People v. Kermit Gitenstein Found., Inc., Index No. 604475/16

• Decision Date: 03 November 2016
• Docket Number: Index No. 604475/16
• Citation: 2016 NY Slip Op 32674 (U)
• Parties: THE PEOPLE OF THE STATE OF NEW YORK, by ERIC T. SCHNEIDERMAN, Attorney General for the State of New York, Petitioner, v. THE KERMIT GITENSTEIN FOUNDATION, INC. Respondent.
• Court: New York Supreme Court

2016 NY Slip Op 32674(U)

THE PEOPLE OF THE STATE OF NEW YORK,
by ERIC T. SCHNEIDERMAN, Attorney General for
the State of New York, Petitioner,
v.
THE KERMIT GITENSTEIN FOUNDATION, INC. Respondent.

Index No. 604475/16

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NASSAU

November 3, 2016

NYSCEF DOC. NO. 106

DECISION/ORDER

To commence the statutory time period for appeals as of right (CPLR 5513[a]), you are advised to serve a copy of this Order, with Notice of Entry, upon all parties.

Motion Date: September 6, 2016

ONOFRY, A.J.S.C.

The following papers numbered 1-91 were read and considered on this Order to Show Cause and Petition of the New York State Office of the Attorney General pursuant, inter alia, Not for Profit Corporation Law §§ 112, 1102, 1107 and Estates Powers and Trusts Law § 8-1.1, for an Order: (1) dissolving the Kermit Gitenstein Foundation and distributing its assets via cy pres distribution to quality tax exemption charitable organizations engaged in activities similar or substantially similar to the Foundation's activities; (2) appointing a Receiver over the Foundation, pursuant to Not for Profit Corporation Law §§ 1102 and 1203; and (3) granting Petitioner such other and further relief as the Court finds necessary, appropriate and just; and on a motion by proposed intervenor Steven R. Schlesinger for an Order: (1) granting Steven R. Schlesinger leave to intervene in the pending dissolution proceeding pursuant to CPLR §§ 1012 and 1013: (2) removing the four (4) accounting proceedings currently pending before the Nassau County Surrogate's Court under Surrogate File Nos. 357003/A, 346141/V, 301202/D and 138481/A and consolidating said accounting proceedings with the instant dissolution proceeding, pursuant to CPLR § 602; and (3) amending the caption in the instant proceeding to reflect that it has been consolidated with the aforementioned accounting proceeding; and (4) granting such other and further relief as the Court deems just and proper; and upon the application of court appointed referee/examiner Joseph W. Ryan, Esq., for an Order granting approval of his request for compensation and attorney's fees for his duties as such.

Order to Show Cause and Verified Petition of New York State Office of the; Attorney General - Exhibit A	1-3
Application by Court Examiner/Referee, Joseph W. Ryan, Esq.,; For Court Approval of Compensation - Exhibits A-C	4-7
Notice of Motion to Intervene, Remove & Consolidate; Affidavit -Schlesinger - Memorandum of Law - Exhibits 1-54	8-64
Affirmation of David L. Kurtz - Exhibits A-D	65-69
Memo of Law of Attorney General	70
Reply in Opposition - Nassau County Public Administrator	71

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Reply Affidavit - Steven R. Schlesinger, Esq. - Exhibits 1-15; Reply Memorandum of Law	72-88
Reply Memorandum of Law to Public Administrator Response -; Schlesinger	89
Sur-Reply in Opposition to Motion to Intervene - Public Administrator	90
Pryor Cashman LLP letter dated 2 September 2016	91

Upon the foregoing papers, it is

ORDERED, that the branch of the motion of Proposed Intervenor Steven R. Schlesinger Esq., which seeks permission and authority to intervene pursuant to CPLR § 1013, is granted and the Intervenor's proposed answer, which is appended to his moving papers, is deemed served; and it is further

ORDERED, that the branch of the motion which seeks permission to intervene as a matter of right, pursuant to CPLR § 1012, is denied has having been rendered moot by the foregoing determination; and it is further

ORDERED, that the branch of the motion which seeks removal and consolidation of the four (4) accounting proceedings under Surrogate File Nos. 357003/A, 346141/V, 301202/D and 138481/A with the pending dissolution proceeding [ Nassau Supreme Court Index No. 604475-2016] pursuant to CPLR §602, is granted; and it is further

ORDERED, that in conformity therewith, the caption of the instant proceeding be, and the same shall be, amended to reflect such removal and consolidation; and it is further

ORDERED, that the branch of the petition, which seeks an Order dissolving the Foundation and a direction that its assets be distributed pursuant to the cy pres doctrine to qualified tax exempt charitable organizations engaged in similar or substantially similar activities to the Foundation, is granted; and it is further

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ORDERED, that in conformity with the foregoing, the Kermit Gitenstein Foundation, Inc. (the "Foundation") be, and the same is hereby, dissolved, the Certificate of Incorporation of the Foundation annulled, and the corporate existence of the Foundation is terminated; and it is further

ORDERED, that the branch of the Petition which seeks the appointment of a successor receiver to effectuate the dissolution of the Foundation, to marshal its assets, pay and discharge its liabilities and distribute its remaining assets as set forth herein, is granted; and it is further

ORDERED, that Howard Protter, Esq., Jacobowitz & Gubits, P.O. 367, Walden, New York, (845)-778-2121, Fiduciary No. 436362, be, and is hereby, appointed successor receiver of the assets and property of the Foundation, with the usual and customary powers and duties according to the laws of the State of New York including, but not limited to, New York Not for Profit Corporation Law (N-PCL) § 1206.

