This action was commenced by the Attorney General with a 43 page Verified Complaint dated October 8, 2008, and filed with the Ulster County Clerk's Office on October 10, 2008, that alleged ten (10) causes of action against the above named Defendants. In the First and Second Causes of Action it was alleged that Defendants, Frederick Fritschler ( "Fritschler") and Lower Esopus River Watch, Inc. ( "LERW"), as Fritschler's alter ego, violated Section 63-c of the Executive Law (the so-called Tweed Law) by breaching their respective fiduciary duties and committing fraud. The Third and Fourth Causes of Action were brought pursuant to Sections 717 and 720 of the Not-For-Profit Corporation Law ("N-PCL") and Section 8-1.4 of the Estates Powers and Trust Law ( "EPTL") seeking an accounting and restitution from Fritschler. In the Fifth Cause of Action, the Attorney General alleged that Fritschler was a convicted felon and sought an injunction to prohibit Fritschler from soliciting charitable contributions in New York State.

The remaining five (5) Causes of Action are alleged against the other named Defendants and LERW but are not germane to this instant matter since all of the other Defendants, including LERW, have settled with the Attorney General. Defendant David B. Straus ( "Straus") paid $15,000.00 in restitution, Defendants R. Dixon Onderdonk ( "Onderdonk"), Bruce C. Duffy ("Duffy"), Jennifer A. McLeroy ( "McLeroy") and Joel Shuman ( "Shuman") collectively paid restitution in the sum of $31,000.00 and as members of the LERW Board, consented to the dissolution of LERW.

Efforts were made to settle this matter with Fritschler, but he refused to do so. Consequently, this Court embarked upon an eight day bench trial, heard the testimony of 19 witnesses, including Fritschler, and received 76 exhibits into evidence, many of them consisting of hundreds of pages and filling four file boxes.

The Attorney General has submitted extensive, detailed, and exhaustive proposed Findings of Fact which the Court will not attempt to improve upon. For the most part, these Findings of Fact accurately set forth the testimony of the witnesses and references to the relevant exhibits. In those areas where Fritschler's proposed Findings of Fact differ from those proposed by the Attorney General, the Court has determined that the Attorney General's version of the trial testimony is more accurate.

Fritschler contends that he was "impaired" during the course of the trial, but the Court saw no evidence of this fact. Fritschler attended the trial dates on time, returned to Court after every recess and fully participated in the trial by cross-examining witnesses, calling and examining witnesses, and introducing exhibits into evidence. Only on one occasion, on the seventh day of trial, October 19, 2012, did Fritschler indicate to the Court that he was ill. He asked the Court if he could adjourn his taking the stand to testify until the next day because he was feeling ill. The Court granted the adjournment, but immediately thereafter, Fritschler was outside the Courtroom discussing the trial with reporters.

The Attorney General has pointedly advised the Court that in 1975 Fritschler was [*2]convicted of armed robbery and served approximately three and half years in prison. However, there was no evidence produced that Fritschler ever tried to cover up the fact that he was a convicted felon. In fact, his felony conviction was apparently widely known throughout Ulster County. Fritschler's felony conviction has played no part in the Court's decision in this matter.

As can be seen from the Findings of Fact set out below, the Court has given great weight to the testimony of Lester Dier ("Dier") who was an experienced Forensic Accountant and Senior Investigator formerly serving with the Attorney General's office. (Dier retired before this matter came to trial.) Dier worked on and developed many of the Exhibits that were used by the Attorney General to present this case to the Court and to calculate the damages and restitution sought to be imposed upon Fritschler.

There was never any intent by the New York State Legislature to strictly constrain EMCs to any advisory role nor can such an inference be made from the language of Article 47. In fact EMCs have exceptionally broad authority to engage in environmental matters and their activities are only limited by the local governing bodies [sic] willingness to approve their work and to fund their activities. . . .

the applicant is a nonprofit entity (under IRS rules). With the exception of clergy or teachers, the nonprofit has no compensated individuals providing any services. (Id. (emphasis added).)

I find that the Attorney General has prevailed on the his First and Second Causes of Action against Fritscher that allege violations of the Tweed Law (Executive Law Section 63-c).

Executive Law Section 63-c entitled "Action by the people for illegal receipt or disposition of public funds or other property" provides in part at subsection 1. "Where any money, funds, credits, or other property, held or owned by the state, or held or owned officially of otherwise for or in behalf of a governmental or other public interest, by a domestic, municipal, or other public corporation, or by a board, officer, custodian, agency, or agent of the state, or of a city, county, town, village or other division, subdivision, department, or portion of the state, has heretofore been, or is hereafter, without right obtained, received, converted, or disposed of, an action to recover the same, or both, may be maintained by the state in any court of the state... having jurisdiction thereof, although a right of action for the same cause exists by law in some other public authority...The attorney-general shall commence an action, suit or other judicial proceeding, as prescribed in this section, whenever he deems it for the interests of the state so to do; or whenever he is so directed, in writing, by the governor."

