MVSD Attorney general wants court to revive $2.4M suit

It was the attorney general's first time arguing a case in a decade.
By DAVID SKOLNICK
VINDICATOR POLITICS WRITER
YOUNGSTOWN -- Ohio Attorney General Jim Petro urged a three-member federal appeals court panel to reinstate a $2.4 million lawsuit against a company that he says was improperly paid for work done at the Mahoning Valley Sanitary District in the mid-1990s.
"I achieved my goal of presenting issues that the court will examine to reverse the district court's decision," Petro said after Wednesday's hearing in front of the 6th U.S. Circuit Court of Appeals in Cincinnati. "Money was illegally expended."
When Petro was state auditor, he issued a report in 1997 calling for $2.6 million in findings for recovery stemming from an investigation into the MVSD.
About $2.4 million of the findings was against the Gilbane Building Co. of Providence, R.I., which served as the agency's construction manager for its capital improvement projects, and former MVSD directors Frank D. DeJute of Niles and Edward A. Flask of Poland.
The audit contended that Gilbane was paid to provide construction management over projects that were never built at the sanitary district. MVSD provides water from Meander Reservoir to about 300,000 residents in Mahoning and Trumbull counties.
The audit says the company received 60 percent of its fee when only 24 percent of the construction work was completed.
Then-Ohio Attorney General Betty Montgomery filed civil suits against the company and the two former directors, but the state has met with no success in the court system.
District court ruling
The state's biggest blow was an October 2001 decision by U.S. District Judge George C. Smith to grant Gilbane's motion for summary judgment and to dismiss the lawsuit. The judge ruled there was no evidence that there was an illegal expenditure of public money.
Petro was in the federal appellate court arguing that the payments were not approved by the MVSD's court of jurisdiction, which oversees the agency, and therefore were illegally expended.
"This wasn't a case subject to summary judgment," Petro said. "We have an opportunity to prevail."
William Wilkinson of the Columbus law firm of Thompson Hine, which represents Gilbane, said there is nothing illegal about a governmental agency's paying a project manager a fixed fee for work.
Gilbane received money for other tasks that were done besides overseeing the construction projects, including design work, organizing the bidding process, negotiating with companies on behalf of the district, and project planning, Wilkinson said.
What lawyer said
"The bottom line is when the state filed this lawsuit, they undertook the burden to prove the payments to Gilbane were illegal, and they've failed to do so in every court they've argued," he said. "It's always gratifying to get to an oral argument and discover that the other side has no new ideas."
This is the first case Petro has argued on behalf of the state since he began serving as attorney general in January. It was also his first time in front of federal appeals judges and the first time he's argued a case as an attorney in a decade.
"I feel so passionately about this case," he said explaining why he is handling it personally. "I thought I did OK. I was a little nervous in the first minute or two, but I have 30 years as a lawyer. It came back to me."
Wilkinson and Petro said they didn't know when the court would have a decision on reinstating the lawsuit. After the decision is made, regardless of the outcome, Petro said he plans to reinstate separate lawsuits against DeJute and Flask.
DeJute said he believes the timing to refile a case against him has expired.
"The only reason he filed the Gilbane appeal was to appease The Vindicator," DeJute said of Petro.
skolnick@vindy.com