Testimony of
Robert M. Morgenthau
District Attorney, New York County

Before the

City Council
Public Safety Committee
March 21, 2006

 

          Thank you for the opportunity to speak before you today with regard to the Mayor’s Proposed Fiscal Year 2007 Preliminary Budget and its impact on the New York County District Attorney’s Office. 

          In his 2006 State of the City Address, Mayor Bloomberg said: “Putting New York on the road to long-term success rests on our ability to continue making the safest big city in America even safer.  Public safety is the foundation of our City’s prosperity.”  We welcome this acknowledgement that successful crime fighting is essential to the continued well-being of the city.  However, though prosecutors’ offices are critical to this goal, our funding levels have been steadily falling.

          Even in a year when the city surplus is greater than expected, our budget is shrinking.  We ask for the restoration of budget cuts imposed since Fiscal Year 2003 so we can fulfill our responsibility to investigate and prosecute violent crime and economic crime.  We also hope that you can help us to combat gun violence, to prosecute and prevent child abuse, and to investigate terrorist financing.  Recently federal funding for these three important areas was eliminated.  Finally, we seek parity with Corporation Counsel that has seen its budget increase while the District Attorneys’ budgets have been dramatically reduced.  Your support will contribute significantly to the safety of our residents and our city, as well as allow us to protect our most vulnerable citizens, our children. 

          We are grateful that the City Council has continued to provide this office with funds that are vital to our work.  Therefore, I hope that you can continue the grant of $1,100,400 for the partial restoration of cuts that have been made to our base budget.  We do ask, though, that the Council increase the funds made available to this office so that we can devote additional resources to speed the arrest to arraignment time, which has increased of late.

Economic Stability and Crime Reduction

          The reduction in crime over the last decade has been the prerequisite for the economic improvement in the city.  As Crain’s New York Business said, “The gains that the economy has made would have been impossible had the 1980s crime wave continued.”  Manhattan plays a particularly important role in insuring the economic stability of the city.  

          Manhattan generates 63.5 percent of New York City’s total tax revenue, and its workers are responsible for 85 percent of the city’s personal income taxes.  Tourism is on the rebound.  Forty one million international and domestic tourists visited New York in 2005, spending more than $22 billion, mostly in Manhattan.  Manhattan has 93 percent of the hotel rooms in the city and accounts for nearly 94 percent of the city’s hotel taxes.

          Manhattan has a wildly disproportionate share of the jobs in New York City.  It accounts for 80 percent of all wages earned in New York City and 94 percent of the FIRE payroll (finance, insurance, and real estate sectors).  The critically important securities industry, based largely in Manhattan, has been adding jobs over the past year.  Bonuses paid to employees in the financial sector are expected to hit $21.5 billion for 2005, generating $500 million in tax revenue for the city.  

          Benefits to the Economy: This economic upswing would not be possible without reductions in crime to which this office has contributed.  We play a vital role in helping to ensure honesty and fair-dealing in business and labor practices and in maintaining the integrity of the financial markets.  This position, unique among the city’s district attorneys, derives from our jurisdiction over Manhattan, the economic heart of the metropolitan area, and our years of experience dealing with complex investigations. 

          Successful prosecution of white collar crimes and tax fraud is advantageous not only to the economy of the city, but to the city’s budget, which benefits tremendously from investigations that generate substantial revenue from unpaid taxes and fines.  Over the past year this office has investigated and prosecuted cases involving financial schemes by the treasurer of a residential co-op, restaurant and nightclub owners, several construction companies, and several art and luxury goods dealers.  In addition to leveling the playing field for honest businesses, these cases have returned significant taxes and other revenues to the city.

          Tax Fraud Is Increasing: The Internal Revenue Service recently issued a report that found that American taxpayers shortchanged the government by $345 billion in 2001.  Another report by the United States Commerce Department found that Americans failed to report more than a trillion dollars in income on their 2003 tax returns, a 37 percent increase since 2002.  Since the IRS has not increased its ability to enforce the tax laws and federal prosecutors have been forced to devote more resources to national security issues, the role of this office in conducting complex white collar and tax investigations becomes even more critical. 

