And then, the whole thing went off the rails. Kerik withdrew his name from nomination. The newspapers disclosed his extramarital affairs and his Ground Zero love nest. The Bronx District Attorney was probing the apartment renovation and his ties to Interstate and the DiTomassos. And Rudy Giuliani was running away as fast as possible.

"We have a problem with Mike Caruso on our hands," Hearn told an aide on Dec. 20, 2004, about a week after Kerik withdrew his name. "A big problem." Outwardly, Hearn was still publicly supporting Caruso. Privately, she was struggling. The court records portray her as complaining about Caruso even as she was insisting that he stay on.

Hearn was now trapped between her prior support of Caruso and the impending fallout from Kerik's inevitable indictment. "Kerik gets whacked, and at that point they had already broken bread with Caruso, so now they had to go easy on him," the retired correction official says. At one point in 2005, about six months after Kerik's career imploded, she begged him not to resign. "I need people who are loyal to me," she told Caruso when he offered to step down. "If you resign, that means you're not loyal to me. You better not resign."

As commissioner of the Department of Investigation, Rose Gill Hearn stands on the front lines of the city’s anti-corruption resistance. But can she escape the toxic cloud released by Bernie Kerik and her ex-employee Michael Caruso?
Richard Drew
As commissioner of the Department of Investigation, Rose Gill Hearn stands on the front lines of the city’s anti-corruption resistance. But can she escape the toxic cloud released by Bernie Kerik and her ex-employee Michael Caruso?
Bernie Kerik
CHRIS KLEPONIS/EPA/Newscom
Bernie Kerik

As the investigation into Kerik gathered steam in February, 2006, Hearn offered Caruso additional duties, more office space, and a raise. It was as though her aides were trying to build a record that somehow legitimized the relationship. In early March, DOI concluded that Caruso's past contacts with Kerik were clean. In a March 7 e-mail, Landa, the agency's general counsel, called the media's criticism of Caruso "largely unfair."

With the Kerik grand jury just a couple of weeks away, Hearn finally decided to move Caruso out of correction and put him in charge of sanitation and parks. "Knowing that the criticism which had rained down on Mike for two to three years was going to get worse, I decided that if he were out of [correction] that would be an acceptable way of dealing with the criticism," she said in a deposition. The move was presented to DOI staff as a promotion.

The main concern in DOI was not Caruso's unethical behavior and possible misconduct involving Kerik, but how it would look in the press. According to a memo from Landa, "The move away from DOC would blunt the criticism . . . The motive to move him right then was to [pre-emptively] avoid anyone saying the transfer was because of Kerik's indictment." In fact, Landa came very close to suggesting that the DOI spokesperson had been intentionally misleading reporters about how close the two men were. "[The spokesperson] could no longer say that Mike was not really Kerik's friend when she provided the press with her other explanations for why the substance of any allegation against Kerik was not reasonably known to Mike and DOI," she wrote.

Michael Caruso testified before the grand jury in March, 2006. The centerpiece of that testimony was the troubling 1999 meeting he attended in which Kerik lobbied Ray Casey on Interstate's behalf. It was clear that if Kerik was indicted, the meeting—the quid pro quo for the apartment renovation, a bribe—would be crucial to the foundation of the criminal complaint.

On March 21, the very morning of Caruso's testimony, Hearn was still planning to avoid bad press by transferring him to sanitation and parks, rather than firing him. "Hurricane Mike/Kerik will have hit within/before three months," Hearn wrote in an e-mail. An aide replied, "I would move Mike without any big announcements. In the meantime, you can . . . quietly look for his replacement."

Three days after he testified, Hearn decided to fire Caruso. "He was terminated because he didn't sign on to the version of events they wanted him to," says Caruso's lawyer, Marc Bogatin. Caruso is seeking back pay and a better pension, and claims Hearn fired him because she didn't like the way he testified in the Kerik grand jury. He claims that he was told to perjure himself, and when he refused, Hearn retaliated.

Hearn was not available for an interview, and her spokeswoman Diane Struzzi was limited in what she could say because of pending litigation. But she did offer this defense of the agency's handling of Caruso: "DOI is an agency that investigates and acts on facts, which is what we did in this matter now almost seven years ago, and even then we were reconstructing events that happened six years prior to that."

Yet in their depositions, Hearn and her aides deny that the grand jury testimony was the reason for Caruso's firing, but they contradict one another in offering other explanations. Some of Hearn's aides say Caruso was fired because he attended Kerik's 1999 meeting with Casey—but by that point DOI had known about the meeting for six years.

Other aides say Caruso was tossed because he kept talking to Kerik. But Hearn had known about those calls for at least two years.

Hearn offered still a third explanation in her own deposition. She claims she fired Caruso because he whined about being moved out of correction during a meeting with her. "My idea to transfer him was thrown back in my face and imploded right there and then," she stated, adding that Caruso had become a "disruption" in the office.

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