Matter of Parente

[*1] Matter of Parente 2014 NY Slip Op 51334(U) Decided on June 30, 2014 Sur Ct, Nassau County McCarty, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on June 30, 2014
Sur Ct, Nassau County

In the Matter of the Account of Jeffrey E. DeLuca, Public Administrator of Nassau County, as Administrator of the Estate of William M. Parente a/k/a WILLIAM MICHAEL PARENTE, Deceased.



356816/R



The appearances of counsel are as follows:

Ms. Mary Ann Messano Ciesla(Pro Se creditor)

321 North Avenue East

Cranford, NJ 07016

Kenneth L. Kutner, Esq.(for creditor)

100 Park Avenue, 20th Floor

New York, NY 10017

Allan Kornblau, Esq.(Pro Se creditor)

1520 York Avenue, Suite 12B

New York, NY 10028-7010

Davis, Saperstein & Salomon(for creditor)

375 Cedar Lane

Teaneck, NJ 07666

Abbey, Spanier, Rodd & Abrams, LLP(for creditor)

212 East 39th Street

New York, NY 10016

Rivkin Radler, LLP(for creditor)

926 RXR Plaza

Uniondale, NY 11556

Brosnan & Hegler, LLP(for Public Administrator)

1325 Franklin Avenue, Suite 335

Garden City, NY 11530

C. Raymond Radigan(Referee)

Ruskin Moscou Faltischek, P.C. 1425 RXR Plaza

East Tower, 15th Floor

Uniondale, NY 11556
Edward W. McCarty III, J.

Before the court is the account of the Public Administrator as the administrator of the estate of William M. Parente. The final account was filed on February 27, 2013, and on August 20, 2013, an affidavit was filed bringing the account current to June 30, 2013. Jurisdiction was completed on September 25, 2013.

The Honorable C. Raymond Radigan, former Judge of the Surrogate's Court, Nassau County, was appointed by this court as special referee to hear and report pursuant to SCPA 506 (1). He filed an interim report on January 5, 2012, and a final report on November 25, 2013.

The New York State Department of Taxation and Finance filed a notice of appearance and objection on April 23, 2013. This was resolved on May 13, 2013, by the filing of a notice of consent and withdrawal of objection.

BACKGROUND

As described more fully in prior decisions issued by this court,[FN1] William M. Parente ("decedent") committed suicide on April 20, 2009, apparently immediately after causing the deaths of his wife, Betty Parente, and two daughters, Stephanie Parente and Catherine Parente ("Betty," Stephanie," and "Catherine"). Prior to his death, decedent, who was a practicing attorney, perpetrated a "Ponzi" scheme, in which he obtained funds from various individuals by claiming that he would invest the funds, but the funds were never invested. Instead, the funds were used for payment of decedent's expenses and for the repayment of prior investors. After decedent's death, the investors filed claims against the estate in the combined total amount of $34,637,698.06. In a prior motion for partial summary judgment, the Public Administrator asked the court to confirm its application of the net equity method to value the individual claims, and the motion was granted.[FN2]

PRIOR PROCEEDINGS, ACTIONS AND SETTLEMENTS

As reflected in the account filed by the Public Administrator, prior proceedings, actions and settlements in connection with this estate are as follows:

1. The Insurance Trust Proceeding

During his lifetime, the decedent created an irrevocable life insurance trust (the "Insurance Trust"), which owned a $5,000,000.00 life insurance policy on his life. By order to show cause dated July 23, 2009, the Public Administrator commenced a proceeding in the Nassau County Surrogate's Court which sought an order directing Leonard Aloi, as Trustee of the Insurance Trust (the "Trustee"), to pay and distribute the assets of the Insurance Trust, consisting of the insurance policy proceeds of approximately $5,000,000.00, to the Public Administrator as Temporary Administrator of decedent's estate (the "Insurance Trust Proceeding").

In opposition, Joseph Mazzarella ("Mazzarella"), as the administrator of Betty's estate, filed a Cross-Petition, which sought distribution of the Insurance Trust assets to Betty's estate. On September 17, 2009, the Public Administrator served and filed a motion seeking summary judgment. By a decision and order dated June 3, 2010, the Nassau County Surrogate's Court held that the assets of the Insurance Trust were properly payable to decedent's estate and directed the Trustee to pay and distribute the assets to the Public Administrator, as administrator of decedent's estate. The assets then became available to partially satisfy the allowed claims of decedent's creditors.

In July 2010, Mazzarella, as administrator of Betty's estate, filed a Notice of Appeal with the Appellate Division, Second Department, pursuant to which he sought to obtain a reversal of the June 3, 2010 Order (the "Appeal"). The Appeal was later withdrawn with prejudice.

2. The Joint Property and Other Property Proceeding on Behalf of Betty's Estate

By a petition dated July 28, 2009, Mazzarella, as administrator of Betty's estate, also commenced a separate proceeding in the Nassau County Surrogate's Court, which sought an order declaring that Betty's estate was entitled to receive the entire value of all property owned jointly by decedent and Betty, and any other property owned by decedent (the "Joint and Other Property Proceeding").

