Greer urges board to hike '06 legal costs in anticipation of spring trial on lawsuit
December 07, 2005 - Crestwood City Administrator Don Greer recommended Saturday morning that the Board of Aldermen increase legal costs by $100,000 in its proposed 2006 budget.
Greer told aldermen during a budget work session that a court-ordered mediation of a lawsuit the city filed against two former employees and a former auditing firm was un-successful and he anticipates the case will go to trial next spring.
As recommended, the costs for legal services would in-crease to $250,000 from $150,000 in the proposed 2006 budget. A public hearing on the proposed budget will take place Tuesday, Dec. 13, during the Board of Aldermen meeting that will begin at 7 p.m. at City Hall, 1 Detjen Drive.
In November 2003, the city filed a lawsuit in St. Louis County Circuit Court alleging that former City Admin-istrator Kent Leichliter and former Finance Officer Robert Wuebbels breached their fiduciary duties by manipulating financial records to misrepresent the city's true financial condition to then-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.
As aldermen were reviewing the budget, Greer suggested that the amount for legal services be increased.
"I guess it's probably appropriate to discuss this at this time. Earlier in the week, I spent all of Tuesday in Clayton on mediation for our pending lawsuit and we left that day without resolving that issue,'' Greer said, adding that he anticipates the case will be set for trial in the spring.
"I'm suggesting to you that you're probably going to need to add $100,000 to your legal costs for '06,'' he said. "If this thing goes to trial, it's going to cost another $100,000 ...''
Ward 4 Alderman Pat Duwe asked, "If we win, do they have to pay court costs?''
Mayor Roy Robinson said he hoped that would be the case, but "you never know ...''
Greer said, "... I can tell you that I think the chances are pretty slim that this thing will settle ...''
Greer was named city administrator in December 2002. The next month, he told members of the Ways and Means Com-mittee 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.
Though the Board of Aldermen adopted a balanced fiscal 2004 operating budget in July 2003, 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 Alder-men) 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,'' stated the forensic audit report prepared by Brown Smith Wallace.
The forensic audit report stated, "Al-though 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. 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.''
Based on the forensic audit, the lawsuit filed in November 2003 alleges that Wueb-bels, with Leichliter's knowledge, "en-gaged 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.''
In January 2004, Leichliter filed a counterclaim against Crestwood contending the city breached an agreement to pay him salary and benefits through March.
Leichliter served as city administrator for nearly 25 years before retiring in De-cember 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.
In a closed session Oct. 28, 2003, the board voted to terminate the reassignment agreement and all payments to Leichliter.