As pointed out by the Court in State v. Grecco, 21 A. D.3d 470 (2d Dept 2005): "In sum, the Tweed Law vests the Attorney-General with the discretionary authority to seek the recovery of money or property (other than real property) belonging to the State or a municipality, or to recover damages or other compensation for the same, or both, pursuant to any viable action or proceeding at law or in equity available to the State or municipality." (at 477)

Pursuant to the January 8, 2007, Resolution of the County Legislature, the Attorney General began his investigation that led to the filing of the lawsuit that was the subject of this Trial. The Tweed Law confers authority on the Attorney General to prosecute common law fraud and breach of duty claims against Fritschler on behalf of the County.

The Court finds that the Attorney General has satisfied its burden of proving that Fritschler committed fraud against the County. The elements of a cause of action for fraud are: (i) a misrepresentation of a material fact; (ii) the party making the misrepresentation knew it to be untrue; (iii) the misrepresentation was made with the intent to deceive and for the purpose of [*18]inducing the other party to act upon it; (iv) the other party justifiably relied on the misrepresentation and was thereby induced to act or refrain from acting; and (v) injury or damage. [see Eurycleia Partners v. Seward & Kissel, LLP, 12 NY3d 553, 559 (2009).]

In a case against a fiduciary, like Fritschler, a fraud action may be maintained where the fiduciary intentionally conceals a material fact and the principal relies on this non-disclosure to the principal's detriment. [see American Baptist Churches of Metropolitan New York v. Galloway, 271 AD2d 92, 100 91st Dept 2000).]

During the period from 2002 through the end of 2006, Fritschler made numerous misrepresentations in order to conceal his role at LERW, intentionally deceiving County employees and Legislators into believing that he had no official role at LERW after his sham resignation and that he was not receiving financial and other benefits from it. For example, Fritschler presented contracts to the County that gave no indication of his role with LERW and that did not give any indication that he, and not Onderdonk, had signed Onderdonk's name and had made the decision to sign them.

Fritschler also made numerous fraudulent misrepresentations to County officials and Legislators to convince them that he performed his environmental work on a volunteer basis and concealed the fact that he was receiving payments from LERW with County funds. When asked about his means of livelihood, Fritschler actively misled these County officials by telling them that he worked as a contractor or maintained estates. He also routinely stated that he was performing work on environmental matters as a volunteer.

In addition, by failing to register LERW with the OAG and timely filing LERW's IRS Forms 990, Fritschler concealed from the public information that could have alerted County officials to his continued control over and receipt of money and other benefits from LERW. In particular, the IRS Form 990, which is filed with the OAG as part of the annual financial reports of registered charities, requires charities to list their "current officers, directors, trustees, and key employees." (Ex. 21, Part V-A.) Fritschler's control over LERW warranted his inclusion on this list.

During 2002 through 2006, Fritschler used his position as EMC Chairman to obtain sizable budgets for the EMC from which he directed approximately $1.7 million be paid to LERW pursuant to the LERW Contracts. Fritschler apparently knew that this scheme would be impossible to carry out if the County Legislators and officials were aware of his control over LERW's affairs and his receipt of money and other benefits from that entity. Fritschler knew this because, in 2002, County officials had told him that his resignation from LERW was a precondition for his continued service as EMC Chairman.

To maintain his scheme post 2002, Fritschler intentionally concealed his ongoing role at LERW by falsely asserting that he had resigned from LERW and by making representations that concealed his continued association with LERW, such as misrepresenting his own signature as that of Onderdonk's and falsely stating that he worked on environmental matters as a volunteer. [see Striker v. Graham Pest Control, 179 AD2d 984, 985 (3d Dept 1992), where it was held that an intent to deceive can be inferred from the failure to disclose]. [*19]

Fritschler's admission that he worked hard to make Onderdonk's signatures on the LERW Contracts appear genuine, rather than indicating that he was signing his name for him, further establishes that Fritschler intended to deceive the County. [see Cetnar v. Kinowski, 263 AD2d 842 (3d Dept 1999), where it was held that an intent to deceive can be inferred from circumstantial evidence.]

The County relied on Fritschler's misrepresentations in numerous ways. Peruso, the County's Purchasing Agent, relied on the fact that Onderdonk signed the LERW Contracts in order to determine that they were arm's length transactions. As Peruso testified, if she had known that Fritschler was, in effect, signing both sides of the LERW Contracts (both as the EMC department head on the Contract Approval Routing Slip and as LERW's representative on the contract), it would have raised a red flag. (10/17/12 Tr. 24:16 — 24:20 (Peruso).) In such a case, she would not have approved the LERW Contracts, but rather would have reported the matter to the County Attorney immediately.

Similarly, the County's Insurance Agent, Szpulecki, relied on the forms filed by Fritschler regarding LERW's lack of "compensated individuals" in order to approve the LERW Contracts without the usual presentation of proof of Workers Compensation Insurance. In addition, she would have been concerned if she learned Fritschler was signing Onderdonk's name on the LERW Contracts and, like Peruso, would have reported the matter to the County Attorney immediately.

