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Decision No. 14,274

Appeal of JAMES LEMAN and PETER W. SLUYS from actions of the Board of Education of the South Orangetown Central School District and Charles Bevington, Assistant Business Manager, and Nancy Russell, Geraldine Miras, Barbara Scheulen, Edward Stanford and Anna Stellweg, members of the Board of Education of the South Orangetown Central School District, regarding expenditure of public funds.

Decision No. 14,274

(December 21, 1999)

Raymond G. Kuntz, P.C., attorneys for respondents, Mario L. Spagnuolo, Esq., of counsel

MILLS, Commissioner.--Petitioners challenge the expenditure of public funds by the Board of Education of the South Orangetown Central School District ("respondent board") in three separate business transactions. Petitioners also seek the removal of Charles Bevington ("respondent Bevington") from his position as assistant business manager, and respondents Nancy Russell, Geraldine Miras, Barbara Scheulen, Edward Stanford and Anna Stellweg from their positions as members of respondent board, pursuant to Education Law "306. The appeal and application must be dismissed.

Petitioners' first claim arises out of a 1997 contract with Cimple Systems, Inc. ("Cimple"). The district's former superintendent, Dr. Morton Sherman, and respondent board decided to hire computer specialists to design a district-wide technology plan and develop a wide area network. The district issued a Request for Proposals ("RFP") and three entities, including Cimple, responded with proposals. The district's technology coordinator reported to respondent board on June 5, 1997 concerning the status of the RFP process. At this meeting, the board deferred further action until a project management issue was resolved.

The record does not reflect any further discussions by respondent board, or any specific authorization to the superintendent to enter into a contract with any of the three entities that had responded to the RFP. Nevertheless, on August 12, 1997, Dr. Sherman signed a contract with Cimple. The record indicates that the district's attorney did not review this contract prior to execution, but respondent board asserts that it was aware of the negotiations between Dr. Sherman and Cimple. The total cost of the contract was $565,000 over three years, with an initial payment of $195,000 for the 1997-98 school year. The contract further provided that the district could recover 50% of this initial payment within the first 6 months of the contract if Cimple failed to perform as required. Respondent Bevington prepared a purchase order for the advance payment, obtained approval from the district's internal auditor for the expenditure, and asked the district treasurer to issue a check to Cimple.

Cimple breached its obligations under the contract, and on February 11, 1998 the district terminated the contract and demanded the return of $97,500, plus an additional $48,750 for inadequate performance. The record indicates that Cimple had not repaid any of the money, and the district was contemplating suit against Cimple, as of the date of respondents' answer.

Petitioners contend that execution of the contract without a bid or approval by respondent board, and the payment of $195,000 in advance of performance of the contract, violated the Education Law and warrant respondents' removal. Respondents deny the claim that the actions were unlawful, and assert that Mr. Bevington acted properly as purchasing agent for the contract and followed all legal requirements and applicable policies of the board.

The second transaction challenged by petitioners is a contract with Kenneth Flatto to provide consultant services to the district. Dr. Sherman executed the contract on June 30, 1996, which provided for a monthly fee of $1,750 effective June 19, 1996. Petitioners contend that respondent board did not authorize the contract, and that $15,474 was illegally paid to Mr. Flatto pursuant to this contract. Respondents deny the allegation that the contract was unauthorized and the payments were invalid. However, although the June 30, 1996 contract expressly states that Dr. Sherman's signature thereto indicates that the agreement has been authorized by the board of education, respondent board indicates that it first approved the contract by resolution dated August 26, 1996, retroactive to June 19, 1996.

The third transaction challenged by petitioners concerns the incorporation of a not-for-profit charitable corporation, Clausland Mountain Education Foundation, Inc. ("Foundation"). The Foundation was incorporated in 1993 to establish and promote scientific, educational, cultural and social projects in the Rockland County area. There is no dispute that Dr. Sherman asked the district's attorney to incorporate the Foundation, and that Dr. Sherman and respondent Barbara Scheulen were members of the Foundation's initial board of directors. Petitioners contend, upon information and belief, that the costs of forming the Foundation, including filing and attorney's fees, were directly or indirectly paid by the district without lawful authority. Respondents assert that the attorney acted probono and the district did not pay any of the costs associated with creating the Foundation.

