The ongoing battle over $1.3 billion in taxpayer money spent to reconstruct Buffalo’s dilapidated schools could end up in a legal showdown after failed efforts to reach a compromise, even as federal investigators have subpoenaed documents related to the mammoth project.
LPCiminelli, the region’s largest construction contractor, remains at odds with some members of the Joint Schools Construction Board, which has held up payments over allegations of excessive profit-taking during its 11-year reconstruction of 48 city schools.
Carl Paladino, who serves on both the Construction Board and the Buffalo School Board, has submitted a resolution for Wednesday night’s School Board to transfer governing control over the project from the Construction Board to the Board of Education.
“I may very well recommend to the School Board that we start a lawsuit,” Paladino said. “The School Board is the principal here. It’s the School Board’s money that was stolen or misappropriated.”
This is not a personal campaign on his part, he said, but rather part of his fiduciary responsibility as an elected School Board member.
Paladino believes some members of the Construction Board, including the mayor and city comptroller, were on the board when apparent fraud and “bad mistakes” were made. Therefore, he said, they have an appearance of a conflict of interest and should allow the School Board to take over the handling of project payments.
It also appears federal investigators are looking into the reconstruction project. Sources familiar with the investigation told The Buffalo News that federal subpoenas demand records and documents connected to the reconstruction project, as well as the Buffalo Billion initiative.
On Tuesday, Daniel C. Oliverio, a lawyer for Ciminelli, deflected suspicions that investigators are looking into wrongdoing by the company.
“Neither LPCiminelli nor any of its principals is the target or subject of any investigation regarding the Buffalo Billion or the Buffalo Joint Schools Construction Project,” he said in a prepared statement. “Any statement to the contrary is either erroneous or uninformed.”
The ongoing dispute pitting Paladino and his allies against Ciminelli is a messy one.
The award-winning, billion-dollar project, largely bankrolled by the state, led to critical renovations and technology upgrades in the district’s aging schools. While publicly managed school construction projects tend to be poorly run, many have praised the unique public-private partnership between the school district, the city and Ciminelli as a model worth pursuing in other urban districts.
But the repeated refusal by Ciminelli to provide a more detailed breakdown of its actual costs, versus what it charged the district for the work, has raised concerns about excessive profits. An earlier Buffalo News analysis found more than half a billion dollars unaccounted for and indicates Ciminelli could have made profits of 30 percent.
A total of $41 million for the project’s final phase has not been documented because it reflects internal cost allocations that Ciminelli considers proprietary. That has led the Construction Board to hold off final payments of $3.1 million that would allow the company to close its books on the project.
Ciminelli contends the company has met, or exceeded, every legal obligation of what it considers a fixed-price contract with the Construction Board. Company leaders consider Paladino’s antagonism against the company to be part of a political and personal vendetta against CEO Louis P. Ciminelli.
Construction Board leaders, including Mayor Byron W. Brown, generally consider the 11-year project to be a success and want the matter put to rest. Brown said he’s particularly concerned that the Construction Board is holding up $1.8 million in payments that Ciminelli would make to smaller subcontractors that are being hurt by the ongoing dispute.
“I certainly think we have a fiduciary responsibility to get to the bottom of this,” Brown said. “But at the same time, we talk about the importance of business development and small-business growth in our community, and we have small businesses that are caught in the middle of this dispute, and they are the ones that are suffering.”
The last four monthly meetings of the six-member Construction Board have been canceled due to the ongoing stalemates, as well as board turnover.
Recent mediation talks between LPCiminelli and Construction Board representatives Paladino and Larry Quinn – who is also a School Board member – have gone nowhere, with Paladino saying that no settlement can be reached without further disclosure by Ciminelli. Unlike Paladino, both the mayor and Ciminelli representatives do not yet consider mediation talks over.
In regard to Wednesday’s School Board resolution, Ciminelli spokesman Kevin Schuler said his company’s lawyers “have serious reservations” about its legality, given the project’s founding legislation.
Brown, however, said he’s open to having the School Board take this long-running dispute off the city’s hands.
“If JSCB program counsel determines that it’s legal for the Buffalo Board of Education to assume jurisdiction over the matter,” Brown stated, “I support this action and encourage the board to quickly resolve the claims of the subcontractors, many of whom have contacted me to express the hardship that this has caused their businesses.”