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New Jersey's Acting Governor Was Faulted on Ethics in 1998

Originally appeared in the New York Times on April 17, 2001
By DAVID M. HALBFINGER

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    TRENTON, April 16
    A 1998 report by lawyers for the Township of Scotch Plains concluded that Acting Gov. Donald T. DiFrancesco, then the township attorney, repeatedly violated legal-ethics rules and should be removed from his job, according to confidential documents obtained by The New York Times.

    Mr. DiFrancesco, who was then the president of the State Senate, had wielded enormous influence over his hometown government for decades and had been township attorney for 16 years. But in 1998, two special counsels, one a Democrat and the other a fellow Republican otherwise loyal to him, urged Council members to remove Mr. DiFrancesco as township attorney. Republican Council members told him he would be dismissed at the end of 1998 unless he came up with a satisfactory response to the report.

    Mr. DiFrancesco tonight adamantly denied the allegations against him and accused Democrats in his hometown of leaking the report to damage his campaign for governor in this year's elections.

    But in 1998, Mr. DiFrancesco never answered the allegations against him to the satisfaction of town officials.

    Instead, he was saved by the bell, in a way: In a rare electoral upset, Democrats took control of the Township Council in November 1998. They immediately fired Mr. DiFrancesco and replaced him with a Democratic township attorney, giving his termination the appearance of simple partisan politics.

    But when Republicans regained control of the Council just a year later, they hired another Republican lawyer instead of Mr. DiFrancesco. And Republican and Democratic officials alike now say Mr. DiFrancesco would have been dismissed as township attorney at the end of 1998 no matter who won the election.

    "It was made clear by the Council at that point that he would not be reappointed," said Robert E. Johnston, one of the five Republican Council members at the time.

    After 18 months of agonizing internal debate, members of the Township Council had become convinced that Mr. DiFrancesco had, among other things, lobbied township officials to give members of his family a zoning change they wanted, while failing to disclose his own financial stake in the project's success; ruled on other projects involving a major homebuilder shortly after receiving $225,000 from that homebuilder to pay off a judgment against him; and influenced township officials to drop plans for a youth soccer field because his relatives held out hope of developing the property.

    "His actions and nonactions vis--vis the Council not only give the appearance of impropriety but are clearly improper and replete with conflicts that cannot be ignored or waived," the lawyers wrote. Rule 1.7 of New Jersey's Rules of Professional Conduct governing lawyers, they explained, "prohibits a lawyer from representing a client if the representation of that client may be materially limited by the lawyer's own interests."

    In an interview tonight, Mr. DiFrancesco flatly denied the report's allegations, and said that no one had ever referred the matter to the New Jersey bar's disciplinary committee. "There's nothing unethical about what I did," he said. "There's nothing illegal about what I did."

    Mr. DiFrancesco called the disclosure of such a confidential document a "totally unfair" effort to damage him politically. "It's clearly being dropped by the Democrats on the Town Council," he said. "This is all about making Don DiFrancesco look bad after 16 years of sweating my blood for this town. It's insulting."

    At the heart of the ethical questions that have surfaced since Mr. DiFrancesco became acting governor of New Jersey on Feb. 1 and have haunted his candidacy in this year's gubernatorial campaign is a troubled real estate venture on a tract of land in Scotch Plains that his relatives have tried to develop for more than a decade.

    The outline of that deal has already been reported. Mr. DiFrancesco's relatives - his brother, Paul, and cousin, Ernest - borrowed money from a friend and law client of his, Dr. George W. Scott, in 1987, but stopped repaying the loan in 1990. Dr. Scott, who had been given a lien on the property, sued Paul and Ernest for defaulting and Donald for malpractice. He won a $553,260 legal judgment against all three DiFrancescos in January 1995.

    Mr. DiFrancesco's relatives continued to try to develop the property, and in 1996, they appeared to have lined up a deal with K. Hovnanian Companies, the state's largest homebuilder.

    But Paul and Ernest DiFrancesco had stopped paying the real estate taxes on the property in 1990, and by 1995, with the unpaid tax bill climbing past $85,000, the Township of Scotch Plains moved to foreclose.