With respect to such jointly owned property, the decedent and Betty owned together certain household contents and tangible personal property, and the following residences as tenants by the entirety: (i) a single family home at 4 First Street, Garden City, New York (the "Garden City Premises"), (ii) a residential condominium at 575 Dune Road, Unit 30, Westhampton Beach, New York (the "Westhampton Condominium"), and (iii) a residential cooperative apartment at 9265 Shore Road, Unit 6H, Brooklyn, New York (the "Cooperative Apartment").

The Garden City Premises had an appraised fair market value of $725,000, but was subject to (i) a recorded first mortgage loan in the principal amount of approximately $600,000, plus accrued and unpaid interest, late charges and fees, and (ii) an unrecorded home equity loan in the principal amount of approximately $300,000, plus accrued and unpaid interest, late charges and fees. The Westhampton Condominium had an appraised fair market value of $595,000, but was subject to (i) a recorded first mortgage in the principal amount of approximately $200,000, and (ii) a recorded second mortgage in the principal amount of approximately $300,000. The Cooperative Apartment had an appraised fair market value of $260,000, and was not subject to any loan indebtedness.

The Public Administrator interposed an Answer, conducted discovery and defended against the Joint and Other Property Proceeding. The Joint and Other Property Proceeding was settled and discontinued with prejudice.

3. The Supreme Court Action Seeking Damages of $5,000,000.00 Against the Estate for Pain and Suffering and Wrongful Death

On or about September 9, 2009, Mazzarella, as administrator of each of Betty's, Stephanie's and Catherine's respective estates, also brought a lawsuit against the Public Administrator, as the administrator of decedent's estate, in the Supreme Court of the State of New York, County of Nassau, designated as Index No. 018595-09 (the "Supreme Court Action"). The Supreme Court Action sought a judgment in the amount of $5,000,000.00 against decedent's estate for the alleged infliction by decedent of pain and suffering upon Betty, Stephanie and Catherine, and for decedent's alleged causing of the wrongful death of each of [*2]them.

The Public Administrator interposed an answer, conducted discovery and defended against the Supreme Court Action. The Supreme Court Action was discontinued with prejudice.

4. The Global Settlement of Surrogate's Court Proceedings and Supreme Court Action

On December 23, 2010, after extensive litigation in connection with each of the Insurance Trust Proceeding, the Joint and Other Property Proceeding, and the Supreme Court Action, the Public Administrator and Mazzarella entered into a global stipulation of settlement of all actions, proceedings, disputes, claims and other issues existing among the Public Administrator and Mazzarella, as administrator of each of the estates of Betty, Stephanie and Catherine (the "Global Stipulation of Settlement"). The Global Stipulation of Settlement was approved by the Surrogate.

Pursuant to the terms of the Global Stipulation of Settlement, Mazzarella (i) withdrew the Appeal of the June 3, 2010 Order with prejudice, (ii) discontinued the Supreme Court Action with prejudice, (iii) irrevocably waived any right to commence any further actions or proceedings or to file any claims whatsoever against decedent's estate, and (iv) waived any right to appeal from any order of the Surrogate's Court approving the Global Stipulation of Settlement. As consideration, the Public Administrator agreed that (i) Betty's estate was entitled to receive a sum equivalent to (a) the net proceeds from the sale of the jointly owned household contents and tangible personal property in the approximate amount of $14,079.93, (b) the net equity, if any, in the Garden City Premises, (c) the net proceeds from the sale of the Westhampton Condominium in the approximate amount of $286,391.441,[FN3] and (d) the anticipated net proceeds from the sale of the Cooperative Apartment in the approximate amount of $244,460, and (ii) decedent's estate waived any right to any share of the estates of Betty, Stephanie and Catherine. Furthermore, from such property, Mazzarella agreed to the Public Administrator's request that Mazzarella establish a permanent tribute or memorial to each of Betty, Stephanie and Catherine, in an amount not to exceed $5,000 for each of them. Additionally, from such property, Mazzarella was entitled to be reimbursed for the funeral and burial expenses he incurred in an amount not to exceed $30,000.00.

By an order of the Surrogate dated January 26, 2011, the terms and provisions of the Global Stipulation of Settlement were incorporated into an order of the court. As a result of the Global Stipulation of Settlement, the Public Administrator was then able to proceed with the administration of decedent's estate and the determination of the validity of the numerous creditors' claims against the estate.

5. The Net Equity Proceeding

Sixty-eight (68) claims were filed against decedent's estate by persons who had invested money with decedent by making loans to him (collectively, the "Investor Creditors"). On or [*3]about April 18, 2011, the Public Administrator filed a Petition to Determine Validity and Allowed Amount of Investor Creditors' Claims in this court.