Each of the current and former Legislators who testified at trial indicated that Fritschler's signing of the contracts for LERW was material information that the Legislature should have had at the time the contracts were being entered into.

As a result of Fritschler's fraud, the County entered into and made payments on the LERW Contracts which substantially harmed the County in the following ways:

Firstly, the County overpaid LERW by $113,123.09, the amount that the LERW Bank Account grew as a result of Fritschler's awarding contracts to it during 2002 through 2006. Since LERW received virtually all of its funds from the County, this increase in its assets was a direct result of the County overpaying LERW for the services it purportedly provided.

Secondly, Fritschler used $152,143.78 in County funds for his personal use during 2002 through 2006, a time when he held himself out as a volunteer. The use of County funds for Fritschler's personal use was not approved by the County and, as a result, all unauthorized benefits Fritschler received must be disgorged and returned to the County.

Thirdly, Fritschler deprived the County of the use of equipment worth $118,896 that he had put in LERW's name, by moving this equipment off County property and by causing LERW to refuse to make it available to the County upon his resignation from the EMC in 2007. As a result of the 2009 Settlement, equipment worth $43,516 was returned to the County. The difference, $72,699, represents the diminution in value of the equipment that Fritschler rendered unavailable to the County before it was returned to the County pursuant to the 2009 Settlement.

Fourthly, Fritschler defrauded the County into paying an additional $58,200 in 2008 to [*20]LERW for contracts that he caused the EMC to enter into without fully disclosing the material facts detailed above.

Accordingly, the Court finds that the County has been damaged by Fritschler's fraud in the principal sum of $396,165.87. This amount was determined by adding up the $113,123.09 representing the increase in LERW's bank account, the $152,143.78 in funds used by Fritschler for personal use, the $72,699.00 representing the diminution in the value of the equipment, and $58,200.00 in funds for LERW contracts for a total of $396,165.87.

The Court finds that the Attorney General has met his burden of proving that Fritschler breached his fiduciary duty to the County. The elements of a claim for breach of fiduciary duty are: (i) the existence of a fiduciary duty; (ii) its breach; and (iii) damages flowing from the breach of fiduciary duty. [see, e.g., Bromwell Ault v. Soutter, 204 AD2d 131, 131 91st Dept 1994).]

A fiduciary relationship arises when a party reposes trust in another to carry out certain duties and the other party agrees to accept that delegation of trust and carry out those duties. EBC I, Inc. v. Goldman Sachs & Co., 5 NY3d 11, 19-20 (2005) Thus, a fiduciary relationship "exists between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation." Id. at 19 (quoting Restatement (Second) of Torts § 874, cmt. [a] ). "This definition expressly refers to an agency relationship and an advisory relationship in the disjunctive. Hence, either is sufficient to establish the fiduciary relationship." Pergament v. Roach, 41 AD3d 569, 571 (2nd Dep't 2007).

A fiduciary duty will attach even in circumstances when the party advises the principal, but does not have the power to bind the principal. Pergament, 41 AD3d at 571 ("since one can give advice to an entity without having the authority to bind it, the Supreme Court's conclusion that the moving defendants were not fiduciaries because they had no authority to bind [the principal] is incorrect").

Fiduciary duties arise regardless of whether the party in whom trust is reposed is a volunteer or is compensated. Restatement (3rd) Agency § 8.01, cmt. (c) ("the fiduciary principle is applicable to gratuitous agents as well as agents who expect compensation for their services").

Fritschler owed fiduciary duties to the County because the County entrusted him with wide powers and granted him discretion in managing the EMC's affairs and he accepted the County's delegation of trust by acting as Chairman of the EMC for a decade. The discretion and trust given to Fritschler included the authority to: (i) draft and submit the EMC's budget to the County Administrator; (ii) design the EMC's programs; (iii) select the County's vendors for services contracts; and (iv) supervise and work with the EMC's employees in carrying out the County's environmental conservation programs. The performance of these duties also cloaked Fritschler with public officer status, and thus he had fiduciary responsibilities to the County for this reason as well.

Throughout the trial, Fritschler contended that he did not owe a fiduciary duty to the County because he was not an "officer" of the County but a mere volunteer. He argued that since the EMC was not established by a local law, his position as Chairman of the EMC could not be considered as a "public office". He also argued that since he was not an office holder or an [*21]employee of the County, he was not bound by the County's Ethic's Law (the Ethic's Law).

The Court has accepted the Attorney General's contention that as chairman of the EMC, Fritschler was a public officer. The Court concurs with the Attorney General's argument that there is no requirement that the office occupied by a public officer be established by local law. The Attorney General has pointed out that pursuant to County Law Section 153(1), counties can exercise their powers through the adoption of a resolution. Citing an Informal Attorney General's Opinion, the Attorney General has further pointed out that the statutory designation of a position as an office is but one of several possible indications for the recognition of public office.