    In late 1996, Hovnanian gave Donald DiFrancesco $225,000 to settle the debt to Dr. Scott, a transaction that Hovnanian and Mr. DiFrancesco have described as a down payment on Hovnanian's development deal with Mr. DiFrancesco's relatives.

    But no one paid the overdue property taxes. And in October 1996, the township government took title to the property, killing the DiFrancescos' project and leaving Hovnanian out $225,000.

    In early 1997, the DiFrancescos sued to reopen the foreclosure proceeding. And in a move that stunned township officials, Donald DiFrancesco sided with his relatives.

    In a sworn statement, he accused Scotch Plains officials of acting in bad faith.

    The Times, relying on public records in several court cases, reported last month on the DiFrancescos' efforts - which did not succeed - to regain possession of the property, at 2435 Plainfield Avenue. But newly obtained documents, including confidential letters and the minutes of closed meetings of the Township Council, along with interviews with many of the people involved, shed light on the reactions of Scotch Plains officials as they slowly became convinced Mr. DiFrancesco committed serious ethical improprieties.

    The most explosive of the documents is a June 17, 1998, letter to Scotch Plains Council members from two lawyers. They were Lewis M. Markowitz, the Democratic lawyer hired three years earlier to represent the township on matters involving Mr. DiFrancesco's family, and Douglas W. Hansen, a Republican who was brought in as Mr. Markowitz's assistant in February 1997. Together, the two lawyers presented the case against Donald DiFrancesco.

    In 1995, the Scotch Plains Township Council was firmly in the grip of the local Republican Party and its favorite son, Mr. DiFrancesco, who, as Senate president, was one of the state's three most-powerful officials. The party had controlled the Council since 1978, and a Democrat had not been elected since 1984. What is more, the five Council members included Irene Schmidt, a legislative aide to Mr. DiFrancesco in his district office, and William McClintock, a political consultant who frequently worked for Mr. DiFrancesco.

    Despite Donald DiFrancesco's influence over town government, however, the property at 2435 Plainfield Ave. had become a source of growing irritation for Council members, especially when Mr. DiFrancesco's relatives repeatedly sought a zoning change to permit a supermarket on the site.

    To insulate themselves from Paul and Ernest DiFrancesco and to avoid any appearance of special treatment for relatives of Donald DiFrancesco, township officials retained Mr. Markowitz to represent them on anything having to do with the property. Mr. Markowitz, a former township attorney and a Democrat, was hired on May 30, 1995, records show.

    Township officials knew nothing then of Dr. Scott's suit against the DiFrancescos or of the $553,260 l judgment against them that Dr. Scott had won the previous January.

    On June 19, Mr. Markowitz met with Mr. DiFrancesco and told him to have nothing to do with the property, that Mr. Markowitz would be handling the matter from then on, records show.

    The Council's decision seemed politically prudent that August, when hundreds of residents at a public meeting opposed allowing a supermarket in the residential neighborhood. Council members recall that a resident stood and bitterly remarked that the DiFrancescos owed thousands of dollars in back taxes on the property.

    In response to the uproar and the suggestion of special treatment, the Township Council not only rejected the zoning change, but also hired yet another outside lawyer, Carmen Mendiola of Elizabeth, to begin tax foreclosure proceedings against the Plainfield Avenue property.

    In the ensuing months, the DiFrancescos proposed a residential development and brought in Hovnanian representatives to help persuade township officials to grant a different zoning change. They won the zoning change. But they did not pay the real estate taxes. And the township completed the foreclosure.

    A fax that arrived in Ms. Mendiola's office on Dec. 27, 1996, signaled a new wave of trouble for Scotch Plains officials. It was from Robert Kraus, the lawyer for Paul and Ernest DiFrancesco, pleading with Ms. Mendiola to go along with a legal effort to get the foreclosure case reopened. In a handwritten note, Mr. Kraus said: "Mr. DiFrancesco adised [sic] me on Dec. 9 that the Township will consent."

    Ms. Mendiola immediately informed the township manager, Thomas E. Atkins, records show. And Mr. Atkins spoke with Mr. Kraus, who confirmed that he was referring to Donald DiFrancesco.

    But Mr. DiFrancesco tonight denied saying anything of the kind to Mr. Kraus.

