Monday, March 2, 2009 | Lawyers from a firm that has received millions of dollars in business from a public agency that handles lawsuits for school districts have, at least twice in recent years, helped it screen potential employees who later oversaw outside attorneys’ work.

The Risk Management Joint Powers Authority, a public agency composed of dozens of local school districts and run through the San Diego County Office of Education, has paid the law firm of Stutz, Artiano, Shinoff & Holtz nearly $7 million between July 2002 and July 2008 to handle lawsuits brought against school districts.

Two shareholders in the firm, Daniel Shinoff and Jeffery Morris, have helped screen job applicants for the agency by sitting on the first of two interview panels that candidates undergo before being hired. Such interviewers don’t make the final hiring decisions, but they narrow the hiring pool by asking predetermined questions provided by the human resources department and ranking candidates based on their responses.

Including the attorneys in the interview process means that in at least two instances, an employee has owed his or her job, in part, to one of the firms that he or she is hired to monitor.

The practice is among a bevy of complaints lodged in a lawsuit by a former authority employee, Rodger Hartnett, who alleges that the Stutz Artiano firm received a disproportionate share of work “based on personal relationships” in the office rather than merit. Harnett, who was interviewed for his job by a panel that included Shinoff, claims in his wrongful termination suit against the County Office of Education that he was fired because of his complaints about Stutz Artiano.

Several legal and ethics experts cautioned that the practice of having the contracted attorneys aid in the hiring process was fraught with the risk that employees would feel they owed loyalty to the attorneys.

“The lawyer’s incentive is clearly to hire a ‘yes’ person, a person who won’t challenge their costs and will stick with and approve the lawyers they already have,” said University of San Diego law professor Shaun Martin.

Shinoff said he personally has only interviewed employees for one position, the claims coordinator job that ultimately went to Hartnett five and a half years ago; Morris likewise said he had interviewed employees for just one position, that of a claims adjuster, and couldn’t recall the date. Both claims coordinators and claims adjusters analyze the agency’s legal exposure, oversee litigation and create plans with attorneys on how to pursue and resolve cases, according to job descriptions.

Neither of the two employees would choose which attorneys get which cases. But they are one layer of oversight in an agency that handles millions of dollars in legal work annually. They help ensure that attorneys do not run up unreasonable bills.

County Office of Education spokesman Jim Esterbrooks said that including the attorneys in the interviewing process wasn’t problematic. In a written statement, he said it is common practice at his agency for vendors to help screen employees because they are familiar with the work. The practice could be continued in the future, he said.

“Such a position has negligible impact,” Esterbrooks said. He added that Shinoff “doesn’t have any hiring clout or even close.”

The amount of money paid to Stutz Artiano from July 2002 to July 2008 dwarfs what was paid to two other firms that handle lawsuits for the agency — $1.56 million and $324,000, respectively — in the same time period. The firm has decades of experience handling school cases, and its attorneys are reputed to be aggressive litigators and have earned praise from school officials across the county. Some school districts request them by name.

Superintendent Describes Practice as Common

Job applicants at the agency typically undergo two panel interviews before they are hired. The first is a screening interview in which a panel of interviewers asks predetermined questions provided by the human resources department, listens to the candidates, and ranks them based on their answers. The panels have ranged in size from two to four interviewers in recent years, according to the human resources department. Some applicants also take tests relevant to their work. Shinoff and Morris said they have only sat on that first panel.

The second and final interview for risk management jobs is performed by a panel that includes Executive Director of Risk Management Diane Crosier, and the ultimate authority on all hiring decisions is county Superintendent of Schools Randolph Ward.

The County Office of Education initially said it could not answer questions about the hiring process because of the Hartnett lawsuit and referred to the transcript of his disciplinary hearing, which gave limited information about the process. It later supplied some basic information about the hiring process through written statements and a brief comment provided by its spokesman.

Ward and other County Office employees declined to be interviewed on the topic. Simple questions sometimes took a week or more to answer. And the agency required to file a written request for economic disclosure forms that are supposed to be readily available with no questions asked.

Numerous former agency employees did not return calls or declined to speak on the hiring process and the Stutz Artiano attorneys’ involvement. Testimony at the Hartnett disciplinary hearing was sometimes difficult to reconcile with other statements.

“We often ask some of the technical contractors who have expertise in that area to come in and participate on a hiring committee because they have the kind of expertise that we don’t as lay people,” Ward said, according to the transcript of Hartnett’s disciplinary hearing. He added, “It’s common that you will bring somebody from the private sector to give you that perspective.”