After an extensive review of the claims filed by the Investor Creditors and decedent's records, it became apparent that decedent had been engaged in perpetuating a "Ponzi" scheme in the years before his death, pursuant to which he received money from numerous individuals in exchange for short term promissory notes paying interest well in excess of commercially available market rates.

However, it does not appear that decedent actually invested any of the money received from the Investor Creditors, but rather utilized the money to pay his own personal living expenses and to make payments of interest and periodic principal payments to other Investor Creditors on their promissory notes. Decedent kept very careful records of the scheme, which allowed him to manage the fraud until late 2008 and early 2009, when the scheme unraveled. After decedent committed suicide on April 20, 2009, the claims filed against decedent's estate in connection with the fraudulent scheme totaled $34,637,698.06 (the "Investor Creditors' Claims").

Due to the nature of a "Ponzi" scheme, individuals who had participated in the scheme for the greatest number of years received a disproportionate share of other people's funds, in the form of fictional investment returns. Accordingly, it was necessary for the Public Administrator to employ an equitable methodology in order to compute the allowed amount for each of the Investor Creditors' Claims.

The Public Administrator prepared a computation of claim schedule for each of the Investor Creditors' Claims (the "Computation of Claim"). The individualized Computation of Claim for each of the Investor Creditors' Claims set forth (i) the "Amount Paid to Decedent" cumulatively, (ii) the "Amount Paid to Claimant" cumulatively, and (iii) the "Net Amount," i.e, the "Allowed Claim". Thus, the Computation of Claim utilized and illustrated the "cash in/cash out" or "net amount" method of calculating equitably the allowed amount of each of the Investor Creditors' Claims (the "Net Equity Method").

The Surrogate's Court appointed the Honorable C. Raymond Radigan, former Judge of the Nassau County Surrogate's Court, as Special Referee (the "Special Referee"), to hear and determine the Net Equity Proceeding. The Public Administrator then filed a motion for partial summary judgment seeking court approval of the application of the Net Equity Method. The Special Referee issued a report recommending that the court approve the Net Equity Method. As indicated above, by a decision and order of this court, dated March 30, 2012,[FN4] the Net Equity Method was judicially authorized for use by the Public Administrator for the computation of the allowed amount of each of the Investor Creditors' Claims.

6. The Claw-Back Proceedings

On or about April 18, 2011, the Public Administrator also filed Petitions to Set Aside Fraudulent Transfers Made By Decedent, seeking recovery against each Investor Creditor whose Computation of Claim indicated that he or she had received back from decedent, through the Ponzi scheme, more money than Investor Creditor had originally paid to decedent. These "claw-back proceedings" were commenced in order to (i) reduce the aggregate amount of all owed claims, and (ii) seek recovery of the "excess" cash paid out to these particular Investor [*4]Creditors.

On the citation return date, three Investor Creditors defaulted. One of the defaulting Investor Creditors subsequently settled with the Public Administrator and the claim was withdrawn. The relief requested in the "claw-back" petitions filed against the remaining two defaulting Investor Creditors contained, among other things, a request that money judgments be entered against each of these defaulting Investor Creditors, in favor of the Public Administrator, as Administrator of Decedent's Estate, in the amounts of $76,700.00 and $28,568.75, respectively.

Subsequently, the Public Administrator settled with an additional five Investor Creditors, which resulted in (i) the withdrawal of their claims in the aggregate amount of $2,474,397.00, and (ii) an actual cash recovery for the estate of $275,000.00. The Public Administrator's receipt of the cash settlement proceeds in connection with this recovery is recorded as the Subsequent Receipt of Principal on Schedule AA of the Public Administrator's final account.

At the time of the filing of the Public Administrator's Final Account, there remain five "claw-back" proceedings still pending against certain Investor Creditors. Any sums recovered from these proceedings will be added to the decedent's estate, and will be incorporated in a supplemental accounting and be the subject of a subsequent distribution to creditors.

These remaining proceedings are in the discovery stage of litigation. The Nassau County Surrogate's Court has not yet conducted any hearings or rendered any decisions in connection with these "clawback" proceedings.

THE ACCOUNT

The account of the Public Administrator shows the receipt of $8,946,958.23 of estate principal, which was supplemented by the subsequent receipt of $275,040.45, realized increases of $3,385.20 and income collected totaling $379,811.65. This resulted in total charges of $9,605,195.53. This amount was reduced by realized decreases of $280,197.28, administrative expenses through December 31, 2012 in the amount of $837,323.86, and payment of creditors' claims in the amount of $2,184,102.69, leaving a balance of $6,303,571.70 on hand.

