Pennsylvania and Harrisburg sue firms over incinerator debt fiasco
State and Harrisburg officials on Monday filed a lawsuit in the Commonwealth Court of Pennsylvania, seeking damages from a litany of professional firms involved in the capital city's incinerator debt crisis.
After the city agreed in 2003 to guarantee a project to retrofit a trash-to-energy facility, the project fizzled as debt spiraled to roughly $400 million and pushed the city to an attempted Chapter 9 bankruptcy filing eight years later, which a federal court nullified.
According to the Patriot-News of Harrisburg, defendants in the lawsuit include law firms Buchanan, Ingersoll & Rooney PC; Obermayer, Rebmann, Maxwell & Hippel LLP; Eckert Seamans Cherin & Mellott, LLC; and Foreman & Caraciolo PC.
Financial firms RBC Capital Markets Corp. and Public Financial Management were mentioned, as was engineering firm Buchart Horn Inc.
Problems with the incinerator project ranged from faulty technology to lack of a performance bond. Most dubious, which the Harrisburg Authority public works agency highlighted in a January 2012 forensic audit, were certifications that the debt would be self-liquidating.
"These lawsuits are unfortunate, but not unexpected," said Anthony Sabino, a Mineola, New York, white-collar defense attorney, former prosecutor, and a St. John's University law professor.
"The city fathers of Harrisburg need to blame someone, rightly or wrongly. As to whether the claims of professional malpractice are justified, well, that’s for a court to decide," Sabino added.
"Certainly, if the professionals did not do their best, they have to account for that. Yet it must be remembered that, when it’s all said and done, Harrisburg officials chose this path, and gave the final go-ahead. Their fate is ultimately in the hands of the people that elected them."
The suit notes that they firms provided city officials with "false and misleading information" designed to win their approval, including pledging Harrisburg's "full faith, credit and taxing power" as a guarantee.
After federal Judge Mary France nullified the City Council's Chapter 9 filing — which then-Mayor Linda Thompson opposed — Harrisburg negotiated an intricate five-year recovery plan under state-appointed receiver William Lynch. The Commonwealth Court approved the plan in September 2013.
The suit seeks unspecified damages, plus interest costs.
"It is time to hold those responsible for the failed incinerator debt scheme accountable and recoup the taxpayer dollars wasted by their negligence and deception," Gov. Tom Wolf said in a statement.
"This project, started in 2003, represents the worst of how lobbyists and special interests bilk taxpayers for their own gain," he added. "My administration is standing up to these interests on behalf of the taxpayers and we will continue to fight to stop anyone that uses deception or fraud to take advantage of taxpayers."
"Even when others did not, we produced every document requested, accommodated every request for an interview of our attorneys, and voluntarily appeared before a Senate committee," the firm Eckert Seamans said in a statement. "We remain firm in that belief and that Eckert Seamans will be fully vindicated in this proceeding."
"We believe these claims are entirely without merit," RBC Capital Markets said in a statement. "The project's difficulties were directly caused by the project engineer and lead contractor, Barlow Engineering."
The Securities and Exchange Commission in May 2013 accused Harrisburg of misleading investors about the city's deteriorating finances, but neither fined nor prosecuted anyone.
"These are attempts by the state and Harrisburg officials to show the citizens they are doing their due diligence and fiduciary responsibilities, even at this late stage in the dramatic events of our state's capital," said Villanova School of Business professor David Fiorenza. "If anything, it should provide caution to other cities and municipalities looking for their golden fix to budgetary issues."
Former Mayor Steve Reed received two years of supervised probation early in 2017 after he pleaded guilty to 20 counts of receiving stolen property. Two counts were felonies.
Prosecutors in July 2015 accused Reed, Harrisburg's mayor from 1982 to 2009, with diverting municipal bond proceeds to a special projects fund he allegedly used to buy as many as 10,000 Wild West artifacts and other "curiosities" for himself.
Reed failed in his attempt to open a city museum of the Wild West.