East Hampton Town’s former budget officer Edward “Ted” Hults was arraigned on seven felony charges and two misdemeanors Thursday morning after a months long investigation by Suffolk County District Attorney Thomas Spota into alleged criminal mismanagement and fraud related to illegal transfers from the town’s Community Preservation Fund and misrepresentations allegedly made by Hults on bond applications.
For over a year, Hults and East Hampton Town Supervisor Bill McGintee have been under scrutiny, and investigation, over the town’s finances, as the town went from an $11 million surplus in 2004 when McGintee was elected to what is expected to near an $18 million deficit by the close of the next fiscal year.
McGintee has yet to be charged with any crimes, although according to published reports he has retained legal counsel.
Hults, who resigned as budget officer three weeks ago, was arraigned at East Hampton Town Justice Court on a felony charge of defrauding the government, and a misdemeanor count of official misconduct as a result of the alleged transfer of $8 million from the town’s CPF to other operating funds, despite warnings from the town attorney that such transfers were illegal.
He was also charged with two counts of fraudulent practices in respect to stocks, bonds and other securities, two counts of falsifying business records in the first degree and two counts of offering a false instrument for filing in the first degree – all felony crimes, as well as an additional misdemeanor count for official misconduct in relation to allegations that Hults prepared bond documents with false information in July and August of 2007 in an effort to borrow money on behalf of the town.
According to a release issued by District Attorney Spota’s office on Thursday, Hults allegedly prepared a bond anticipation note for the town in June and August of 2007 that stated the town had a surplus of $171,573 when in fact it was running a deficit of over $900,000. Another misrepresentation made in the note, said Spota, was that former town attorney Laura Molinari had reviewed the documents when in fact she had not. Molinari resigned last year as town attorney after joining town board members in calling for Hults’ dismissal.
According to the district attorney’s office, the felony counts have the potential to carry 16-month to four-year sentences, while the misdemeanor counts are punishable by up to a year in jail.
Hults pled not guilty to the misdemeanor charges and did not enter a plea for the felony counts.
During his arraignment on Thursday, Chris McPartland, chief of the county’s government corruption bureau, which has been handling an investigation of town officials’ alleged crimes, did not request bail for Hults, citing his cooperation with the district attorney’s office. East Hampton Town Justice Lisa Rana released Hults on his own recognizance and the court will reconvene to hear the matter on July 30 at 9:30 a.m.
Following Hults’ arraignment, district attorney Spota and New York State Comptroller Thomas DiNapoli – whose office has been investigating the misuse of CPF throughout the five East End towns – convened a press conference to discuss both the district attorney’s investigation and the state comptroller’s findings.
Noting East Hampton is often viewed as a playground for the rich and famous, Spota noted many residents of the town are hardworking men and women, sometimes working two jobs, and now wondering how they will manage not only their mortgage payments, but also sky-high taxes.
“They are entitled, in my view, to rely on their public officials to be running an honest, efficient open government,” said Spota. “Unfortunately that has not happened in East Hampton.”
Spota said the criminal mismanagement and fraud committed by Hults was not for personal gain – Hults has not been accused of embezzlement – but rather for “political advantage.”
“These lies did not personally enrich Hults in anyway, or anyone else,” said Spota. “He did it to hide the deteriorating financial situation that would, if uncovered, create significant political problems for the town supervisor who at that time was running for reelection.”
According to Spota, the “scheme” began in December of 2006 when Hults allegedly received a call from McGintee reporting that the town was unable to meet its payroll for its over 500 employees. It was then, Hults told the district attorney’s office, that he suggested they take monies from CPF to meet payroll and other financial obligations.
“It is very, very clear in the law, and Hults and McGintee were warned and told by the town attorney that the CPF is to be used only to acquire open space and farmland,” said Spota.
In addition to covering payroll, according to Spota, the $8 million taken from CPF also covered town expenses at the airport, for highway street lighting and for garbage removal.
“These illegal transfers were made to hide from the taxpayers and voters in the town the horrendous fiscal condition that the town was truly in,” said Spota.