Wednesday, June 19, 2013

Costs continue to rise in McKinstry litigation

School District has spent nearly $1.7 million already

Express Staff Writer

Mike Chatterton

With a jury trial still almost 10 months away, the Blaine County School District has already spent nearly $1.7 million in legal fees and investigation costs in its lawsuit with McKinstry Essention.
    Costs associated with the litigation were released by the district to the Idaho Mountain Express on Monday. Release of the information followed a week-long dispute between several district patrons and district officials over whether the information could be made public.
    A final opinion on the issue was delivered at a June 11 school board meeting when board Chair Steve Guthrie read a letter from the district’s attorney, Kyle Kring, stating that “we have instructed the district to comply with the most current information request and they will do so within two days.”
    Two of the leaders in obtaining the information were Barbara Browning and Holmes Lundt. Browning declined Monday to comment on the record, but Lundt issued the following statement to the Express:
    “This is just more good money thrown after bad. Since we are now closing in on $2 million of taxpayer funds being spent on litigation related to McKinstry, isn’t it time for the community to reflect on the fact that so many of the $20 million in levy funds spent have been utterly wasted? Once again, not a dime of this latest round of waste is helping kids get a better education.”
    Lundt was referring to a 10-year $59.8 million plant facilities levy approved by Blaine County voters in 2009. Levy money was the major funding mechanism for extensive energy savings work and other improvements that McKinstry was directed to perform on eight district schools and facilities in 2010.
    Litigation started in May 2012 when both parties filed lawsuits against the other. The lawsuits have now been consolidated with McKinstry listed as the plaintiff and the School District as the defendant and counterclaimant.
    McKinstry claims that it performed work worth about $26 million, at the district’s direction, and that the district still owes the company about $7 million. The district claims it authorized work worth only $18.6 million and is seeking damages against McKinstry for at least that much.
    The trial, expected to last about 25 days, is now scheduled to start on April 8.
    District Business Manager Mike Chatterton acknowledged Monday that money for the litigation is coming from the plant facilities levy funding. Some district patrons have questioned the legality of using levy funds because use of the money for legal fees was not specifically listed when the issue was put to the voters.
    Chatterton also acknowledged that the costs will continue to go up as the litigation proceeds. However he said he is “confident of the outcome.”
    “I expect we’ll recoup the majority of it,” Chatterton said, noting that McKinstry could end up paying the district’s legal fees.
    The cost information released by the district shows payments made through the end of May. The largest expense, $1,148,241, is for legal fees paid to the two firms working on the case for the School District. Greener Burke Shoemaker, located in Boise, had been paid by the end of May a total of $817,226, while Kring & Chung, located in Ervine, Calif., had been paid $331,015.
    The records show that the Greener Burke Shoemaker firm was first hired to work on the McKinstry litigation in November 2011, about the time that the district became aware that McKinstry was claiming millions of dollars in cost overruns.
    The first payment to Kring & Chung was in June 2012 after the lawsuits were filed.
    The information provided by the district also shows costs of $543,736 for investigation of the case, with the largest share, $355,817, going to Hailey Engineer Brian Formusa. The Hailey firm Corporation for Land Planning & Engineering has received $176,698.
    Both Formusa and Corporation for Land Planning & Engineering began investigating the McKinstry work in October 2011.
    Chatterton said some of the work done by Formusa and the corporation was not related to McKinstry, but he was unable to say how much.
    A third firm, Danrae CM, located in Southern California, has recently been hired by the district for construction expertise. By the end of May, Danrae had been paid $17,831. A fourth expert whose name was not disclosed in the district information has been paid $3,389.
    Chatterton said more experts will likely be brought in to assist the district with the case. In addition to investigating the case, the experts will serve as witnesses when it goes to trial.

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