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Former Meriden city manager details alleged PUC overcharge in amended lawsuit

Former Meriden city manager details alleged PUC overcharge in amended lawsuit

MERIDEN — In a new court filing, former city manager Guy Scaife, who is suing the city over his December 2017 termination, alleges the city in past years “deceived” public utilities users by overcharging them upwards of $750,000 for unnecessary administrative costs.

A judge presiding over Scaife’s federal lawsuit recently allowed Scaife to amend his original complaint, filed in May 2018, to include new details regarding Scaife’s allegation that the city knowingly overcharged public utilities customers.

The amendment, filed Aug. 5, claims an external forensic review confirmed the overcharges alleged by Scaife in a “draft report” submitted to and reviewed by Scaife shortly before the City Council voted 8-4 to terminate him on Dec. 18, 2017. According to the amendment, Scaife was notified the City Council would consider a resolution to fire him a few days after Scaife informed Finance Director Michael Lupkas he planned to disclose the review’s findings to City Council leadership.

The auditing firm was expected to issue a final report in January 2018. However, that report was never publicly presented to the council following Scaife’s termination. The Record-Journal has filed a pending request for the firm’s report under the Freedom of Information Act.

City Attorney Stephanie Dellolio referred questions about the allegations in Scaife’s complaint to the city’s outside counsel, attorneys David Monastersky and Katherine Rule of the Hartford law firm Howd & Ludorf. Monastersky and Rule didn’t respond to an email seeking comment.

Scaife’s attorney, Henna Kapadia, declined to comment on the recent filing.

The City Council cited “escalating discord in City Hall” in firing Scaife, who came to Meriden in September 2016 after serving as Rocky Hill’s town manager.

In his wrongful termination lawsuit, Scaife accused top city staff and elected officials of engaging in a retaliation campaign against him that resulted in his termination. In many cases, the lawsuit implies the retaliation was prompted by Scaife’s efforts to uncover what he alleged was various wrongdoing by city staff, including financial overcharges and misuse of funds.

Scaife’s original May 2018 complaint includes his allegations that the city overcharged public utilities users for administrative costs, but does not go into as much detail as the amendment filed last month.

‘Profound effect’

The filing states that Scaife first discovered the alleged overcharges in early 2017.

“This scheme involved assessing of fabricated overly high allocation of costs in the amount of $759,750 annually to the Public Utility Department in the city budget and requiring the public utility users, who were residents of the city of Meriden and non-residents who lived in close proximity to the city’s borders, to pay for water and sewer use which did not occur,” the amendment states.

The overcharges occurred on the Public Utilities Department’s administrative cost line, according to Scaife.

Scaife’s lawsuit claims Lupkas automatically increased the administrative cost allocation to the Public Utilities Department at a rate of 3 percent annually, “while the overall city budget was increasing by less than 1 percent.”

“The compounding of this excess allocation rate had a profound effect over the lengthy time frame,” the lawsuit says.

Scaife initially brought his concerns to Lupkas, who “could not provide any explanation for the over assessment,” according to the court filing.

The Record-Journal contacted Lupkas seeking comment, however, City Manager Tim Coon “decided to respond for (Lupkas)” after Lupkas informed him of the Record-Journal’s inquiry.

Coon, who started with the city in September 2018, said he was made aware of the outside study mentioned in Scaife’s filing during the most recent budget process. Coon said the study, which commenced over two years ago, hasn’t been completed yet, but he couldn’t offer specifics about what still needed to be done.

While the study isn’t yet complete, Coon said the city has “decreased and capped” its allocation to the Public Utilities Department’s administrative cost line from $2.1 million in fiscal year 2017-18 to $1.7 million for the 2018-19 and 2019-20 fiscal years.

“This amount will be reviewed when the report is finalized,” Coon said.

After confronting Lupkas, Scaife also raised the issue to former Public Utilities Director Dennis Waz, who the complaint says shared Scaife’s concerns. Waz said he “had attempted for years to bring focus on what he believed to be obvious overcharging,” according to the complaint. Waz, who retired from the city this year, couldn’t be reached for comment.

Report presented

Scaife brought his concerns about the alleged overcharges to City Council leadership in February 2017, according to the court filing, and in May 2017, the Public Utilities Commission voted to hire an independent consulting firm, Wright-Pierce Engineering, to “determine the accurate costs,” Scaife’s amendment states.

The PUC voted at the May 2017 meeting to spend $37,000 on the study, according to meeting minutes. The money was taken out of the water and sewer divisions’ cash reserves. At the meeting, Waz said the study would provide a “breakdown of what the Department of Public Utilities is being charged for in-kind services by the other departments in the City of Meriden,” according to the minutes.

Waz stated at the meeting that he didn’t believe the department was “receiving the level of service that we are currently paying for” and that the study would “help more appropriately allocate department resources and (that) savings would directly affect departmental revenue.”

In December 2017, the engineering firm issued a draft of its report, which was reviewed by Waz and Scaife. Scaife claimed in his lawsuit that the “draft report showed an annual over-allocation to the Public Utility Department in excess of $871,000.” Shortly after reviewing the draft, Scaife informed Lupkas he would disclose the findings to the City Council. A few days later, Scaife was informed the City Council would be voting on a resolution to terminate him at its next meeting, according to the recent amendment.

A final draft of the firm’s report was due to the city in January 2018, however, the court filing claims it was delayed following Scaife’s termination and “has yet to be released to the Public Utility Commissioners, City Council, or public.”

Minutes from a January 2018 PUC meeting, however, state that a representative from Wright-Pierce Engineering, Brian Armet, presented the “forensic evaluation” to commission members. The meeting minutes do not go into detail about Armet’s findings, but state the commission voted to authorize staff to “report the findings to the City Manager, Finance Department and systematically through the channels toward a conclusion.”

PUC members couldn’t be reached for comment.

The city filed an objection to Scaife’s motion to amend his original lawsuit, but Judge Michael P. Shea ruled in an order dated Aug. 28 that the “proposed amendment does not add new legal theories or a major new factual narrative; rather, it sets forth an additional example of alleged misconduct — among several — the plaintiff claims he was preparing to reveal to others before he was terminated.”

Both parties are currently working through the discovery phase of the case. Discovery is due Oct. 10, according to online court records, and dispositive motions are due by Dec. 11.

“The parties have over a month at this point to complete discovery,” Shea wrote in the Aug. 28 order, “and although (the city) claims that it tailored previously written discovery to the earlier allegations, there is sufficient time for the parties to complete discovery as to the new alleged misconduct before the close of discovery.”
Twitter: @MatthewZabierek

Finance Director Michael Lupkas in his office in City Hall Thursday Oct. 16, 2008. | David Zajac, Record-Journal