Questions and Scrutiny Grow Over Monroe County Nonprofit Development Corporation

A lawyer with close ties to Monroe County forms a nonprofit local development corporation to handle a $99 million county contract. He names himself and two friends as the board of directors. The friends are not told of their roles and never participate in a proceeding of the board. One of them is aghast to learn seven years later that he was ever a director.

The scenario illustrates the convoluted origins of Upstate Telecommunications Corp. and raises questions about the validity of the corporation and its 16-year contract to manage the county's vast information technology network, according to nearly a dozen experts in nonprofit law, including lawyers who regulated nonprofit corporations for New York state.

Specifically, how did Upstate Telecommunications become functional without input from its founding directors? And did the directors who approved contracting with the county have the authority to act?

Answers remain elusive because the corporation claims it cannot locate records that could shed light on the matter, and its incorporating attorney, Michael Townsend, has declined to answer questions about the founding.

The notion that a local development corporation with a multimillion-dollar county contract would be formed unbeknownst to most of its founding directors baffled experts briefed on the scenario.

All of them cast the situation as an example of poor corporate governance, but most agreed that questions of the corporation's validity would not alone unravel its contract — a scenario with potentially dire consequences for the county.

"The consequences of a corporation not being a valid corporation are sort of unclear," said Amy Lavine, a senior staff attorney at Albany Law School's Government Law Center, where she writes extensively about nonprofit public benefit corporations. "A court might treat it like a corporation if it's been acting like one. In the real world, how do you undo a $99 million contract that's halfway done?"

State Attorney General Eric Schneiderman has subpoenaed Upstate Telecommunications for documentation about its founding and finances as part of an investigation into Monroe County local development corporations with state Comptroller Thomas DiNapoli.

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