RELIEF REQUESTED

The Public Administrator seeks an order granting the following relief:

1. Releasing and discharging the Public Administrator from all liability, accountability and responsibility as to all matters set forth in the account of proceedings;

2. Approving and allowing payment to the Public Administrator of fiduciary commissions in the amount of $223,301.94, pursuant to SCPA 2307 (1), and the reasonable and necessary expenses of the Office of the Public Administrator, in the amount of $96,051.96, pursuant to SCPA 1207 (4);

3. Fixing and determining the attorneys' fees of Certilman Balin Adler & Hyman, LLP, in the approximate amount of $164,688.07, of which $89,688.07 has been paid and approximately $75,000.00 remains unpaid;

4. Fixing and determining the attorneys' fees of Ahmuty, Demers & McManus, in the amount of $12,533.50, all of which has been paid;

5. Fixing and determining the attorneys' fees of Royston, Mueller, McLean & Reid, LLP, in the amount of $5,158.75, all of which has been paid;

6. Fixing and determining the special referee's fees of the Honorable C. Raymond Radigan, in the approximate amount of $45,000.00, none of which has been paid;

7. Fixing and determining the attorneys' fees of Brosnan & Hegler, LLP, in the [*5]approximate amount of $697,193.56, of which $572,193.56 has been paid and approximately $125,000 remains unpaid;

8. Determining that the legal services performed by Rivkin Radler, LLP, as attorneys for Investor Creditors, Leonard Gallo, Anthony J. Salierno and Kathleen Salierno, in connection with several proceedings concerning decedent's estate, resulted in a pecuniary benefit to decedent's estate and all of its creditors, and that the attorneys' fees constitute a proper expense of administration payable from decedent's estate;

9. Fixing and determining the attorneys' fees of Rivkin Radler, LLP, as attorneys for Investor Creditor, Leonard Gallo, in an amount equivalent to the quantum meruit value of its legal services (but not the contingency fee sought), and directing the Public Administrator to pay such attorneys' fees as an expense of administration;

10. Fixing and determining the attorneys' fees of Rivkin Radler, LLP, as attorneys for Investor Creditors, Anthony J. Salierno and Kathleen Salierno, in an amount equivalent to the quantum meruit value of its legal services (but not the contingency fee sought), and directing the Public Administrator to pay such attorneys' fees as an expense of administration;

11. Fixing and determining the accountant's fees of Rispoli & Co., CPA's, P.C. in the amount of $4,800.00, of which $2,850.00 has been paid and $1,950.00 remains unpaid;

12. With respect to each claim filed by an Investor Creditor as recited in Schedule D of the Final Account and Rider No.1, disallowing the respective amounts set forth in the column entitled "Amount of Claim Rejected", in accordance with Dec. No. 27753, dated March 30, 2012;

13. With respect to each claim filed by an Investor Creditor as recited in Schedule D of the Final Account and Rider #1 annexed hereto, allowing the respective amounts set forth in the column entitled "Amount of Claim Allowed", in accordance with Dec. No. 27753, dated March 30, 2012;

14. With respect to each claim filed by a claimant other than an Investor Creditor (a "Non-Investor Claimant") as recited in Schedule D of the Final Account and Rider #2, disallowing the respective amounts set forth in the column entitled "Amount of Claim Rejected" for (i) 21st Century Auto Insurance, (ii) America Online, (iii) American Express account number ending 2000, (iv) American Express Optima account number ending 4007, (v) Aspen Publishers, (vi) Bank of America Credit Card account number ending 7516, (vii) Cablevision, (viii) CCH Incorporated, (ix) Chase Line of Credit account number ending 9236, (x) Chase Business Line of Credit account number ending 2927, (xi) Chase Business Line of Credit account number ending 2928, (xii) Chase Credit Card account number ending 5465, (xiii) Chase Credit Card account number ending 9265, (xiv) Chase Line of Credit account number ending 5080, (xv) Chase Line of Credit account number ending 7797, (xvi) Chase Credit Card account number ending 8131, (xvii) Chase Credit Card account number ending 9705, (xviii) Chubb & Son, (xix) Citibank Diamond Credit Card account number ending 1149, (xx) Earthlink, (xxi) Federal Express Corporation, (xxii) Gerald Weinbar, P.C., (xxiii) National Grid, (xxiv) Lord & Taylor Credit Card account number ending 4750, (xxv) Midland Funding/GE account number ending 5475, (xxvi) Time Warner Cable account number ending 9600, (xxvii) Time Warner Cable account number ending 4813, (xxviii) Travelers Commercial Insurance, (xxix) Verizon account number ending 1723, (xxx) Verizon account number ending 2270, (xxxi) Verizon account number ending 5277, (xxxii) Verizon account number ending 2274, (xxxiii) Verizon Wireless account number ending 0001, and (xxxiv) Winthrop Orthopedic Association, on the grounds that the [*6]claimants have failed to (1) submit sufficient documentary evidence to substantiate their claims, and (2) submit Affidavits of Claim required by the Public Administrator as set forth in SCPA 1803;

