Dan's Papers - October 30, 2009

Bill McGintee resigned from his job as East Hampton Supervisor on October 5 not because political opponents hounded him out of office, or because a big hatchet job was done on him, but because he was scared that a District Attorney investigating things might put him in jail for a long, long time.

In my opinion, McGintee should have resigned a long time ago, when the mess he made of things was pointed out. He did not. So things got worse. And if not for the efforts of District Attorney Tom Spota, who could not believe a person could mess things up so badly without pocketing some of the money himself, McGintee would be our supervisor today.

The fact is, McGintee never used any of our tax funds for himself or his family-there were no fancy cars nor expensive vacations. We now have very thorough and expensive proof of that, thanks to a team of assistant DAs who went through all the files and checkbooks.

This has turned out to be an embarrassment for our politically ambitious DA. He needed to find something to be able to put the handcuffs on McGintee. Incredibly, though McGintee might have been incompetent, he was honest.

I think that McGintee himself very likely did not know if he had stolen anything. His level of incompetence-and I do not mean anything personal by this-was so great he had no idea where the money was coming from and going to. Maybe he DID take some of it. He would not have done it intentionally. But what if he DID? Somebody with all his ducks in a row would be confident that he'd be cleared of all wrongdoing. My guess is that McGintee simply did not know how this would turn out. He resigned. He will not be indicted. That is the deal.

But didn't McGintee do SOMETHING wrong? He sure did. He spent this town into the dumps. Too bad for us.

In many ways, McGintee's story is very similar to that of a man named Dr. John Ferry, Jr. that occurred 15 years ago in Southampton.

At that time, Ferry, who had a doctorate in hospital administration, became the president of Southampton Hospital. A dashing, handsome man filled with ideas, he was at first seen as a savior of the hospital, which, at that time, was just sort of bumping along and barely breaking even.

Ferry began implementing his ideas. He brought in a concierge. He brought in valet parking. He ordered a stem-to-stern remodeling of the hospital's interior by a noted designer. There were paintings on the walls, new track lighting and a grand entrance. Ferry said he was going to make a "boutique" hospital for the rich, similar to such hospitals that exist today in Palm Springs and Aspen. Great doctors with worldwide reputations would settle in Southampton. They would work in the "satellite" hospitals he planned for East Hampton, Westhampton Beach and Hampton Bays. He bought the land for these satellites. He broke ground and began construction. He was the featured guest at great fundraisers.

After five years of this, the hospital's board of directors, a bunch of older men who would burst into applause whenever Ferry strode into a room, were told something was amiss. But what could it be? They did have, after all, a $60 million endowment in the bank. All of these wonderful and daring changes would be accomplished on their watch.

Well, good heavens, when they checked the account at the bank, the entire $60 million endowment was gone. Ferry had spent it all, paying the contractors and designers and architects who were fulfilling his grand plans. Furthermore, the losses were accelerating. It turned out that among other things, the hospital's ancient computers were malfunctioning. There was medical work being done at the hospital that was not being billed out. There was no clear idea what was paid and what was not. There was not even a collection department. What a mess.

They called in Ferry. He was presented with what was going on. And he looked at everybody in horror. He had no idea, he said. He was not paying any attention to those sorts of details. He was an idea man. He would resign.

Then, as soon as possible, he did. And he left town. He did not flee the country. He was available to be arrested if it came to that. But when the accountants came in, they found that Ferry had never taken anything for himself. He'd really wanted what was best for the hospital. He was simply guilty of financial incompetence. And that was that.

I think it is fair to say that if Ferry had not resigned when he did, a DA would have been brought in to investigate for possible criminal activity. What DA would not assume the good doctor was lining his own pockets? What was he hiding?

Well, Ferry agreed to scrap the remainder of his contract. Also his golden parachute, though he did accept enough to cover the cost of relocating his family elsewhere. He was very apologetic. He is, I have to say, remembered fondly, though with a sense of outrage by all of us. It's complicated.