The essential and dispositive element of public office is that "the duties to be performed shall involve the exercise of some portion of the sovereign power, whether great or small." Held v. Hall, 741 N.Y.S.2d 648, 657 (Sup. Ct. Westchester Cty. 2002) (quoting People ex rel Corkhill v. McAdoo, 90 N.Y.S. 689 (2d Dept 1904); Dawson v. Knox, 231 A.D. 490, 492 (3d Dept 1931), aff'd 267 NY 565 (1935)). In determining public officer status, whether the individual exercised discretion and independence in carrying out government functions is the key factor. County of Suffolk v. State of New York, 138 AD2d 815, 816 (3d Dept 1988) (a public officer "exercises a high degree of initiative and independent judgment"), aff'd, 73 NY2d 838 (1988). Another indicia of public officer status, applicable here to Fritschler, is the person's "appointment for a definite term." 1995 NY Op. (Inf.) Att'y Gen. 4; 1995 NY AG LEXIS 96 at *2;Finally, public officer status may arise whether or not someone is paid. 2008 NY Op. (Inf.) Att'y Gen. 5, 2008 NY AG LEXIS *2 (uncompensated ethics board members were public officers); see also Public Officers Law § 64 (providing for reimbursement of expenses for unpaid public officers).

By accepting the County's request that he carry out the County's environmental programs, as Chairman of the EMC, and by undertaking this duty, Fritschler satisfies the common law standard for the establishment of public officer status.

As a public officer, as well as because of his undertaking the duties entrusted to him as EMC Chairman, Fritschler owed fiduciary duties to the County. [see Grecco, 21 AD3dat 474-78 (County officials are required to act faithfully in the course of their employment with the County); Tuxedo Conservation & Taxpayers Assoc. v. Town Bd. of Town of Tuxedo, 69 AD2d 320, 324 (2d Dept 1979) (fiduciary duty of "the punctilio of an honor the most sensitive" applies to public servants) (quoting Meinhard v. Salmon, 249 NY 458, 464 (1928)); Landau v. Percacciolo, 66 AD2d 80, 87 (2d Dept 1978) ("[t]he relationship between a municipality and its servants springs from the fiduciary roots of agency, a concept deeply embedded in the common law"), aff'd, 50 NY2d 430 (1980).]

"An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected with the agency relationship." Restatement (Third) Agency § 8.01. Fiduciary duty requires the "avoidance of situations in which a fiduciary's personal interest possibly conflicts" with the interests of his principal. Birnbaum v. Birnbaum, 73 NY2d 461, 466 (1989); see also Restatement (Second) of Agency § 387 ("an agent is subject to a duty to his principal to act solely for the benefit of the principal in all matters connected with his agency"). In particular, "[a]n agent has a duty not to acquire a material benefit from a third party in connection with transaction conducted or other actions taken on behalf of the principal or otherwise through the [*22]agent's use of the agent's position." Restatement (Third) Agency § 8.02. This is true even if the agent does not believe any harm will befall the principal as a result of the agent's taking the benefit. Id., cmt.(b).

As an agent and public officer of the County, Fritschler owed the County this duty of trust and loyalty. See Restatement (Second) of Agency § 13; Sokoloff v. Harriman Estates Dev. Corp., 96 NY2d 409, 416 (2001); American Map Corp. v. Stone, 264 AD2d 492, 492-93 (2d Dept 1999). Fritschler breached his duty of loyalty to the County by using his position as EMC Chairman to divert County funds to LERW, an entity that he controlled and from which he received substantial benefits. In so doing, Fritschler surreptitiously provided himself with compensation using County funds.

In addition, the work that had ostensibly been outsourced to LERW was, in fact, performed by County employees under Fritschler's supervision. Accordingly, LERW served no purpose other than as a holding company for the cash surpluses generated by the EMC's programs and for the vehicles and equipment used by the EMC. As such, Fritschler ensured that these resources were available to him — but not the County — upon his resignation from the EMC on January 8, 2007.

A fiduciary with divided loyalties must disclose any potential conflicts to his principals. In particular, a fiduciary must disclose "any substantial advantage" he receives "from third persons," and any advantage which may have "eroded [the fiduciary's] duty of undivided loyalty to [its] employer." Black v. MTV Networks Inc., 172 AD2d 9, 11 (1st Dept 1991); TPL Associates v. Helmsley-Spear, Inc., 146 AD2d 468, 470 (1st Dept 1989) (holding that principal has no duty to inquire into agent's relationships with third parties and that the agent has the affirmative obligation to disclose any conflicts to the principal).

This common law fiduciary duty to disclose one's conflicts of interest applies to public officials. Grecco, 21 AD3d at 477-78 (which reinstated the Attorney General's claim for common law breach of fiduciary duty against Suffolk County official who failed to disclose his conflict of interest in real estate transaction to Suffolk County).

