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Mar. 25 UPDATED - 'Giusti Gate': Mayor Jackson states she did not approve $12,000 a month retainer for Atty. Peter Giusti on Batson-Cook lawsuit

'Giusti Gate' -  Why wasn't Mayor and Council on top of legal bills in the Batson-Cook case?

By Lou Phelps, Savannah Business Journal

UPDATED March 25, 2015, 4:34 pm. (Originally published Mon. Mar. 23, 2015)

The Savannah City Council held a special-called meeting Sunday night for executive session for the purpose of litigation.  Former City Attorney Jimmy Blackburn was in attendance, as well as all Aldermen, Mayor Edna Jackson and City Manager Stephanie Cutter.   

The Council had originally held an executive session on Thursday for litigation on what is now clear was to discuss the upcoming mediation ahead with Batson-Cook on its lawsuit against the City, but Blackburn had been unable to attend.    

“We needed to hear the other side of the story,” explained Alderman Tom Bordeaux, in an interview Monday, on why there was a need for a late night Sunday meeting. “It was the only time everyone was available – the reason for the Sunday night.” 

What has come to light after Sunday’s session is the morass and lack of management of the City’s representation on that case, as well as what is being spent to defend the case.  

In December 2013, the City Council approved using former City Attorney Jimmy Blackburn to oversee the legal case for no fee, according to Bordeaux. Current City Attorney Brooks Stillwell had to recuse himself as his former firm, Hunter McLean was a party to the suit.

Blackburn apparently agreed to pay former Asst. City Attorney Peter Giusti a $12,000 a month retainer to continue working on the case, even if there was no activity on the case in any particular month, which has now come to light.  Giusti was Asst. City Attorney under Blackburn’s administration of the City’s legal office.

Stillwell, who oversees the City’s subcontracted attorneys had originally agreed to pay Giusti only $1,200 a month to stay on the case, he stated in an interview Monday morning. Bills on the Batson-Cook case are submitted to the City Finance Director David Maxwell, not to Stillwell. “I’m completely out of that loop,” Stillwell states.

The lawsuit arose out of the discovery of “materially different site conditions,” as defined under the parties' contract.   Raito, Inc., a subcontractor on the Ellis Square parking garage project, filed an action against Batson–Cook Company, the firm the city hired to design and build the garage.  Batson–Cook then filed a third-party complaint against the city. 

But who has been aware of the $12,000 a month fee?  And, who is approving the monthly bills and issuing payment, is a question being asked by several of the Aldermen. 

 

In an interview Wednesday, Mayor Edna Jackson states emphatically that she did not authorize the $12,000 a month retainer, and was not informed about the arrangements that former City Attorney Jimmy Blackburn made with former Asst. City Atty. Peter Giusti.

 

“Jimmy Blackburn is my friend, and he has been for many years, but right is right. The $12,000 came to my attention from the City Manager, and we agreed that she would bring it to the Council,” said Jackson.

 

She stated that the former City Finance Director put the bill into the system before his departure.  Jackson had to step into another meeting, and committed to comment further at a later date.

Current City Finance Director David Maxwell has been unavailable for comment since Monday.

 City Manager Stephanie Cutter told the Aldermen that she was not aware of the $12,000 retainer, which then raises the question of who is looking at the City’s Accounts Payables, according to one Alderman.   Maxwell reports to Cutter.

The City has an approaching mediation session set with Batson-Cook and their representatives. The project went millions of dollars over budget due to cost overruns ultimately due to inaccurate soil sample work.

The City Aldermen, Mayor and City Manager are all stating that they were not aware of the $12,000 fee, but were only aware of the fees being paid to the Atlanta law firm on the case, billed by the hour for specific work, monthly. Bordeaux reports that the City has paid them over $800,000 in the past three years.

The Savannah Business Journal has attempted to interview Maxwell about whether the City Manager sees the monthly Accounts Payable billing run, or whether he was the only Senior Management person aware of the monthly payment to Giusti. SBJ has also filled an open records request for all emails and correspondence between Maxwell, the City Manager and Mayor Edna Jackson on the retainer.

