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What Really Happened with Legal Services RFP Pulled by New Rochelle BOE?

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What Really Happened with Legal Services RFP Pulled by New Rochelle BOE?

December 02, 2018 - 20:16
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“Litany of Errors” pretext does not stand up to scrutiny.

NEW ROCHELLE, NY -- Despite repeated claims by leadership of the New Rochelle Board of Education that an RFP for Legal Services issued in October was pulled because it was “filled with errors” or had “a litany of errors”, a line-by-line analysis of changes between the RFP issued in October and a second RFP issued in November shows nothing of the sort.

School President Jeffrey Hastie and Vice President Amy Moselhi have repeatedly blamed unspecified errors in the October RFP for their decision to withdraw the RFP at an Executive Session School Board meeting on October 30th. The new RFP issued in November not only failed to correct a number of minor errors such as spelling and punctuation mistakes and left in place several “boilerplate” anachronisms but actually created inconsistent language in one of the few real changes to the RFP.

The only two substantive changes to the RFP — not errors — was to keep in place the current law firm even after the bid is awarded and, more significantly, place the winning bidder under the control of the Board President — not the Superintendent as has always been the case in New Rochelle. It appears this latter consideration — more power concentrated in the hands of the School Board President — was the primary motivation for pulling the RFP.

Up for grabs is a multi-million dollar contract as outside counsel for both the City School District of New Rochelle and the New Rochelle Board of Education. Jeff Kehl has held that lucrative position for 41 years through his current law firm, Bond, Schoeneck & King (BSK) and Kehl, Katzive & Simon (KKS), the firm he merged with BSK in 2014. Kehl’s firm has been without competition for decades while billing its “cash cow” client an estimated $30,000,000 to $40,000,000, in today’s dollars, starting in 1977.

The two substantive changes made to the RFP are as follows:

1. Under the October RFP, the law firm would report to the Superintendent whereas under the November RFP the law firm will report to the Board President.

2. Under the October RFP, Bond, Schoeneck & King would be replaced immediately whereas under the November RFP, Bond, Schoeneck & King would remain as outside counsel until June 30, 2019 (and beyond if they are the winning bidder).

Under New York State law, the Superintendent is the Chief Executive of a school district.  It is not common practice for outside counsel to report to the School Board President.

When asked about extending Bond, Schoeneck & King until June 30, 2019, a board member claimed the board was told it was required because BSK’s current contract ran until the end of 2018-19 school year. Told by who? The legal advisor to the District is Bond, Schoeneck & King, hardly a neutral observer to the RFP.

The Kehl agreement of 41 years might be described as a “no-bid contract” if there actually was a contract. It appears, so far, there is no contract. In response to a Freedom of Information request made several weeks ago seeking a copy of the current BSK contract, neither Board Clerk Liz Saraiva or BSK lawyers have been able to locate a contract with Kehl’s law firm, either with BSK going back to 2014 or KKS going back before that to 1977. Saraiva has provided years worth of letters signed by Kehl going back to 1999 asking the District to extend an agreement and board resolutions that describe extending an agreement but, so far, no actual agreement, no executed contract signed by both parties.

On Friday, Saraiva wrote:

“We are continuing to search our files to see if there is a contract/agreement with BSK, and I am also awaiting to hear from Sara Richmond, Esq., of Bond Schoeneck & King to see if they have a contract/agreement on file for legal services.”

One might believe that producing a contract worth tens of millions of dollars over the years could be found quite readily if it existed.

The lack of a BSK/KKS contract would have major implications for the T&M Protection Resources investigation as well. We have been asking school officials for weeks for an explanation as to why the District took the unusual step of outsourcing the hiring of T&M to BSK.  In responding to our FOIL request for the T&M contract, Saraiva answered a question we did not ask:

“Please find a copy of the executed agreement between Bond Schoeneck & King, PLLC and T&M Protection Resources, LLC, dated May 23, 2018. There is no signature by representative of our School District because the agreement was between BSK and T&M.”

This claim was asserted to explain why the District did not have invoices from T&M, a claim later proven to be false after Dr. Magda Parvey granted an appeal of our original FOIL request by turning over T&M invoices sent to former Schools Superintendent Dr. Brian Osborne in September.

Parvey’s delivery of the invoices prompted this question from Talk of the Sound:

“Why was I told that the District was not a party to the T&M contract despite all evidence to the contrary? I still fail to understand both why anyone would believe that the District was not a party to the T&M contract and, conversely, why BSK was and is a party to the T&M contract. The whole thing strikes me as flipped on its head - the District should have hired T&M directly and on its own and BSK could play a role advising the District under the contract between the District and BSK. I see no reason at all for BSK to be mentioned at all in the T&M contract. Can you explain that?”

