In December 2004, several MSD employees were laid off after raising concerns about alleged political patronage. This week their whistleblower lawsuit is going to trial, and the outcome could answer this question: Is governmental ethics an oxymoron?
This is a story about dirt.
In a small sense, it is about the proper and improper moving of fill dirt in the capital projects of a public agency, and who falls under the rules governing such things. In the larger view, it concerns the figurative tossing of dirt: Who is entitled to know when a government agency — or if a government agency — is violating its own rules of conduct? When employees of Louisville’s public agencies blow the whistle on what they consider to be misconduct, are they destined to lose their jobs? Conversely, is there a proper mechanism in place to prevent the agency from losing face to an overzealous employee?
The first testimony came in a federal courtroom yesterday of a lawsuit that could bring to light acts of alleged malfeasance on the part of the Metropolitan Sewer District, a quasi-public agency responsible for Louisville’s sewer systems. Four employees, laid off on the same date in late 2004, sued their former employer because they thought the layoffs were in retaliation for blowing the whistle on several instances of malfeasance — in this case, alleged favors from MSD for a Metro Councilman, his legislative aide and an MSD Board member. In court filings, the MSD officials named deny any wrongdoing. In an interview last week, the Metro Councilman and his legislative aide called the whole thing a conspiracy to help a former political opponent.
Meanwhile, a complaint similar to the suit in federal court has been before the Metro Ethics Commission since November 2004, and the body has failed to act meaningfully to this date. Its stagnancy suggests serious doubt as to whether the Commission, established by the Metro Council to enforce the ethics and conduct rules for public employees, is instead an ineffectual caucus more concerned with who may accept free tickets to a sporting event than whether a political figure has received favors from a public agency.
Aside from defending itself against the former employees’ suit, MSD also sued the Commission in an attempt to keep it from investigating the claims. As of November, the agency had spent more than a quarter of a million dollars of ratepayer money on the two cases, according to documents obtained by LEO through open records requests.
All of this for what? Both the complaint to the Ethics Commission and the lawsuit against MSD allege a pattern of deference to officeholders and people of influence on the part of MSD, one that amounts to a misuse of public resources and an abuse of power. MSD says the former workers are disgruntled, and that one had planned her exit from the agency in advance, trying to get a buyout.
If the court rules in favor of the former employees, it’s damn ugly for all public officials involved, and will most assuredly be the first in a series of censures likely to culminate in something far nastier than bad press. If the court rules in MSD’s favor, it will reveal a system that protects public agencies from what some have argued is a group of disgruntled employees.
The stakes, it appears, are quite high.
Allegations of indiscretion
Sarah Lynn Cunningham worked at MSD for 14 years. An engineer and a stickler, she had always been outspoken, according to court records obtained by LEO, as well as a former co-worker. (Cunningham declined to be interviewed for this story, citing the ongoing legal matters.) As a part of MSD’s executive office, she reported directly to Bud Schardein, the agency’s executive director.
According to records in the court files and various other public documents, it was April 1, 2004 that Cunningham first approached Schardein with word of potential indiscretions on the part of an MSD Board member, a Metro Councilman and his legislative aide. She had heard weird rumors from co-workers about the possibility of political patronage on capital projects.
On May 6, 2004, Cunningham and a team conducted an audit of an MSD capital project at Valley Village and Castle Road, in South Louisville. Ronald Barber, a contractor for MSD for 12 years through his employer, Rangaswamy & Associates, had been working the project for the agency since August 2003. He was among those who passed information to Cunningham about a situation there that seemed amiss.
Certain things are typical of an MSD worksite, things of which the general public may be unaware: A “flag lot” is a plot of land MSD contractors use to store equipment and fill dirt, the result of an agreement typically facilitated by the contractor and a nearby landowner. Fill dirt is soil that’s removed for a reason — in this case, by MSD to lay sewer lines. Once the pipes are laid, the displaced dirt must go somewhere. The contractor can do whatever he or she wants with the dirt that will not be refilled, so long as proper permits are acquired from MSD; typically, contractors will work with nearby landowners to disperse dirt.
When she arrived at the Valley Village and Castle Road project that Thursday, Cunningham found pools of stagnant water containing mosquito larvae on the flag lot down the street. Larry Mattingly, legislative aide to Metro Councilman Bob Henderson, D-14, owns the five-acre swath, which is in District 14. Mattingly said in an interview last week that the lot needed fill dirt; it consistently held water and neighbors had even called the Health Department to complain about it.
