Major construction lawsuit settled by DeKalb schools

Timeline of Heery International, Inc.’s dispute with the DeKalb County School District

  • October 2004: Crawford Lewis becomes school superintendent and later hires Pat Reid (her surname was then Pope) to oversee Heery International Inc. and E.R. Mitchell & Co., which jointly manage school construction projects.
  • April 2006: Heery and Mitchell are suspended over allegations of mismanagement and billing fraud, then fired 10 months later.
  • February 2007: Heery/Mitchell sue for $478,000 and damages.
  • March 2007: DeKalb countersues for $17 million, eventually seeking more than $100 million.
  • December 2008: Lewis tells school lawyers that Reid tried to blackmail him, recommended firing Heery/Mitchell and wanted to hire her friends to work on school construction projects.
  • July 2009: DeKalb's law firm, King & Spalding, agrees to work on contingency, retroactive to June 1, 2008. It already had been paid $6.5 million.
  • May 2010: Lewis, Reid, her husband Tony Pope, and Reid's assistant are indicted. (The assistant is later dismissed from the case.) Lewis had been fired a month earlier.
  • October 2010: Heery/Mitchell file a second amended complaint, claiming criminal fraud drove their termination.
  • June 2012: School board approves cashless settlement with E.R. Mitchell & Co.
  • April 2, 2013: DeKalb "special master" Judge Stanley Birch dismisses the bulk of Heery's financial claims, throwing out the company's contention that it was terminated because of a fraud conspiracy by district officials.
  • June 10, 2013: DeKalb school board approves amended contract with its law firm, King & Spalding. The firm waives $30 million in fees and agrees to pay ongoing case expenses, which had already cost DeKalb $12 million.
  • Oct. 16: Lewis pleads guilty to a misdemeanor obstruction charge and agrees to testify for the prosecution against Reid and Pope.
  • Nov. 20: A DeKalb jury convicts Reid and Pope of racketeering and theft.
  • Dec. 2: Superintendent Michael Thurmond announces settlement agreement with Heery.

Sources: Court pleadings, indictment, contract between DeKalb and King & Spalding, Atlanta Journal-Constitution.

The DeKalb County School District freed itself of another major distraction, with a decision to settle a long-running lawsuit that cost millions of dollars and contributed to financial and political instability.

Superintendent Michael Thurmond announced that Heery International, Inc., the district’s former construction manager, will pay $7.5 million to end the dispute that has boiled in DeKalb Superior Court since 2007.

Thurmond called the lawsuit an “albatross” and “cancer” and said “it is time to move on.” The school board agreed, with all seven members present voting for the agreement Monday night.

It was a lawsuit that might have flowed from the pen of Charles Dickens, threatening as it did to cost the players more than any payout they stood to receive. It initiated a period of turmoil, with school officials later facing indictment over alleged misuse of the money stream Heery once managed. The scandal led to the termination of then-Superintendent Crawford Lewis, which led to a revolving door in the superintendent’s office, exacerbating the instability that led to trouble with the district’s accreditation.

DeKalb spent at least $18 million on the lawsuit, and Heery likely spent a bundle as well. The decision to withdraw from the case without recouping costs drew criticism, but board member Marshall Orson, who pushed for settlement while running for office last year, said it was time to end the fight.

Previous school boards that authorized the suit and kept paying for it “thought they had a lottery ticket,” Orson said. They gave the district’s law firm, King & Spalding, too much say over whether to settle, he said, and the lawyers pushed DeKalb to keep fighting — and paying.

“I thought it was a fool’s errand,” said Orson, who is a lawyer himself.

Heery was part of a joint venture that managed the multimillion-dollar school construction program, and sued after being fired. The district alleged mismanagement and billing fraud, and countersued. Heery slapped back, contending that its termination was connected with a criminal conspiracy to misuse money from the construction fund. Lewis and the woman he hired to oversee Heery were among those indicted in a separate corruption probe. Lewis pleaded guilty in October to a misdemeanor obstruction charge. He then testified against his former chief operating officer, Pat Reid, and her ex-husband Tony Pope, a one time architectural contractor for the district.

Reid and Pope were convicted last month on racketeering and theft charges, but a “special master” judge in the civil case had previously dismissed Heery’s allegations that Lewis and Reid fired the company to get their hands on the construction money.

The path to settlement was cleared in June, after accreditation problems led Gov. Nathan Deal to replace six of the nine school board members. The new board amended the district’s contract with its lawyers. King & Spalding agreed to waive $30 million in legal fees and to pay ongoing case expenses, and also agreed to take a back seat in any decisions about settlement.

The district’s legal costs had attracted the ire of parents and the attention of the Southern Association of Colleges and Schools, which placed DeKalb on probation last December. Among the agency’s complaints: the “excessive” amount spent on legal fees — money that might otherwise have gone into classrooms. SACS gave DeKalb a year to address its management issues or risk accreditation loss, and is expected to issue an updated accreditation decision later this month.

Former board member Paul Womack defended the lawsuit and said the new board could have pursued it at little risk since the law firm was now shouldering the costs. He said he’d seen “overwhelming” evidence against Heery and said DeKalb could have won in court and should have held out for a larger settlement.

“This board is leaving between twenty and thirty million dollars on the table,” Womack said. A vote for the settlement, he said, “borders on malfeasance in office.”

Heery President Rich Driggs said in a written statement that the payout would cost his company less than paying the lawyers to go to trial. The settlement will change the official reason for Heery’s termination from “for cause” to “for convenience,” with neither side admitting liability.