Chronicle: Proviso D209 Board Never Approved $7 Million Fire Repair Bills, Say Lawyers

ProvisoEastFriday, May 6, 2016 || Originally Published: Cook County Chronicle || By Jean Lotus and Bill Dwyer

A lawsuit against the Proviso Township High School District 209 School Board contains evidence that both the current school superintendent and the former board president signed a multi-million dollar building repairs contract without the knowledge or formal approval of the school board.

The district hired Franklin Park-based Restore Construction to clean up and renovate after a three-alarm electrical fire damaged 10 rooms of Proviso East High School at 807 N. First Ave. in Maywood on May 10, 2014. Almost a year later, the work was still not complete. Restore stopped work in April, 2015 after the school district’s insurance company raised questions about billing for the work.

Restore, run by brothers Patrick and Michael Santoro, has numerous political connections, including to former D209 Board President Emanuel “Chris” Welch and Melrose Park Mayor Ron Serpico.

Contained in the lawsuit filings are documents from the insurer, which alleges Restore engaged in “bait-and-switch” conduct with “the clear intent” of misleading the insurer on amounts billed for their restoration work.

Documents show the contract for fire remediation, labeled with the hand-written word “Emergency” at the top, was signed in haste within days of the fire. District 209 Superintendent Nettie Collins-Hart and Chief Financial Officer Todd Drafall retained Restore without any approval by the school board.

Dan Adams, who was board president in May 2014 at the time of the fire, subsequently signed an amendment to the contract on Aug. 12, giving Restore wide latitude in dealing with the insurance company. That action, despite being taken nine weeks after the fire, was also undertaken without either the knowledge or approval of the school board.

School board presidents have no legal authority to authorize large payments on behalf of a school district without a formal vote by the school board, according to Illinois school law.

Further compounding the district’s current problems, no surety bond was acquired for the reconstruction work, leaving the district liable for any additional charges. The district could well find itself on the hook for $1.86 million plus interest.

Restore filed suit last October against District 209 and the insurance company for breach of contract. The suit names Adams, Collins-Hart, Business Manager Drafall, and Principal Tony Valente individually for simple fraud and breach of contract.

Attorneys for the school district have responded that the contract imposes no legal liabilities on D209 because Collins-Hart had no legal authority to enter into contracts over $25,000, and Adams had no personal authority to sign any documents without the express approval of the school board as a whole.

On Aug. 12, Adams on his own approved the district to not only pay Restore any amounts the insurance company might refuse to pay, but also pay Restore’s legal bills in case of a lawsuit. The amended contract also granted Restore power of attorney, allowing the contractor to act in the stead of district administrators “with respect to signing, approving, authorizing and endorsing” various documents “necessary to satisfy Contractor’s claim for payment …”

Restore contends that work it did was conducted on an emergency basis due to the need to re-open the building for the 2014-15 school year.

Traveler’s Indemnity Company, the school district’s insurer, which paid out more than $5.5 million to Restore, accused the company of engaging in “bait and switch” billing and using a significantly higher pay standard for workers than it had agreed to in negotiations. The Insurance company alleges Restore agreed to “prevailing industry wages” but then billed using “Prevailing Wage” pay rates routinely adopted by most governmental entities.

Traveler’s attorney, Matthew S. Ponzi, alleged that during a July 8, 2014 teleconference, Restore gave a repair cost estimate of $4.2 million. That cost would balloon to more than $7 million.

“The rates charged by Restore’s field labor and project management team have not been agreed to,” Ponzi wrote in a memo.

In June 2015, after work stopped, Restore Carpentry Foreman Steve Searle told the school board in public comments that labor costs were high because the only way to get quality workers was to pay prevailing union wage.

“We solicited bids from firms that were not union, that did not pay prevailing wages, but those firms were not able to respond with resources necessary to complete a fast-track project,” Searle told the board.

Searle also said Restore had turned in all paperwork for subcontractors, but still the insurance company had stopped payment.

But in the lawsuit, a third-party administrator, Madsen, Kneppers & Associates, (MKA) conducted an audit of Restore’s payment submissions and found them to be incomplete.

Some subcontractors named in Restore’s paperwork were not union shops. MKA found instances where sub-contractors’ liens indicated they had been paid tens of thousands of dollars less than Restore billed the district for their work.

MKA also stated that a previously agreed to 6 percent overhead and 6 percent profit margin were raised to 10 percent each without any discussion with the insurer.

The Santoro brothers, and their companies Restore Construction and Restore Restoration have donated heavily to local political figures. That includes $10,334 to Chris Welch since February 2012. Over the last 11 years the firm has also given $16,000 to Melrose Park mayor Ron Serpico and $39,595 to Cicero Town President Larry Dominick.

In the April 2105 elections, Restore also donated thousands to several Cook County school board race campaigns alongside D209’s former law firm, Del Galdo Law Group. VFP

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