Friday, July 27, 2012

District: McKinstry pulled ‘bait and switch’

Energy savings guarantee not put into writing

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By TERRY SMITH
Express Staff Writer

McKinstry Essention promised to guarantee energy savings to the Blaine County School District, a guarantee that would have provided that the company reimburse the district if specified savings were not met. However, the guarantee was never put into writing.

The guarantee would have been included in a financial energy audit, a document required by the McKinstry contract with the district and by Idaho law. According to the district, McKinstry never submitted the audit.

The issue is at the heart of the many of the claims that the district has made against McKinstry, including fraud, breach of contract, violation of Idaho law and racketeering.

McKinstry, contracted by the district in 2010 for energy savings projects at eight district schools and facilities, is now suing the school district in Blaine County 5th District Court, claiming that it performed work worth $25.8 million and that the district has refused to pay about $7 million of that amount. The district claims that it only authorized work through the original contract and approved change orders worth a total of $18.6 million and has filed a counterclaim against McKinstry alleging damages of at least that much.

McKinstry has not directly addressed the financial energy audit in any of its court filings, and the company has thus far declined to comment on the issue.

The School District's position regarding the audit is mentioned in previous court filings but is spelled out more clearly in two new documents filed within the past week in district court. One document was filed in opposition to a McKinstry motion for dismissal of the district's fraud and racketeering allegations. The second amends the district's original counterclaim and provides new details to its claims.

In the documents, the district accuses McKinstry of "classic bait and switch," claiming that "a promise was made without the intent to perform."

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The district alleges that McKinstry representatives David Nacarrato and Mike Johnson promised that the company would guarantee energy savings in presentations to district officials and the district board of trustees prior to approval of the contract in 2010.

The district further alleges that the McKinstry representatives promised that if specified energy savings were not met in any given year that "McKinstry would pay the difference to the district."

According to the district's recent court filings, the specified savings for each district facility where work was performed were to be included as part of the financial energy audit. The audit was intended to consider historical energy use at the facilities and to project how much would be saved once the new systems were installed.

According to the contract, the audit was to be submitted as part of contract "amendment no. 1," another document that was never completed between the parties and that would also have allowed the original contract price of $15.1 million to be modified up or down once designs were completed and work was under way.

In its court filings, the district ties its fraud and racketeering allegations against the company to the alleged "misrepresentations" of McKinstry representatives.

Regarding racketeering, the district alleges that McKinstry engaged in similar misrepresentations to other governmental entities in Idaho and specifically states that such a misrepresentation was made in 2008 to the Garden Valley School District, which also entered into a contract with McKinstry for energy savings work.

"At the time each public entity entered into a contract with McKinstry, the public entity did not know the falsity of the representations made by McKinstry, and McKinstry knew that the public entity was unaware of such falsity," the district states in its amended counterclaim.

The new court documents were filed on the district's behalf by Boise attorneys Robert L. Bilow and Richard H. Green and Irvine, Calif., attorney Kyle D. Kring.

Terry Smith: tsmith@mtexpress.com

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