15. With respect to each claim filed by a Non-Investor Claimant as recited in Schedule D of the Final Account and Rider #2, allowing the respective amounts set forth in the column entitled "Amount of Claim Allowed" for (i) AT & T Universal Citibank Mastercard account number ending 1533, (ii) Bank of America Credit Card account number ending 5809, (iii) Bank of America Credit Line account number ending 3062, (iv) Citibank Credit Card account number ending 9954, (v) HANN Financial Service Corporation, (vi) HFC account number ending 3189, (vii) HSBC Credit Card account number ending 6599, (viii) Lawyers Fund for Client Protection as Subrogee of Patrick Russo, (ix) Mercedes Benz Financial Services account number ending 5460, (x) Mercedes Benz Financial Services account number ending 0571, (xi) New York State Income Tax, (xii) Estate of Frank Siclari, and (xiii) Sterling National Bank;

16. Disallowing the claim of Lucille Gribbin on the grounds that the claim is not a valid and enforceable obligation of decedent's estate;

17. Disallowing the claim of the United States Department of Education for educational debt related to the college tuition of decedent's daughter, Stephanie Ann Parente, on the grounds that the terms of any such educational financing for which decedent was a primary or secondary obligor provide that all such outstanding educational indebtedness is subject to cancellation and discharge upon the death of all of the primary and secondary obligors;

18. Determining that decedent's estate is insolvent, and directing and authorizing the Public Administrator, after the payment of the unpaid expenses of administration approved by the court herein, to pay from the net distributable estate, the allowed claims of the Investor Creditors and the Non-Investor Claimants, on a pro rata basis, based on the proportion of each allowed claim to the total allowed claims;

19. Releasing and discharging the surety, Liberty Mutual Insurance Company; and

20. Granting such other and further relief as this court deems just and proper.

INTERIM REPORT OF THE SPECIAL REFEREE

The Special Referee filed an interim report on June 25, 2013, addressing the claims filed by the law firm of Rivkin Radler and the prayer for relief contained in paragraphs eight through ten of the petition to settle the judicial account, all of which were cited above. Rivkin Radler appeared on behalf of Investor creditors Dr. Anthony Saliero, Kathleen Salierno, the AJ Salierno Defined Benefit Plan, and Dr. Leonard V. Gallo.

Some of the Investor Creditors objected to Rivkin Radler's request that they be paid fees out of estate assets. The Special Referee afforded the Investor Creditors the opportunity to submit their positions in writing. All parties agreed to waive a hearing. The objecting parties argued that Rivkin Radler's clients should pay their own fees, as some of the other Investor Creditors had to do.

In connection with the claims filed by Dr. Anthony Salierno, Kathleen Salierno, and the AJ Salierno Defined Benefit Plan (collectively, the "Salierno claims"), claimants have a claim against the estate for legal fees in the amount of $133,987.11. They paid Rivkin Radler $56,196.16 on account. Rivkin Radler asserts that the arguments made by the firm benefitted all of the claimants and resulted in an estate valued in excess of nine million dollars. Counsel made 13 court appearances, including one hearing, and actively participated in many of the varied proceedings. Rivkin Radler was the only firm to participate in the settlement negotiations [*7]between decedent's estate and the estate of Betty, which led to the withdrawal of an appeal by the administrator of Betty's estate. The firm also appeared in connection with the net equity proceeding. Rivkin Radler expended 139.21 hours over a three-year period.

In connection with the claim filed by Leonard G. Gallo, individually and as the executor of the estate of his wife, Dolores V. Gallo (COLLECTIVELY, THE "Gallo claims"), claimant has a claim against the estate for legal fees in the amount of $66,694.58, based upon his contingent fee arrangement with counsel. Gallo paid $25,847.20 to the firm on account. The firm spent 56.7 hours on this matter. The Special Referee notes that all of the time devoted to these claims by the firm was divided between the clients and not double billed.

The Public Administrator asked that the court determine whether the services provided by Rivkin Radler benefitted the estate and all of the Investor creditors. The petition asks that if fees are awarded from the estate, that they be calculated on the basis of quantum meruit and not pursuant to the contingency fee arrangements between counsel and the clients.

The referee notes that Rivkin Radler intervened and strongly supported the motion for summary judgment made by counsel for the Public Administrator in connection with the Insurance Trust Proceeding. It was helpful for the court to hear from someone representing the interested parties, and this benefitted all of the Investor Creditors. Counsel for the Public Administrator acknowledges the presence and support of Rivkin Radler at all court conferences and in connection with the Net Equity Proceeding.

In his interim report, the Special Referee discusses entitlement for reasonable compensation out of the estate and quantum meruit compensation. He concludes that the firm provided legal services which enlarged the estate and benefitted all of the Investor Creditors, but that their compensation by the estate can only be made on the basis of quatum meruit. The Special Referee found that one-third of the time expended by Rivkin Radler is chargeable to the estate, or a total of 46.57 hours on the Salierno claims, at a blended rate of $315.00, for a total of $14,669.55, and 18.9 hours on the Gallo claims, at a blended rate of $315.00, for a total of $5,953.50.

