Education

Contractor asks Fresno Unified to join in fight to recover $37 million from leaseback deal

Gaston Middle School is at the center of a controversy involving construction deals by Fresno Unified School District.
Gaston Middle School is at the center of a controversy involving construction deals by Fresno Unified School District. jwalker@fresnobee.com

The contractor who took Fresno Unified School District to court over a no-bid construction project is now asking school district officials to join him instead of fight him – a move he says could result in the district recovering $37 million.

Fresno contractor Stephen Davis sent a letter to Fresno Unified trustees last week asking them to join in his efforts to make Harris Construction pay back the money the firm was paid to build Gaston Middle School in 2012.

“I am hopeful that you will consider my request and stop wasting taxpayer dollars opposing my action,” Davis wrote in the letter.

Davis alleges that the “lease-leaseback” contract Fresno Unified signed with Harris Construction is illegal.

The 5th District Court of Appeal said in June that the contract was not a genuine “lease-leaseback” agreement even though it was labeled as such. Leaseback agreements were designed to allow cash-strapped districts to build schools by going outside of the traditional competitive bidding process and pick consultants who will front the cost of a project and be repaid over time. But Fresno Unified had the money to pay for the project, and the court said it used the leaseback method improperly.

This is not the first time Davis has invited the school board to join his side.

I can appreciate that it’s difficult for the district to join with us in recovering the money they are legally entitled to because it would be an admission on their part that they should have never paid the money in the first place.

Kevin Carlin, attorney for Stephen Davis

Kevin Carlin, the San Diego-based attorney representing Davis, said all efforts so far have been ignored.

“We don’t yet know whether the district is going to join with us or not. I can appreciate that it’s difficult for the district to join with us in recovering the money they are legally entitled to because it would be an admission on their part that they should have never paid the money in the first place,” Carlin said. “However, as trustees of the district they have an ethical and legal obligation to do what’s in the best interest of the district and its taxpayers.”

Carlin points to Miller v. McKinnon, a case from 1942 that said contractors are required to pay back all money received from a public entity under an illegal contract.

But why wouldn’t the school district want the money and, in theory, a free school?

“It’s much more complicated than that,” said Donald Fischbach, an attorney from Fresno-based Dowling Aaron who is representing the district in the case. “We have not made a decision on what we’re going to do, but it’s not that clear cut. It’s not as easy as Mr. Carlin would believe it to be. He thinks the law is very clear and very direct and we disagree. There are options, and a lot of factors, including what Harris’ position might be.”

Fischbach would not elaborate on what options Fresno Unified is exploring, saying, “that’s up for the board to decide.”

“This is being watched everywhere in the state of California – not only school boards but also institutional contractors,” he said. “There’s a lot of impact.”

Davis and Fresno Unified are headed back to Fresno County Superior Court, after the state Supreme Court refused to take up the 5th District opinion.

Mackenzie Mays: 559-441-6412, @MackenzieMays

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