    Mr. Markowitz and Mr. Hansen would later remind Council members that Mr. DiFrancesco had been told in June 1995 "to have no involvement" with the Plainfield Avenue property. "His conduct," they would write, "is an egregious conflict of interest and improper conduct and is a clear violation" of Rule of Professional Conduct 1.7.

    In January 1997 the Scotch Plains Township Council met in two closed sessions to decide whether to allow the foreclosure to be reopened. Mr. Markowitz reminded the members how outraged residents had been in August 1995 at the mere insinuation of special treatment for the DiFrancescos. On Jan. 14, 1997, records show, the Council decided to let the foreclosure stand.

    The next day, Donald DiFrancesco signed a sworn certification in which he questioned the good faith and fair dealing of Scotch Plains officials, who employed him as township attorney. Mr. DiFrancesco's certification stunned Township Council members, and set off a rapid investigation by Mr. Markowitz and the lawyer for the township's planning board, Lawrence Woodruff. A title search revealed Dr. Scott's lawsuit and the $553,260 judgment.

    Tonight, Mr. DiFrancesco said he had actually informed Mr. Atkins, the town manager, of his financial interest in the Plainfield Avenue property within weeks after he paid off Dr. Scott on April 17, 1996. This recollection is at odds with Mr. Atkins's, as reflected in records.

    "I remember it well," Mr. DiFrancesco said. "That doesn't mean he remembers it. I did not put that in writing, that's true."

    On Jan. 28, Mr. Markowitz telephoned Mr. DiFrancesco and confronted him with his findings, records show. Mr. DiFrancesco disclosed for the first time that Hovnanian had paid him $225,000 to satisfy the Scott judgment a few months earlier. Mr. Markowitz then urged Mr. DiFrancesco to resign as township attorney. That night, in a closed session of the Township Council, records show that Mr. Markowitz urged the Council to fire Mr. DiFrancesco if he refused to quit.

    Three days later, Mr. Markowitz reviewed Mr. DiFrancesco's actions in a letter to Mr. Atkins and the Council. Given the Scott judgment and the Hovnanian payment, he wrote, "the judgment of foreclosure has a substantial financial impact on Mr. DiFrancesco." If the legal effort by Mr. DiFrancesco's family to overturn that foreclosure were successful, he wrote, Mr. DiFrancesco "and his family members would obviously have a financial gain."

    "Simply," Mr. Markowitz concluded, "in my opinion, there is both an actual conflict as well as an egregious appearance of impropriety if Mr. DiFrancesco continues as Township Attorney. The citizens of the Township of Scotch Plains are entitled to undivided loyalty by all of their elected and appointed officials."

    But Council members, all of them Republicans, balked at firing Mr. DiFrancesco. Instead, they sought a second opinion from Mr. Hansen, a former municipal prosecutor and a fellow Republican.

    Mr. Hansen, in turn, advised Mr. DiFrancesco to abandon his support for his relatives' legal efforts. Once Mr. DiFrancesco did so, Mr. Hansen ruled that Mr. DiFrancesco's conflict was a moot point. With that opinion in hand, Council members decided not to fire him.

    Mr. Markowitz, meanwhile, successfully defended the township in Superior Court. On March 21, 1997, Judge John M. Boyle ruled that the foreclosure would stand.

    Yet even after being warned by Mr. Markowitz that he could be fired for his actions, Mr. DiFrancesco continued as township attorney to involve himself in other Hovnanian projects, according to the June 1998 report.

    Four days after Judge Boyle's ruling, another Hovnanian request for a zoning change - on a tract known as the Donato property - came up at a public meeting of the Township Council. Mr. DiFrancesco took part in the discussion, records show. "A clear conflict," Mr. Markowitz and Mr. Hansen would later write.

    Mr. DiFrancesco said tonight he merely repeated back to Mr. Atkins something he was asked, and described this allegation as baseless and an example of Mr. Markowitz "piling on."

    After a lull, the litigation over the Plainfield Avenue site intensified in February 1998. Mr. DiFrancesco's relatives contested Judge Boyle's decision at the state Appellate Division, sued the township in Federal District Court, and filed an adversary proceeding against the township in Bankruptcy Court. The township hired a bankruptcy lawyer, Gary Jacobson, and its legal bills quickly piled up.