I will first address two procedural objections raised by respondents. Respondents contend that petitioner Sluys lacks standing to bring this appeal because, although he may own property in the district, he does not reside there. Petitioner Leman, however, is undisputably a taxpayer and district resident. It has long been recognized that a resident and taxpayer of a district has standing to seek removal of district board members for alleged misconduct (Applications of Eisenkraft, 38 Ed Dept Rep 553, Decision No. 14,092; Application of Viviano, et al., 18 id. 263, Decision No. 9,834). Therefore, I will not dismiss the petition for lack of standing.

Respondents further contend that all three claims in the petition are untimely and should be dismissed. An appeal to the Commissioner of Education pursuant to Education Law "310 or application pursuant to Education Law "306 must be commenced within 30 days from the making of the decision or the performance of the act complained of unless excused by the Commissioner for good cause shown (8 NYCRR ""275.16 and 277.1). An application for removal pursuant to "306 may also be timely commenced within 30 days of the petitioner's good faith discovery of the alleged misconduct or misuse of funds, even though the actual conduct occurred more than 30 days before the application was instituted (Matter of Appeal against BOCES, Third Supervisory District, Suffolk County, 32 Ed Dept Rep 519, Decision No. 12,905).

The claims involving the contract with Kenneth Flatto and incorporation of the Foundation are clearly time barred. The Flatto contract was signed in June 1996 and publicly ratified by respondent board in August 1996, almost 2 years before this proceeding was commenced. Although petitioners argue that respondents gave no public notice that Mr. Flatto was hired, the record contains a resolution passed at the board's August 26, 1996 meeting that specifically refers to hiring Mr. Flatto to provide financial consultant services to the district. Similarly, the Foundation was incorporated in 1993, more than 5 years before this proceeding was commenced. Petitioners make no claim that they only discovered the alleged facts underlying the incorporation within the 30 days prior to initiating this proceeding. I must therefore conclude, on the record before me, that these claims are untimely.

As to the Cimple contract, petitioners contend that respondents kept this matter secret and petitioners only discovered the facts when petitioner Sluys in his capacity as a journalist interviewed a board member. The date of this interview is not provided, but respondent's interim superintendent, Dr. Sandra Kolk, states that she met with petitioner Sluys on January 22, 1998 and discussed the Cimple contract, and that extensive documentation regarding the contract was delivered to Mr. Sluys on January 23, 1998. Respondents assert that they were not served until February 23, 1998, 31 days after delivery of the documentation, and this proceeding is thus untimely.

An appeal commenced 31 days after the latest date of discovery of the alleged wrongdoing is subject to dismissal as untimely, unless petitioner shows good cause for the delay (Appeal of Ponella, 38 Ed Dept Rep 610, Decision No. 14,103). In their reply, petitioners provide no explanation whatsoever for the delay. They argue instead that the statute of limitations was tolled or is otherwise inapplicable, citing cases involving the continuous treatment and continuing nuisance doctrines and equitable estoppel. The doctrine of equitable estoppel is incorporated into the principle permitting a "306 application to be commenced within 30 days of discovery of an alleged wrongdoing or misuse of funds, and does not serve to extend further the limitations period. Petitioners' reference to Greene v. Greene, 56 NY2d 86 (1982), is misplaced, as Greene addresses an attorney's "course of continuous representation concerning the same or a related problem." The claims concerning the Cimple contract involve the execution of the contract on August 12, 1997, and payment of an initial pre-performance installment of $195,000 that the record indicates occurred prior to October 1997. Absent the proffer of any excuse for the delay in instituting this proceeding after receiving full explanation and documentation of the contract and payment, this claim is also dismissed as untimely.