According to his deposition, the contractor Barber had already reported to Cunningham that he suspected malfeasance — he thought Mattingly was getting the fill dirt because of favors being granted to him, Henderson and MSD Board member William Gray by MSD. At that point, Mattingly had not obtained a proper permit to house the fill dirt, nor was silt fencing — required to contain sediment — on site. When Mattingly was asked to get a permit, he — along with Henderson and Gray — allegedly threatened Barber’s job, according to Barber’s deposition.
A brief filed by the attorney for the former employees details the situation: “Barber told Mattingly, who apparently wanted to receive dirt on property he owned, that anyone receiving more than two loads of dirt would first have to obtain a fill permit. Mattingly nevertheless told Reynolds to dump fill dirt on his site. And Barber learned that, despite his repeated instructions to Reynolds, Reynolds was hauling dirt to non-permitted sites, including property owned by Mattingly and Henderson. Henderson obtained more than two loads of dirt without a fill permit and Mattingly received ‘probably hundreds’ of truckloads.” Fill dirt may seem rather inconsequential, but on the open market it can cost at least $25 to load a pickup truck.
In separate phone interviews last week, Mattingly and Henderson denied this series of events, which is consistent with pre-trial testimony both have given.
“At the time I asked the inspector, do I have to have a permit for this?” Mattingly said. “And I told him what I did, I said I work in the government, I don’t want to have no problems here. The contractor told me I didn’t have to have nothing, but I said I need to talk to MSD before I do that. said you don’t have to get a permit.”
Henderson said he never directly threatened Barber’s job. Instead, he said he told MSD supervisor Thomas Williams that “anybody who would do something like this, we don’t need them. We don’t need them working for any part of our government. And you know what? I still say that. I haven’t backed off from that. We don’t need people that are determined to throw the damned monkey wrench in a job. In other words, he could’ve called, got the permit — by the way, went on, so somebody must’ve given the number.”
That somebody was MSD Board member Gray, Cunningham alleges, who she said obtained permits — by virtue of his position — for this and other jobs, without the proper paperwork. Mattingly acknowledged that when he finally went to MSD to apply for a permit for his flag lot, Gray showed up and “wanted to show his muscle, I guess.”
Barber testified that he kept in his daily logs records of what transpired. He later went to his MSD supervisor, Frank Walker, with this and other “ethical issues,” as he saw them, as well as to Williams, who was Walker’s supervisor and also an initial co-plaintiff in the lawsuit against MSD (he, along with Steven Brooks, dropped out before the trial began). Williams would later say in a deposition that he and his staff felt threatened by those involved.
The next day, according to a court brief, Cunningham approached Schardein to report what she’d witnessed at the Valley Village site and been told about several others, all of which involved the same group of people — Henderson, Mattingly and Gray. Schardein asked for a detailed memo of the allegations that named those involved, something Cunningham had not done up to then, for fear of retribution at the office. Schardein told Cunningham he’d address the issues the following Monday morning, May 10.
Complaint to the Attorney General
Cunningham sent a complaint to Attorney General Greg Stumbo’s office roughly two weeks later, on May 24. In court documents, she said she went to the AG because, after approaching Schardein three times with information of what she considered possible violations of the agency’s ethics code, Schardein had yet to respond to her allegations.
The complaint, which LEO obtained, cites six “suspicions of ethical transgressions,” including the issue of the fill dirt on the Valley Village and Castle Road project. All of them involve some combination of Gray, Henderson and Mattingly.
At least two other claims listed in the complaint involve the alleged improper dissemination of fill dirt. Two others refer to churches receiving special treatment from MSD — one where Gray was a trustee and the other where Henderson is a member.
Another is the case of Cemex, a cement manufacturer in South Louisville, also in Henderson’s district. Cunningham said MSD agreed to pave a portion of an access road the company uses — it had become an issue for the company, as its trucks were kicking up egregious amounts of dirt and dust, enough for the Air Pollution Control District to level a fine. The complaint cited a May 7 meeting of Cemex, Air Pollution Control District, MSD and Metro Public Works in which Henderson allegedly tried to broker a deal to get Metro Government to pave the road.
In a phone interview last week, Henderson admitted trying to get Metro Government to pave the road, or at least part of it, because he said Metro agencies often use it, a claim that at least one former MSD employee denied.
Contrary to what the complaint alleges, Henderson said no one from a public agency agreed to pave it. Ultimately, he said, Cemex paved the road.