    Council members, meanwhile, wondered what to do with the property. In April 1998 they came up with a temporary solution. The township's soccer fields were overrun with youngsters. At a session on April 21, members agreed that the township would apply for aid from Union County to make the vacant land into a soccer field.

    But on April 28, records show, Mr. DiFrancesco and Mayor Joan Papen discussed the Council's proposed resolution to convert the site into a soccer field. At Mr. DiFrancesco's request, Mayor Papen pulled the resolution from the agenda of the Council's next meeting, officials say. "Highly improper and a blatant conflict of interest," Mr. Markowitz and Mr. Hansen would write of Mr. DiFrancesco's action.

    Mr. DiFrancesco said tonight Ms. Papen had asked him repeatedly to give her direction on the matter, that he declined, but that after repeated entreaties he merely advised her of her options.The soccer field matter, in any case, galvanized the township's lawyers and, to a degree, the Council members, against Mr. DiFrancesco, documents and participants suggest.

    Councilman Johnston recalled that Mr. DiFrancesco had lobbied him as early as 1994 and as recently as 1996 to allow his relatives' property to be rezoned - without ever disclosing the Scott lawsuit and judgment or the Hovnanian payment. Mr. DiFrancesco denied this tonight, saying Mr. Johnston must have been confusing him with either his brother or cousin.

    On May 19, in a closed Council session lasting more than three hours, the township's four special lawyers - Mr. Markowitz, Mr. Hansen, Mr. Jacobson, and another bankruptcy lawyer, Nancy Isaacson - implored Council members to demand Mr. DiFrancesco's resignation or, if need be, "take further steps," according to Mr. Atkins's minutes.

    "The attorneys were upset too about having to tell the Council this needed to occur, but there was no other option," the minutes read.

    On June 18, Mr. Markowitz drafted another confidential letter to the Township Council. Mr. Hansen, who had approved Mr. DiFrancesco's remaining as township attorney 18 months earlier, now signed his own name beneath Mr. Markowitz's.

    Mr. DiFrancesco said repeatedly tonight that he believed Mr. Markowitz "intimidated" Mr. Hansen, himself a former member of the Union County bar association's ethics committee, into signing the letter.

    In the litany of conflicts that the two lawyers detailed in six blistering pages, one stands out. "Mr. DiFrancesco's acceptance of the money," they wrote of the Hovnanian payment, "and failure to advise Council of same was an egregious ethical breach."

    They also warned township officials that legal fees attributable to Mr. DiFrancesco's conflicts had skyrocketed. By 1999, the township had spent well over $200,000 - a large sum considering the municipal budget was about $16 million.

    Despite the lawyers' oral and written pleas, however, Scotch Plains Council members refrained from firing Mr. DiFrancesco then. Council members and other Republican officials say they met with Mr. DiFrancesco in August and September 1998 and pleaded with him to explain himself or else step down.

    Mr. DiFrancesco, officials say, promised to respond with a legal brief in his own defense. But he never did. It was that failure to respond, Mr. Johnston said, that convinced a majority of Council members that Mr. DiFrancesco should not be rehired when his term expired.

    Mr. DiFrancesco did not recall meeting with Mr. Johnston but said he did rebut the report's allegations sometime in 1998 at a closed council meeting. He said he was never fired or threatened with firing and that Council members actually wanted him to stay on.

    By late September, meanwhile, the Council's election campaign was in full swing, and the dispute was tabled. On Nov. 3, three Democrats -, Geri Samuel, Tarquin Bromley and Franklin Donatelli - won the three open Council seats. The new majority quickly ended Mr. DiFrancesco's tenure as township attorney.

    The Democratic interregnum lasted only a year, however. In November 1999, Republicans recaptured a majority of the Council seats, and pressure quickly mounted for Mr. DiFrancesco's law firm to be rehired, officials in both parties say.

    But Mr. Bromley, a lawyer, who died of a heart attack last year, had learned of the ethics issue and threatened to reveal it to federal prosecutors or to a newspaper, officials say.

    The idea of rehiring Mr. DiFrancesco or his law firm was quickly dropped.

    Mr. Hansen was named township attorney, a job he still holds. His law office, in a building around the corner from Town Hall, looks out across a driveway at Mr. DiFrancesco's senatorial district office.

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