On Friday, Parvey responded:

“The contract that you have received was entered into by the Bond Schoeneck & King and T&M on behalf of the School District. The contract operates for the benefit of the School District and is enforceable whether or not it is/was signed by Brian Osborne or any subsequent Superintendent or District officer.”

A review of the contract shows that T&M certainly expected a signature from a District officer. The contract contains a signature line to that effect.

What Parvey is asserting is that BSK is authorized to act as agent for the District and has the authority to bind the District even to an open-ended, six figure contract. She does not say on what basis BSK is authorized to act as agent and bind the District. This is troubling because by this logic, the District need not ever comply with New York State procurement law. They can skirt the law by having BSK hire vendors and pay BSK to pay the vendor invoices. This would appear to be a specious argument. It is more troubling because, it appears, there is no contract at all let alone a contract designating BSK as agent authorized to bind the District to a $100,000 contract, or any amount.

With all that said, let’s take a closer look at the two RFPs for legal services.

Overall, there are 30 changes from the October RFP to the November RFP. Of those 30 changes, 17 are minor changes required because the original RFP was pulled such as date changes and proposal ID numbers, 10 are wordsmithing changes or redundant points of emphasis, 2 are major changes and 1 is a meaningful error.

There are 8 minor errors that exist in both RFPs. 3 are the use of outdated information: referring to the water company as United Water of New Rochelle (now Suez), saying the only phone company is Verizon (there are now dozens of telecommunications providers available in New Rochelle), and includes the grounds garage (i.e. Cliff Street) on a list of district locations (the Cliff Street lease was terminated earlier this year). There are 4 spelling or punctuation errors: related/relates, meets/meet, Boston post Road/Boston Post Road, and a missing comma. There is one boilerplate error where the Conflict of Interest statement references “Chapter 112 Florida Statutes” when it should read “New York General Municipal Article 18”.

There are 10 wordsmithing changes or redundant points of emphasis that either make minor alterations to language without changing the meaning or redundantly expand on an a point already implied in the contract. 

An example of a wordsmithing change can be found on Page 6 where a sentence that read “Counsel must be available to give advice and consult with the Superintendent of School or his/her designees and the Board President” in the October RFP was edited to read “Counsel must be available to give advice and consult with the Board President and the Superintendent of School or his/her designees” in the November RFP. Reversing the words “Board President” and “Superintendent” in this sentence does not change the meaning of the sentence.

An example of redundantly expanding on an a point already implied in the contract can also be found on Page 6. The October RFP states that Counsel shall be able to attend school board meetings but the November RFP expands on that to add policy committee meetings which are meetings of the board. The law firm will happily send lawyers to every school play, football game or PTA meeting if the Board so directs because those would all be billable hours and would result in a hefty fee paid to the firm.

There is nothing “wrong” with any of these 10 changes, they are neither right nor wrong, but they are not “errors”, they are just different ways of saying the same thing. They are the sort of changes one gets any time a lawyer is asked to review a document; any lawyer handed a document will instinctively pick up a pen and start making edits. If you hand a lawyer the Declaration of Independence he or she would mark it up to “improve” the document.

None of these typos or anachronisms or wordsmithing edits or redundancies are “errors” that necessitated pulling the RFP.

Ironically, for a board so concerned with “errors”, there is one failure to change the December RFP to match one of the two major changes from the November RFP. As noted, one of two major changes in the December RFP is to extend BSK until the end of the current school year. Having made that change it becomes necessary to change the sentence in the first paragraph on Page 3 which reads “The initial contract period will be from Board of Education approval through June 30, 2019.” That should now read “The initial contract period will be from July 1, 2019 to June 30, 2020.”

In the end, there is only one even remotely meaningful error of fact in the October RFP.

On Page 11, the last line reads “The City School District of New Rochelle conducted an average of zero (0) Special Education Impartial Hearings per year over the past five years.”

Under a Freedom of Information request, Talk of the Sound obtained records from the New York State Education Department Impartial Hearing Reporting System which showed the following number of Impartial Hearing during each of the last 5 school years:

2013-14: 5

2014-15: 9

2015-16: 6

2016-17: 3

2017-18: 6

TOTAL = 29

Over the last 5 school years there has been on average of 5.8 Impartial Hearings.

The November RFP now reads “The City School District of New Rochelle conducted an average of six (6) Special Education Impartial Hearings per year over the past five years.”