         Terrorist Financing: One of the most important areas in our white collar crime investigations is eliminating possible avenues of terrorist funding.  Money transfer businesses are obligated under federal and state law to develop and implement an effective anti-money laundering program that includes: filing suspicious activity reports, obeying currency transaction reporting (CRT) requirements for transactions over $10,000, and screening customers' identification against lists of known terrorists and narcotics traffickers.  This office has investigated and prosecuted a number of illegal banks and money transmission businesses that have ignored these regulations and wired more than $14 billion worldwide.  Curtailing the illegal transfer of money is an important tool in the fight against terrorism.

          Major investigations of this scope are costly; however, the economic benefits and strengthened security for the city are well worth the investment. 

Budget Requests

1. Restore Cuts to the Baseline Budget and Provide Parity with the           NYC Law Department                                                                      

          Budget Cuts and Revenue Agreement:  Though we are grateful that the proposed cuts of three percent and six percent for FY06 and FY07 were rescinded, we are still suffering from the cuts imposed in the last several years.  In FY03, $7.2 million was removed from our base budget.  In FY04, we negotiated an agreement with the city allowing us to offset the FY 04 and FY 05 baseline cuts of $5.1 million with tax, bail bond, and restitution revenues collected by this office.  In addition to offsetting our own city cuts and providing substantial revenue to the city, we contributed $12 million in FY04 to help the other District Attorneys and the Special Narcotics Prosecutor (SNP) to pay for their city cuts.  In FY05, we contributed $6 million to the other DAs. 

          We have just received the FY06 revenue proposal, which unfortunately is less favorable to us than the prior agreements.  It requires us to contribute up to $18 million to the other DAs, depending on their contributions.  If we cannot raise these revenues, we stand to loose another $1 million from our base budget in addition to the $7.2 million that has been cut each year since FY 03.  Just as significantly, the new revenue plan provides no incentive for District Attorneys to use their scarce funds for the complex and much needed investigations that yield revenue to the city.  We are discussing these issues with the Criminal Justice Coordinator. 

          The changes in the revenue plan have highlighted the importance of budgetary certainty.  Our budget cannot be predicated upon an agreement that changes from year to year and on our own ability to generate revenues which are subject to wide annual swings.  Therefore, in order to put our budget on solid financial ground, I seek the restoration of all of our baseline cuts.

          Parity with Corporation Counsel: The cuts to our budget are even more egregious when compared to the budget increases provided by the Mayor to other law enforcement agencies.  At the same time that the budgets of prosecutors have been reduced, funding for the New York City Law Department increased by 20 percent over the last several years. 

          Two years ago, the Mayor provided funds for salary enhancements for lawyers in the Law Department.  Our discussions with the city to provide this office’s lawyers with salary increases comparable to those received by the Law Department have not been successful.  While we agree that the Law Department required additional funds for lawyers’ salaries, the District Attorneys’ Offices have the same needs.  In the past, it has always been city policy to provide comparable funding for both prosecutorial and Law Department legal staff.  The District Attorneys, like the Corporation Counsel, cannot retain their most valuable staff if they are not provided with sufficient means to match salaries paid to attorneys in the public sector.  We ask that parity be restored.

2. Gun Violence                                                                     $537,000

          We are requesting $537,000 to fund gun violence investigations and prosecutions.  Even as crime on the whole has declined in New York, gun violence remains a serious problem.  The Police Department’s CompStat numbers for 2005 show that while major crimes decreased six percent in Manhattan, the number of shooting victims increased when compared to 2004.  You said in your State of the City Address that: “Getting tough on illegal gun sales is not a conservative or liberal issue.  It is an issue of law and order and life and death.”  We fully agree.

          In addition, robberies are increasing for the first time in years, particularly in Manhattan.  After a long period of steady decline, robbery complaints increased by four percent in 2005 over 2004.  In the first two months of 2006, robberies have increased dramatically in several areas of Manhattan.  In the 20th and 24th Precincts on the Upper West Side, robberies jumped by 85 percent and 25 percent, respectively.  In the 34th Precinct in Northern Manhattan, robberies grew by 34 percent.  This office must be prepared to respond to these serious crimes that often involve the use of guns. 

