During a specially called meeting of the Blytheville City Council Friday afternoon, City Attorney Chris Brown announced that on Jan. 30, 2017 in Chickasawba District Civil Division Court, Circuit Judge Richard Lusby found the city of Blytheville and Blytheville Waterworks not financially responsible for the office equipment lease agreements made with De Lage Landen Financial Services and therefore the suit against them was "dismissed without prejudice". Lusby, however, did find that former Waterworks Manager Gary Phillips was financially responsible and issued a summary judgment against Phillips in the amount of $99,049.65 plus post-judgment interest at the rate of 10 percent per year, court costs of $215 and attorney's fees in the amount of $1,500.
In fact, the City of Blytheville and Blytheville Waterworks filed an answer in the suit on June 5, 2016 and specifically alleged that Phillips "had defrauded the City of Blytheville and that Phillips was the party that should be held liable for the default of the Lease Agreements." When Phillips was served with a copy of the "amended complaint for replevin" on May 18, 2015, he failed to make an answer in his defense denying the allegations against him.
Therefore, legally, absent of an answer, the judgment states, "Phillips is in default and the allegations in the Amended Complaint should be deemed admitted by Phillips."
In other business from the meeting, the council voted to authorize an appeal of an recent Iowa District Court ruling that held the City of Blytheville financially responsible in the amount of $14,530.12, plus monthly interest at 1.5 percent from August 7, 2015 until the present regarding two contracts for office equipment at Blytheville Waterworks with GreatAmerica Financial Services (GFS). The city argued they were not approved by the city, but rather were ordered and unauthorized payments were rendered in the city's name by former Waterworks Director Gary Phillips.
City attorney Chris Brown informed the council that the matter, to his knowledge, is still under investigation by the Arkansas State Police, but that the city was nevertheless sued by GFS regarding two of six contracts in Iowa and that as a result of the ruling, the city needed to soon make a decision whether it wanted to appeal the ruling or not.
Brown explained that the case was tried in Iowa because the contract stated that all litigation arising from the contract would be subject to Iowa law. As a result, the suit was filed in Iowa District Court and the judge used Iowa law in all matters pertaining to the case except one. The one matter that he used Arkansas law, concerned whether the city "ratified" the unauthorized contract by making payments on it. The judge ruled that the city of Blytheville had, in fact, ratified the deal solely through its payments.
Brown added that once Phillips had left, John Callens had noticed the payments and ordered them stopped.
According to Brown, attorney Ivan Webber, of the Des Moines law firm Ahlers and Cooney, L.L.C., who represents the city in the matter, believes that the Iowa judge was in error by not applying Iowa law in all matters. He went on to say that if he had, the City of Blytheville would have won, because ratification would not have been found to have occurred.
With the interest added, the judgment totals approximately $20,000. Additionally, GFS's attorneys are asking for attorney fees at a rate of approximately three times what Ahlers and Cooney has been charging the city. Therefore, if awarded the full attorneys fees, the grand total in the judgment would approach $76,000. Additionally, Brown said that GFS has offered to settle all six cases, not just the two that have gone to court, for $105,000.
It was Brown's recommendation as well as that of Iowa attorney Ivan Webber to file an appeal, believing that the ruling will be overturned with the proper application of Iowa law.
"My recommendation is to let our Iowa attorney file an appeal and also negotiate to see if he can get it down to an amount in our interest," Brown told the council. "If they use Iowa law we win. If they use Arkansas law we lose. The concern, obviously, is throwing good money after bad. But I believe if we did lose, we wouldn't lose much more than we are talking already...we are running up to our deadline so he needs to know if we intend to appeal. My thoughts are we can file the notice to appeal and that can also be used as leverage...obviously, my goal is to save the city the most money. We don't need to be paying a lot of money for what Gary Phillips did...Now if we get hit with this judgment, we can in turn go after Gary Phillips. But, he's already been hit with a judgment for $100,000 so I don't know that he has any money.
"May I speak on behalf of Ward 2? We have 2,500 voters in Ward 2 and they are demanding accountability for Mr. Phillips. They feel that for him to take advantage of his position in his job and the free reign of what he had going on over there until we got reign...that he should be held accountable either financially or be locked up," Councilwoman Barbara Brothers said.
"Absolutely," Brown agreed.
"They are tired of people taking from the taxpayers and we [just] pat them on their back and they walk away. They want accountability," she added. "And then we go back after Mr. Phillips and then if there is anybody else working with him. If he had anyone else working with him they need to be terminated or held accountable too and that includes the man that leased him the equipment."
"That is another thing...how far does this go? That was something that came up in the issues over in Iowa about that company that allowed for all of these different leases to be done," Sanders said.
"They should be held accountable," Brothers replied.
"As I understand there has been a special prosecutor appointed to investigate," Brown said before being cut off by Brothers.
"Well the taxpayers have been very patiently waiting and I know the state investigators, if something comes along that takes more precedence that that, takes priority. But everybody, in their mind, thinks that we are trying to hide something and we are not. We are waiting on them to tell us what the answers are and then we need to decide what we as a city are going to do," Brothers said.
After the meeting concluded, Sanders told the CN, "It's unfortunate again that we are having to do this, but I think that our council made a good decision by deciding to file this appeal. This company is trying to take advantage of us. Again it also allows for the city to be able to recoup any losses that may come upon the city, in the event of us being able to collect our funds from either Gary or the other companies or whatever is associated with this being done."
When asked what he wanted to be done, in the event that investigators find that Phillips did in fact commit a crime, Sanders answered, "Again, whatever the law provides...You can only do what the law provides for that and that is one of the reasons I tell the council to allow for this investigation and all the investigation to play out and see what the special prosecutor recommends. It's the same thing with what we are doing with our attorney. Our council has fiduciary control over the city. And what you say, in these types of cases, is that I bring before the council...and they can make their recommendations of what they'd like to see and I relay that to the special prosecutor or our city attorney...again, it may sound like a cliché' but in the interest of justice we have to let this play itself out in that fashion and then take whatever the court system puts before us to do."
After the meeting, when Brown was asked by the CN if he could file charges against Phillips, based upon evidence if the special prosecutor chose not to, he said, "I think there could possibly be a misdemeanor charge, obviously I don't have access to their files. But if he did commit crimes within the city limits of Blytheville that is a possibility."
Brown did, however, make sure to point out that if a evidence shows that a crime was committed that rose to the level of a felony, it would be beyond his ability to prosecute and would then be up to Prosecutor Scott Ellington's office (or the special prosecutor).