Even if they were not dismissed as untimely, the claims involving the Flatto contract and incorporation of the Foundation would be dismissed on the merits. The Flatto contract signed on June 30, 1996 expressly indicates that the board had authorized the contract. While the record indicates this statement is inaccurate, I note that the board eventually approved the Flatto contract in August 1996, retroactive to June 19, 1996. Thus, the formal resolution on August 26, 1996 ratified the prior action (Town of Moriah v. Cole-Layer-Trumble Company, 200 AD2d 879, 881 [3d Dept 1994]; Hoke v. Shanker, 108 AD2d 1065, 1066 [3d Dept 1985]; Appeal of Andela, 38 Ed Dept Rep 388, Decision No. 14,062). The record also indicates that the district's attorney acted probono when he incorporated the Foundation, and no fees or costs of the incorporation were charged to the district. Petitioners fail to rebut respondents' assertions with any substantiated proof. In an appeal to the Commissioner of Education, the petitioner has the burden of demonstrating a clear legal right to the relief requested and the burden of establishing the facts upon which petitioner seeks relief (8 NYCRR "275.10; Appeal of Robert D. and Barbara D., 38 Ed Dept Rep 18, Decision No. 13,975; Appeal of Logan, 38 id. 694, Decision No. 14,120). Petitioners have not met this burden, and these claims are dismissed.

With respect to the Cimple contract claim, the record does not support a finding of willful violation of law or neglect of duty to justify removal of the named respondents under "306 (Application of Cobler, 35 Ed Dept Rep 176, Decision No. 13,506; Application of Sabuda, 31 id. 461, Decision No. 12,700), nor does the record support petitioners' claim that respondent board improperly employed an RFP process rather than competitive bidding. Although contracts for the purchase of goods or services in excess of $10,000 must generally be publicly bid (General Municipal Law "103), there is a longstanding exception to the competitive bidding requirements for contracts that call for services involving scientific knowledge or professional skills. This exception has been applied specifically to contracts for computer software design and development (e.g., Opn. St. Comp. 88-35; Burroughs Corp. v. NYSHESC, 91 AD2d 1078 [3d Dept 1983]; American Totalisator Co., Inc. v. Western Regional OTB, 44 AD2d 750 [4th Dept 1974]; AEP Resources Service Co. v. LIPA, 179 Misc 2d 639 [Sup Ct Nassau Co 1999]). An RFP may properly be used if the professional services exception applies (Opn. St. Comp. 88-35). Neither party to this appeal has provided copies of the RFP or the submitted proposals, and I am thus unable to determine whether respondent's contract meets the criteria for the professional services exception and for use of an RFP. Petitioners have, therefore, failed to sustain their burden of establishing the invalidity of the RFP process employed by respondents (8 NYCRR "275.10).

Although I am constrained to dismiss the Cimple contract claim as untimely, I am deeply disturbed that a contract in excess of one-half million dollars was signed without review by the district's attorney and apparently without formal authorization by the board, that the district contracted to pay a pre-performance installment of $195,000, approximately 35% of the entire contract, with no justification for such advance payment provided in the record, and that such fiscal practices were justified by the board on the basis of a purported need to put these services in place as soon as possible.

Although respondents assert that Dr. Sherman was authorized to "sign" the contract on the board's behalf, respondents provide no evidence of such authority or the means by which such authority was delegated to Dr. Sherman.

Respondents also provide no proof that the board actually performed its duty to evaluate the three proposals and determined that the Cimple proposal would be in the taxpayers' best interests, as required by General Municipal Law "104-b, prior to execution of the contract. Respondents similarly provide no evidence that the board or superintendent conducted sufficient inquiry to assure that Cimple was capable of performing the contract (Appeal of Brau Bus Corporation, 22 Ed Dept Rep 76, Decision No. 10,886). In addition, although respondents assert that the board was aware of Dr. Sherman's negotiations with Cimple, they provide as purported proof of such knowledge only one set of minutes dated two months prior to execution of the Cimple contract, which contain a recommendation to award the contract to another party, and admit that the district's attorney did not review the contract prior to execution. Respondents further provide no explanation of or justification for the very large advance payment prior to any performance of the contract.

I am encouraged by Dr. Kolk's acknowledgement that the board has subsequently reviewed its procedures to ensure that in the future the district's attorney reviews contract documents before execution, that such large payments are not made before services are provided, that specific board approval is obtained for contracts involving a large amount of money, and that the district is not subjected to avoidable financial risk such as occurred with the Cimple contract. I urge respondent board to review its internal policies and procedures, as required by General Municipal Law "104-b, to ensure that all procurements made without public bidding are made in a manner to assure the most prudent and economical use of public moneys.