Yet information supplied by the agency dating back to July 2005 shows no other attorneys or vendors sitting on the interview panels, which typically have included business analysts from the county office and managers from school districts. No earlier records were available from the human resources department, said Pam Gilles, senior director of internal business services.

Ward declined to be interviewed to clarify how his remarks could be reconciled with the information supplied by human resources staff, and Esterbrooks said that Crosier had declined to provide examples of other agencies that used the practice.

Risk management experts from across California said such a hiring policy was not standard, but there are few fixed standards for hiring in such agencies. James Marta, accreditation manager for the California Association of Joint Powers Authorities, said he didn’t know of any other agencies that use their panel attorneys to help interview applicants, but did not think the practice was inherently problematic.

“You will have the pressure that, if you see something they are doing, you don’t want to disclose it because they hired you,” Marta said. But the same pressure would exist if the employee saw their boss doing something improper, he said, adding, “It’s a natural thing that happens. I don’t think that’s extraordinary.”

Other legal experts and ethicists were wary of the practice. Screening employees for the same department that sends the attorneys business and tracks their costs “certainly raises ethical questions,” government ethicist Bob Stern said, even if the specific employees themselves do not assign legal work. Martin, the USD law professor, said it was extremely rare for a law firm to be involved in hiring people who would monitor them. It is not categorically wrong, Martin said, but is “fraught with danger.”

Stern said, “The problem is, I’ll hire you, you hire me.”

University of San Diego public interest law professor Robert Fellmeth found the practice counter-intuitive. He wrote in an e-mail that the agency employees would naturally view their attorney interviewers as people “to whom you owe some loyalty.” That runs exactly counter to the actual obligation from the attorneys to their clients and overseers in the agency, Fellmeth wrote. Consulting an attorney during hiring would only make sense if there are legal questions about the hiring process, he wrote.

Former Employee Alleges ‘Insider Dealings’

While employed for the agency, Hartnett complained that Stutz Artiano was getting a disproportionate share of work and expressed concern about its billings, according to an internal memo and testimony at his disciplinary hearing.

In his lawsuit and a mediation brief, Hartnett alleges that he was fired for blowing the whistle on “insider dealings” to the firm and specifically to Shinoff. He wrote in his lawsuit that he came to believe that “Mr. Shinoff was receiving business or a disproportionate volume of business based on personal relationships within our department rather than on merit.”

The agency counters that Hartnett was fired for negligence, insubordination and dishonesty, including discussing a confidential file with an outside attorney and lying about it. He thus “violated specific SDCOE Risk Management procedures regarding confidentiality of claims files,” according to his initial August 2007 termination notice. An internal Office of Education commission found that his termination was “for good cause and not excessive” and that he was not the victim of retaliation.

“These were very serious violations of trust which had the potential, if repeated, of seriously harming the relationship between the [agency] and its member districts and the districts’ legal interests,” wrote the three-member commission of Mary Beall, Miriam Rothman and Bert Seal in a decision signed by Rothman. It concluded, “Hartnett did not prove that the legitimate reasons (for his termination) were a pretext for retaliation.”

Shinoff called Hartnett’s allegations “vulgar accusations” that there was no point rebutting, and declined to comment on whether they were true.

“You work hard for people,” he said. “Your work speaks for itself.”

Hartnett is appealing the finding in Superior Court. “I discovered and reported a culture of corruption within my department involving conflicts of interest and interpersonal relationships,” Hartnett wrote in his suit.

He has questioned whether it is appropriate for employees to retain the same legal firms for their personal use that they hire for the agency. Stutz Artiano has represented Rick Rinear, the employee who makes the ultimate decision of which attorneys to assign to handle cases, in at least two cases including a dispute over a plot of land in Jamul that was settled last year. Hartnett alleges that Rinear could have gotten discounts on services because he has the power to steer business toward Stutz Artiano, but could not provide evidence that a discount had been given.

Rinear declined to be interviewed and didn’t respond to a request for his private legal bills to check the allegation. Esterbrooks said he was unable to provide any details about the process by which Rinear was hired in 1992.