The common law duty of public officials to disclose their conflicts of interest to the municipalities that they serve is consistent with General Municipal Law ("GML") § 803, which requires such disclosure. Landau, 66 AD2d at 87-88 (Putnam County official breached his statutory duty to disclose to the County his interest in real estate transaction). GML § 803 provides that: "Any municipal officer or employee who has, will have, or later acquires an interest in . . . any actual or proposed contract . . . with the municipality of which he or she is an officer or employee, shall publicly disclose the nature and extent of such interest in writing to his or her immediate supervisor and to the governing body thereof as soon as he or she has knowledge of such actual or prospective interest. Such written disclosure shall be made part of and set forth in the official record of the proceedings of such body."

Trial testimony established that Fritschler had a direct financial interest in LERW, which received a significant portion of the EMC's budget, that plainly conflicted with his duties as the EMC Chairman to make independent decisions concerning to whom to award County contracts. [*23]The evidence at trial also established that Fritschler failed to make any disclosure to the County officials and Legislators who acted on EMC's proposed budget requests and contracts that he, Fritschler, maintained complete control over LERW's finances, signed virtually all LERW checks, had exclusive use of the LERW Credit Card, and reaped substantial financial benefits through his control of LERW's accounts. Notwithstanding his clear fiduciary duties, Fritschler never disclosed his financial interest in or control over LERW to the County Legislature or any of the County employees with whom he dealt.

Fritschler argued that he did not have any duty to disclose his conflicts of interest because he was not specifically listed among the County officers that were required to make financial disclosures under Section 3 of the Ethics Law. However, other sections of that law refute his argument. In particular, while Section 3 of the Ethics Law only applies to "Certain County Officers," Section 1 of the Ethics Law applies to all officers and employees, even unpaid ones. (Ex. EE at 31 § 1; see id. § 1(E) (referring to paid and unpaid officers). As EMC Chairman, Fritschler presented proposed budgets to the Legislature and awarded contracts to LERW without disclosing his association with, or compensation from, that entity. His failure to fully disclose his conflicts violated a number of provisions in Section 1 of the Ethics Law.

Section 1(E) of the Ethics Law requires all County officers, whether "paid or unpaid" who participate in discussions with the County Legislature concerning legislation to "publicly disclose on the official record the nature and extent of any direct or indirect financial or other private interest he or she has in such legislation." (Ex. EE at 31-32.) Similarly, Section 1(C) precludes all employees and officers from entering "into any agreement, express or implied, for compensation for services rendered in relation to any matter before any municipal agency over which he or she has jurisdiction or to which he or she has the power to appoint any member, officer or employee." (Ex. EE at 31.) Finally, Section 1(G) provides that County employees and officers "shall not . . . render services for private interests when such employment or service creates a conflict with or impairs the proper discharge of his or her official duties." (Ex. EE at 32.)

"It is fundamental that a fiduciary must make whole a beneficiary of the trust for any damage resulting from a breach of the fiduciary's duty." Evans v. Catalino, 88 AD2d 780, 781 (4th Dept 1982); see Matter of Rothko, 43 NY2d 305, 322 (1977). "[B]reaches of a fiduciary relationship ... comprise a special breed of cases that often loosen normally stringent requirements of causation and damages." Gibbs v. Breed, Abbott & Morgan, 271 AD2d 180, 188-89 (1st Dept 2000) (quoting Milbank, Tweed, Hadley & McCloy v. Chan Cher Boon, 13 F.3d 537, 543 (2nd Cir. 1994)). Thus, a plaintiff need only allege that "the offending parties' actions were a substantial factor in causing an identifiable loss." Gibbs, 271 AD2d at 189 (quoting Milbank Tweed, 13 F.3d at 543).

Accordingly, the Court finds that the County has been damaged pursuant to the Second Cause of Action by Fritscher's breach of his fiduciary duty to the County in the sum of $396,165.87. This amount was calculated by following the same reasoning used by the Court in determining the damages owed to the County because of Fritschler's fraud as proven under the First Cause of Action. [*24]

The Court finds that the Attorney General has prevailed on his Third Cause of Action against Fritschler alleging the Fritschler breached his fiduciary duty to LERW.

The N-PCL requires directors and officers of not-for-profit corporations to adhere to basic fiduciary duties that include the duty of care, the duty of loyalty and the duty of obedience. N-PCL § 717; [see Martha Graham School & Dance Foundation, Inc. v. Martha Graham Center of Contemporary Dance, Inc., 224 F. Supp.2d 567 (S.D.NY 2002); see also Manhattan Eye, Ear & Throat Hosp. v. Spitzer, 186 Misc 2d 126, 151 (Sup. Ct. New York Cty. 1999) ("As caretaker, the board ha[s] the fiduciary obligation to act on behalf of the corporation . . . and advance its interests")]

Pursuant to the N-PCL §713, an officer of a not-for-profit corporation is someone elected or appointed to certain positions of responsibility by the corporation's board of directors. The Court finds that as the individual charged by the LERW Board with managing LERW's affairs and administering its accounts, Fritschler was an officer within the meaning of N-PCL § 713.

