Board of Education Overpaid $1 Million in Legal Fees, Audit Finds

The meeting open with the student ROTC Honor Guard. Credits: Fran Sullivan

ELIZABETH, NJ – The former Board of Education paid in excess of $1 million more than its customary rate in legal fees to one law firm, according to forensic accountant Dieter Lerch, of the firm Lerch, Vinci, and Higgins, who reported his findings at the board meeting last night, June 16.

The law firm of Pashman Stein Walder Hayden was hired in 2011 to handle six cases and was paid $2,764,000. Three of the firm’s attorneys had contracted hourly rates of $400 to $500. One of the three billed more than the contracted rate for a total of $29,000, which Lerch reported may be recoverable. The rates for associate attorneys were not specified in the contract, and the board was subsequently charged between $175 to $450 per hour. According to Lerch, the board customarily pays $165 an hour for legal services, so Pashman Stein Walder Hayden received $1,069,000 more than what is normally spent.

Attorney Lester Taylor, whose firm Florio Perrucci Steinhardt & Fader is assisting with the audit, proposed a resolution that would amend the professional services contract to specify rates.

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A second issue involved unemployment payments of $110,000 to 20 individuals, some of whom were tenured teachers, during the summer 2015. “These individuals were employed by the board in September 2016,” said Lerch. “We turn the matter over to the board to see if there are extenuating circumstances as to why they received benefits.”

Added Taylor, “It is a question how a tenured educator could have obtained unemployment insurance when there was a reasonable assurance that they would be employed.” There will be a review of the legality of those claims, he said.

The third area of concern, said Lerch, involved the use of Lowe’s Home Center credit cards. The store has a state contract for walking items only, which are small purchases such as hammers and drills. The audit revealed the board has used the account for special order bulk items such as $80,000 for carpet tiles and $42,000 for ceiling tiles. In a four-year period, the board spent $208,000, the majority on bulk items, said Lerch.

Board member Carlos Trujillo voiced concerns about when the board would be re-paid for some of these overages. “For six months, we have been hearing about these expenditures. I don’t hear about when we are going to re-coup the money.”

Taylor answered that the process has been started with monthly reports updating the findings and keeping the customer informed of the status of this investigation. This is a legal process that should be continued in close session, he stated. “It is not appropriate to disclose the content of these discussions.”

In the public portion of the meeting, parent advocate Cristina Moreira stated the Elizabeth board is the only one to hire an outside public relations firm. She quoted N.J.S.A. 18A:17-20 that says, “New Jersey Rules and Regulations require that excessive expenditures public relations be avoided and performed in-district under the direct supervision of the superintendent who is legally responsible for this function under the general powers and duties designated by the statute.”

Moreira continued, “This responsibility of the chief school administrator may be delegated to a designated supervised employee of the school district and cannot be usurped by the board by awarding a contract expenditure to a person or commercial enterprise for profit external to the school district.”

Board President Charlene Bathelus has already addressed this issue in a previous article on TAPinto Elizabeth. She explained that the decision to hire an outside agency was based on budget concerns. “Last year the District paid an individual $161,600 plus benefits to handle public relations matters. With benefits, the cost was considerably more than $200,000 to the district. In addition, the previous board also hired a communications consultant at a cost of $175 per hour. We’ve reduced these costs by 80 percent by retaining a public relations consultant at a lower rate. The Board retained a public relations firm to reduce costs so that more funds can be spent on classroom instructions.”

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