Hartnett also alleged in his suit and interviews that Shinoff regularly bought lunches for employees, including senior claims investigator John Vincent, senior claims adjuster Lisa Jensen, and Crosier, who worked briefly for Stutz Artiano 14 years ago. She also had worked alongside Shinoff at a previous job, according to her testimony at Hartnett’s hearing. Crosier reported no gifts on financial disclosure forms between 2004 and 2007; the agency said employees in Vincent and Jensen’s positions aren’t required to file such forms under San Diego County Office of Education board policies.

Under state law, gifts that exceed more than $50 annually from a single source typically must be disclosed, said Roman Porter, executive director of the Fair Political Practices Commission.

Few Standards on Assigning Legal Work

Sixty-eight school districts and charter schools largely in San Diego County have joined the Risk Management Joint Powers Authority to insure themselves against claims and lawsuits for liability, property damage and workers’ compensation. The authority analyzes claims and hires attorneys in suits against the school districts and charters. Members pay into their own funds with the authority to cover the costs of their claims.

Some of its employees oversee attorneys and work out litigation plans with them; Hartnett said in interviews that he also reviewed cases to make sure that legal bills were reasonable. The authority is administered by the county superintendent of schools and the San Diego County Office of Education, which hires and supervises its employees.

Attorneys at the Joint Powers Authority are selected for each case by Rinear, who defers to school districts if they choose an attorney first, according to the hearing transcript. He chooses from three firms: Stutz; Winet, Patrick & Weaver; and Kleindinst, Fliehman & McKillop. Agency policies say only that cases are assigned to the attorney who is most qualified to handle them with consideration given to the school district or charter school’s wishes. It doesn’t specify what would make an attorney more or less qualified to handle a case.

During the Hartnett hearing, Crosier said she believes that Shinoff gets more work simply because school districts often ask for him in employment cases, which tend to be more expensive. The same explanation was given by Lora Duzyk, assistant superintendent of business services, in a memo to Hartnett in 2007.

Crosier’s claim cannot be verified because Esterbrooks said the agency does not routinely document whether school districts ask for a specific lawyer. Crosier described Shinoff as the most experienced of the three attorneys they hired. Some school districts said they have specifically requested Shinoff; others said they trust the judgment of the agency and would rarely demand an attorney by name.

Government agencies such as the Joint Powers Authority are free to select professionals, including attorneys, without competitive bidding. Some choose to do competitive bidding anyway to reduce costs and foster competition. Harold Pumford, chief executive officer of the Association of Governmental Risk Pools, said there are no firm standards on how to assign cases to attorneys.

“The fact that one firm gets more work than others is not, per se, an improper practice,” said Jose Gonzales, deputy general counsel for San Diego Unified, which is not part of the Joint Powers Authority. “It’s up to the clients to make that decision.”

School district leaders such as Encinitas Superintendent Lean King said Shinoff had a solid reputation for defending school districts on cases in which a lot of money is at stake. Mike Castanos, assistant superintendent of business for National School District, said the district has specifically requested the “highly regarded” firm in the past. And Carlsbad Superintendent John Roach called him simply “good.”

“He is aggressive, and if you have a case that fits that, I could see requesting Dan,” Roach said.

In his more than 25 years of work with the agency, Shinoff has defended Fallbrook schools for yanking an article and a student editorial on sex education from a school paper; he fended off a negligence claim against Grossmont schools from grieving parents of two teens shot dead by a classmate. And school districts that do not contract with the agency have also used Stutz Artiano, as well as Shinoff. San Diego Unified, for instance, hired the firm to help negotiate a contract for former Superintendent Carl Cohn.

Not everyone is satisfied with the firm. Critics abound at MiraCosta College, where Shinoff was involved in the controversial aftermath of an investigation of the illegal sale of palm trees at the college. Several college trustees complained that Shinoff pressured them to award a roughly $1.6 million settlement package to then-President Victoria Richart after faculty and staffers criticized her handling of a costly investigation of the palm tree scandal.

“I share in [another trustee’s] belief that Stutz, Artiano, Shinoff & Holtz failed to properly represent the College,” wrote board member Judy Strattan in a legal declaration.

Stutz Artiano was also criticized by Julie Hatoff, the former vice president of the college, who unsuccessfully sought to have the attorneys disqualified from representing MiraCosta in her suit against the school. She claimed that the firm never told her it was representing the college — and not her — in their conversations. Shinoff was also mentioned in a lawsuit against the college by resident Leon Page, who argued that the attorney placed the interests of Richart ahead of those of taxpayers and the board and prodded them to approve an excessive buyout that he believes violated state law.

A judge ruled in September that the payout was not illegal; Page is appealing the ruling.

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