NYC Mayor’s Top Aide Subpoenaed as Witness in Racketeering Suit

(Bloomberg) -- New York City Mayor Eric Adams's chief of staff, Frank Carone, was subpoenaed for documents in a $4.5 million federal civil racketeering lawsuit over alleged fraudulent insurance charges.

The subpoena to Carone, who is not a defendant in the suit and isn't accused of misconduct, is part of insurance giant Geico Corp.'s broader allegations that several New York and New Jersey doctors and medical clinics submitted “thousands of fraudulent no-fault insurance charges” related to motor vehicle accidents, according to a complaint filed in federal court in Brooklyn.

Before becoming the mayor's gatekeeper, Carone, a longtime Brooklyn power broker, served as counsel to the Brooklyn Democratic Party and was a law partner at the firm Abrams Fensterman.

The insurance company's attorneys alleged that Carone and his former law partners Howard and Jordan Fensterman held significant ownership stakes in four funding companies that lent money to the medical clinics and were paid back, with interest, after Geico paid out the claims.

Geico's attorneys requested in a motion filed Dec. 10 that Carone and his former partners turn over communications they have with the defendants. Carone and the Fenstermans responded that those communications are shielded by attorney-client privilege, although it isn't clear whether Abrams Fensterman represented the clinics or providers. On Jan. 10, the court denied the blanket subpoena and requested that Geico submit one with a narrower scope.

Carone and Howard Fensterman “are merely passive investors” in the funding companies, which advance money to “no-fault medical providers in order to maintain operations while they await payment of claims from insurance carriers,” according to a memo by Abrams Fensterman that was provided by a City Hall spokesperson.

Geico has argued that the funding companies were being used by a doctor involved in the alleged scheme “as a means of facilitating and concealing ... ownership” of the clinics that submitted the allegedly fraudulent claims.

In support of their motion, Geico's attorneys provided voluminous bank records that show hundreds of thousands of dollars in transfers involving Abrams Fensterman and the advance funding companies, along with incorporation documents showing Carone and the Fenstermans' ownership interest in those entities.

Ethics Headaches

Though neither Carone nor the Fenstermans are accused of wrongdoing, Carone's involvement in the Geico lawsuit is the latest potential ethics headache for the mayor, who faced questions about Carone's array of business interests and possible conflicts of interest in the weeks before his appointment as chief of staff.

Good-government groups expressed concern about the fact that Carone's law firm had real estate, transportation and other clients with business before the city. Carone's law partners bought out his 9% ownership stake in the firm. He also resigned from his position with the Kings County Democratic Party, gave up his position on the board of Hanover Bank and placed his assets in a blind trust.

Carone, who in the past has served as Adams's personal attorney, was at the center of a controversial $173 million housing deal done during Mayor Bill de Blasio's administration. He negotiated the city's purchase of 17 buildings from Stuart and Jay Podolsky, landlords known for violations at their properties, while donating to the political action committee that de Blasio used to explore a presidential run, the New York Daily News reported at the time. Carone and de Blasio have denied discussing the property sale.

Several other Adams administration appointees have raised ethical questions. Adams's pick for deputy mayor for public safety, former NYPD chief of department Philip Banks, was named as an unindicted co-conspirator in a federal police corruption investigation.

Adams also came under fire for attempting to hire his brother Bernard to help run his security detail at a six-figure salary, despite the city's anti-nepotism regulations. Instead, his brother was hired to a lower-profile position, at a nominal salary of $1 a year. Last month, Adams slowed the hiring process for other senior positions in his administration to allow for a more careful vetting process, Politico reported.