Lawsuit filed against school board, Clouet

City officials have officially filed legal action against the Shelton Board of Education, the school superintendent and two former finance directors.
The city — in its filing at state Superior Court in Milford — has charged the board, school Superintendent Dr. Chris Clouet and past finance heads Edward Drapp and Dominic Barone with overspending the approved education budgets in fiscal years 2016-17 and 2017-18 by $2.6 million.
The suit states that those named are “personally liable” for these losses, with the overspending being a violation of Chapter 7 of the city charter, which requires that the Board of Education is “not to overexpend their appropriated fiscal year budget.”
According to the filing, the city is seeking money damages as well as an “injunction directing the defendants to cease overexpending their duly appropriated fiscal year budget.”
There are two counts in the suit against the Board of Education, the first for the claim of overspending in fiscal year 2016-17. According to the suit, education officials overspent by $1.5 "million in that fiscal year, during which Barone was school finance director. The second count is for the 2017-18 fiscal year, during which city officials claim that school officials overspent their approved budget by $1.1 million. Drapp was school finance director during that fiscal year.
“Leadership by lawsuit is not leadership,” said Clouet about the lawsuit. “This is another example of wasting taxpayer money.”
This is the second such legal action brought by the city against the Board of Education in the past year. The first revolved around the city’s attempts to take over operation of the school bus transportation. The suit ended in a court negotiated settlement that ultimately left Durham School Services operating the bus transportation this school year, and the city, which has its own fleet of buses, taking over operation this July 1.
“It’s a frivolous lawsuit that will waste thousands of taxpayer dollars,” said Board of Education Chairman Mark Holden about the latest suit.
The Board of Aldermen, in a special meeting on April 11, voted 5-4 to file legal action against Clouet and the Board of Education in response to the recently released audit report, which reported that the school board overspent its budget allotment by some $3.1 million over a two-year period.
The motion stated that the “City of Shelton take appropriate legal action against the Shelton superintendent of schools and those responsible on the Board of Education and/or within the Shelton school district for deficit spending by the Shelton school district in violation of city charter as noted by the city of Shelton auditor for the fiscal years 2016-17 and 2017-18.”
In a roll call vote, the aldermen deadlocked at 4-4, with Mayor Mark Lauretti breaking the tie with a vote in favor of the legal action. David Gidwani, Jim Capra, Noreen McGorty and Cris Balamaci voted against filing the suit.
“This is the only option available to us,” said Lauretti after that meeting, “and we’ll have an independent party make a decision. As I have said before, this type of situation has never happened here before, and I think people must be held accountable.”
After the aldermen’s vote, Board of Education member and Shelton Democratic Town Committee Chair Dave Gioiello, in a post on the Shelton DTC Facebook page, stated: “Despite a highly disputable city audit, the mayor and four Republican aldermen have voted to initiate legal action against the Board of Education (BOE) and the superintendent of schools, over the excess cost grant money provided to the schools for special education for the last two years.”
Gioiello said there is a letter from the state Board of Education confirming that the board acted properly, however, the city is still going ahead with a lawsuit.
“This is a total waste of taxpayer money,” stated Gioiello. “Shelton deserves better. This does not move the city forward but only feeds the mayor’s long record of aggression towards our public schools. Let your alderman know you do not support this waste of your tax dollars.”
When asked how the Board of Education would be called upon to reimburse the city, Lauretti said he was not sure, “but everything is on the table.
“Negotiation can be ongoing, but if you don’t have a viable option to get someone to the table, where do you go?” asked Lauretti. “This (legal action) seems to be the only real option to get them to the table. They just seem to still be in denial.”
The suit stems from the report filed by CPA David Cappilletti of Clermont and Associates, LLP, the city’s independent auditor. The audit uncovered a $3,170,300 accumulated loss in five special-revenue accounts maintained by the Board of Education and school district. The biggest shortfall is for $2,776,708 in the state excess cost-grant program, a fund used primarily to subsidize high-cost special education programs. Much of its revenue gets reimbursed by the state, hence the name of the fund.
“All of a sudden a fund is down $2.7 million?” asked Lauretti the night the audit report was discussed with the aldermen in February. “That’s concerning to me . I don’t recall this ever happening in my many years as mayor.”
Cappilletti did not suggest there was any wrongdoing on the part of the Board of Education or school district staff. Instead, the problem came about because of misunderstandings of the budgeting requirements, he said, and a lack of communication between the school district and City Hall.
For his part, Clouet has stated that the school district sends a detailed letter to City Hall each year outlining any excess expenses.
“Neither the city nor its auditor — the same auditing firm that reviewed the Board of Education’s compliance with state of Connecticut excess-cost grant procedures in prior fiscal years, ever contested this process,” said Clouet in a prepared statement, “or the district’s legal right to the excess-cost funds.”
Clouet also said there are “serious errors” in the audit report. He said the error stems from how the district uses and accounts for state-issued excess-cost funds that help school districts deal with unanticipated special ed costs. Such students, he said, typically “need complex services offered in out-of-district settings.”
After several unsuccessful attempts to get the auditor to alter his findings, the Board of Education filed an ethics complaint against Cappilletti and Clermont and Associates, LLC, with the state Board of Accountancy. No ruling has been made yet on that complaint.