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Wednesday, November 30, 2005

Ind. Courts - Marion County Judge Zore orders Lake County to pay Arthur Andersen $2.4 million

The Gary Post-Tribune reports today, in a story by John Byrne:

Heaping insult upon injury, a judge has ordered Lake County to pay disgraced accounting firm Arthur Andersen millions of dollars for the 2002 countywide property reassessment.

Though Andersen fell apart in 2002 after it was implicated in the Enron scandal, Marion County Judge Gerald Zore ruled the firm is due $2.439 million for work it performed in Lake County prior to the collapse.

Lake County must honor the contract state officials signed with Andersen on the county’s behalf in January 2002, Zore ruled. * * *

Zore noted state officials terminated the agreement in April 2002 after determining Andersen “had lost its reputation for integrity and was no longer capable of delivering the reassessment contemplated by the contract,” but said Lake County is nonetheless responsible for paying four invoices the company turned in before then.

“The contract ... is a valid and enforceable contract,” Zore wrote in a decision handed down last week. * * *

The county already has paid more than $20 million to Ohio consulting firm Cole Layer Trumble for work the company performed on the reassessment after taking over for Andersen.

State officials negotiated contracts with both firms, much to the chagrin of county officials who believed Lake County was being wrongly singled out by Indianapolis. * * *

Councilman Larry Blanchard said he wants to appeal. “Andersen’s billing was totally bogus,” Blanchard said. His contention seems to be borne out at least in part by Zore’s ruling.

The judge ordered more than $3 million deducted from Andersen’s four early 2002 invoices. That money, Zore notes, was to be paid by Andersen to subcontractors, but has already been paid directly to the subcontractors by the county.

Despite their disappointment, officials were relieved Zore did not award Andersen the full $11 million the company asked for in its suit against Lake County and the state Department of Local Government Finance.

The Munster (NW Indiana) Times reports, in a story by Bill Dolan:
CROWN POINT | An Indianapolis judge has ordered Lake County to pay the Chicago accounting firm of Arthur Andersen LLP $2.49 million for its aborted overhaul the county's property assessment system.

"What a slam to taxpayers to have to pay that to a company that did absolutely nothing," County Councilman Larry Blanchard, R-Crown Point, said Tuesday afternoon after making the decision public.

It was a welcome victory for Andersen, the accounting firm that nearly went out of business following allegations its people shredded possibly incriminating documents for Enron, an energy giant that crashed in December 2001 upon revelations it improperly inflated stock prices. * * *

Unless Lake County appeals the decision, it could be the final act in what has become the longest and most expensive property tax reassessment in Lake County history.

Lake County already had paid more than $22 million for the reassessment -- a regular across-the-board review of real estate values to map property values for the purposes of raising taxes to finance local government.

The county's 11 township assessors performed those duties until 2002 when the state Legislature ordered a private contractor do it in response to allegations urban township assessors were systematically undervaluing residential homes.

The state signed a contract with Arthur Andersen in January 2002 to perform field inspections of all 247,000 property parcels in the county.

The state rescinded that contract four months later in the wake of the Enron scandal.

Andersen claimed it didn't violate any Indiana laws and completed millions of dollars of work for the state and county during those four months and it is the victim of a breach of contract. The firm sought as much as $11 million compensation.

Here are links to three earlier entries on the Andersen contract, from 3/9/04, 3/19/04, and 3/29/04 (this entire 3/29 entry is a must read).

The 3/29/04 entry includes this quote from a Times story:

The federal suit challenges the state law that required only Lake County to hire an outside firm to conduct the reassessment. Because Lake County was the only one of Indiana's 92 counties mandated to hire an outside firm to conduct the reassessment, the law amounts to "special legislation," according to the federal lawsuit. The lawsuit also claims the tax-reform state law violates the federal Voting Rights Act because it strips residents of the right to have their property assessed by the officials they voted into office to do just that. If the federal court rules in the county's favor, Andersen's contract would be dissolved and the company could be paid only for work it actually did, [County Council attorney Gerald] Bishop said.
Notes: (1) I don't know whether the federal case is still pending. (2) Although the trial was held before Marion County Superior Court Judge Zore, and involves decisionmaking at the higher levels of state government, there has been no coverage of this dispute, to my knowledge, other than in Lake County. Maybe that is what blogs are for.

Posted by Marcia Oddi on November 30, 2005 09:03 AM
Posted to Ind. Trial Ct. Decisions