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Ciminelli wins ruling on claims on $1.3 billion schools project

An acting state judge has dismissed most of the claims raised in a Buffalo School District lawsuit that alleged LPCiminelli concealed information and pocketed excessive profits on the $1.3 billion school renovation and construction project.

Regardless of how much profit LPCiminelli made on the project, the construction company fulfilled its obligations to renovate dozens of public schools, acting State Supreme Court Justice Timothy J. Walker said in his 21-page decision.

“The purpose of the Program was to renovate 48 District schools for a stipulated sum. That purpose was fully accomplished,” Walker wrote in his decision. “The District does not dispute this. It accepted the work, occupied the buildings and received the certifications of the Architects of Record.”

The school district will appeal the case, said Carol E. Heckman, attorney for the district. And while Walker’s decision concentrated on the financial aspects of the schools project, Heckman said the judge has not yet ruled on claims that LPCiminelli provided insufficient and misleading information to the school district on the hiring of women and minorities. “This will go before the appeals court, and they will decide. It’s not over until it’s over,” she said.

But the lead attorney for LPCiminelli said the judge’s ruling puts to rest the accusations.

Allegations “of profiteering, making excessive profits, breaching fiduciary duties, breaching the contract, illegally withholding information from the school board – all of them have now been dismissed in this case,” said Daniel C. Oliverio. “In addition to that, the district still owes Ciminelli $3.1 million, and the judge says there has been no reason shown why they should not pay it.”

The dispute over the Buffalo schools project is unrelated to federal bid-rigging charges against three top LPCiminelli executives for the contract on the SolarCity plant at RiverBend.

School Board Member Carl P. Paladino, who led the push for the Buffalo schools lawsuit and has accused the company of reaping unreasonably high profits, criticized the decision.

“LPCiminelli was not only our construction manager, but he was our representative on financing, hiring contractors and on all other issues. He is obligated under law to provide all the information we are entitled to,” Paladino said. “The judge ruled that LPCiminelli was not our agent … It’s crazy.”

The lawsuit

The school district filed its lawsuit against LPCiminelli in February, charging that the company withheld financial information as part of “a scheme to conceal the excessive profits it was pocketing.”

“This is a public project. This was funded with taxpayer dollars. There has to be accountability for how the money was spent,” Heckman said.

The district asked for release of all Ciminelli financial records on the project, explaining how more than $1.3 billion in taxpayer money was spent renovating 48 public schools. The lawsuit asked for unspecified financial damages, including repayment of all or some of LPCiminelli’s profits, in addition to punitive damages.

School district attorneys claimed that the Buffalo construction firm gave the district misleading information that “led the district to believe that” the company’s “costs were much higher than they actually were.”

If officials of the district had known how much profit LPCiminelli was making, they would have either fired LPCiminelli or demanded that more of the money be spent on renovations and less on LPCiminelli profits, the lawsuit contended.

The company has released some records to the school district, but has refused to release other information, saying it is proprietary information related to LPCiminelli’s business and profits. LPCiminelli has contended that the company turned over all the records required under its contract and that the complaints by board members Paladino and Larry Quinn were “overcharged rhetoric and political nonsense.”

“Carl has suggested that Ciminelli made $400 million in profits on the schools project. Absolutely not true,” Oliverio said.

Asked what LPCiminelli’s profit was on the project, Oliverio said: “I cannot tell you that, it is proprietary information…It was far less than $400 million.”

In an analysis of the school construction project last year, The News reported that – based on LPCiminelli documents available at the time – payments were made to contractors totaling $851 million, leaving roughly $549 million for project overhead and profit.

State legislation

State legislation authorizing the project established an arrangement in which a fixed price was established for each phase of renovations.

LPCiminelli said it assumed much of the financial risk for the project and was responsible for hiring subcontractors to do the work within the budgeted amount. Under the schools contract, money that was left over after the subcontractors were paid was given to LPCiminelli to cover overhead and profit.

“It is as if you agreed to pay a stipulated sum or $100,000 to build you a home,” Oliverio said. “If it costs the contractor way more than $100,000, or way less than that, $100,000 is the amount you pay. And you are entitled to the house that he agreed to build.”

But school district officials previously were not raising enough questions about the expenses, Paladino said Friday.

“Ciminelli was doing the cost estimating for the project,” Paladino said. “Nobody ever questioned them or did any kind of auditing … Overestimating was constant on this job and we did not get our bang for the buck.”

Oliverio disagreed.

“The state provided the funding for almost this entire project, not the city,” he said. “State architects and state auditors approved everything Ciminelli did, every step of the way. Over a period of more than ten years, 265 payments to Ciminelli were approved and processed because the work was done properly.”

Oliverio said LPCiminelli “provided the district with 48 beautiful, state of the art schools, and the company is proud of the work they did on this project.”

LPCiminelli has filed a notice of claim against the district, essentially reserving its right to sue the district for the last $3.1 million owed to the company.

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