More Questions Than Answers At Town Council Special Meeting

Many questions were raised and some were answered at the Town Council special meeting Chair Mark DeWaele called on Monday night to discuss the council’s and the Loureiro Contractors litigation and arbitration.

At the May 18 meeting, Town Council members were caught unawares about a $617,000 judgment against the town, handed down by the American Arbitration Association in a dispute about the bridge on Lakeview Ave.

took full responsibility for failing to communicate information about the arbitration award to the town’s governing bodies. Walker was told of the judgment against the town in late February. In his remarks Walker said, “It fell through the cracks. It’s something I’m not proud of. It will never happen again. I take full responsibility for that.”

Vice-Chair Stephen Karl said the Executive Committee of the (Chair, Mark DeWaele, Karl and Secretary Kit Devereaux) met for three hours on Saturday, May 21 and broke the issue into five categories in preparation for Monday’s meeting:

1. Communication (Why weren’t town bodies apprised of the arbitration judgment until after the award was paid?)
2. Management (Who knew of the arbitration and subsequent litigation? Who was responsible for managing litigation?)
3. Payment (How did the town pay for the expenses and the judgment? Out of what account did it come? Who authorized the payments?)
4. Reserve (When should a reserve have been set up for the potential judgment against the town, as well as legal fees?)
5. Next Steps (What steps should be taken to address these questions and to establish safeguards to prevent a future failure in the system?)

Council members, led by Tom O’Dea, as well as residents attending the meeting wanted to know how the legal fees for the arbitration ended up costing more than the judgment itself. O’Dea, who is an attorney, said, “Part of my daily job is telling my clients what their exposure is and what it’s going to cost. Telling them the cost of litigation and the cost of success.”

Council member Kit Devereaux asked how the estimate for legal services and the amount billed by the firm of McCarter and English were so far apart.

“I’m really confused about how we went from an estimate of $200,000 to $300,000 to over $800,000. How could so much money be spent?" she asked.

The approve legal bills at their bi-weekly meetings. Selectman Sally Hines said they receive the bills the day before the board meetings.

“In regards to approval of the bills, it is our custom to ask specifically ‘are there any issues here?” she said. “I have no legal training. I have no expertise in legal matters. I ask Mr. Walker and Mr. Conrad, and my question always is: ‘Are there any that are higher than they should be?’ This is all in a public meeting. At no time was the board told there was an outlier or these litigation costs were getting high relative to the exposure.”

Mike Pastore said the award was paid the way they would pay any other bill, since the work had been approved before the work on the bridge began in 2007.

“Basically, we treated it like a contract payment that was paid under the contract. We were faced with the unhappy decision, and we processed it,” he said.

The judgment amount, as well as an additional $100,000 in arbitration-related fees, was paid in March from the non-recurring capital fund, CFO Gary Conrad said.

Town Attorney Chris Jarboe said the town used a state contract form with Loureiro. The bridge, which was supposed to be completed in 2007, was not finished until 2008. The town withheld just under $250,000 in payments to Loureiro.

“In 2008, when the contractor was submitting claims to DPW, my recollection is their claims were in the million dollar range, on top of what they had already been paid," Jarboe said. "Following receipt of these claims we met with some people at DOT to get their reaction. We were using a state contract form, because we were expecting 80 percent reimbursement from state.”

Conrad said if the reimbursement comes through, the town’s exposure on the matter — minus the legal bills and arbitration fees — will be far less than the judgment awarded in arbitration.

 “At the end of the day $617,000 will come to $125,000,” he said.

The Town Council appointed Kit Devereaux to chair a subcommittee it created to look into the matter further. Council members Ken Campbell, DeWaele, John Emert, Karl, and O'Dea will serve.

"The sub-committee of the Town Council appointed last night has some complicated and difficult work ahead," Devereaux said in an e-mail to Patch. "I think the town bodies and the residents all want the same thing: to fully understand the sequence of events which led up to this issue; to understand why the process broke down; to find out where the responsibility lies; and, if possible, to start the process of putting systems in place in order to keep an event like this from recurring."