Diminished Capacity


It may have been the easiest raise ever won in city government. Approximately every two weeks in 2001, someone with access to the computerized payroll system at the city’s Housing Development Corporation typed in a new, higher figure for Russell Harding’s paycheck, a federal investigator said in an affidavit compiled last year.

“The effect of this periodic manual override,” wrote Marcus Castro, a senior special agent with the United States Customs Service, “was to cause the [agency’s] payroll company to issue paychecks to Harding in amounts approximately 10 percent greater than he would have received based upon his approved salary.”

Harding, the son of Liberal Party chief Raymond Harding, was appointed president of the corporation in 1998 by then mayor Rudy Giuliani, who said he’d bring “exceptional skill” to the job. By 2001, Harding’s official salary was $162,780, but records show he inexplicably received $27,000 extra.

The computer manipulation was just one of several schemes revealed in the affidavit, which was prepared last May in support of a search warrant for Harding’s East Side apartment that was placed in court records for the first time last week. Among them:

• Just before resigning from the agency in February 2002, Harding awarded himself a $60,000 bonus—a windfall that was never approved by the corporation’s board of directors, investigators determined. The money was part of a mystery $128,000 check received by Harding that was disclosed by the Voice last year. At the time, officials refused to explain it, citing the investigation. But the affidavit reveals that the check included the bonus plus $68,000 in “unused annual leave.” This was another no-effort scam: Someone electronically “increased the amount of annual leave accrued by Russell Harding from four weeks per year to eight weeks per year,” the affidavit states.

• After the Voice requested Harding’s travel and expense records under the Freedom of Information Law, Harding allegedly ordered his secretary to stop logging all such data in her computer. Instead, Post-Its were used and then shredded at the end of each day.

• In the two weeks before he resigned his position, Harding (apparently unaware of city rules governing document retention) “directed and supervised the shredding of almost all records maintained in his administration, including . . . his schedule, travel and appointments.”

• In the same frantic last days, Harding had agency computer technicians “delete information from [his office] computer in such a fashion as to render the information permanently unrecoverable.”

• Not taking any chances, on his final day in office, Harding allegedly “directly and personally supervised the reformatting of his computer.” It worked. Investigators said they were unable to retrieve “most of the relevant information that had been stored on his computer.”

Harding, 38, now faces a maximum of 45 years in federal prison, stemming from four counts of fraud for allegedly stealing hundreds of thousands of dollars from the agency and two more counts involving child pornography reputedly found on his home computer. He has pleaded innocent. His explanation, as the Daily News‘ Robert Gearty reported last week, is this: He never meant to do it.

Russell Harding

(photo: Keith Bedford)

“[Harding] intends to introduce expert testimony in support of a defense of diminished capacity and/or mental disease or defect and/or incapacity to form specific intent as to the offenses listed as Counts One through Four of the Indictment,” wrote Harding’s able defense attorney, Gerald Shargel, in court papers attached to motions filed last week.

In medical terms, Harding suffers from “a non-verbal learning disability” stemming from “severe bi-polar disorder,” according to his attorney. To counter the claim, federal prosecutors are seeking Harding’s psychiatric records, including sessions with a shrink while he was at HDC.

Whatever Harding’s malady, it didn’t affect his high-tech interests. According to the affidavit, after Harding resigned, the agency was missing $30,000 worth of electronic equipment, including a 21-inch NEC computer monitor that cost $4,525, four Palm Pilots worth $2,200, three laptops, a $3,200 Compaq desktop computer, and a $920 Blackberry organizer.

Some of those gizmos were recovered from Harding’s apartment, prosecutors charge. What investigators didn’t learn until later was that Harding also had the agency pre-pay $4,482 to cover a year’s rent for a 500-cubic-foot, walk-in storage locker at a Manhattan Mini Storage facility at East 62nd Street and First Avenue, just two blocks from his apartment. By the time agents searched the locker, it was empty.

There was other evidence as well. The affidavit says that a friend of Harding’s told agents about a summer 2000 jaunt to Portland, Oregon, and the Northwest. The friend is identified only as the recipient of a plane ticket to Portland in his name. HDC documents, obtained in the Voice‘s records request, show that person to be Vincent LaPadula, then and now a top City Hall official.

The affidavit described LaPadula’s story this way: “According to the individual in whose name the plane ticket was issued, he met Harding in Portland, and the two men enjoyed several days of leisure time together. He indicated that charges to the Heathman Hotel in Portland, as well as charges for meals and a rental car, were incurred in connection with this personal trip.” All told, Harding charged the agency $4,200 for the excursion, listing his expenses as business related, and LaPadula’s plane ticket as “Bus. Travel per City Hall.”

LaPadula has refused to answer Voice questions about his conduct or to say whether he has reimbursed the city.

Harding’s motion papers don’t directly address the child pornography charges. Instead, attorney Shargel is seeking to have that evidence—a computer disk containing 10 photos and a movie—thrown out of court altogether, a move that would sharply reduce the prison time Harding would face if convicted. The argument here is that the search warrant affidavit pertaining to the porn allegation was based on information from “a demonstrably unreliable source.” The reference is to Fred Sawyers, a spurned former cyberpal who spent more than three years sharing often intimate thoughts with Harding from his home computer in Indianapolis.

Sawyers, 34, cooperated with authorities and shared copies of e-mails and online chats in which Harding allegedly talked about his expense account stunts. The search warrant affidavit refers to Sawyers as a confidential source who “is believed to be reliable because [his information] has been corroborated in numerous instances.”

Sawyers showed investigators (as well as the Voice) original copies of records showing that a $360 DVD player Harding sent to Sawyers in September 2000 was charged to his agency credit card. Agents were also able to confirm that Harding was in fact visiting places, such as San Diego and Las Vegas, at the same time that he was allegedly chatting about his travels with Sawyers. They also received confirmation from America Online that the screen names allegedly used by Harding in the chats (one was “JockCop7”) were listed on Harding’s AOL account.

Shargel, however, says the government “ignored startlingly obvious clues” that Sawyers was fabricating the chats. He points to an inconsistency, revealed last year by the Voice, in a September 2000 chat in which Harding allegedly badmouthed Bill Clinton for locating his office in Harlem. At the time, Clinton was still president and didn’t make the move to Harlem until several months later. Sawyers said he assumed that he had somehow merged separate chats.

In addition, a computer forensics expert hired by Harding has offered an affidavit suggesting that manipulating the chats would be a relatively simple matter and that he had found inconsistencies in the computer-generated headings.

“If you can get a search warrant based on chat rooms and e-mails, then any person with a grudge can have anyone in America searched,” Shargel told the Voice.

Sawyers insists the chats are authentic. “It would be awfully hard for me to make all that up, since I’ve never even been to New York,” he said. For Harding’s trial, however, the matter may be moot. Prosecutors have told the judge that they have no intention of using Sawyers as a witness or entering the chats as evidence at the trial, now scheduled for late September.