New Rochelle School District Stonewalling on Additional Conflict of Interest Disclosure Forms for Current and Past Board Presidents

Written By: Robert Cox

Lacher Merchant

NEW ROCHELLE, NY — Apparently we struck a never after obtaining copies of audit disclosure documents signed by members of the New Rochelle Board of Education for the 2013-14 fiscal year under a recent Freedom of Information request. In the District’s response to our request for additional records the District demands Talk of the Sound pay $895 for what amounts to a 54 page PDF file or $16.57 per page. The statutory limit in New York for paper records is 25 cents per page; electronic records are free.

Based on the most recent disclosure forms for the 2013-14 fiscal year, signed over the summer, we were able to report that New Rochelle Board of Education President Lianne Merchant failed to disclose that an LLC she owns with her husband owes more than $25,000 in back school taxes and penalties and that former New Rochelle Board of Education President David Lacher made a material false statement to District auditors regarding his $13,500 debt for unpaid medical insurance premiums.

The back taxes owed by Merchant’s LLC date back to April 2013 and Lacher’s unpaid medical insurance goes back to August 2012 making the disclosure forms for the 2012-13 fiscal year of special interest — they are being withheld based on a spurious claim that a partner at their external auditor has to personally “going through” and “review” these records and charges $290/hour for this service.

In order to investigate both board members, we requested “Related Party Questionnaire” documents for all board members as far back as they are available. The District responded by indicating that the oldest records go back to 2008-2009, sending the “Related Party Questionnaire” documents for the 2011-12 fiscal year and claiming it would cost $895 to obtain the records we have sought under our Freedom of Information request.

In other words, the District was able to produce under this FOIL request, at no charge and without delay, disclosure forms for 2011-12, a period which ends on June 30, 2012, but cannot produce the more recent disclosure form for 2012-13 when Lacher owed the District thousands in unpaid medical insurance bills, which began in August, 2012, and cannot produce the disclosure form from last year when Merchant’s LLC had unpaid school district taxes.

The District auditors are the firm of O’Connor, Davies which does accounting work for many of the regions school districts, municipal governments and non-profits.

The District claims to have received the following message from O’Connor, Davies:

The following represents the costs of providing the information in the FOIL requests that you asked me to get for you:

1) Senior Accountant to go through 2008/09 and 2009/10 hard copy files delivered from offsite storage facility to locate specific documents and make copy of said documents for Partner review – 2 hours @ $155/hour* = $310

2) Partner going through electronic copies of the 2010/11, 2011/12 and 2013/14 files and forwarding those onto the school and review of 2008/09 and 2009/10 storage documents per Firm’s policy – 1.5 hours @ $290/hour*= $435

3) Warehouse Charges to pull audit boxes from 2008/09 and 2009/10 and restocking charges when returned – $150.

4) * discounted 20% from our standard hourly rates.

Therefore, total cost for this request is $895.

Let me know how you would like to proceed.

This statement attributed to O’Connor, Davies raises quite a few questions, among them:

1. What sort of Conflict of Interest policy does the New Rochelle Board of Education have that does not require them to keep audit records themselves? Why would O’Connor, Davies have agreed to be there external auditor without such a policy in place?

Clearly, O’Connor, Davies would require the New Rochelle Board of Education to have a Conflict of Interest policy and would require the District to maintain records of their own audits. The SCHOOL DISTRICT OFFICER AND EMPLOYEE CODE OF ETHICS 4150 references “Disclosure of interest in matters before the School District or Board of Education” (we have since filed another Freedom of Information request for all disclosures made under this policy going back to July 1, 2008).

2. Why does the District have the 2011-12 and 2013-14 audit disclosure forms or “Related Party Questionnaires” on hand and available but not the others?

In case you have not figured it out yet, the District is stonewalling for a reason and we would surmise the reason is that the Lianne Merchant and David Lacher both checked “no” on the 2012/13 disclosure forms which would be a material false statement. The bigger question is whether the District has notified O’Connor, Davies that two of their board members are alleged to have made material false statements in their disclosure forms for 2013/14 and that this may be true for 2012/13 as well. I would add that we suspect there are an additional 3 current and past board members who made material false statements in their disclosure forms.

3. Why would O’Connor, Davies charge $435 to pull and “review” electronic records? Why would a partner or senior accountant need to review the District’s own records before providing those records to the District? Why not a clerk?

4. When did O’Connor, Davies convert to electronic records? Why does O’Connor, Davies only have electronic records of District audits going back to 2010? What sort of accounting firm was operating a paper-based system in 2010?

5. Why would O’Connor, Davies participate in what appears to be a scheme by the District to discourage Talk of the Sound from obtaining the disclosure forms by charging an exorbitant rate? There are 9 board members, the disclosure forms are one page long, the period in question is 6 years or 9 x 1 x 6 = 54. At $895 for 54 pages that comes out to $16.57 per page of a PDF document when the law caps that rate at 25 cents per page for a paper document (PDF documents are free under FOIL in New York).

The District and their auditors acknowledge that there are electronic records readily available for 2010/11, 2011/12 and 2013/14. They skip entirely 2012/13 without explanation.

Under the New York State Freedom of Information Law, an agency like the City School District of New Rochelle cannot charge any fee for electronic records or their transmission if done via email attachments, as we requested. Therefore the cost of the 2010/11, 2011/12, 2012/13 and 2013/14 records and the cost of delivery of the records should be zero.

In fact, the District has already sent the 2011/12 and 2013/14 — at no charge.

Under the New York State Freedom of Information Law, an agency like the City School District of New Rochelle cannot charge any fee for the preparation of records to comply with a FOIL request unless the time involved takes more than two hours.

O’Connor, Davies has advised the District it will take 1.5 hours for the electronic copies for 2010/11, 2011/12 and 2013/14 to be gone through, reviewed and forwarded. They leave out 2012/13 and we already have 2011/12 and 2013/14. As the time does not exceed 2 hours the fee charged for preparing the records should be zero.

We sought an opinion from Robert Freeman of the New York State Committee on Open Government who concurred.

“No fee can be charged for searching for documents or reviewing them to determine which portions are available under FOIL or which may be withheld,” said Freeman. “The only instance in which an hourly rate for labor can be assessed would involve the need to use two hours or more to ‘prepare’ records. It appears that the records sought have been ‘prepared’.”

We have now asked the District produce the records for 2010/11 and 2012/13 immediately and will revisit the issue of the records they claim are in storage after we have all the records they acknowledge are available in electronic form.