Serving Northern St. Louis County, Minnesota

Wasting tax dollars

Knutson firm took advantage of the St. Louis County School District

Posted 7/16/14

The St. Louis County School District’s pursuit of legal disputes on the advice of its attorney has cost the district hundreds of thousands of dollars that could have been spent on …

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Wasting tax dollars

Knutson firm took advantage of the St. Louis County School District

Posted

The St. Louis County School District’s pursuit of legal disputes on the advice of its attorney has cost the district hundreds of thousands of dollars that could have been spent on education.

Attorney Steven Knutson claims taking issues to the courts has saved the district hundreds of thousands of dollars in claims filed by contractors, but he doesn't tell the full story. One contractor that the district has fought for years offered to settle for $86,000 and change over a year and a half ago. Since then, Knutson has racked up more than $116,000 in legal fees on the case and the district is currently on the hook for the contractor's legal fees on top of that. And just this past week, Knutson filed a notice of intent to appeal to the Minnesota Court of Appeals. The meter, in other words, is still running. While Knutson benefits financially from protracted litigation, the district would have been far ahead by negotiating settlements rather than waging questionable courtroom battles.

It’s a situation that also disturbs new Superintendent Steve Sallee, who has indicated the district may seek to end its association with the law firm of Knutson, Flynn & Deans. We would urge him to act as soon as possible to cut ties with the law firm.

As we document in our story this week, the district shelled out more than $450,000 in legal fees to Knutson over the past two years — a figure that wildly exceeds spending by other area districts of similar size. And that doesn’t include more than $163,000 the district has been ordered to pay for another party’s legal costs in one of those disputes, nor other related costs for board members or other expert witnesses called to testify in the cases.

The most expensive matter involved a dispute with Jamar Construction for the installation of roofing materials at the district’s South Ridge School in southern St. Louis County.

Jamar sought payment of $183,000, which the company later revised to $86,786, prior to an arbitration hearing over a year and a half ago. Instead of negotiating a settlement, the district filed unsubstantiated counterclaims, and defied efforts by Jamar to settle the case. While the district fared reasonably well in the initial arbitration, that decision was overturned by the district court in Virginia. In district court, Judge James Florey awarded Jamar $42,207 in payment for its construction services. In addition, he ordered the district to pay Jamar’s legal fees, now at $163,000 and climbing. Knutson’s fees to the district have already topped $140,000 and the meter is still running with the case now being appealed.

The tally for the district so far is more than $330,000 and could conceivably top $500,000 or more should the district lose the appeal. Once again, the district is gambling with taxpayer dollars on a suit that could have been settled for far less.

But the risk doesn’t affect Knutson, who gets paid whether the district prevails or not. While the district digs itself a deeper hole, Knutson keeps handing them another shovel to expand his money pit.

There’s little doubt that he has exploited the situation. The combination of former Superintendent Teresa Knife Chief’s inexperience and school board Chairman Robert Larson’s failure to ensure board oversight gave Knutson free rein when it came to legal disputes and he has used it to his advantage.

Johnson Controls Inc. also shares some of the blame. The contractor’s actions had a direct bearing on at least two costly legal issues for the district.

Wagner Construction was awarded $75,862 when an arbitrator ruled that failed footings at the South Ridge School project were not the contractor’s fault. Wagner had said the soils were too saturated with snow and rain to pour the footings when requested, but the project team led by JCI insisted the footings be poured. When they had to be repaired, the district tried to stick Wagner with the bill rather than demanding JCI make good for the damages.

Wagner could have received an even bigger award due to another error by the project managers, who supplied inaccurate elevation data to the contractor. Wagner was forced to haul in many thousands of extra yards of fill material to meet the terms of their bid. While the district claimed Wagner had erred in its calculations, the arbitrator disagreed. However, the arbitrator said Wagner had not done an adequate job of documenting original evaluations and the district skated by without having to pay Wagner for the extra work.

JCI also played a role in the district’s improper promotion of the bond referendum. The consulting firm’s materials provided the substance of the articles printed in the district’s newsletters — materials that the Office of Administrative Hearings deemed clearly promotional, exaggerated, and one-sided.

The district’s promotion of the referendum triggered the need for the district to file a report with the Campaign Finance Office. Again, following the advice of Knutson, the district appealed the case to the Supreme Court and then squandered an additional $140,000 on legal fees at an evidentiary hearing before the OAH. The district had the option of just filing the required disclosure form and ending the case after the Supreme Court ruled, but chose to litigate the issue further, to no avail and at great expense.

Ironically, some district officials have complained publicly about how the legal disputes over the restructuring project have sapped dollars from education and criticized those who challenge the board’s actions.

But it’s time for the board and district officials to stop blaming citizens and take a hard look at their own actions. If the board had not used tax dollars to promote the bond issue, there would have been no case. And the bulk of their legal costs have resulted from a law firm that milked the district for every dollar it could squeeze and school officials who failed to watch the tab as the district’s legal fees mounted.

We’re pleased that Superintendent Sallee plans to dig further into the district’s staggering legal costs and take steps to curb the district’s runaway expenses. We wholeheartedly support his efforts and pledge to continue to keep taxpayers informed of how school district dollars are being managed and hold those responsible accountable.

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Excellent editorial Tom! Concise, to the point, factual, no fluff.

Thursday, July 17, 2014