even if all of the trips submitted for reimbursement were valid, auditors determined that DePasquale would have spent so much time traveling that he would have been neglecting administrative and oversight responsibilities.
During the same five-month period, DePasquale was reimbursed for between $250 and $350 each week – a total of $6,261 – for entertainment expenses, but he provided no actual receipts from restaurants or other venues. Even if the money was actually spent for entertainment, since CIF’s only purpose is to provide capital loans to NYRA, it is not clear why the CIF Executive Director would need to entertain people and how that would serve the purpose of the Fund. It seems highly likely that these expenses were not appropriate.
Auditors also determined that the administrative director spent hours every work day dealing with issues relating to Levin’s bed and breakfast.

CIF paid an outside attorney for legal services a total of $285,267 during the audit period, but did not have an active contract with the individual, who worked an average of 25 hours per week. According to the attorney’s invoices, he did administrative work as well as legal work after DePasquale left CIF. Auditors questioned the cost-effectiveness of this practice.

Auditors also found a range of internal control weaknesses at CIF including:

The legislation that established CIF limited the Fund’s total salaries for officers, employees, attorneys, auditors and others to $250,000 per year. In fact, CIF paid more than $458,000 in such expenses in 2003.
Some seats on CIF’s nine-member board of directors were left empty for extended periods, and the board met only once in 2003 and once in 2004. Those two meetings were held by conference call and included votes by participating board members, despite the fact that the Department of State’s Committee on Open Government has ruled that a board member cannot cast a vote unless he or she is physically present at a board meeting or participating by video conference.
CIF lacked policies for a number of administrative and financial functions including cash handling, time and attendance recordkeeping, purchases and travel.
Comptroller’s Office audits are generally submitted to the subject agency for comments before being made final, and a written response from the agency becomes part of the audit. Because the CIF audit identified improprieties by CIF officials, the audit was not submitted to them for comment and was not publicly issued until now, at the request of the D.A. However, auditors did share some of the audit findings with the Chairman and other CIF officials after they completed their work, but did not receive any comments or additional information at that time.

Because the final report does not include comments from CIF, it is being issued as a review, rather than an audit.
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