I am Neil Getnick, managing partner of the New York City law firm of Getnick & Getnick LLP. We practice in the areas of commercial counselling and litigation, with a particular focus on civil prosecution, the use of civil remedies to combat commercial fraud and related criminal conduct.
Since 1991, I have chaired the New York State Bar Association Commercial and Federal Litigation Section Civil Prosecution Committee. I am also the President of the International Association of Independent Private Sector Inspectors General. I am speaking to you today in an individual, not representative, capacity.
The proposed New York City legislation to reform the City’s private carting industry through administrative oversight and independent monitoring deserves the strong support of the City Council.
Corrupt and anti-competitive activities by racketeers, carting companies and the trade association representing carting companies in New York City have been well-documented in congressional hearings, government investigations, research studies, media articles, judicial opinions, and most recently, the Manhattan District Attorney’s indictments of and civil forfeiture actions against the leadership of the cartel that for several decades has controlled the industry.
During the three decades preceding this one, the principal weapon of choice of state and local agencies in their attempts to increase competition in the New York City garbage industry was prosecution. In 1987, the New York State Organized Crime Task Force and RAND Corporation issued a report which recommended structural reform of the carting industry as the best means of ridding the industry of racketeers, increasing competition and lowering prices.
The administration’s proposed legislation, jointly supported by Mayor Giuliani, Public Advocate Mark Green, Speaker Vallone, and Councilmembers Fisher, O’Donovan and Koslowitz, likewise proposes structural reform of the industry. The legislation follows a tradition established during the 1980s when prosecutors began to realize that fighting organized crime was as much about eliminating the influence of criminal organizations in legitimate industry as it was about incarcerating mob leaders. Traditional criminal prosecutions had successfully targeted the leadership of organized crime. Prosecutors recognized, however, that attempting to eradicate mob influence from mainstream business requires more than jailing organized crime leaders. Others are always waiting to take their place.
Through the proposed Trade Waste Commission, the legislation will reform the industry administratively by providing for the issuing of licenses, the setting of standards for rates and services, the conduct of investigations and audits, and related functions. Through the proposed pilot project to establish two trade waste removal districts, and by making provision for independent auditing and monitoring of individual carters, the administration’s plan will achieve long term structural reform.
My testimony will focus on the proposals for independent auditing and monitoring, also a product of the innovative war on the mob which our local and federal prosecutors have fought for the past decade. Central to this campaign has been the use of the federal RICO Act to appoint trustees and monitors to replace the leadership of corrupt labor unions and scrutinize the affairs of mob-dominated entities.
The purpose of trustees and monitors primarily was to prevent and expose criminal activity within organizations, to report violations to government authorities, and to cooperate and assist the government with its investigation. This monitoring function – undertaken by independent firms with legal, investigative and audit skills – has since been developed, refined and implemented outside the RICO context.
Monitoring seeks to replace corrupt business practices with legitimate activity by simultaneously scrutinizing and redesigning the practices, procedures and standards of the workplace. It has been applied by the Manhattan District Attorney’s Office, U.S. Attorneys in the Southern and Eastern Districts of New York, and the New York State Organized Crime Task Force. It has been adopted by the New York City School Construction Authority and the New York State Department of Environmental Conservation. In March 1994, the U.S. Attorney for the Eastern District of New York announced the settlement of a civil RICO action filed by the United States against the Private Sanitation Industry Association of Nassau/Suffolk Inc. and over one hundred other defendants. The terms of the settlement placed eight of Long Island’s largest carting companies in monitorship for a period of five years. Since then, more carting companies have been added to the monitorship. Monitors have also been appointed to oversee the mob-infiltrated New York City garment center trucking industry and the Fulton Fish Market and corrupt unions. Organizations in mainstream industries, including real estate management, securities, and street festivals have also agreed to appoint monitors after fraud or corruption allegations. Monitoring has also been used by the Securities and Exchange Commission in the appointment of special investigative counsel as part of a consent decree.
In 1993 the State Bar’s Civil Prosecution Committee produced a report entitled “The Independent Private Sector Inspector General” (IPSIG), which described a state-of-the-art monitoring mechanism that was developed by a working group of public and private sector attorneys, investigators and accountants in New York. An IPSIG is an independent, private sector firm with legal, auditing, investigative, and loss prevention skills, employed by an organization to ensure compliance with relevant laws and regulations and to deter, prevent, uncover, and report unethical and illegal conduct by, within and against the organization. The working group prepared a draft Code of Ethics for the International Association of IPSIGs, setting forth ethical and practical guidelines embodying the values of integrity, honesty, impartiality and professionalism that are fundamental to the effectiveness and credibility of the IPSIG industry.
In 1994, the Civil Prosecution Committee produced another report which applied the IPSIG mechanism to the New York City carting industry. The report endorsed an existing bill, Intro. No. 127, sponsored by the New York City Public Advocate, Mark Green, which would create commercial waste hauling “competition zones” in which carters would have to bid against each other and the Department of Sanitation for an exclusive license to collect garbage in that zone.
The Civil Prosecution Committee report recommended requiring that the successful bidder hire an IPSIG, to be pre-certified by the Department of Consumer Affairs and paid for by the carting company. That recommendation was adopted and incorporated in an amended bill, Proposed Intro. No. 127A, sponsored by Public Advocate Green and Councilmember Fisher. Under that bill, the carter must give the IPSIG complete access to all books, records and employees of the company. The goal of the IPSIG is to prevent problems by working closely with the carter’s leadership and workforce. Those problems include activities which would undermine the exclusive licensing plan, such as private deals between customers and carters, all forms of labor racketeering, illegal dumping and political corruption. The IPSIG would also supplement the DCA’s resources by helping to enforce its regulations and monitor actual service levels. Because the IPSIG would be paid for by the carting company, the City would be saved enforcement costs.
Independent monitoring makes good business sense both for the government and the monitored company. The monitor’s functions are as much about improving the bottom line for the company’s business and its customers as they are about policing its activities. Fraud, waste and abuse are rarely good business.
The administration’s plan, embodied in Intro. No. 676, likewise includes provision for the Trade Waste Commission to require that individual carters retain independent auditors or monitors. This proposal should be strengthened in two ways: first, by greater specificity as to the functions, powers and qualifications of the auditors or monitors and the means by which they are to be financed; and second, by making the hiring of IPSIG monitors mandatory for carting companies that successfully bid for contracts in the proposed trade waste removal districts as part of the pilot project.
IPSIG monitoring of the activities of carting companies can best ensure that the carting business does not slide back into business as usual after the Trade Waste Commission begins its work. In the long term, monitoring will provide the means by which corrupt business environments can be transformed. By that transformation honest businesses will be given a real opportunity to operate both legitimately and competitively.
The administration’s plan represents an important step towards restoring and maintaining honest business practices in an industry long infiltrated by corruption. It is a part of a broader City-wide commitment to reducing the infiltration of organized crime into legitimate industry and the impact this has on both the quality and cost of services — a commitment evidenced by the current vigorous enforcement of legislation enacted earlier this year to regulate and reform the Fulton Fish Market. This plan follows in that tradition. It deserves the Council’s full support.