“At some point that $1,200 had become $12,000 a month,” Bordeaux said today. “That information had not been brought to the council, and it should have been.  Ultimately, the City Council is hiring him, not the City Manager.” 

“Emails going back to June 2013 between Giusti, former City Attorney James Blackburn, and the city’s former Chief Financial Officer Dick Evans discuss the pay,” said Bordeaux, but it’s not clear who actually approves the compensation.

Bordeaux also confirmed today that Blackwell told them he has no documentation from Giusti on the work Giusti was doing on the case.

“I personally favor terminating that agreement,” states Bordeaux,“and hiring someone more qualified to represent us, even if we have to delay the mediation.” 

And, Bordeaux stated that it is the City Council’s responsibility to manage Blackburn on this matter, but that it had not been put on an agenda by Mayor Jackson, in his memory.

Bordeaux said that Blackburn has continued working on some cases that were not resolved following his retirement in 2012, “which I have no problem with. He is a very qualified attorney.” 

 

Giusti has issued the following statement to local media:

 

“When Mr. Blackburn, the City’s long-serving City Attorney and my mentor, retired and the City choseMr. Stillwell as his successor, I offered to remain employed with the City as Associate City Attorney. The City and I were not able to come to an agreement on the terms of my continued employment, so I decided to resign from the full time position. Due to my intimate familiarity with the multi-million dollar lawsuit concerning the cost of the Ellis Square Garage project, having been counsel for the City in the matter prior to the lawsuit and counsel of record since its filing, and because Mr. Stillwell has a conflict of interest, the City asked if I would remain it’s lawyer as part of the legal team representing it in the matter. I agreed to do so.  In negotiating what I would be paid, the City and I agreed on a flat fee based on an estimated 80 hours per month at $150 per hour, with the understanding that the case would take priority over my other work. I am not aware of who in the City was or was not consulted to approve of this arrangement.”

 

According to City spokesman Bret Bell, the Mayor is overseeing the relationship with Blackburn, not the City Manager.  Giusti’s bills are sent to the Asst. City Manager, who submits them to the Finance Dept. for payment. He states that the City Manager was not aware of the change in retainer to Guisti – from $1,200 to $12,000 a month – and is the one who brought this to the City Council’s attention.

 

Bell also states that the city is normally paying $175.00 to $200.00 an hour for legal work, and Blackburn viewed Giusti’s rate as a good deal.

 

The judgment of almost $19 million in the case was overturned in January, and both parties have now agreed to go to mediation.  What the City will ultimately pay to settle the case, or be ordered to pay by the Mediator, is unknown.  

Background on the Batson-Cook case against the City

According to Findlaw.com, the City of Savannah awarded the bid for a new underground parking garage at Ellis Square to Batson–Cook Company.  The Sept. 2005 contract included a guaranteed maximum price of $29,592,416 and a completion date of August 28, 2007.   The contract also included a “materially differing site conditions” clause, which provided that should Batson–Cook encounter site conditions that differed materially from the conditions indicated in the contract documents or from conditions ordinarily found to exist, the price of the contract would be adjusted.   The contract required the party observing the materially different condition to notify the other party within 21 days.

In Dec. 2004, prior to the execution of the contract, WPC, Inc., a local engineering firm the city had hired, prepared a preliminary soils report that analyzed four soil borings so that interested bidders could prepare cost proposals.   The borings indicated that the northeast corner of the site contained soft clay.   The contract entered between the city and Batson–Cook contemplated a second, more detailed soils report.   At the city's direction, Batson–Cook hired WPC to prepare the second report.   On Sept. 26, 2005, about two weeks after Batson–Cook and the city had entered their contract, WPC provided the second report.   The second report showed no additional soft clay.

