Insiders pocket $350G

Nassau Democratic Party attorney Steven Schlesinger and Gary Melius, the political power broker who owns Oheka Castle, pocketed more than $350,000 in fees for overseeing a Medford commercial property in foreclosure — more than twice the amount Schlesinger originally told Newsday the pair had collected for the court-appointed work.

The payouts are detailed in a previously unavailable accounting of expenses that Schlesinger prepared for Suffolk Supreme Court Justice Thomas Whelan. The judge had appointed Melius to be the property manager and Schlesinger to be the receiver — which is essentially a temporary landlord — of the commercial complex.

Last week, Newsday reported that Whelan and another judge violated court rules designed to limit cronyism in the court system’s fiduciary appointment process by tapping Melius and a network of associates to oversee four commercial properties in foreclosure. The judges then effectively hid the group’s activity by failing to publicly report appointments and fee awards to the group as required.

Newsday reported that the Medford accounting was not in the case file, even though the foreclosure proceedings ended in April. Reporters had asked state court officials for the record more than a month ago and were told it was not available.

Medford

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Heather Walsh

Schlesinger initially told Newsday that he and Melius had been paid between $70,000 and $80,000 each. Court officials produced the fee accounting Thursday, which shows $189,998 in fees paid to Schlesinger and $161,073 to Melius.

The fee amounts were the largest distributed for any of the four properties reviewed by Newsday.

Schlesinger said Friday that he gave Newsday the lower fee amounts because a reporter asked him something other than how much he’d been paid. However, an audio recording of the interview shows the reporter asked Schlesinger, “How much were you paid?”

The new fee figures in the Medford case push the total money collected by Melius and his associates for court-appointed work to at least $900,000 since 2009. That total includes payments made from receivership accounts to Melius, his associates and his companies.

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Court official: Probe opened

Also Thursday, Whelan issued an order in which he declined to approve Schlesinger’s accounting for the Medford receivership, citing a failure to explain expenditures. Whelan’s order specifically notes dozens of checks that lacked documentation.

Whelan’s order gives Schlesinger 30 days to submit a new accounting and directs the parties involved to meet “to resolve the issues raised in this order.” No date has been set for that meeting.

Whelan declined to comment through a court spokesman.

Schlesinger said he could not comment about Whelan’s order because he had not seen it. Asked whether he had concerns about the accuracy of the accounting, he said, “None whatsoever.”

In a telephone interview, Melius refused to answer questions about the Medford accounting and instead criticized Newsday’s coverage of his court appointments.

“I don’t know where you guys have the nerve to do what you do,” Melius said. “Don’t you have any conscience, character? You have no character. You lie. You misrepresent.”

Asked for an example, Melius provided none.

A state court official said Thursday that the Office of the Managing Inspector General for Fiduciary Appointments had opened an investigation in response to Newsday’s story. The office, which examines allegations of poor performance and misconduct involving court appointees, can refer findings to state prosecutors and a court system committee that disciplines attorneys.

On Friday, New York Chief Administrative Justice A. Gail Prudenti sent a letter to all state judges reminding them of their obligation to follow court guidelines on fiduciary appointments, known as Part 36 rules.

Stressing the need to “protect our judiciary from claims of misfeasance,” Prudenti referenced reports “alleging serious lapses in compliance.”

“These reports serve as a stark reminder to all of us of our shared obligation as judges to meet the rule’s requirements,” Prudenti wrote. “One fact must be crystal clear: the court system requires scrupulous adherence to Part 36 rules as a cardinal principle of both judicial ethics and judicial discipline.”

‘Not a penny is improper’

In another receivership, involving the Whitman Atrium in Huntington Station, Suffolk Supreme Court Justice Emily Pines reopened the case after reporters questioned improper payments. Pines has scheduled a hearing on it for Wednesday.

Newsday reported that Richard Bellando, Melius’ former son-in-law and an Oheka Castle employee, was named property manager in the Huntington Station case and collected $90,000 in fees. Bellando is Nassau County’s Independence Party leader, and state rules prohibit party leaders from holding fiduciary appointments.

The expense register in that case, and the two others Newsday previously examined, lacked details showing what work had been done by vendors.

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In addition to the fees that Schlesinger and Melius collected, the newly available Medford expenses show payments to Melius’ companies, including $17,397 to ArchCon Design Ltd. and more than $1,150 to Oheka Catering and Oheka Management. Those expenses, like all of the $3.4 million in total disbursements, are not accompanied by a description of the work performed.

Schlesinger wrote in an email Friday that the payments to Oheka companies were for building supplies that were purchased using an Oheka master account. The payments to ArchCon, he said, were mostly for infrastructure repair, including a broken underground pipe. Schlesinger offered to show a reporter all the invoices for work done on the property during the receivership.

“I know that not a penny is improper,” Schlesinger wrote of the payments.

Melius named property manager

The lender foreclosing on the Medford property, which is known as the Brookhaven Executive Center, had asked Whelan in March 2012 to appoint a receiver who runs a national property management company. Whelan instead picked Schlesinger, but did not report the appointment to state court administrators, as court rules require.

Soon after, Whelan granted Schlesinger’s request to name Melius property manager.

Records show that Schlesinger and Melius then signed an agreement that allowed Melius to lease out spaces at the complex, rather than seeking a court order to appoint a lease broker, as required. Melius would have been able to collect payments on each lease agreement he obtained.

State law requires that itemized receivership accountings be “open to public inspection.” It’s unclear why court officials were unable to produce the accounting in the Medford case for so long.

Records show that Schlesinger first filed a final expense accounting with Whelan on July 30, though it was not put in the court file. Newsday first asked for the record Aug. 29. After repeated attempts to locate the record, a Suffolk court official said it had been sent to Schlesinger for his signature on Sept. 10.

In an interview Sept. 30, Schlesinger said he did not remember receiving the accounting. However, records show he resubmitted it to the court Sept. 22. A spokesperson for the Office of State Court Administration in Manhattan provided Newsday with the record on Thursday.

Correction added on 1/9/16 In a series on court appointments published in 2014, Newsday reported that Suffolk County Supreme Court Justice Thomas Whelan twice appointed Oheka Castle owner Gary Melius to manage properties when Melius was not on the court system’s approved list of property managers. Whelan made one such appointment, in 2009. In Whelan’s 2012 appointment of a foreclosed property in Brookhaven, Melius was on the approved list and the judge was not required to file a written justification for his decision. This has been corrected in the story above.

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