Dave Johnson, formerly the director of maintenance at MSD who was laid off in the group with Cunningham, was at two of the meetings on the Cemex road. He said in a phone interview last week that, outside one of the meetings, Henderson and Mattingly both made comments to him that were “meant to intimidate.”
“ made comments that we need to know where our bread is buttered, we need to know how to deal with the Council people,” Johnson said. “Basically, go along with the program. The insinuation was that if we didn’t, there would be problems.”
In separate phone interviews, Henderson and Mattingly denied threatening anyone in that manner.
Henderson claimed that all this is evidence of a political conspiracy against him, to support a former opponent who used some of these allegations against him in a 2004 race.
“You could see it was a conspiracy, because whoever was with MSD … was at that meeting, he evidently run right and told Cunningham ‘look what they’re doing,’ you know,” he said.
Henderson alleged in an interview that the conspiracy involves Cunningham and Barber, as well as a landowner in South Louisville who was receiving fill dirt from the Valley Village and Castle Road project, and Diane Newton, Henderson’s former opponent, who he claimed also has ties to the landowner. He said the conspiracy is still going on, and that the complaint Cunningham took out against him with the Metro Ethics Commission on Nov. 22, 2004 — which remains unresolved — was filed solely in an effort to oust him from office.
Cunningham demoted after reporting possible indiscretions
On that Monday morning, May 10, Schardein and Cunningham — among others — had a meeting to discuss her allegations. According to a brief filed by MSD’s attorney, Cunningham lost her cool and yelled at Schardein, saying Schardein was “too fucking stupid to manage this agency or too God damned (sic) stupid to know what is going on.”
In a deposition, Cunningham said she told Schardein the previous Friday that he “couldn’t have situations where people were breaking the law … where people were threatening so many employees with their jobs … that it would come out, and that Mr. Henderson wouldn’t take the rap for it.”
She went on: “Henderson won’t take the bullet for that. Jerry Abramson’s not going to take the bullet for that. You’re going to take the bullet for that.” Cunningham said in the deposition that she tried to get Schardein’s attention, saying “he better get a fucking grip because politicos were taking advantage of him and they’d fuck … him over in a heartbeat if necessary.”
That Tuesday, May 11, Cunningham was formally reprimanded for using profanity and stripped of her duties as an engineer. Although she was an executive office employee at MSD with 14 years of experience and, as recently as early 2004 had received a near-perfect employee evaluation, Cunningham was named Environmental Educational Coordinator. She could no longer perform duties such as environmental audits; instead, she would lead MSD’s “After We Flush” outreach program for local schools, which had previously been only a part of her job. Williams, the MSD supervisor who initially joined Cunningham and the two others in the lawsuit, said in a deposition that he was shocked that Cunningham was punished so severely for using profanity.
MSD’s attorney wrote in a brief that such behavior could’ve gotten Cunningham fired on the spot, and that MSD showed “tolerance” by offering her either a 15-day suspension or an anger management class, along with the demotion. In the same brief, MSD said Cunningham had been plotting her exit from the agency for some time and that she would leave if they asked. They allege that the report to the attorney general was part of an exit strategy.
On May 14, Cunningham told the agency she was being slapped for a “verbal report of improprieties” and, according to the same brief, she notified Kathy Cooksie, MSD’s director of human resources, that she was a whistleblower. Cooksie denied that designation, saying: “To date, you have not reported any activities that we would deem ‘improper,’ nor do we have any knowledge of any wrongful activity that might be disclosed by you at a later date. You are wrong in characterizing yourself as a whistleblower and in viewing our actions as retaliatory.”
Cunningham filed the complaint with the Attorney General 10 days later. She would file a similar complaint with the office of County Attorney Irv Maze on Nov. 16, 2004. Schardein later said in a deposition he was “not happy” that Cunningham had taken the complaint to the Attorney General.
MSD lays off Cunningham,
others involved in allegations
In late October or early November of 2004, MSD was preparing for a third wave of layoffs, mostly the result of a huge capital project called Project DRI, which was sucking millions from the agency’s budget. According to MSD legal director Carolyn Shain, the agency is funded through drainage fees, general sewage fees, capacity charges and connection fees, all of which come from both public and commercial ratepayers. In addition, the agency issues bonds — it holds its own bond status. All money enters a general fund and is spent as needed.
Schardein suggested one employee who he thought should be laid off, according to a court briefing: Cunningham. He said she had not been adequately doing her job with “After We Flush” and said her position could be consolidated.