We did a little checking. We asked a board member, off the record, about their claim that the October RFP was pulled because it was “full of errors”. Asked to describe a few of them only one was offered, that the October RFP said there were zero Impartial Hearings per year when there were actually 6. Pressed for more, no more “errors” were offered. Asked who had complained of the supposed errors, the board member said Rachel Relkin provided a “litany of errors” and then added that Liz Saraiva had identified errors to the board. We do not credit that last remark. It is simply not plausible that Liz Saraiva would sit in an Executive Session board meeting and offer a critique of an RFP. Regardless, there was no “litany of errors”, just the one. We made further inquiries as to how the figure of zero Impartial Hearings ended up in the October RFP and was told the source was Dr. Amy Goodman, Assistant Superintendent of Student Support Services; she provided that figure to the Purchasing Department.

In any event, an Impartial Hearing is typically a few hours of billable work so the monetary difference between 0 and 6 is perhaps $10,000 annually on a multi-million dollar contract, even less meaningful if the contract includes a retainer plus hours over a pre-determined amount so the law firm will be paid for that work.

All but three of the changes in the RFP are substantive changes: the law firm now reports to the Board President, BSK will be retained for the rest of the school year and there are 6 Impartial Hearings a year.

Any and all of these changes could have been made via an addendum, a common practice to alter an RFP once it has been issued. There was plenty of time to do so because the “litany of errors” board meeting took place on October 30th. The RFP Reply Date for the October RFP, the date by which law firms were to notify the District of their intent to bid, was October 31st. As few, if any, of the prospective bidders had begun work on their bids, and the changes ultimately made to the October RFP would have no impact on the bids whatsoever (what difference would it make in pricing out a bid whether the law firm reported to the Superintendent or Board President or whether there were zero or six Impartial Hearings a year — a few hours of work on a very large contract that would be billed for in any event?).

It is worth noting the school board initially ordered up an RFP for Legal Services in early July. There was ample time for the board to direct that the RFP be written to have the law firm report to the Board President. They never asked.

There is absolutely no legal requirement that BSK be retained as legal counsel until the end of the school year once the bid is awarded (likely to be in late January). Professional services contracts can be terminated at any time unless specified in a contract (often 60 days notice). As there is no BSK contract there is not even a required notification period. Not only was it not necessary to change this in the RFP, in doing so the District is affording a benefit of 5 extra months of work worth about $200,000 that BSK would otherwise not be entitled to receive.

The New Rochelle Board of Education has had far too cozy a relationship with Jeff Kehl for far too long.

School districts in New York State are not required to purchase professional services through a competitive bidding process. New York State law requires that every local government and school district adopt its own policies and procedures for procurements of goods and services not required by law to be competitively bid. The District, which relies on Kehl for such things, has had no such policy. 

Professional services companies like Bond, Schoeneck & King/Kehl, Katzive & Simon and ServiceMaster/Aramark have remained ensconced in the District for decades without competitive bidding; Aramark starting in 1986 and Kehl in 1977.

This sort of chummy connection rarely serves the interests of the taxpayer which is why the Office of the State Comptroller of New York State has been recommending since a 2008 audit that the New Rochelle Board of Education put their legal services contract out for bid.

In 2017, John Gallagher of Aramark was indicted on federal bribery and kickback charges, four years after Robert Cox met  with federal prosecutors to make them aware of rampant corruption in New Rochelle. Gallagher pled guilty and was sentenced to 37 months in federal prison earlier this year.

Kehl was a staunch defender of John Gallagher, Aramark’s senior consultant in New Rochelle for many years.  Despite a well-documented (by Talk of the Sound) history of corruption, Jeff Kehl was a major obstacle to removing Aramark.

In 2012, when a majority of board members were convinced (by this author) to get rid of Gallagher by replacing Aramark, Kehl pushed the board to delay an RFP for facilities management services for a year.  A mysterious board resolution in which Kehl may well have played a role would have put Gallagher on the District payroll (a violation of the Aramark contract) days before a deadline to qualify employees for a more lucrative New York State pension, a maneuver that only makes sense if there was a plan to circumvent the will of the board by hiring Gallagher as a District employee if the Aramark contract was terminated.

