By Hillel Aron
By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
Time and again, the arbitrator chided L.A. Unified, faulting the school district in one instance for refusing to pay for the cost of delays caused by district decisions that had nothing to do with contractors, and also for alleging overbilling “without any legitimate basis.” None of the contractors “intentionally overbilled for work performed on the project,” ruled Arbittier.
The district’s Kwalwasser took exception to this tone and also noted that the district retained the option of challenging elements of the arbitrator’s decision and his jurisdiction in court — even though the contract specifies that the results of arbitration are binding on both parties.
For now, chalk up another $20 million in Belmont-related costs — this time, ironically, in the service of abandoning the project and recouping funds. This cost-recovery strategy was meant to answer critics who questioned why the school board would ditch Belmont — and thus throw away some $200 million of public investment in a badly needed school that experts say could be safely completed, despite the oil field. The district provoked the arbitration by stopping payments and also pursued a civil lawsuit against the developers and subcontractors.
“This action, authorized by the Board of Education, is consistent with the district’s goal of recovering all funds that may have been improperly submitted on billings and recovering all taxpayer money that was lost as part of building the Belmont Learning Center,” said Chief Operating Officer Howard Miller at the time. (Shortly thereafter, Miller left district employment to resume his private-sector law practice. He then assisted with the arbitration case on an hourly basis, earning $111,000 over a nine-month period, according to district records.)
Kwalwasser acknowledged late last week that the arbitrator’s decision casts doubt on the civil lawsuit, which covers essentially the same legal ground. Two major elements of cost recovery remain: the potential sale of the Belmont land and a malpractice suit against O’Melveny & Myers, the firm that used to represent L.A. Unified on Belmont.
The state, however, has a claim on any profit realized from the sale of the land, because state funds, not local money, were used to buy the Belmont property in the first place.
As far as the O’Melveny lawsuit goes, the school-district strategy is rather inscrutable, even to some school-board members. The district’s highly regarded contingency-fee attorneys (some of whom represented the real-life Erin Brockovich) have played mostly defense so far, even though the school district initiated the lawsuit. O’Melveny and its powerhouse defense team from Gibson, Dunn & Crutcher, meanwhile, have been the aggressors, pursuing a scorched-earth discovery process that involves deposing scores of witnesses and demanding libraries’ worth of documents. O’Melveny is racking up million of dollars in litigation costs.
One board member commented that she is confident that attorneys on the O’Melveny case will protect the district’s financial interests — because they get paid only if the school system collects money. But that’s not the entire picture. Taking on the O’Melveny case put these same attorneys in position to handle the arbitration matter, for which they were paid as much as $350 an hour.
O’Melveny representatives declined to comment on the arbitration result, and the district’s Kwalwasser asserted that the ruling would probably have no material impact on the O’Melveny litigation.
The arbitration decision, however, is another Belmont bust for school-district Inspector General Don Mullinax. The drubbing began when the law-enforcement arms of the city, county and state all declined to pursue criminal investigations related to Belmont after Mullinax referred his findings to them. Then, the school district was obliged to reinstate employees — after a year of paid leave — that Mullinax had fingered for Belmont-related blame and discipline. Now, an arbitrator has ruled that the district could not prove the missteps and legal violations that Mullinax thought his investigators had amply documented.
Following the O.J. Theory, losing such big ones is more than enough to get a high-profile prosecutor/investigator fired. But school-board member Victoria Castro said it would be unjust to scapegoat Mullinax, who shares responsibility for these Belmont-related events with many other district officials and attorneys. Even if his star turn on Belmont has been tarnished, Mullinax’s lower-profile investigations and audits are helping the district save money and function better, added Castro. (And Mullinax’s investigation prompted some contractors to lower their billing claims even before the arbitration began.)
But Castro is hardly sanguine about the arbitration effort. “We were given the legal advice that we had all these winning points,” she said. “It’s unconscionable. My hope would be that we look freshly at all the issues surrounding Belmont.”
For now, Castro — who retires from the board at the end of June — is in the minority as a Belmont-project advocate. But she’s in harmony with Superintendent Romer. “I view this decision as finishing up a dispute of the past,” he said. “It now opens up a rational opportunity of deciding what to do to finish Belmont.” He added, “We’ve got to pay whether we stop Belmont today or not. Now it frees us up to go forward.”