          However, our funding for these gun cases has been severely reduced in the last two years.  Since 2004, we have lost two federal gun prosecutions grants totaling $410,000 annually. Our Homicide Investigation Unit and our Firearms Trafficking Unit, which investigate and prosecute gun trafficking and homicide cases, were funded by these grants.  The long term investigations conducted by these units are extremely expensive but well worth the cost, in terms of public policy.

          Here are just three examples of recent investigations:

          Douglass Houses Drug Gang:  Just last week, this office indicted 18 members of a violent drug gang based at the Frederick Douglass Houses on the Upper West Side for two drug-related murders and an attempt to murder members of a rival drug crew.  The Firearms Trafficking Unit, working with NYPD’s Manhattan North Narcotics Major Case Team, conducted a long-term investigation that arose out of drug-related violence at the Douglass Houses.  The gang’s drug business topped $1,000 a day per dealer, while the gang’s upper echelon also supplied larger, wholesale amounts of crack cocaine to other street level operations.

          Operation Harlem:.  This past January 2006, the Firearms Trafficking Unit, working in conjunction with the NYPD Firearms Investigation Unit, uncovered a ring of illegal gun traffickers in Harlem.  This investigation led to the indictment of six individuals on firearms and drug sale charges arising from the distribution of handguns, assault weapons, and drugs throughout Harlem.  More than 40 illegal weapons, including compact 9 millimeter and .380 caliber semi-automatic pistols were purchased during the investigation.

          Operation Take Out: Last month, the office indicted thirteen men on drug and gun trafficking charges stemming from a long term investigation into wholesale cocaine dealing, heroin dealing, and firearms trafficking at a restaurant in Hamilton Heights.  This indictment was the culmination of a long-term investigation conducted jointly with this office and the Police Department’s Manhattan North Narcotics Major Case Squad.  The investigation used surveillance and undercover detectives to infiltrate a group of wholesale narcotics dealers and gun traffickers using the restaurant as their base of operation.  As a result, the neighborhood has become a far safer place for its residents.

          Debriefing Gun Defendants:  In the Mayor’s State of the City address, he called for a gun initiative that would include creating a ‘de-briefing’ protocol for felony gun defendants so that prosecutors can learn where and by whom illegal guns are sold.  This is something we are already doing and would like to expand.  Every felony arrest that comes into our Complaint Room is reviewed by an experienced attorney who looks for a potential gun component in the case.  If guns are involved, an ADA will attempt to take a statement from the defendant in our video recording stations within ten to fifteen hours from the arrest.  These digital videos recordings are powerful evidence in court and contribute significantly to the defendant’s conviction. 

          We are in need of continued funding to further our investigations of high-level firearms and narcotics traffickers and to respond effectively to the recent upsurge in gun-related crimes.  We urge the city to provide us with the resources necessary to continue this important work.

3. Child Abuse Prosecution                                                   $479,500

          Our Child Abuse Prosecution Unit, a major component of our Family Violence and Child Abuse Bureau, originally formed in 1989, has developed a highly effective, multidisciplinary approach to investigating and prosecuting child abuse cases.  In furtherance of our common goal, we have been working with the Criminal Justice Coordinator and Deputy Mayor Gibb’s staff to develop new strategies to enhance the investigation and prosecution of child abuse cases. 

          This past year, when the residents of the city have been shocked over heinous child abuse incidents, our child abuse unit lost all of its federal funding.  The Mayor has allocated an additional $16 million for new initiatives to improve services for children who are abused and at-risk and to improve investigations into the abuse.  These enhancements are welcome and necessary, but will certainly increase the workload in this office.  We are requesting $479,500 for our child abuse prosecutions so that we can continue our important work and handle the new work generated by the Mayor’s initiatives. 