FINAL REPORT OF THE SPECIAL REFEREE REGARDING

ATTORNEY FEES

On November 25, 2013, C. Raymond Radigan filed his final report concerning the requests for legal fees payable to counsel for the Public Administrator. He reviews in great detail the services provided by the law firm of Brosnan & Hegler LLP and by the law firm of Certilman Balin Adler & Hyman LLP, each of which provided services to the Public Administrator in the course of this estate administration.

The Special Referee notes that Brosnan & Hegler LLP, provided extensive, varied and valuable services in connection with this estate, resulting in billable hours which totaled $660,306.25 for services rendered through June 30, 2012. The fees were voluntarily discounted to $596,440.45, of which $572,193.56 was paid, leaving $24,246.89 unpaid for that time period. Billable fees for the period July 1, 2012 through August 13, 2013 are $125,725.00, to which a voluntary 10% deduction was applied, reducing the bill by $12,572.50, to $111,068.51. The firm further reduced this amount by $10,315.40, to $100,753.11, plus disbursements of $2,046.01. These amounts remain unpaid. The Special Referee recommends that the firm be paid the discounted and reduced amount of $697,193.56 as requested, of which $125,000.00 remains unpaid, plus disbursements in the amount of $2,046.01.

The Special Referee also recommends approval of the payment to Certilman Balin Adler & Hyman LLP in the total amount of $89,688.07, which amount includes disbursements of [*8]$83.72. He notes the courtesy discount of $2,641.00 given by the firm, and points out that this firm handled the proceedings to determine the validity of the claims filed by the Investor Creditors. These proceedings resulted in the reduction of allowed claims from $34,666,148.06 to $15,810,265.30, as reflected in Schedule J. The firm was also responsible for the claw-back proceedings and for representation of the Public Administrator in the Supreme Court action.

FEES

1. Fee of Brosnan & Hegler, LLP

This administration required many different types of extraordinary legal services. As reflected in the affirmation of legal services dated August 19, 2013, in addition to addressing issues that arose in connection with the marshaling of decedent's assets, Brosnan & Hegler LLP, as counsel for the Public Administrator, was involved in multiple litigations with decedent's many creditors. Counsel also advised the Public Administrator concerning his interactions with media, police and federal law enforcement officials and assisted in the unraveling of the decedent's Ponzi scheme. The multitude of services provided by counsel are set forth in great detail in the affirmation of services filed by counsel, and include conducting legal research; investigating and speaking with family members, friends, clients, alleged creditors and their attorneys; preparing for court appearances and conferences; drafting pleadings, motions and related legal documents; engaging in document discovery; analyzing investors' claims; reviewing promissory note issues and other financial records; and collecting and preserving the estate assets.

Schedule C reflects that the firm has been paid a total of $572,193.56 to date. Schedule C-1 shows unpaid fees of $125,000.00. These amounts are reflected in the relief requested by the Public Administrator. As recommended by the Special Referee, the fee is approved in the sum of $697,193.56, of which $125,000.00 remains unpaid, plus disbursements in the amount of $2,046.01.

2. Fee of Certilman Balin Adler & Hyman LLP

This firm represented the Public Administrator in defense of more than $3.6 million in claims filed by Investor Creditors and handled the proceeding to determine the validity of the claims. Counsel analyzed and compared the claims, determined the applicability of the precedents set in the Madoff federal bankruptcy proceedings, corresponded with Investor Creditors and counsel, and developed the concept of net winners and losers and moved the court for the adoption of the net equity method of determining the Investor Creditor claims. They brought claw-back proceedings against the net winners, and negotiated settlements. The firm assisted co-counsel in making interim payments to Investor Creditors, and represented the Public Administrator in Longo v Milgram, Index No. 4622/10, the Supreme Court litigation brought by several of the Investor Creditors. As a result of the firm's work, the allowed claims of the Investor Creditors were reduced from $34,637,698.06 to $15,810,265.30. After the claw-back proceedings, cash payments of $275,000.00 were made to the estate, and claims amounting to $2,474,397.00 were withdrawn by stipulation.

For their work, the firm of Certilman Balin Adler & Hyman LLP billed $89,688.07, of which $83.72 represented disbursements, all of which was paid. The firm voluntarily discounted their fee by $2,641.00. As recommended by the Special Referee, the fee is approved in the amount paid.

3. Fee of C. Raymond Radigan

The Special Referee submitted an affidavit of legal services as well as his time records [*9]for June 9, 2011 through November 19, 2013. These documents reflect that the services provided by the Special Referee included review of the court file and other materials provided by counsel, conferences with the parties, review of the account, review of legal memoranda and stipulations, and the filing of several interim reports as well as a final report. The Special Referee and his law firm devoted 99.20 hours in connection with these proceedings, which does not include time spent in the preparation of the affidavit of services. The Special Referee further advises the court that his hourly rate is $675.00 an hour, for 43.60 hours, and that his associates bill at $425.00 an hour, for 55.60 hours, resulting in a total fee of $50,692.50, plus disbursements of $354.30, for a combined total of $51,046.80. Schedule C-1 and the relief requested estimated that this projected fee would be approximately $45,000.00, none of which has been paid.

