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MVSD Court won't reinstate lawsuit

By David Skolnick

Saturday, January 31, 2004

No money was illegally spent by the MVSD board, the court ruled.
A three-member federal appeals court panel refused to reinstate a $2.4 million lawsuit against a company that a state audit contends received improper payments for work done at the Mahoning Valley Sanitary District.
The 6th U.S. Circuit Court of Appeals panel in Cincinnati upheld a lower court's decision to dismiss the case because "the funds had not been illegally expended."
The state's case against the Gilbane Building Co. of Providence, R.I., which served as the MVSD's construction manager for its capital improvement projects in the mid-1990s, was argued by state Attorney General Jim Petro in front of the federal court in September.
It was the first case Petro argued on behalf of the state since he began serving as attorney general a year ago. Also, it was his first time in front of federal appeals judges, and the first time he argued a case as an attorney in a decade.
"We respectfully disagree with the court's decision," Petro said. "The ruling doesn't change my strong feeling that the Gilbane Co. received an unjustified gain at the expense of the taxpayers of the Mahoning Valley."
While auditor
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, which provides water to about 300,000 Mahoning and Trumbull counties residents. About $2.4 million of the findings were against Gilbane, and former MVSD directors Frank D. DeJute of Niles and Edward A. Flask of Poland.
Separate civil lawsuits against DeJute and Flask have repeatedly stalled. The state was banking on a victory in the court of appeals against Gilbane to trigger further court action against DeJute and Flask.
"Every legal mind on the state and federal level that has heard this case has dismissed it," DeJute said. "In every instance, the courts have unequivocally ruled that this isn't a case. I hope the harassment is finally over. I guess they could go to the Supreme Court. How much money will that cost the taxpayers?"
DeJute blames management at The Vindicator for pushing Petro to pursue what he calls losing cases.
"The newspaper has to have egg on its face after this decision," he said.
Audit's contention
The state audit had contended Gilbane was paid to provide construction management over projects that were never built at the MVSD. The audit says the company received 60 percent of its fee when only 24 percent of the construction work was completed.
The federal court stated in its decision that state law doesn't define "illegal expenditures ... For an expenditure to be illegal, it must violate an identifiable existing law." The court ruled that the state failed to meet that standard.