IRSD could sue former CFO, but won’t right now

Date Published: 
February 10, 2017

Former Indian River School District chief financial officer Patrick Miller has been accused of nepotism, mismanagement of funds, authorizing payments to other nonprofit organizations he leads, improperly using the IRDS board president’s signature and potentially intimidating staff into sharing their financial software passwords to bypass financial safeguards.

But he has yet to be charged with any criminal acts.

Miller’s name has been plastered on news reports across the state as a result of the allegations, though he resigned about the same time that a Delaware Auditor of Accounts (AOA) audit of the district began.

Some members of the public are now clamoring for action to be taken against Miller, and they’re demanding it be taken sooner, rather than later, though investigations are ongoing. “What’s stopping the IRSD from revoking his pension?” they have asked. “Moreover, why hasn’t a lawsuit begun?”

The answer to those questions starts with the American credo that people are considered innocent until proven guilty.

Miller has not been formally charged with a crime in regards to IRSD finances. Although the auditor’s office is an official government agency, their report still amounts to an accusation.

The Delaware Attorney General’s Office is the only party that can pursue criminal charges (such as theft or forgery) in such a case, and after receiving a copy of the 2016 audit, the Delaware Department of Justice has been investigating the matter. Eventually, they’ll decide whether to even pursue charges.

Personally, Delaware Auditor Wagner has said, he has investigated more egregious acts in other cases that weren’t pursued in court. But his job as auditor stops when the report is done.

The Attorney General hasn’t given the IRSD any indication of the outcome of its investigation.

For both district officials and the public, “Realistically, we’re all going to find out at the same time,” said Mark Steele, the IRSD’s acting superintendent.

IRSD could pursue civil lawsuit

Aside from possible criminal charges, when it comes to civil lawsuits, “Individual school districts retain their own legal counsel, so they are not represented by the DOJ,” according to DOJ spokesperson Carl Kanefsky. “However, there is nothing that would keep them from bringing civil action against a person.”

But there are some issues that have kept the district from moving ahead with a lawsuit thus far.

To begin with, as a plaintiff, the IRSD and its legal team would bear the brunt of leading a potential lawsuit and persuading a judge of their case.

“The district hasn’t made a decision one way of the other … because it is waiting for all the processes to conclude,” said IRSD attorney David Williams of Morris James LLP. “The district wants to make an informed, intelligent decision about what course of action to take. It really isn’t in a position to do so that this point.”

Yes, the IRSD could theoretically pursue civil suit. But district officials say now is not the time.

The IRSD would benefit from waiting for the AG’s Office to complete its work, for several reasons. If the AG prosecutes and secures a “guilty” plea or verdict, then the sentencing would likely include jail time and/or restitution. In that case, justice would be considered served, and there would be no reason to pursue civil action. Additionally, attorney fees are expensive and the IRSD could save money by not bringing its own suit, if it can be avoided.

“I personally don’t think the timing is appropriate,” Williams said. “The district is waiting to see what the outcome of all that is, and then it’ll make a more informed, intelligent decision.”

Civil suits would be appropriate next steps in a situation in which the AG fails to prosecute, so the employer would have to prove theft in a civil case in order to get restitution.

“The district gets frustrated it takes the auditor as long as it does,” Williams said. “We would all like to see this thing move along more quickly, but the district has to be smart about what it does.”

Between the auditor’s office and AG investigations, the IRSD’s own likely investigation has taken a back seat.

“The state auditor came in and conducted a lengthy investigation. When the state audits, the district is not really even permitted to conduct a parallel investigation,” Williams said.

As a legal issue and with an active investigation by the Attorney General’s office under way, IRSD officials declined to comment further at this time.

“The district does not have the authority or jurisdiction to charge any current or former employee with a crime. The AG’s office is in possession of the state auditor’s report and is currently conducting its own investigation,” IRSD officials stated.

Pensions are also untouchable

Miller has yet to be officially charged with any wrongdoing in the case, so he remained on paid leave until his official retirement in June 2016, when his pension began.

“As a general rule, an employee is placed on unpaid leave if he or she has been charged with a criminal act,” according to an IRSD statement on Feb. 1. “If the investigation results in the employee being charged with a crime, his or her leave may be converted to unpaid status.”

In general, the IRSD doesn’t deal with pensions after an employee retires.

During a state employee’s career, both they and the employer make contributions to the state pension trust fund. Upon retirement, their pension benefits are calculated, based on their years of service and highest three years of pay.

