Leichliter files countersuit against city of Crestwood
A former Crestwood official who is being sued by the city for alleged mismanagement of city funds has filed a counterclaim against Crestwood contending the city breached an agreement to pay him salary and benefits through March.
The lawsuit was filed last month by Kent Leichliter, who served as city administrator for nearly 25 years before retiring in December 2002. Under the terms of a reassignment agreement approved by the Board of Aldermen in December 2002, Leichliter was to serve as an adviser to the board and receive his $91,056 salary and other benefits, including health insurance, through March 2004.
The reassignment, according to the agreement, will end "no later than March 1, 2004, unless terminated earlier upon the majority vote of Crestwood's Board of Aldermen.''
Don Greer, who has served as the city's police chief since 1990 and remains in that post, was named city administrator by the Board of Aldermen after aldermen accepted Leichliter's retirement.
Shortly after Greer became city administrator, he told members of the Ways and Means Committee that while the Board of Aldermen was led to believe the city's general fund was balanced at the end of fiscal 2002, that was not the case. He also announced at the Jan. 18, 2003, Ways and Means Committee meeting that the previous day he had asked for and received Finance Officer Robert Wuebbels' resignation.
During the preparation of an end-of-the-year budget adjustment ordinance designed to close out the city's fiscal 2003 books, city officials discovered that fiscal 2003 general fund expenses were slightly more than anticipated, while revenues, particularly those from merchant licenses, were far less than projected. A forensic audit of fiscal 2001 and fiscal 2002 was initiated after officials began an internal investigation into the accounting practices used by Leichliter and Wuebbels.
"As a result of our forensic investigative procedures, we have concluded that there have been a staggering amount of disbursements, improper journal entries and misrepresentations to the Board (of Aldermen) of the city's financial position, authorized by Leichliter and performed by both Leichliter and Wuebbels, representing mismanagement of city funds and financial reporting errors,'' states the forensic audit report prepared by Brown Smith Wallace.
"Although the board has ultimate authority and oversight responsibilities, it is our opinion that they could not make the appropriate and necessary fiscal decisions for the city because they were misled by Leichliter and Wuebbels as to the true financial condition of the city,'' the report states. "Leichliter and Wuebbels' actions, as evidenced by the multitude of documents we reviewed, were in violation of numerous ordinances, the city of Crestwood's charter, possible state statutes, good financial practices, and, most importantly, their duties as fiduciary officers of the city of Crestwood.''
In November, the city filed a lawsuit in St. Louis County Circuit Court alleging that Leichliter and Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city's true financial condition to Mayor Jim Robertson and the Board of Aldermen.
The lawsuit also alleges professional negligence and breach of contract by Hochschild, Bloom & Co., which served as the city's independent auditing firm from 1998 to 2002.
Based on the forensic audit, the lawsuit alleges that Wuebbels, with Leichliter's knowledge, "engaged in a complex scheme to manipulate the financial accounts of the city of Crestwood so that the city budget would appear to be in balance and that the city was operating in a positive cash-flow situation, when, in fact, the city was operating in a serious negative cash-flow situation.''
The scheme "devised and perpetrated'' by Wuebbels and Leichliter included fabrication of revenues, improper inter-fund transfers and fraudulent submissions of warrants, the lawsuit alleges.
During a closed session Oct. 28, the Board of Aldermen voted to terminate the reassignment agreement and all payments to Leichliter. The city's lawsuit also seeks a judgment rescinding the reassignment agreement and ordering Leichliter to repay the city the salary and benefits he has received under the terms of the agreement.
Leichliter's counterclaim states, "Since on or about October 2003, the city of Crestwood has failed to make any payments to Kent Leichliter as provided in the reassignment agreement and release.
"Kent Leichliter has thereby been damaged,'' the counterclaim states.
In his counterclaim, Leichliter seeks judgment against the city "in an amount representing all the damages incurred by Kent Leichliter as a result of the breach by the city of Crestwood of the reassignment agreement and release, including Kent Leichliter's 'attorney's fees and costs ...''