A high-ranking city official’s resignation became official yesterday, but the real reasons behind his departure might not be clear for months, if not years. If the stories some City personnel are telling are true, Baldwin might be escaping with millions of embezzled dollars, with little chance of prosecution.

Michael Baldwin, a deputy director of the City’s Department of Human Services and Public Welfare, submitted his resignation three days ago, claiming he had enjoyed his service to the city but that it was time to “spend more time with his family.” As soon as word of his resignation leaked out of City Hall, though, rumors started flying about Baldwin’s true motive for stepping down.

“There’s two million reasons he’s leaving,” said one city official who, like everyone else we spoke to about Baldwin, demanded anonymity. “Two million reasons the city won’t ever recover.”

Emily Jackson, director of DHSPW, offered a boilerplate message of thanks for Baldwin’s service, but department sources say she had secretly been trying to force Baldwin out for months.

According to DHSPW staff, Baldwin had been responsible for loosening many of the department’s external auditing rules, making it very difficult to track whether grant dollars distributed by DHSPW were used effectively, or even legally.

“We had no idea where millions of dollars were going,” one staffer said. “For all we knew, people were lining their pockets with those dollars.”

That might be exactly what was happening, as sources tell us that Baldwin, using intermediaries, set up a few dummy non-profit organizations that had little purpose other than lining Baldwin’s pockets. By some estimates, Baldwin used those organizations to funnel as much as two million dollars into his personal bank accounts.

While government officials might be expected to react to Baldwin’s embezzlement with anger, not to mention indictments, both Director Jackson and the District Attorney’s office have been oddly quiet about the matter.

The reasons for the DA’s silence are simple—Baldwin’s scheme worked too well. While insiders are confident that Baldwin was lining his pockets, they say they cannot prove it. The accounting and auditing standards introduced by Baldwin were so lax that staffers in the City Comptroller’s office become red in the face at the mere mention of DHSPW. Prosecutors are still working on the case, but off the record they have confided that they are not confident in their ability to get enough evidence for an indictment.

The reasons for Jackson’s silence are more complicated. While sources say she is incensed about the missing money, she has also been tagged as a future mayoral candidate, and the last thing she needs is a scandal in her department that might have fingers pointing at her for lax oversight. For a candidate trying to put together a good-government campaign, the Baldwin situation is a nightmare. There are whispers that Jackson is so anxious to keep the story quiet that she is suppressing evidence that could lead to Baldwin’s indictment, but some staffers believe her personal ambitions have not yet overridden her sense of public responsibility.

After spending months assembling evidence from city and statewide law enforcement agencies for the high-profile prosecution of alleged murderer Martin Grace, the New York County District Attorney’s office may be thwarted not by Grace’s attorney, but by the D.A.’s own son.

Next week, Grace -- the so-called “blind serial killer” -- will stand trial for the 2004 murder and rape of local hip-hop vocalist Tanya Gold. The prosecution claims Grace is also suspected in 11 more deaths across the state. The New York Times reported yesterday that Zachary Taylor, 25, is overseeing treatment of Grace at Brinkvale Psychiatric Hospital.

In what has already been characterized by local legal experts as a “bizarre” case with “tenuous” claims from the prosecution, yesterday’s Times story may indicate a conflict of interest for the county’s legal team, which answers to District Attorney William V. Taylor. Zachary Taylor is the D.A.’s eldest son.

According to the Times story, Zachary Taylor, an art therapist, has been tasked with determining Grace’s mental competency to stand trial. His role at Brinkvale received media attention last week, as his therapy helped solve a 30-year-old art theft and triple homicide.

“This nepotism is clearly another cog in (William) Taylor’s scheme to convict my client of crimes he didn’t commit,” said Marian Cannon, Grace’s public defense attorney. “By enlisting the help of his own son, the D.A. is obviously trying to stack the deck with an ‘inside man.’ This behavior is beyond deplorable, and simply showcases Taylor’s personal obsession with this case.”

Neither William nor Zachary Taylor could be reached for comment, but Assistant District Attorney George De Luca released a statement to the media, saying, “[T]he selection of Zachary Taylor was a Brinkvale matter. Our office had no involvement, and we resent any implication to the contrary. While Zachary is surely a professional and would not allow familial ties influence his diagnosis, we are currently in discussions with Brinkvale staff to remedy this matter.”

Brinkvale chief administrator Theodore Peterson confirmed that District Attorney representatives have contacted him about Zachary Taylor’s involvement. He also said he has no plans to assign another therapist to the Grace case.

Grace was a “pariah” who was “shoved” through the New York state mental health system, Peterson said. But now at Brinkvale, the suspect will receive the attention he deserves, he said.

“In the three months that Zachary has worked here, he has facilitated breakthroughs with numerous patients,” Peterson said. “His unconventional, yet passionate, approach to his work -- and his uncanny ability to connect with our residents -- makes him an invaluable asset to this facility. I can think of no better Brinkvale employee to determine Grace’s competency.”

Grace, dubbed “the blind serial killer” by local media, lost his sight two years ago. According to a Brinkvale employee who spoke on the condition of anonymity, Grace’s blindness is psychosomatic in nature. Emotional trauma -- “which may include deep remorse for murdering those dozen people,” the source said -- is the likely cause.

Cannon stated she plans to petition the Justice Department about the possible conflict of interest.

For a mental hospital to receive a nickname like “The Brink,” a great many misdeeds must have happened there. Unfortunately, in the case of Brinkvale Psychiatric Hospital, the statement is historically accurate.