When an RFP was finally prepared in 2013, Kehl was involved crafting language that so heavily favored Aramark that only Aramark bid. In 2014, Kehl stonewalled efforts by Talk of the Sound to obtain a copy of the resulting contract under a Freedom of Information request, telling Interim Superintendent Dr. Jeffrey Korostoff that the District was not required to comply with the FOIL request on the bogus pretext that publisher Robert Cox had once refused to pay a falsified 2009 invoice for under $300 for records never provided to Cox (between 2009 and 2010, Kehl and then-Board President Sara Richmond repeatedly lied to other board members about the bogus invoice. In 2010, Richmond left her position as Board President, joined Kehl’s law firm then lied about how she would deal with the inevitable conflicts of interest sure to arise given her five years as a trustee of her new client.

Korostoff personally reviewed the 2009 invoice in early 2014, immediately realized Kehl had lied to him, and authorized the release of the contract. Neither Kehl nor then-Assistant Superintendent for Business & Administration John Quinn were able to produce the contract, one which Quinn had purported to read from at a June 2013 board meeting. Korostoff acknowledged there was no contract. An actual contract was not put in place until 2015, by which time Dr. Brian Osborne was the Schools Superintendent and Jeff White was Assistant Superintendent for Business & Administration. In April of 2016, White terminated the Aramark contract and built an in-house team under Facilities Director Carl Thurnau.

Back in 2014, Korostoff asked Kehl to draft a letter to Aramark notifying the company that the District was exercising its option on the preceding 1986 contract to immediately replace any Aramark consultants working in the District without providing a reason. Kehl refused to draft such a letter to Aramark on the nonsensical grounds that since there was no contract Korostoff could not remove Gallagher. Ultimately, Korostoff simply called Aramark Vice President Steve Weiser, negotiated the removal of Gallagher on his own, and effectively forced Kehl’s hand so that Gallagher departed the District in September 2014.

The man Kehl so vigorously protected, now known as Prisoner 75799-067, currently resides at the United States Penitentiary in Lewisburg, PA where visiting hours are from 8 a.m. to 3 p.m. on weekends and holidays. Gallagher is expected to remain incarcerated in federal prison until December 5, 2020.

As Kehl had protected his friends at the Board of Ed, his friends have protected him.

In June, BSK lawyers were allegedly involved in a serious breach of client confidentiality that could result in sanctions and possibly disbarment. It was certainly grounds for terminating BSK.

In June, Talk of the Sound learned months ago, Facilities Director Carl Thurnau sent an email to BSK seeking advice on how to deal with the fact that William Coleman, the Plant Supervisor at Isaac E. Young Middle School, was only working 60% of his day at the school. Coleman, promoted to Executive Vice President of F.U.S.E., the union representing the District’s pedagogical staff and service related professionals, is entitled to work 40% of his day on union business. Within an hour F.U.S.E. President Martin Daly was at City Hall pushing back on the points raised by Thurnau’s email to BSK lawyer Craig Oliva. Thurnau was deeply distressed that a confidential employee memo would have been shared by BSK with F.U.S.E.

BSK represents the District not F.U.S.E. and ostensibly sits on the other side of the bargaining table during Labor negotiations. According to the RFP for Legal Services, the F.U.S.E. contract is currently being negotiated between BSK and F.U.S.E. 

Soon after Daly left Thurnau received an email from BSK which contained unmistakable indications that the email had been cobbled together by cutting and pasting text from multiple documents. In the email, BSK put forward a point by point rebuttal of Thurnau’s concerns that appeared derived from the points Daly had just raised at City Hall.

Thurnau believes that BSK leaked his confidential employee memo to F.U.S.E. and that BSK collaborated with F.U.S.E. on the response sent by Craig Oliva to Carl Thurnau. If true, this would be a grotesque violation of client confidentiality and employee confidentiality by BSK.

The matter was referred to Schools Superintendent Dr. Brian Osborne and then-School Board President Rachel Relkin.

Three board members have since claimed to have no knowledge of the incident until Talk of the Sound began making inquiries in September. That would mean that Rachel Relkin, a lawyer,  withheld a report of a significant ethical violation bordering on malfeasance from her fellow board members while they were actively discussing whether or not to issue an RFP for Legal Services over the last 5 months.

Relkin’s apparent failure to disclose ethical violations by BSK and her apparent role in delaying the legal services RFP by showing up at a board meeting with a list of supposed “errors” raise serious questions about her intentions.

The board has stonewalled since 2010 on putting in a place a policy to prevent board members from leaving the board to either take a job with the District or a District vendor. If the board wants any credibility on these sort of conflicts of interests they need to act now to prevent another Sara Richmond situation where board members can be acting on recommendations by Jeff Kehl that benefit Jeff Kehl one day and working for Kehl the next. They ought to act immediately before another board member seeks to leverage their position to feather their own nest.

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