Betty Montgomery responds to Dennis Leone re: Payment of legal fees for STRS employees

Betty Montgomery's letter to Dennis Leone

October 18, 2006

Re: Payment of Legal Fees

(From STRS website: http://www.strsoh.org/pdfs/opinion.pdf)

Dear Dr. Leone:

You have requested that our office examine whether the State Teachers' [sic] Retirement System (STRS) has the authority to reimburse legal fees incurred by three STRS employees. This expense arose out of their testimony at the trial of former STRS Board member Hazel Sidaway. Normally, it is the practice of our office to defer such inquiries to the next regular financial audit of the system. However, we made an exception in this case as my tenure as auditor is coming to an end and that audit would not occur until next year. Given your concern, we made the decision to review the situation immediately.

We understand that three STRS employees, [name omitted], [name omitted], and [name omitted] were all subpoenaed to testify in the criminal trial of former STRS Board member Hazel Sidaway. All three were on the trip to New York that was the subject of Ms. Sidaway's ethics charges. None of the employees requested assistance or representation from the Attorney General before retaining their own counsel. All three employees were granted immunity, so none were in danger of prosecution due to their testimony at trial. We understand that expense reimbursement checks were approved June 28th, 2006 by Dr. Asbury and have been issued to [name omitted] and [name omitted]. [Name omitted] has not yet been reimbursed for her legal fees.

As you know from your service as a school superintendent, it is customary for the Auditor of State to defer to the reasoned legal opinion of our clients' statutory counsel which, in this instance, is the Attorney General. This is a long-standing practice which respects the general principle that government entities should be able to rely on their own attorneys for legal guidance. Thus, our office needed to understand whether the Attorney General had offered a legal opinion to the Board regarding the payment of legal fees for these employees.

To that end, we requested, and the Board agreed, to waive the attorney client privilege and reveal the advice received from the Attorney General's Office with regard to the payment of legal fees. The Board waived its privilege as to the executive sessions conducted at the May 18, 2006 and August 17, 2006 meetings when the reimbursement for legal fees was discussed. Our staff spoke with Assistant Attorney General John Patterson, former Board member Steve Busar [sic], Executive Director Dr. Damon Asbury, STRS Chief Legal Counsel William Neville and you. As part of this process, we also reviewed Board resolutions and the bills submitted by the employees.

Let me say how deeply disappointed I was to learn that after all STRS has been through in the last several years, the Board would authorize payment for legal fees surrounding Ms. Sidaway's trial when the employees failed to request Attorney General assistance at the time they received subpoenas. Though I understand the anxiety lay people feel about testifying in court and the desire to retain counsel to relieve that anxiety, I do not understand how the Board views that personal decision worthy of reimbursement with STRS funds. I do not understand why Dr. Asbury, having promised to change the way STRS does business, would approve these bills when the employees failed to make a prior request. If they had made the request, they would have learned that the Attorney General's office would have assisted them free of charge.

Unfortunately, despite not having consulted with the Attorney General prior to the hiring of these private attorneys, Mr. Patterson indicated that his legal advice to the Board on August 17th was that Dr. Asbury was authorized to reimburse these three employees for legal fees incurred under his general delegation to pay administrative expenses passed by the Board on October 21, 2005. Though Mr. Patterson did not believe it wise, he opined that because the employees were called to relate information regarding their work at STRS, and the information sought from them arose out of their status as employees, Dr. Asbury was not precluded from paying the bills. Mr. Patterson further stated that the payment did not require a separate vote of the Board, and the Board's usual approval of monthly expenses would suffice. The Board subsequently approved the expenditure for attorney's fees for [name omitted] and [name omitted] through approval of the June monthly expenditures at the August 18, 2006 meeting.

There is, therefore, no legal basis for me to undo that approval and no ability for our office to render those payments illegal, given the actions taken by the Board, the policies in place granting Dr. Asbury authority to pay administrative expenses, and, most importantly, given the Attorney General's legal advice on this matter.

The Auditor of State does not have the authority to substitute his or her judgment for the judgment of the clients we audit. The STRS Board, understandably without your support, determined that the employees in question were acting within the scope of their duties as STRS employees when they gave testimony in Ms. Sidaways' [sic} case. That is precisely why the Attorney General could have assisted, if only the employees or Dr. Asbury had asked for such assistance. However, according to the Attorney General, the Board and Dr. Asbury did not exceed the scope of their legal authority in deciding to reimburse the employees for private counsel after the fact.

Dennis, I can assure you that had I still been a member of the Board, I would have joined you in objecting to the payment of attorneys' fees in this matter. Had they asked, the Attorney General could have offered legal assistance to these employees. I must, however, discharge my duties as Auditor of State in a lawful manner, and there is no legally justifiable basis for me to determine that these reimbursements for legal fees violate Ohio law as already opined upon by STRS's attorney, Assistant Attorney General Patterson. While this will certainly disappoint you, I can only ask that you respect my obligation to follow the law in making this determination and know that I would have objected to these payments on a policy basis had I been given the opportunity.

Please do not hesitate to contact me if you wish to discuss this issue further.

Sincerely,

Betty D. Montgomery

Auditor of State