With respect to disbursements, the tradition in Surrogate's Court practice is that the attorney may not be reimbursed for expenses that the court normally considers to be part of overhead, such as photocopying, postage, and telephone calls (Matter of Graham, 238 AD2d 682 [3d Dept 1997]; Matter of Diamond, 219 AD2d 717 [2d Dept 1995]; 8 Warren's Heaton, Surrogate's Court Practice § 106.02 [2] [a] [7th ed]). In Matter of Corwith (NYLJ, May 3, 1995, at 35, col 2 [Sur Ct, Nassau County]), this court discussed the allowance of charges for photocopies, telephone calls, postage, messengers and couriers, express deliveries and computer-assisted legal research. The court concluded that it would permit reimbursement for such disbursements only if they involved payment to an outside supplier of goods and services, adopting the standards set forth in Matter of Herlinger (NYLJ, Apr. 28, 1994, at 28, col 6 [Sur Ct, New York County]). The court prohibited reimbursement for ordinary postage and telephone charges other than long distance. The disbursements include charges for in-house copies and postage, which are disallowed.

The fee is approved in the amount of $45,000.00, plus disbursements of $261.56.

4. Fee of Ahmuty, Demers & McManus

Ahmuty, Demers & McManus served as counsel to the Public Administrator in connection with the Supreme Court Action (Index No. 018595-09) brought by Mazzarella, as the administrator of the estates of Betty, Stephanie and Catherine, against decedent's estate for damages of $5,000,000.00 for pain and suffering and wrongful death. As noted above, this lawsuit was discontinued with prejudice. The fee of $12,533.50 charged by Ahmuty, Demers & McManus for their services has been paid. There were no objections to this fee.

5. Fee of Royston, Mueller, McLean & Reid, LLP

The firm of Royston, Mueller, McLean & Reid, LLP served as out-of-state counsel to the Public Administrator in connection with the police investigation into the deaths of the decedent and his family members, which deaths occurred in Maryland. The firm's fee, which totaled $5,158.75, has been paid in full. There were no objections to the payment of this fee.

6. Fees of Rivkin Radler, LLP

Rivkin Radler, LLP served as attorneys for Investor Creditors, Leonard G. Gallo, Anthony J. Salierno and Kathleen Salierno, in connection with several proceedings concerning decedent's estate. The Public Administrator advises the court that the services provided by Rivkin Radler, LLP resulted in a pecuniary benefit to decedent's estate and all of its creditors. On that basis, the Public Administrator asserts that the firm's legal fees constitute a proper expense of administration payable from decedent's estate, in an amount equivalent to the quantum meruit value of its legal services, but not the contingency fee sought by the firm. As recommended by the Special Referee, the fee is approved in the combined total amount of [*10]$20,623.05.

7. Fee of Rispoli & Co., CPA's, P.C.

The firm of Rispoli & Co., CPA's, P.C. served as the accountant in this complex administration. The affirmation of services on file reflects that the firm prepared and filed decedent's 2009 federal and New York State personal income tax returns, and the federal and New York State fiduciary income tax returns for 2010, including extensions, through 2013. The firm was also required to amend the 2009 and 2010 returns. The fee requested is $4,575.00, of which $3,425 has been paid and $1,150.00 remains unpaid. The fee is approved in the amount requested.

CONCLUSION

1. The court releases and discharges the Public Administrator;

2. The court approves and allows payment to the Public Administrator of fiduciary commissions, subject to audit, and the reasonable and necessary expenses of the Office of the Public Administrator;

3. The fee of Certilman Balin Adler & Hyman, LLP, is fixed in the amount of $89,688.07, all of which has been paid;

4. The fee of Ahmuty, Demers & McManus is approved in the amount of $12,533.50, all of which has been paid;

5. The fee of Royston, Mueller, McLean & Reid, LLP, is approved in the amount of $5,158.75, all of which has been paid;

6. The Special Referee's fee of the Honorable C. Raymond Radigan is fixed in the amount of $45,000.00, plus disbursements of $261.56, none of which has been paid;

7. The fee of Brosnan & Hegler, LLP, is fixed in the amount of $697,193.56, of which $572,193.56 has been paid and $125,000.00 remains unpaid;

8, 9, and 10. A combined fee of $20,623.05 shall be paid to Rivkin Radler, LLP, in connection with the Salierno claims and Gallo claims, as a proper expense of administration payable from decedent's estate;

11. The accountant's fee of Rispoli & Co., CPAs, P.C. is fixed in the amount of $4,575.00, of which $3,425.00 has been paid and $1,150.00 remains unpaid;

12. With respect to each claim filed by an Investor Creditor as recited in Schedule D of the Final Account and Rider #1, the court disallows the respective amounts set forth in the column entitled "Amount of Claim Rejected," in accordance with Dec. No. 27753, dated

March 30, 2012;

