Inspector General Releases Report on Compensation of Richard Kessel by Long Island Power Authority

ALBANY, NY (07/17/2008)(readMedia)-- Inspector General Joseph Fisch today released the results of an investigation into whether Richard Kessel acted properly by accepting a salary for serving as chairman of the Long Island Power Authority (LIPA) in 2006.

LIPA, which distributes power in Long Island, is overseen by a board of fifteen unpaid trustees, one of whom is selected by the governor to serve as chairman. The board also hires and pays employees needed to accomplish its mission.

Kessel served as chairman and chief executive officer/president from 1997 to January 2006. On Jan. 18, 2006, he stepped down from his CEO/president posts while remaining as chairman to comply with the new Public Authorities Accountability Act, which requires state public authorities to separate their oversight and operational roles. However, Kessel continued to fulfill the same duties he had prior to his resignation.

The Inspector General focused on whether Kessel acted properly by accepting a salary for his chairmanship position, for which he worked full time throughout 2006, earning $204,932 in salary and bonuses.

The Inspector General's report found that:

• In late 2005, when Kessel informed then-Governor George Pataki that under the Public Authorities Accountability Act, he would have to resign either his position as CEO or chairman. Pataki directed Kessel to stay on as chairman through 2006, the last year of Pataki's term.
• Kessel informed the Governor's office that some believed the Public Authorities Law prohibited the LIPA chairman from receiving a salary. In response, then-Secretary to the Governor John Cahill told Kessel that he could continue to receive a salary as a full-time chairman.
• It was the view of the Governor's office that Kessel, acting as full-time LIPA chairman, was not just another trustee.
• Two written legal opinions and another informal one assured Kessel that a full-time chairman could be compensated.
• The LIPA board was satisfied with Kessel's performance, regarded him as very important in the day-to-day operation of LIPA, and continued to remunerate Kessel as chairman after he resigned as chief executive.

Kessel received clear signals from those in authority, as well as legal opinions, that he could continue to receive a salary. The Inspector General concluded that Kessel did not act improperly by accepting compensation for his full-time work at LIPA.

However, by requesting that Kessel stay as chair and also continue to run LIPA, the governor's office created a situation in which Kessel exercised both managerial and oversight roles at LIPA throughout 2006. This was not the intent of the Public Authorities Accountability Act.

The Inspector General's Office began its investigation last year, several months after Kessel was replaced as chairman. Gov. Eliot Spitzer appointed Kevin Law as chairman. At the time, Kessel told Law that Law could be paid as chairman, as he himself had been advised he could. This conversation prompted Law to contact then-Governor Spitzer's office, which, in turn, asked the Inspector General to investigate.

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