“From our standpoint, it’s coming from the trust fund. It’s not necessarily coming from the State or the employer, and that’s why it’s [protected],” said David Craik, Delaware’s pension administrator.

“Under the current statute, there are no provisions that they would lose their pension,” Craik said of employees in such cases. “You have a vested right to your benefit.”

Over the years, court decisions have only added to those rights. In 1979, the Court of Chancery of Delaware decided that a person may still receive their benefits, even if their breech of public trust resulted in their job termination (State Board of Pension Trustees vs. Dineen). In that case, a director for New Castle County School District pled guilty to official misconduct, a misdemeanor, for not repaying $150 worth of maintenance by district employees on his personal properties during school hours.

“The only time that we would stop [payments] is if some action was taken that would benefit them,” such as a case in which a woman was found guilty for murdering her state-employee husband. She would not get survivor benefits, said Burt Scouglietti of the Office of Management & Budget.

The Delaware State Legislature could change the system, but only within the confines of the Delaware Constitution.

In 2012 and 2015, legislators proposed bills that would eliminate pensions for retirees with the most serious of criminal convictions (murder, sexual crimes, human trafficking and child abuse), or who committed crimes through their public office (including theft and forgery). Neither bill got out of committee.

“A state employee that retires — that’s their retirement. We don’t have any control over that,” said W. Scott Collins, IRSD board member. “Whether employees are charged or not — we don’t have any control over that. There’s things the board is really getting hammered on that we have no control over.”

That’s a frustrating part of being a board member, said Collins, who noted that he had originally joined the board in 2011, raring to go, until he realized how much a school district is bound by state and federal law.

The IRSD Board of Education has begun what little action they feel is possible, he said. The public can’t know what investigations are occurring in the background, but the IRSD did reach out to the Indian River Volunteer Fire Company in January to request a $4,900 reimbursement from the district’s purchase of an all-terrain vehicle (ATV) from the fire company while Miller served on its board, as well as for a district projector the fire company allegedly uses.

“We’ve been pushing for the Attorney General’s Office to do something, so we decided that we felt we needed to reach out, because we’re getting asked about recouping some money,” said Collins.

The people want transparency, but, by law, public employees have a right to privacy. Town councils and school boards cannot discuss an individual’s performance or pay rate in public meetings.

But those restrictions and lack of immediate legal action on the part of the district have only fueled the resistance of those opposing a second attempt at the district’s current-expense referendum, which failed by just 20 votes in November, though those funds are needed to address extensive growth in the school district’s population.

“How can this board have the audacity to ask the citizens to vote for a referendum giving the district more money while allowing this former CFO to retire, receiving $92,000 a year?” Hillary Mitchell asked the board in January.

“The board has further insulted the community by asking us to support a referendum as they allow Mr. Miller to retire with a full pension and paying him $52,000 to end his contract,” Valerie Reeves wrote in a letter to the editor of the Coastal Point.

“It’s great to be open to the public, but we can’t discuss employees,” board Vice President Rodney Layfield has said.

Any employee can also collect leftover vacation and sick days.

“If an employee were to ask for those to be cashed out for their retirement, we would follow the direction of our attorneys, because we are not able to withhold that from an individual employee.”

In fact, the IRSD could be sued for refusing pay such benefits, said Layfield, emphasizing that he was speaking broadly about employee retirements in general.

“By state law, our former CFO was entitled to his full pension and benefits at the time of his retirement. This was not a secretive process, as has been alleged by some members of our community,” IRSD officials stated. “To withhold those benefits would have been a violation of the Delaware Code and exposed the district to possible legal repercussions.”

Past charges couldn’t be shared

When Miller was hired by the IRSD in 1998, he had just departed from the same position with the Brandywine School District. As the only IRSD board member from then still serving today, Charles Bireley said the IRSD wasn’t aware of accusations of financial finagling by Miller in that previous job, even when he was sentenced to community service.

Indeed, officials such as Robert Wagner could face a libel lawsuit if they were to inform another school district of an ongoing investigation.

According to the Delaforum publication, in 2000, Miller entered a plea bargain just before a jury trial was to begin in November of 2000. It was a no-contest plea — one in which the suspect neither admits to, nor fights, the charge of tampering with public records. Under a relatively new law, he could serve probation before the court reached a final verdict.

The judge in that case instructed Miller to serve 100 hours of community service in Sussex County, report to a probation officer and not violate any laws, Delaforum reported. Under the plea agreement, after that, the court would basically acquit Miller, and another charge (theft of an amount less than $1,000) would be dropped.

Afterward, he could potentially seek to have expunged the criminal record that resulted from the charges.