13. With respect to each claim filed by an Investor Creditor as recited in Schedule D of the Final Account and Rider #1 annexed hereto, the court allows the respective amounts set forth in the column entitled "Amount of Claim Allowed", in accordance with Dec. No. 27753, dated March 30, 2012;

14. With respect to each claim filed by a claimant other than an Investor Creditor (a "Non-Investor Claimant") as recited in Schedule D of the Final Account and Rider #2, the court disallows the respective amounts set forth in the column entitled "Amount of Claim Rejected" for (i) 21st Century Auto Insurance, (ii) America Online, (iii) American Express account number ending 2000, (iv) American Express Optima account number ending 4007, (v) Aspen Publishers, (vi) Bank of America Credit Card account number ending 7516, (vii) Cablevision, (viii) CCH Incorporated, (ix) Chase Line of Credit account number ending 9236, (x) Chase Business Line of Credit account number ending 2927, (xi) Chase Business Line of Credit account number ending [*11]2928, (xii) Chase Credit Card account number ending 5465, (xiii) Chase Credit Card account number ending 9265, (xiv) Chase Line of Credit account number ending 5080, (xv) Chase Line of Credit account number ending 7797, (xvi) Chase Credit Card account number ending 8131, (xvii) Chase Credit Card account number ending 9705, (xviii) Chubb & Son, (xix) Citibank Diamond Credit Card account number ending 1149, (xx) Earthlink, (xxi) Federal Express Corporation, (xxii) Gerald Weinbar, P.C., (xxiii) National Grid, (xxiv) Lord & Taylor Credit Card account number ending 4750, (xxv) Midland Funding/GE account number ending 5475, (xxvi) Time Warner Cable account number ending 9600, (xxvii) Time Warner Cable account number ending 4813, (xxviii) Travelers Commercial Insurance, (xxix) Verizon account number ending 1723, (xxx) Verizon account number ending 2270, (xxxi) Verizon account number ending 5277, (xxxii) Verizon account number ending 2274, (xxxiii) Verizon Wireless account number ending 0001, and (xxxiv) Winthrop Orthopedic Association, on the grounds that the claimants have failed to (1) submit sufficient documentary evidence to substantiate their claims, and (2) submit Affidavits of Claim required by the Public Administrator as set forth in

SCPA 1803;

15. With respect to each claim filed by a Non-Investor Claimant as recited in Schedule D of the Final Account and Rider #2, the court allows the respective amounts set forth in the column entitled "Amount of Claim Allowed" for (i) AT & T Universal Citibank Mastercard account number ending 1533, (ii) Bank of America Credit Card account number ending 5809, (iii) Bank of America Credit Line account number ending 3062, (iv) Citibank Credit Card account number ending 9954, (v) HANN Financial Service Corporation, (vi) HFC account number ending 3189, (vii) HSBC Credit Card account number ending 6599, (viii) Lawyers Fund for Client Protection as Subrogee of Patrick Russo, (ix) Mercedes Benz Financial Services account number ending 5460, (x) Mercedes Benz Financial Services account number ending 0571, (xi) New York State Income Tax, (xii) Estate of Frank Siclari, and (xiii) Sterling National Bank;

16. The court disallows the claim of Lucille Gribbin on the grounds that the claim is not a valid and enforceable obligation of decedent's estate;

17. The court disallows the claim of the United States Department of Education for educational debt related to the college tuition of decedent's daughter, Stephanie Ann Parente, on the grounds that the terms of any such educational financing for which decedent was a primary or secondary obligor provide that all such outstanding educational indebtedness is subject to cancellation and discharge upon the death of all of the primary and secondary obligors;

18. The court finds that decedent's estate is insolvent, and directs and authorizes the Public Administrator, after the payment of the unpaid expenses of administration approved by the court herein, to pay from the net distributable estate, the allowed claims of the Investor Creditors and the Non-Investor Claimants, on a pro rata basis, based on the proportion of each allowed claim to the total allowed claims; and

19. The court releases and discharges the surety, Liberty Mutual Insurance Company.

Settle decree.Dated: June 30, 2014Edward W. McCarty III

Judge of the

Surrogate's Court

Footnotes

Footnote 1:For example, see Decision Nos. 686, 687, 688 and 691, issued by this court on November 30, 2009.

Footnote 2:See this court's Dec. No. 27753, issued March 30, 2012; Matter of Parente, 35 Misc 3d 1210[A] (Sur Ct, Nassau County 2012).

Footnote 3:Although the Westhampton Condominium was subject to a recorded first mortgage in the principal amount of $200,000 and a recorded second mortgage in the principal amount of $300,000, the Public Administrator's counsel negotiated with the mortgagees, who agreed to reduce the amount of their secured claim to $300,000 and to have the balance of their mortgage claims be treated as unsecured claims. As a result, there were net sale proceeds available to offer to Mazzarella as a part of the Global Settlement.

Footnote 4:Matter of Parente, 35 Misc 3d 1210[A] (Sur Ct, Nassau County 2012)