In Our Opinion...

County Legislators Refuse To Be Stampeded

We applaud the decision by the County Board of Legislators, under Chairman Bill Ryan, to retain independent counsel to evaluate the feasibility of bringing a successful civil action against KPMG Peat Marwick, LLP, as has been strongly urged by the County Executive’s Office recently. Any such court action would, of course, require the County Legislature to sign off.

County Executive Andrew Spano, based on data compiled by Larry Schwartz, and legal assessments from the law firm Nixon Peabody, has been actively promoting the notion that County taxpayers might recover as much as $200 million from KPMG Peat Marwick because they, allegedly, repeatedly failed to warn the County of problems with the accounting practices employed in-house at the Westchester County Medical Center between 1998 and 2004.

Deputy County Executive Larry Schwartz, several weeks ago, suggested that the well-known accounting firm had been derelict in its duty to inform the County, which guarantees several hundred million dollars of the hospital’s debt, that certain flawed accounting practices might have been misleading, and more encouraging to underwriters, than was warranted. Some observers have expressed doubt that Mr. Schwartz could have been misled, or working under any misunderstanding regarding the Medical Center’s financial health given the publicity attendant to their long-standing financial crisis, and their need for repeated monetary transfusions over the past several years, virtually teetering on the brink of bankruptcy a few years ago.

We appreciate Chairman Bill Ryan’s measured and thoughtful response to Larry Schwartz’ hustle to try to get the legislators on board. Perhaps Ryan, and the other legislators, are experiencing a little difficulty swallowing
the notion that Larry, controlling as he is in all aspects, would somehow be left in the dark regarding the financial health and circumstances of the Medical Center. We certainly would understand if they found his position a little out of character, and somewhat disingenuous.

After all, it’s not as though the County Executive’s Office could have been out of touch with the operational and financial day-to-day realities at the Medical Center, given the fact that Mr. Spano has made several appointments
to the Board of Directors, including its chairman Richard Berman, since 1998, and throughout the period in question. And, clearly, there was reason enough to have justified independent audits given the mismanagement and financial miscues that required repeated bailouts, and, ultimately, the resignation of several top administrators, including Executive Vice President Marilyn Slaaten.

Finally, given the fact that the Medical Center’s administration has announced that they will not be joining in any action to recover money from their former accounting firm, having been advised by counsel that their case would be weak, the Legislature and Chairman Ryan’s hesitation to jump into litigation is both prudent and reasonable. The $20,000 they have agreed to spend for an independent evaluation by Lowey-Dannenberg, a law firm with a great deal of experience in litigation involving accounting firms, is money well spent.