Batson–Cook hired Raito, Inc. to design and install an excavation support system for the project.   After Raito began its work, it learned of additional soft clay at the site.   Accordingly, it had to revise its design.   Raito considered this to be a materially differing site condition, and so notified Batson–Cook on June 1, 2006.

Initially Batson–Cook denied that this was a materially differing site condition, but eventually it changed its opinion.   When it did, Batson–Cook sought from the city an adjustment in the contract price based on differing site conditions.   Because WPC's engineer disagreed that materially different site conditions existed, since both of its soil reports had identified soft clay at the site, the city denied Batson–Cook's claim.

On March 6, 2008, before the project was completed, Raito sued Batson–Cook in Troup County, Batson–Cook's corporate home, for $5.8 million.   Raito sought reimbursement for the extra costs it incurred in redesigning and constructing the support system because of the differing soil conditions.

Batson–Cook answered Raito's complaint and filed a third-party complaint against the city.   Batson–Cook sought to pass through Raito's damages, agreeing that if conditions at the site were materially different, then Raito was entitled to reimbursement but that the city should pay.   Batson–Cook also sought damages of its own.

The city answered Batson–Cook's complaint and filed a counterclaim against Batson–Cook. It alleged that Batson–Cook breached the contract and performance bond in unspecified ways.

The case was tried, and a jury returned a verdict in favor of Raito against Batson–Cook for $2,766,330 and for Batson–Cook against the city for $15,162,592 plus $2,009,620 in attorney fees and expenses.   The jury also found Batson–Cook owed the city $594,000 for project delay.   The city then filed an appeal.

And, the City took the case all the way to the State Supreme Court on the issue that the trial judge should have recused himself.  The City won that case, but that effectively means that the City is back at square one, according to Bordeaux.  The judgment was then overturned in January, based on the trial judge issue, bringing the City back to square one.

A mediation session is now agreed to by all parties, and is set for this Spring.  At issue is who will represent the City in that mediation.  Bordeaux is not in support of continuing retaining Atty. Peter Giusti.

Vendors used by the City of Savannah are public records.

Another Alderman's Perspective ... and anger

“It’s one thing when the fox has got to watch the hen’s; but when you have to worry about the other hens, too, that’s a problem,” said Alderman Tony Thomas on Monday, upset with this latest development in the management of the City government.

“Spending $12,000 a month that we didn’t know about is serious stuff, and for it to go on for two years....” he added.   

“I knew we had an Atlanta firm on the Batson case, and I knew about Blackburn.  The problem now becomes do we change horses mid-stream, with a huge mediation ahead?  But that doesn’t mean that we shouldn’t have public discussion about what we’re spending.”  

“My issue is following the proper procedures to pay someone.  What you have to worry about is where else is this happening, with other departments,” Thomas said.   

“I think it reflects very poorly on the City Manager and the Council. It’s not unfixable, but this City’s broken, and that goes from the top, down.  We can’t build anything in this city that doesn’t get screwed up.  Quite frankly, if you look at any element of this city, it’s broken,” Thomas continued.

“I’m tired of hearing how good we’re doing on this, and how good we’re doing on that.  I’m quite frankly concerned about the government of this City – the whole thing.  It suggests that there are internal problems.  I’m not as concerned about getting re-elected, as I am about having a city to live in after I’m gone from office,” he added.  “It makes us look like ‘Keystone Cops,’”

“I stand with Tom on this, in his concern about what we’ve paying… how this has been handled.  But where we may differ, is that I don’t think it’s the right time to shift lawyers.  We were hoodwinked, but we’re stuck with Giusti through the mediation.  But any monies paid from this point forward should be publicly disclosed,” Thomas added.

Thomas added that he also has questions about the operations of the City Attorney’s office, and that he has been “asking for a year about who we are hiring, and what we are paying. I am being stalled at every juncture, by the City Attorney and the City Manager.  Just tell us what you’re spending, and who you are hiring.”   

Stillwell said Monday afternoon that he is preparing a report on his department’s expenditures for the City Council, at their request.

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