May 21, 2014 - An agreement for financial support services with a company the city of Crestwood once sued for alleged professional negligence and breach of contract was pulled from last week's Board of Aldermen agenda by City Administrator Mark Sime.
Sime told the Call he "received some new information" from "a concerned citizen" that he wanted to investigate before presenting the recommendation for Hochschild, Bloom & Co. to the board.
The proposed agreement calls for Hochschild, Bloom & Co. to serve as a consultant to provide financial support services for the city's Finance Department.
Sime initially declined to elaborate on what the new information was, but when asked about the city's previous lawsuit with the company, he said, "That's what I'm checking out."
The city administrator said he was not aware of the litigation when he recommended the company, and of the proposals received, he believes Hochschild, Bloom & Co. is "the best fit for the city" based on the information provided.
As the Call reported in November 2003, Crestwood sued former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels, alleging the two breached their fiduciary duties by manipulating financial records to misrepresent the city's true financial condition. The lawsuit also alleged professional negligence and breach of contract by Hochschild, Bloom & Co., which served as the city's independent auditing firm from 1998 to 2002.
Leichliter countersued in January 2004 on the grounds that the city breached an agreement to pay salary and benefits to him after his retirement.
The city paid $100,000 to Leichliter and $150,000 to his attorney, Tim Kellett, to drop all litigation, according to the terms of a settlement agreement approved during an April 25, 2006, closed session by aldermen.
The city also agreed to accept $170,000 from Hochschild, Bloom & Co. The agreement stated, "... In no way does this payment reflect an admission of liability or wrongdoing by (Hochschild, Bloom & Co.) ..."
Hochschild, Bloom & Co. provides similar financial services to more than 15 cities in the area "and numerous other entities," according to Sime's report to the board.
Sime stated that of the proposals submitted, Hochschild, Bloom & Co. will allow the city to "come out ahead, both in dollars and in maintaining the capability to expand financial services as the city develops and expands."
Hochschild, Bloom & Co. submitted the lowest bid of $6,400 per month, or $76,800 annually. Other proposals were Swink, Fiehler & Co., $12,000 per month, or $144,000 annually; Schmersahl Treloar & Co., $195,000 annually; and Brown Smith Wallace, $17,000 per month, or $204,000 annually.
Mayor Gregg Roby said he did not have "any information or input" in the recommendation of Hochschild, Bloom & Co. and that the agreement was proposed before he was sworn in as mayor.
Asked about Sime recommending a company with which the city previously was involved in a lawsuit, Roby said he "had no idea that they'd even been involved with us previously. (That was) something that occurred prior to my term as an alderman, and then this issue ... (was) prior to my being sworn in as the mayor."
Ward 2 Alderman Tim Trueblood was on the board in 2006 and voted against the settlement agreement. Though he told the Call he was "embarrassed to admit it," Trueblood said he had "simply forgotten" the city and Hochschild, Bloom & Co. "had a past relationship (that) had turned into a lawsuit" until it was brought to his attention before last week's meeting. He then discussed that relationship with Sime.
In regard to Sime pulling the item from the agenda last week, Trueblood said doing so "was the right thing to do."
"I think it was appropriate," Trueblood said. "... I don't think Mr. Sime had much choice ..."
Ward 4 Alderman Richard Breeding was also on the board in 2006 and voted in favor of the settlement agreement. Contacted by the Call by email, he said he did not have "any great detail to provide."
Sime said he hopes to present an agreement at the next board meeting, which is scheduled for Tuesday, May 27, but he is "going to evaluate" if Hochschild, Bloom & Co. will still be recommended.