Brooklyn Surrogate's Court 2005

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Tuesday, February 15, 2005

Fiduciary System Remedies Proposed;

New York Law Journal - Feb. 9, 2005

By Daniel Wise

Sunshine is the best antidote to counter the "great concern" that "politically connected lawyers" are reaping hundreds of thousands of dollars to handle estates of those who die without wills, a blue-ribbon commission appointed by Chief Judge Judith S. Kaye said in a report issued Monday.

The 14-member commission, headed by Sheila Birnbaum of Skadden, Arps, Slate, Meagher & Flom, also called for legislation that would make mandatory existing guidelines for compensating counsel to public administrators. The administrators have overall responsibility for winding down the affairs of those who die without wills.

The spur to the commission's recommendations was a disciplinary proceeding against Brooklyn Surrogate Michael H. Feinberg for routinely awarding the counsel to the Brooklyn public administrator, Louis R. Rosenthal, fees that equal 8 percent of the estates he handled, an amount two percentage points higher than the ceiling in the guidelines.

The Commission on Fiduciary Appointments also noted that several surrogates had "candidly admitted to political and personal ties with appointees they had selected." That testimony "gives rise to a public perception of an opaque system that operates on the basis of connections and cronyism," the report said.

Oral argument in the state Commission on Judicial Conduct case against Surrogate Feinberg took place in September [NYLJ, Sept. 24], and a decision is pending. The judicial conduct commission also charged Surrogate Feinberg with approving Mr. Rosenthal's fees without required documentation.

The Birnbaum commission also proposed remedies for a problem that surfaced since its first report was issued in December 2001.

In April 2004, a Queens grand jury reported on its investigation into systemic weaknesses that allowed a guardian to steal $272,000 from his ward. The grand jury found a key problem was a lack of oversight of the guardian, lawyer Robert B. Kress, who has been disbarred.

The remedy proposed by the Birnbaum commission was greater supervision of court examiners, who are appointed by judges to oversee the work of guardians. Judges are also responsible for appointing guardians to handle the affairs of persons unable to care for themselves.

As a result of the Birnbaum commission's earlier report, any fiduciary appointed by a judge was barred from receiving additional appointments for a year after earning $50,000 within a 12-month period. State and county leaders also were prohibited from accepting appointment as were members of their law firms.

The earnings disqualification could not be applied to counsel for public administrators whose fees varied, depending on the county, from a low of $87,000 to a high of $1 million. To do so, the commission concluded, would impair the surrogates' statutory authority to appoint a sole counsel to the public administrator in their county. The statute also gives the surrogate authority to appoint more than one counsel.

Instead, the commission recommended counsel to public administrators be brought within a court system rule requiring judges to file a report of any fee awarded in excess of $500. Those reports should be made available on the Internet, the commission urged.

Chief Administrative Judge Jonathan Lippman said that the court system would move to make the rule changes recommended by the commission.

He praised the commission for "focusing on the remaining vulnerabilities in the fiduciary system" and producing recommendations that will insure that "all appointments are what they should be, a public trust."

Finding that employing court staff or outside groups to act as court examiners would be too expensive, the Birnbaum commission urged courts to assign staff to supervise the existing court examiners.

The commission, though, encouraged more projects like one under way in Westchester and another planned for Brooklyn, where non-profit groups are being appointed to act as court examiners.

The commission also noted that many examiners depend on a high volume of assignments because the fees in individual cases are low. In the Appellate Division, Second Department, for instance, an examiner overseeing a situation involving assets of $175,000 would receive a $600 fee.

To prevent the disqualification of talented examiners, the commission recommended that the $50,000 restriction on yearly earnings be raised to $75,000 for court examiners.

The commission recognized that since the system for the appointment of counsel to public administrators is not uniform statewide, achieving legislative changes is a daunting prospect. In New York City, the surrogates appoint counsel, but elsewhere the public administrators appoint their counsel with the surrogate's approval.

Nonetheless, the commission urged the passage of legislation that would make mandatory a 6 percent guideline adopted by the Administrative Board of the Public Administrator, a body created by statute, in 2002.

The board's guidelines do not have the force of law, and the commission noted that several surrogates have continued "to deviate from the schedule" and that one such instance "even led to judicial disciplinary proceedings."

The commission also urged that public administrators' counsel be subject to the same restriction as other fiduciaries barring the appointments of judges' relatives, political leaders and members of their firms.

The extension of those rules would lead to the disqualification of "several current [public administrators'] counsel," the commission said.

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