In addition, it is well established that even if a person is not officially appointed as an officer, he may be considered to be a de facto officer by virtue of his actions and the responsibilities that are delegated to him in running the organization. [see Kessel v. Dodd, 46 AD2d 645, 646 (2d Dept 1974) ("[t]he doctrine of de facto officers is of ancient origin and applies to private as well as public officers"), aff'd, 35 NY2d 722 (1974); Tzolis v. Wolff,13 Misc 3d 1151(A), 2006 NY Misc. LEXIS 1125, (Sup. Ct. NY Cty. 2006); aff'd in relevant part, 39 AD3d 138, 140-41, 146 (1st Dept 2007). A de facto officer has the same fiduciary duties to a charity as its named officers. see Tzolis, 2006 N.Y.Misc. LEXIS 1125 at *8 — *9 (party acting as a de facto manager of an LLC subject to fiduciary duties to the LLC).]

The use of a charity's assets by a director or officer (titular or de facto) for his or her personal benefit constitutes a violation of his fiduciary duties. A fiduciary who violates this duty is responsible for making the corporation whole and is required to repay the losses sustained by the corporation due to his breach. N-PCL § 720(a)(1)(B).

N-PCL § 720 provides a cause of action, inter alia, against a director or officer for the "acquisition by himself or transfer to others, loss, or waste of corporate assets due to neglect of, failure to perform, or other violation of his duties." Vacco v. Aramony, N.Y.L.J., Aug. 7, 1998, at 21 (Sup. Ct. NY Cty. 1998) (Attorney General had standing to sue officers of the United Way pursuant to N-PCL § 720 for losses suffered by the not-for-profit entity as a result of officers' breaches of fiduciary duty, including the misappropriation of United Way funds for personal use). See also People v. Grasso, 54 AD3d 180, 204 (1st Dep't 2008) (by giving Attorney General standing to sue directors and officers under N-PCL § 720, State Legislature has made a "public policy determination that it is in the public interest for the Attorney General to police not-for-profit corporations.")

Any compensation paid by a not-for-profit corporation to its directors and officers must be "commensurate with the services performed." N-PCL § 202(a)(12).

Even after his sham resignation from LERW, Fritschler continued to run LERW as the "de facto unofficial director of operations." The LERW Board continued to cede complete [*25]control of LERW to Fritschler. Fritschler continued to make all decisions concerning LERW's day to day management and continued to: (i) act as its Executive Director; (ii) sign all checks (with Schuman's and Onderdonk's names); (iii) review and sign LERW's contracts (under Onderdonk's name); and (iv) be the primary user of the LERW Credit Card (under his own name). Indeed, Straus recognized that Fritschler continued to be LERW's "CEO" even after his sham resignation. Under these circumstances, Fritschler was an officer, pursuant to N-PCL Section 713, as well as a de facto officer of LERW, and subject to fiduciary duties pursuant to N-PCL Section 717. see Tzolis, 2006 N.Y.Misc. LEXIS 1125 at ***8 — ***9.

By 2002, LERW was used primarily as a holding company for the EMC's equipment and the excess revenue generated by the EMC. In addition, to the extent that Fritschler rendered environmental services for the County, it was in his capacity as Chairman of the EMC. As Chairman, Fritschler developed budgets, established policy, supervised County staff, and reported to the Environmental Committee. None of these activities were done in the name of LERW. Therefore, the $87,921.54 in checks that Fritschler paid to his own company, on LERW's Bank Account, does not, therefore, qualify as compensation under the N-PCL. Because the services that Fritschler performed in the area of environmental conservation were to the County as the volunteer Chairman of the EMC, not to LERW, it was improper for him to be paid at all by LERW. See N-PCL § 202(a)(12) (compensation must be commensurate with services performed).

In addition, during the years 2002-06, Fritschler used LERW's bank account and credit card for over $64,222.24 in personal expenditures. Many of these purchases were for meals and entertainment for which he maintained no documentation of charitable purpose. Even after he resigned from his position as EMC Chairman in January 2007, Fritschler continued to use the LERW Credit Card for his personal benefit, charging an additional $3,424.87 to LERW.

Under these circumstances, Fritschler's use of the LERW Bank Account to pay himself and his use of the LERW Credit Card for his own personal use constitute waste and self-dealing, in violation of his duty of loyalty to LERW, and renders him liable to LERW under N-PCL § 720(a)(2)(B). Similarly, Fritschler's use of LERW's property for his personal landscaping business constitutes waste.

Accordingly, the Court finds that as a result of Fritscher's breaches of duty to LERW, LERW has been damaged in the principal sum of $155,568.65 and is owed restitution in this amount. This amount was determined by adding up the $87,921.54 in checks paid to Fritscher's Company, Environmental Research Associates, the $64,222.24 in personal expenditures and the $3,424.87 in personal expenses charged on the LERW Credit Card. Pursuant to the December 3, 2009, Stipulation of Settlement, any damages that are owed to LERW after its dissolution are to be paid to the County.

The Court finds that the Attorney General has prevailed on his Fourth Cause of Action against Fritschler alleging that Fritschler breached his fiduciary duty to LERW as a charitable organization.