The bankers came in after he left. If they had not, the hospital would have closed its doors. So they came in, and the trustees had to accept draconian terms to borrow the money needed to continue on. The interest rates were through the roof-this was a big risk the bankers were taking, the bankers said-and stayed the same for the full 15 years. These were dark times for the hospital as they made do with very little while the bankers who saved them got rich on the high interest.

One would think that the bankers, who might've needed to use the hospital themselves from time to time, would have changed the terms of the awful loan they made after a few years. But they turned their backs and let the hospital drift. It has only been in the last few years, as the light at the end of the 15-year tunnel has grown brighter and brighter, that the new hospital president, Bob Chaloner, has turned the hospital into a truly successful and wonderful place again. Recently, the hospital began operating in the black for the first time in years.

The thing is that a little over two years ago, in June of 2007, when McGintee learned the horrible truth about the lack of funds in the town treasury, he did not resign so others could fix the problem. He was running for reelection of his third term in November. By his own admission, he simply kept silent about what he had learned so he could be reelected. And he was. Only after that did he make public what he knew, but then he STILL did not resign.

What was he hiding? It seemed like a no-brainer for a crusading DA to come in and make the arrest and send McGintee off to jail for stealing the funds.

What DA Spota found was that East Hampton's budget officer, Ted Hults, who McGintee appointed, was also incompetent. Because he, too, was honest, the best the DA could do was find criminal activity when Hults told the state about the town's finances in hopes of Albany bailing out the town and bonding our children to big state loans for the next 15 years. That's all they could come up with. Spota hauled off Hults in handcuffs. Spota probably rubbed his hands together with glee and thought McGintee would be next. After all, McGintee had signed off on what Hults had done. Ignorance of the law is no excuse.

The most ridiculous part of all of this, if you think about it, is that in his letter of resignation, McGintee thanks the DA for agreeing to allow him to help find out who really caused this mess. It reminds me of that old joke: The wife opens the bedroom door and there is her husband in bed with another woman. The husband sits up, shocked, and says, "Who put this woman in this bed? We have to find that person."

Exactly who does McGintee think might have caused this?

Last week, independent of the DA, the New York State Comptroller's Office finally issued their report on East Hampton finances. They went through each checkbook in great detail. They could document exactly what happened with the finances of East Hampton Town.

I recall that when the trouble began, McGintee, shocked to find they were $6 million in debt, claimed he had inherited the debt from his predecessor, who had left office in 2004 without telling McGintee about the secret deficit.

Turns out that not only did the predecessor leave McGintee a surplus, but the surplus, about $8 million, was still there at the end of McGintee's first term in 2006. McGintee never even knew he was rolling in dough when he was rolling dough.

It was in the beginning of 2007 that things began to go very south. According to a state comptroller, by the end of that year, the surplus was gone and replaced by an $11 million deficit. In June of 2007, McGintee discovered he'd scraped the bottom of the financial barrel. Money was gone. He could not make payroll. He had no idea why. At that time, he should have done what Ferry did. He should have resigned. He didn't.

McGintee not walking away sadly cost this town another $10 million in deficits. 2008 was business as usual. McGintee made no layoffs, cutbacks, tax increases or project abandonments. He simply wrote checks out of an account earmarked for public land purchase to get by. It was illegal. But he was the man in charge and it was an emergency. So he did it.

Personally, I am a taxpayer in two different hamlets in East Hampton Town. From my perspective, McGintee is a man who has screwed us up badly. He meant well, apparently. I think he's a nice guy. He had ideas. He implemented many of them. But I really resent this second $10 million in deficit that taxpayers and our children will have to bear. There will be tax increases, layoffs, reduced services, bonds to pay. And for what? For a man who insisted that what he broke he would fix. That isn't a crime, either. But it's pretty awful. He never did fix it. As a matter of fact, as this is written, things are still headed south.