Introduction

By Administrative Order dated September 29, 2016,¹ the undersigned Justice was assigned to preside over this pending Not-for-Profit Corporations Law (N-PCL) dissolution proceeding commenced by the Office of the Attorney General of the State of New York (hereinafter sometimes referred to as the "Attorney General" or "OAG"), a proceeding that emanates from, and is a by-product of, the lengthy and detailed Nassau Surrogate Court Decision and Order dated May 26, 2016

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(Hon. Margaret C. Reilly, Nassau Surrogate), which Decision and Order, by its terms, chronicled the near 47 history of the Gitenstein family siblings, their collective dispositive schemes, the procedural aspects of their respective estates, and the resulting formation, funding, and management of the Kermit Gitenstein Foundation, Inc. (the "Foundation"). It is a case which, by the very nature of the allegations and issues presented, has engendered a considerable amount of public notoriety, notoriety not only for the parties, but the judiciary.

The Decision and Order, by its terms, also ended the approximate 9 year tenure of Attorney Steven R. Schlesinger (hereinafter sometimes referred to as "Schlesinger") as Receiver of the Foundation, and as fiduciary for the Estates of Shirley Gitenstein, Aaron L. Gitenstein, and Kermit Gitenstein.

In relevant part, the Surrogate Court ordered Schlesinger's removal as: (1) Receiver of the Foundation; (2) Administrator c.t.a. of the Estate of Shirley Gitenstein; (3) Administrator c.t.a of the Estate of Aaron L. Gitenstein; and (4) Successor Trustee of the Testamentary Trust created under the Estate of Kermit Gitenstein.

Based upon the same, the court also appointed the Public Administrator for Nassau County (hereinafter sometimes referred to as the "Public Administrator") as Administrator c.t.a. of the Estate of Shirley Gitenstein, Successor Administrator c.t.a. of the Estate of Aaron L. Gitenstein, and Successor Trustee of the Kermit Gitenstein Testamentary Trust.

That removal was coupled with the court's determination that while it believed that the Foundation could no longer discharge its statutory function due to, inter alia, the absence of any governance structure, and that dissolution of the Foundation and the distribution of its remaining assets, pursuant to the cy pres doctrine [See, Estate Powers and Trust Law (EPTL) §8-1.1; In re Trust

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Co. Bank, 37 Misc.3d 1045, 976 N.Y.S.2d 70 (2012), affirmed, 112 A.D.3d 1099 [3^rd Dept. 2013]) was warranted, it nevertheless lacked the requisite jurisdiction to effectuate the same, relying instead on the Attorney General proceed with the formal dissolution of the Foundation in Supreme Court, pursuant to the applicable provisions of the Not-For-Profit Corporation Law (N-PCL), and to distribute the Foundation's remaining assets via the cy pres doctrine, to various qualified charitable entities.

The Attorney General has now commenced a proceeding to dissolve the Kermit Gitenstein Foundation, pursuant to its statutory authority under, inter alia, Not-For-Profit Corporation Law (N-PCL) §§112, 1102, 1107, 1202, and 1203, and its statutory charitable supervisory and enforcement powers, under Estate's Powers and Trust Law (EPTL) §8-1.1. As an incident thereto, it further seeks to marshal the Foundation assets, satisfy and discharge its obligations and liabilities, and distribute its remaining assets to qualified charitable entities, pursuant to the cy pres doctrine. To effectuate the same, the Attorney General further seeks the appointment of a Successor Permanent Receiver.

In response to the commencement of the dissolution proceeding, former Foundation Receiver, Attorney Steven R. Schlesinger, seeks permission, pursuant to CPLR §1012 and 1013, to intervene in the dissolution proceeding and further seeks, pursuant to CPLR §602, the removal of four accounting proceedings, currently pending in Nassau Surrogate's Court under File Nos. 357003/A, 346141V, 301202D, and 138481A, from the Nassau Surrogate's Court and the consolidation of those proceedings with the pending Supreme Court dissolution proceeding.

The Nassau Public Administrator supports the Attorney General's application for dissolution, and for the appointment of a successor Permanent Receiver. It opposes Schlesinger's request for intervention, removal and consolidation.

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Intertwined in the motions supra, is the Letter Application of Court Appointed Court Examiner/Referee, Joseph W. Ryan, Jr., who not only supports the Attorney General's application, but who seeks an order approving his compensation for services rendered in preparing and...