In addition to the obligations imposed by the N-PCL, trustees of charities are accountable [*26]under the EPTL for the "proper administration" of the assets entrusted to them. [see EPTL § 8-1.4(a),(m); Vacco v. Aramony, N.Y.L.J., Aug. 7, 1998, at 21 (Attorney General had standing to sue officers of the United Way pursuant to EPTL § 8-1.4 for losses suffered by the not-for-profit entity as a result of their breaches of fiduciary duty, such as the loss of charitable funds used for the personal benefit of the officers).]

The EPTL defines a trustee broadly; it is defined as "any individual . . . holding and administering property for charitable purposes." EPTL § 8-1.4(a). The Court finds that as a de facto officer of LERW, a not-for-profit corporation organized for charitable purposes, and as the individual charged by the LERW Board with managing its affairs and administering its accounts, Fritschler was a "trustee" within the meaning of EPTL § 8-1.4(a). Accordingly, Fritschler is responsible for LERW's failure to administer its charitable assets properly.

Fritschler violated his fiduciary duties under the EPTL by engaging in the self-dealing transactions set forth above, namely, using LERW's bank account and credit card and equipment for his undocumented and unreported personal benefit, rather than for the charitable purposes to which they were obligated to be used. Therefore, pursuant to EPTL Section 8-1.4(m), Fritschler must make restitution to LERW for these wasted funds.

New York charities, such as LERW, are required to register and file annual financial reports with the OAG pursuant to EPTL Section 8-1.4(c). LERW was also subject to the registration and reporting requirements of Executive Law Article 7-A, which requires the registration of entities that solicit charitable contributions from, among other sources, governmental agencies. [see Exec. L. §§ 171-a(2), 172.]

Contrary to Fritschler's assertion, the contracts solicited from the County on behalf of LERW constitute contributions pursuant to Executive Law Section 171-a(2). As a charity subject to the registration and reporting requirements of both EPTL § 8-1.4 and Article 7-A of the Executive Law, LERW should have been a "dual" registrant. LERW has never registered or filed annual reports with the OAG, as required under the EPTL and the Executive Law.

Fritschler, as the de facto Executive Director of LERW, is one of the individuals responsible for LERW's failure to register and file the required registration and annual financial reports.

Accordingly, the Court finds that as a result of Fritscher's breaches of duty to LERW by failing to administer its charitable assests, LERW has been damaged pursuant to the Fourth Cause of Action in the principal sum of $155,568.65 and is owed restitution in this amount. This amount was calculated by following the same reasoning used by the Court in determining the damages owed to LERW under the Third Cause of Action.

The Court finds that the Attorney General has prevailed on his Fifth Cause of Action against Fritschler seeking a permanent injunction to forever bar him from serving in any capacity for a charitable entity and from soliciting directly or indirectly for any charitable contributions.

The Attorney General has proven that Fritschler engaged in a scheme to defraud County taxpayers and to enrich himself by controlling and misappropriating the assets of a not-for-profit [*27]corporation, LERW. This scheme included passing off his own signature as the signature of the president of a New York not-for-profit corporation in order to obtain access to County funds. Fritschler carried on this scheme over a period of at least 7 years. Numerous witnesses testified that they were unaware that Fritschler was serving dual roles with the EMC and the LERW. Nor has Fritschler acknowledged or even appeared to recognize his wrongdoing. On the contrary, by maintaining his lack of liability despite admitting the key facts underlying the Attorney General's claims, Fritschler has demonstrated that he does not understand, and is likely not to follow, the obligations required of a director or officer of a not-for-profit corporation, and cannot be trusted with those obligations in any future role. Because there is a tangible likelihood that Fritschler would violate New York law were he permitted to serve again as an officer or director of a charity, the Court finds that injunctive relief is fully warranted.

The Attorney General contends that he is entitled to pre-judgment interest at the rate of nine (9) percent on the First, Second, Third and Fourth Causes of Action against Fritschler. CPLR Section 5001(a) provides in part: "Interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the Court's discretion".

As pointed out by the court in Huang v Fabian A. Sy (62 AD3d 660 [2d Dept 2009]): "The Supreme Court properly awarded pre-verdict interest as a matter of right pursuant to CPLR 5001 (a) upon the principal sum awarded in connection with the plaintiff's causes of action to recover damages for fraud and breach of fiduciary duty (citations omitted)...Contrary to the defendant's contention, these causes of action sounded in law, rather then equity. (citations omitted)."(at 661-662) Pursuant to CPLR Section 5004, the applicable rate of pre-judgment interest is nine (9) percent.

It is necessary for the Court to determine at what point in time, the pre-judgment interest began to accrue. CPLR Section 5001 (b) provides in part: "Interest shall be computed from the earliest ascertainable date the cause of action existed...Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date."

The Court is not persuaded by the argument of the Attorney General that the date for the start of pre-judgment interest should be set at January 8, 2007, for Fritchler's refusal to turn over the equipment having a value of $72,699.00; for May 16, 2008, for the payment of the $58,200.00 to LERW; for July 1, 2004, for the accumulation in the LERW bank account of $113,123.09 and Fritschler's personal expenses of $64,222.24, and for January 1, 2008, for purchases of $3,424.87 Fritscler made on the LEWR Credit Card.

