Lawsuit Against Peninsula School District Dismissed

A Los Angeles Superior Court judge has dismissed a longstanding taxpayers’ lawsuit alleging that trustees of the Palos Verdes Peninsula Unified School District illegally forgave $2 million in developer fees and lease payments that could have been spent on school improvements.

The suit, which a school board member once described as “a witch hunt,” also accused the trustees of “back room dealings” in the 1986 lease and later sale of surplus land that was the site for a high school that was never built.

Janet McAuley of Palos Verdes Estates and Richard Smith of Rancho Palos Verdes filed the suit in 1988, seeking to have the money returned to the district. If the trustees and administrators were unable to collect the fees from developers, they wanted the court to force the trustees to pay the money out of their own pockets.

But Los Angeles Superior Court Judge John Zebrowski said the trustees had done nothing wrong by issuing waivers for developer fees and could not be held personally liable for the money. He said all the acts alleged in the suit were within the legal legislative discretion of the board. At the end of a 45-minute hearing Monday morning, he granted the district’s request to dismiss the case.

“The board members, as well as myself, are ecstatic to say the least,” said board President Jack Bagdasar, who was among those named in the suit. “We knew we had done nothing wrong, and McAuley’s lawsuit cost the children of our district untold thousands of dollars. The cloud of suspicion above board members for four years--that we sold property when we could have gotten more for it--has been removed.”

Others named in the lawsuit include former Supt. Jack Price and former Assistant Supt. David Capelouto; school board members Marlys Kinnel, Joseph Sanford and Jeffrey Younggren, and former board members Sally Burrage and Martin Dodell.

Bagdasar said Tuesday that he plans to ask the district’s attorney, Paul Ostroff, to evaluate the benefits of beginning slander proceedings against McAuley and Smith. School officials estimate the district and its insurance carrier have spent $150,000 to defend against the charges.

For her part, McAuley called the ruling “an absolute shock” and said she has not yet decided whether she will file an appeal.

“What (the judge) is saying is that elected officials can secretly and selectively give financial favors to business associates and friends. . . . ,” McAuley said. “If this ruling is upheld by the appellate court, it will open the door to special deals and tax exemptions.”

The lawsuit stemmed from a decision by the trustees in April, 1987, to enact a local ordinance allowing the district to collect fees from developers for school improvements. The ordinance went into effect two months later.

But the lawsuit alleged that three days before the ordinance was to take effect on June 26, 1987, some developers received secret waivers from district administrators. Eventually, 38 developers, including several business associates and friends of trustees, received developer fee waivers totaling $1 million, McAuley said.

“They are very wealthy people,” McAuley said. “It’s hard to believe they couldn’t pay a tax to the school district, or that they shouldn’t have to pay.”

The lawsuit also alleged that the trustees had illegally waived $1 million in revenue, about half of it in the form of lease payments, that was due the district in the 1986 lease and subsequent sale of Peninsula High, a surplus school site.

The suit also contended the trustees planned to sell Dapplegray Intermediate School, a 43-acre site, for less than fair market value. It says the trustees planned to give away an easement to accommodate the interests of a landlocked developer who needed road access.

Ostroff, the school district’s attorney, described the lawsuit’s claims as “fantasies” and allegations that “border on a trip to the Magic Kingdom at Disneyland.” He gave a detailed refutation of its claims.

Strongly denying there was anything secret about the trustees’ decision to waive developer fees, he said waivers were given only when there was evidence the newly imposed fees would cause developers undue delays. Although a state auditor in 1988 criticized the district for failing to adopt written criteria for granting exemptions, Ostroff said that, at the time, the trustees had simply delegated the process to administrators.

The trustees were entitled to adopt that policy, he added, and “the law doesn’t prohibit (their) friends from getting an exemption.”

Ostroff also denied the trustees had undersold the Peninsula High School site, pointing out that the final price of $6.65 million was substantially more than the price at which the property had been appraised.

And he said the allegations about plans to sell Dapplegray were completely unfounded, noting that the site has remained in the district’s possession.

Despite indications from both sides that the lawsuit may yet have a sequel, Supt. Michael Caston expressed hope that the district would finally be able to put the allegations of mismanagement to rest.

“Everybody I have talked to is just extremely pleased to have it over with and to not have this threat hanging over the school board,” Caston said. “We obviously don’t need to spend the time and the money dealing with something like this and we’re pleased the judge saw it the way we did.”