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2 NYC Council workers indicted in slush fund probe

NEW YORK (AP) — Two aides to a New York City Council member have been indicted in connection with a slush fund used to funnel millions of taxpayer dollars to pet projects and favored community groups.

Federal prosecutors unsealed an indictment Wednesday accusing the former chief of staff to Councilman Kendall Stewart with skimming at least $145,000 from a charity that had received council funds.

Called the Donna Reid Memorial Education Fund, the organization was supposed to provide educational assistance to schoolchildren. But the indictment said it "primarily served as a conduit to provide cash and other personal benefits" to Stewart's chief of staff, Asquith Reid.

Reid was charged with conspiracy to commit mail fraud, money laundering conspiracy and two counts of witness tampering. Prosecutors said he directed two grand jury witnesses to lie about working for the Donna Reid fund and its related financial transactions. The fund was named after a daughter of Asquith Reid who died of cancer at a young age.

Also charged was Joycinth Anderson, another Stewart staffer. The indictment said she aided Reid in the scheme. Stewart was not named in the indictment.

The two aides' loyalty "should have been to the New York City taxpayers," U.S. Attorney Michael Garcia said at a news conference Wednesday. "Instead, they were driven by greed."

Garcia said the federal probe will continue to take a "hard look" at the council's discretionary funds practice.

"Without transparency and accountability in the budget process, discretionary items are ripe for abuse," Garcia said. "Taxpayer money allocated to fake nonprofit entities, organizations that do not even exist, is even more difficult to trace and more easily diverted for personal gain."

Garcia and Rose Gill Hearn, commissioner of the Department of Investigation, would not say who else is under investigation. Gill Hearn said city employees involved in all stages of creating fake organizations and approving their funding are being scrutinized in the criminal probe.

Reid and Anderson were arraigned before a magistrate and released on bond. They did not immediately return calls seeking comment. Garcia said Reid faces a maximum of 80 years in prison and Anderson faces up to 40 years.

Stewart issued a statement in which he said he did nothing wrong.

"While I believe in the presumption of innocent until proven guilty I must say that I'm deeply disappointed over the allegations leveled at Mr. Reid and the embarrassment that his actions — right or wrong — have caused me, my hardworking staff and the people of my district," Stewart said.

The indictment portrays Reid as a corrupt employee who took advantage of the council's recently revealed practice of giving millions of dollars to nonprofit groups favored by council members.

Some of the money was given to fake charities. Once it had been budgeted, that money was then transferred to real nonprofit groups, at the discretion of the council members and their top aides.

Council Speaker Christine Quinn, a likely mayoral candidate next year, has scrambled to explain the practice.

Earlier this month, the speaker and her office said the council had appropriated some $17.4 million since 2001 to groups that did not exist. Last year, $4.5 million was hidden this way in a budget of more than $50 billion. Quinn said the practice of setting aside what she called "reserve funds" dates back at least 20 years.

According to the indictment, the Donna Reid Memorial Education Fund was a real charity that was registered with the state and had received about $365,000 from the council since 2005.

Some of the money passed through fictitious groups created by the city council before being awarded to the fund.

The indictment said at least $31,000 received by the Donna Reid fund was wired to Reid's friends and relatives in Jamaica. Another $21,000 was spent on political events or campaign literature for Stewart.

Anderson also cashed thousands of dollars in Donna Reid fund checks and gave the money to Asquith Reid, according to the indictment.

Associated Press writer David Caruso contributed to this report.