Under CPLR Section 5001 (b), the Court is allowed to compute pre-judgment interest upon all of the damages from a single reasonable intermediate date. In the exercise of its discretion, the Court has determined that pre-judgment interest on all of the damages and restitution awarded herein will be calculated from the date the Attorney General's Verified Complaint was filed with the Ulster County Clerk's Office, which is October 10, 2008. [*28]

The Attorney General has also sought that costs and disbursements be imposed upon Fritschler pursuant to CPLR Sections 8101 and 8301(a)(9) in the sums of $700.00 and $250.00. This relief is granted.

In making its final determination, as to the total damages and restitution owed by Fritschler, the Court is mindful of the fact that pursuant to the Stipulation of Settlement dated December 3, 2009, any damages that are owed to LERW after its dissolution are to be paid to the County. The Court is also mindful of the fact that the County cannot have a "double recovery" on some of the damages nor should Fritschler be made to pay twice for the same damages and restitution. The $87,921.54 in checks paid on LERW's checking account to Fritschler's company were counted as damages on the Attorney General's First and Second Causes of Action and on his Third and Fourth Causes of Action. Likewise, Fritschler's LERW Credit Card expenditures of $64,222.24 for his personal expenses were counted as damages on the Attorney General's First and Second Causes of Action and on his Third and Fourth Causes of Action.

Therefore, the total of the principal damages that should be paid collectively on the First and Second Causes of Action is $244,022.09 which sum includes the increase in the LERW checking account of $113,123.09, the $72,699.00 value of the equipment improperly withheld and the 2008 payment of $58,200.00 to LERW. Further, the total of the principal damages and restitution that should be paid collectively on the Third and Fourth Causes of Action is $155,568.65 which sum includes the $87,921.54 in checks payable to Fritscher's company, and the $64,222.24 and the $3,424.87 personal expenses on the LERW Credit Card.

Thus, the total of the principal damages and restitution to be paid by Fritschler is $399,590.74. Fritscher is entitled to have this sum offset by a portion of the settlement proceeds paid by the other Defendants. The Court will subtract $14,168.27 which is reached by adding the $33.42 balance left over from the 2009 Settlement to Straus's $15,000.00 settlement and reducing it by $865.15, the cost to provide Fritschler with a copy of the trial transcript, to arrive at a final principal sum of $385,422.47. The Court will not include the $1,158.00 used to pay the final bill for LERW's counsel to further reduce the offset. The $14,168.27 will be subtracted from the total of damages to be awarded under the First and Second Causes of Action.

Accordingly, it is hereby

ORDERED, that the Attorney General shall have judgment against Fritschler on his First and Second Causes of Action in the sum of $229,853.82 with pre-judgment interest at the rate of nine (9) percent accruing from the date of October 10, 2008; and it is further

ORDERED, that the Attorney General shall have judgment against Fritschler on his Third and Fourth Causes of Action in the sum of $155,568.65 with pre-judgment interest at the rate of nine (9) percent accruing from the date of October 10, 2008; and it is further

ORDERED, that pursuant to Executive Law Sections 63(12) and 175(2) and EPTL Section 8-1.4, Fritschler is hereby enjoined from:

a. serving as a trustee, director, officer, or in any other fiduciary capacity, of any [*29]charitable trust, not-for-profit corporation, or other charitable entity, domestic or foreign, conducting activities (as defined in N-PCL Article 13) in the State of New York; and

b. engaging, directly or indirectly, in any solicitation of any person in the State of New York for a contribution to any charitable organization, or participation in or controlling such solicitations (as the terms person, solicit, contribution, and charitable organization are defined in Executive Law Section 171-a); and it is further

ORDERED, that the Attorney General is awarded costs and disbursements in the sum

of $950.00.

This shall constitute the Decision, Order and Judgment of the court. All papers, including this Decision, Order and Judgment are being returned to the attorney for the Plaintiff. The signing of this Decision, Order and Judgment shall not constitute entry or filing under CPLR 2220. Counsel is not relieved from the applicable provisions of that rule relating to filing, entry and notice of entry.

SO ORDERED AND ADJUDGED

ENTER.

Dated:April 8, 2013

Kingston, New York

RAYMOND J. ELLIOTT, III

Supreme Court Justice

Papers Considered:

1.Bench Trial Transcripts dated October 10, 2012, October 11, 2012, October 12, 2012, October 15, 2012, October 17, 2012, October 18, 2012, October 19, 2012 and October 22, 2012.

2.Trial Exhibits: 1-17, 18-28, 31-37, 40, 42-58, A-C, E-F, I-K, N, P-T, V-X, AA, CC-GG.

3.Plaintiff's Proposed Findings of Fact and Conclusions of Law, dated March 11, 2013.

4.Defendant's Findings of Fact and Conclusions of Law and Amended Findings of Fact and Conclusions of Law.