On Dec. 7, 2004, the following MSD employees were laid off, according to a document obtained by LEO: Sarah Lynn Cunningham, Thomas Williams, Frank Walker, Steven Brooks, Neill Brooks, Dan Sammons and Dave Johnson. MSD also eliminated one contractor’s job: Ronald Barber.
Of that group of eight, five were involved in the allegations Cunningham had presented to MSD’s executive director just eight months prior.
Johnson said he was among a group of MSD workers who refused to “play the game” with Schardein. The game, he said, was to do anything for any customer, no matter what. That meant extra-special consideration for politicians.
“That was Sarah Lynn’s problem — she wouldn’t play the game with them,” he said. “She was very outspoken — we’re both outspoken. But I was able to do my job. If someone goes back and looks at my performance evaluations, they’re all excellent.” Johnson now lives and works in North Dakota.
After several attempts to contact Schardein, his assistant called LEO late last week to say he couldn’t comment on anything related to the lawsuit, including procedural matters regarding MSD’s capital projects. Derek Guthrie, MSD’s chief engineer, said last week he could not comment on anything related to the suit.
Cunningham, three others sue MSD
The layoffs are the crux of the federal trial — the result of a lawsuit filed March 10, 2005 by Cunningham, Barber, Williams and Brooks — that began yesterday in federal court. Cunningham and Barber, the only two who remain in the suit, argue they were laid off for reporting what they viewed as ethical misconduct. The pair have sought whistleblower status — as employees of a public agency, they argue, they’re entitled to protection against discrimination for trying to shed light on possible malfeasance. They have also argued that their speech should be protected under the First Amendment.
If the trial falls in their favor, they will be entitled to lost wages and benefits, punitive damages and legal fees, as it is a civil rights case. They will also be eligible to get their jobs back.
In legal briefings, MSD’s attorneys contend that Barber, as a contract employee, is not eligible for the same protections offered to workers at public agencies. They have tried to show that Cunningham was interested in leaving the agency anyway, and that she was laid off because she had let things slip in the “After We Flush” program.
On this and its lawsuit against the Ethics Commission — MSD sued the government agency last April — MSD had spent $252,784.18 as of November 2006, according to documents obtained by LEO through open records requests. That money comes from ratepayers and MSD-issued bonds.
Complaint stagnates before
The Metro Ethics Commission asked Cunningham to resubmit her complaint against Henderson on Jan. 6, 2005. She filed the new complaint in early March, this time citing Henderson, Mattingly, Schardein, Gray and Guthrie.
From then until March 9, 2006, the Commission didn’t deal directly with Cunningham — despite her presence at every meeting in between (her name appears on the rolls for every Commission meeting during that year, which LEO obtained through an open records request).
Meanwhile, MSD was trying virtually everything it could to get the case thrown out.
The agency tried in July 2005 to put the proceedings on hold, arguing that Cunningham’s allegations were part of a federal whistleblower case that needed to play out before the Commission could act. The commission denied that request at its August 2005 meeting, according to minutes LEO obtained through an open records request.
Also at that meeting, the Commission attempted to set a hearing date. MSD responded by filing a motion to dismiss; the Commission granted Cunningham until the following February to respond.
With Cunningham’s response in hand by its Feb. 16 meeting, the Commission set two days in late April 2006. for the hearing. MSD then requested a continuance, saying Gray was suffering from a serious illness (during his illness, however, Mayor Abramson actually reappointed Gray to the MSD Board, a process that required Gray to acknowledge he was in adequate health). The Commission denied the request for a continuance, based on a review by its attorney.
On April 3 of last year, MSD sued the Ethics Commission, arguing that the agency did not fall under the purview of the Commission, as MSD is not technically a Metro agency but the result of a state law requiring Louisville to establish its own sewage-management agency.
The next time the Commission dealt with Cunningham was March 9, 2006, when it sent her a letter saying Mattingly — a Metro Council legislative aide — does not fall under its purview. Two months later, it asked the Attorney General for an opinion on whether MSD fell within its jurisdiction. That response came in October: No opinion on a matter still before the court. Later that month, MSD Board member Gray died.
A judge dismissed the MSD suit against the Ethics Commission on Dec. 11.
LEO made repeated attempts to contact an Ethics Commission member who is familiar with Cunningham’s complaint and has discussed it with this reporter before; several phone messages were not returned.
The Commission’s next meeting — which is open to the public — is Feb. 15. By that point, with the MSD lawsuit against it dismissed and the former employees’ suit sure to be decided, it’s possible that — two years and three months after the complaint was filed — the Commission will address it.
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