          Recently, the unit prosecuted a case in which defendants murdered their three-month-old son by beating and starving him.  An autopsy revealed that the baby had multiple fractures and severe injuries all over his body.  He had been shaken so violently that his spine was dislodged and he had multiple injuries to his brain.  The father pleaded guilty to murder in the second degree and was sentenced to 25 years to life in prison.  The mother is awaiting trial.  Funding from the city would ensure that we could continue to pursue serious cases like this with even more vigor.

4. Investigate Terrorist Financing                                        $700,000

          Money laundering, a practice that masks revenue generated by illegal activities, is at the core of almost all large-scale criminal operations, including terrorist financing.  The ongoing terrorist threat to the United States and to New York City in particular has made even more pressing the need to bolster our response to money laundering.  It is of the utmost importance that we are able to trace the source of funding of extremist groups.  Increasingly in our cases we see huge amounts of money being sent offshore.  For example, there is one trillion dollars on deposit in the Cayman Islands, which has no effective bank regulation or financial law enforcement.  Plugging these offshore money streams is an essential part of our effort to cripple terrorist funding mechanisms and other criminal enterprises.

          Illegal Money Transmitters: The Manhattan District Attorney’s Office has prosecuted a number of individuals and businesses, which collectively have wired illegally more than $14 billion worldwide.  Within the past four months alone, two individuals have been convicted independently, both by a guilty plea, of illegally transferring close to $100 million overseas in a five year period.  Both defendants ignored regulations that require money transfer businesses to screen customers carefully for suspicious activity.  In December 2005, our office also reached a joint settlement with the Israel Discount Bank of New York (IDBNY), which had allowed illegal Brazilian money transmitters to move $2.2 billion over five years.  In this and similar cases, our office has uncovered considerable sums of money being illegally transferred on behalf of clients in the tri-border region of Brazil, Argentina, and Paraguay, which is notorious for supplying funds to terrorists in the Middle East.
         
          Money Laundering and Identity Theft:  Recently this office indicted three individuals and their company on charges of operating an illegal check cashing and money transmittal business.  The business serviced clients in Eastern Europe who were engaged in identity theft and a variety of internet schemes.  The one-year investigation began as an inquiry into a report of identity theft.  An upstate New York woman reported that her credit card account number had been used to make fraudulent purchases of electronics over the internet.  Investigations showed that numerous other individuals were victims of the same identity theft scam.  In a four year period, a total of $25 million flowed through the company’s bank accounts, including $4 million from illegally cashed checks. 

          The success and scope of our money laundering prosecutions are inextricably tied to our available budget.  Additional funding would allow us to increase money laundering prosecutions and pursue more complex investigations. 

5. Reduce Arrest to Arraignment Time                                 $192,500

          Manhattan’s arrest to arraignment times have increased over the past five years.  In 2005, Manhattan’s average arrest to arraignment time was 23.5 hours, a nine percent increase from the 21.5 hour average in 2000.  Because legal mandates require that all defendants be arraigned within 24 hours of their arrest, Manhattan is perilously close to exceeding this requirement.

          We have been working diligently to improve the arrest to arraignment process by reengineering the workflow in our Complaint Room, increasing the hours of operation, and assigning additional staff.  A particularly effective measure was greatly expanding our use of paralegals to draft certain complaints.  The Complaint Room paralegals are law students and college graduates who are responsible for drafting misdemeanors.  These cases include drug possession, marijuana possession and sale, traffic offenses, disorderly conduct, and many quality of life crimes.  The paralegals interview police officers and draft complaints in the same manner as assistant district attorneys.  Paralegals are now being trained to work on selected case involving civilian witnesses, which are extremely time consuming.  But more can be done.  We are requesting additional funds to hire five more paralegals in the Complaint Room so that staff can be deployed even more efficiently to reduce the time of our portion of the arrest to arraignment process

        *                               *                                     *       

          The specific budgets supporting these requests follow this testimony.  I ask you to consider the urgency of these matters and provide this office with the resources essential to performing our duties.  We cannot meet our crime fighting responsibilities if we do not have the funds to handle this work.  Thank you.

                                                                            

Budget Requests

 

Restore Baseline Budget and Parity with Corporation Council

 

                                                                  
Gun Violence Budget