The reputation of this subterranean facility -- built in an abandoned Long Island brownstone quarry in 1875 -- is tainted by frightening tales of patient mistreatment, unsanctioned psychiatric and surgical experimentation, and other unethical practices. Some say the nine-level hospital is haunted by the souls of tormented patients.

“Haunted by ghosts? Balderdash,” says Dr. Theodore Peterson, who has been Brinkvale’s chief administrator for the past 11 years. “But sadly, this place’s legacy is haunted by the acts of several severely misguided individuals. Yes, some of the rumors are true. ... But those days are long behind Brinkvale.”

Such honesty is hard to come by in most health care institutions, but since Brinkvale has been a public relations nightmare for the state for more than a century, Peterson is determined to illuminate for taxpayers “the great good” that now happens at the facility.

“For 10 years, myself and others here have been on a crusade to change public opinion,” Peterson says, here in his cramped Brinkvale office. Stacks of paperwork surround the 76-year-old. There’s not a computer in sight. “This place may appear to be an unlikely locale for true, innovative treatment -- but that is precisely what’s happening here these days. We’re proud of what we’ve accomplished.”

Long gone are Brinkvale’s days of cavalier electroshock therapy, experimental aggressive immersion therapy and prefrontal lobotomies. (Longtime Brinkvale doctor Gerald Schwartz reportedly conducted nearly 200 lobotomies here until his own institutionalization in the facility in 1984; he is still treated on-site.) Peterson and his staff embrace pharmacology, talk/group therapy and other practices approved by the U.S. Psychiatric Association, including art therapy and touch therapy.

The facility, once an overcrowded hospital housing hundreds, is now mostly a desolate place, due to budget cuts. Of all New York’s state-funded institutions, Brinkvale receives the least amount of taxpayer money each year. The result is dozens of empty beds -- “Not because we don’t want to treat the ill, but because we don’t have the manpower,” Peterson says -- and an eerie feeling echoing in its halls. This partly hails from the state of disrepair beleaguering much of the building, and partly from a palpable sense of loneliness and abandonment.

And yes, perhaps the feeling of being haunted by ... something.

Despite that eeriness, the staff is a genial bunch, especially considering the place’s underground locale. Friendly greetings abound from team members: Get affable security guard Emilio Wallace talking about his sons and he won’t stop until prodded by a coworker; therapist Anita Colbrunn chats at length about growing up near Brinkvale and “always wanting” to work here; Nathan Xavier, a charismatic young psychiatrist, claims his experiences at Brinkvale will be “invaluable for my career.”

Peterson says the hospital is committed to progressive treatment, and a progressive self-image. Brinkvale recently debuted its website, which features staff profiles and galleries of artwork, created by patients being treated by the facility’s new art therapist. Also included on the website is contact information for Peterson himself, should New York residents wish to learn more about the facility.

“We’re striving to make Brinkvale’s future as bright and accessible as possible,” Peterson says. He then winks. “One could say we’re bringing ourselves back from the brink.”

Five years after the bizarre rape and murder of a local female hip-hop artist, New York County District Attorney William V. Taylor announced yesterday the imminent prosecution of her alleged killer. The suspect is also under investigation for the deaths of at least 10 other New York state residents, Taylor said.

In a peculiar twist worthy of a television legal drama, suspect and Brooklyn resident Martin Grace, 56, is legally blind.

At a press conference held at his office at One Hogan Place, Taylor stated that Grace was now in police custody for the homicide of Tanya Gold, a once-rising star in New York’s music scene. The vocalist, best known for her 2001 debut album “Disease to Please,” was found dead in her Queens apartment in the spring of 2004. The brutality of her unsolved murder dominated local headlines for much of that year.

Taylor, famous for his no-nonsense press conferences, stated that Grace was “unquestionably linked” to Gold’s death. Citing police reports filed the day before her murder, the District Attorney revealed that Grace had “terrorized” Gold at the recording studio where he then worked. According to Taylor, the suspect cornered the woman after her recording session and said she would soon be “raped and ripped to shreds.”

“She filed a restraining order against Grace that day,” Taylor said at the conference. “But obviously, the man had no regard for the law, Gold’s wishes, or anything resembling decency. What he did was horrific. This dark monster will now be brought to justice.”

According to police reports, 21-year-old Gold was brutally murdered in her home on April 21, 2004. Details provided by New York Police stated Gold’s body had been ripped apart by “a homemade torture device.” Her limbs were pulled from her body by a complex rigging of ropes and pulleys. Forensic data indicated Gold had been raped after her death.

Yesterday, Taylor spent much of his time replying to reporters’ concerns regarding the suspect’s ability to effectively conduct the murder. Grace, who according to New York state records has moved residences eight times in the past 10 years, was not legally blind at the time of Gold’s murder, Taylor said.

Public records confirm this; Grace has been blind for two years.

“This man’s eyes were wide open during his travels, murdering not just Tanya Gold but many others,” Taylor said. Citing “critical prosecutorial secrecy,” Taylor would not reveal more information about how Grace was linked to the vocalist’s -- or others’ -- murders.

“As we move forward with this case, information will be revealed,” Taylor said. “We’ve dedicated considerable resources to the investigation of Tanya Gold’s death, and discovered Grace’s involvement there, as well as his decade-long, statewide reign of terror. It ends here and now.”

Marian Cannon, Grace’s public defense attorney, released a statement hours after Taylor’s announcement. “Martin Grace did not murder Gold or anyone else,” Cannon said. “The District Attorney’s case is based on innuendo and rumor. ... [Taylor’s evidence] is a house of cards: fragile, insubstantial and transparent.”

Representatives from Gold’s family could not be reached for comment.