News10NBC Investigates: City to spend hundreds of thousands to defend against charge that sets ‘horrible’ precedent

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ROCHESTER, N.Y. – The City of Rochester City Council is about to approve another $400,000 to fight federal fraud allegations.

That’s on top of $413,000 it’s already paid in legal fees in the case. The city is fighting because it thinks the case is unfair and threatens the security of every single city employee.

“The precedent this would set not only for employees but for all of us in this room would be horrible,” Mayor Malik Evans said at a city council committee hearing last week.

The council was starting the approval of another $400,000 in legal fees to fight the federal Securities and Exchange Commission.

The case goes back five years when the Rochester City School District revealed a $30 million budget hole.
The SEC charged the district’s former finance director but because the city bonded money for the district, as it is required to do by state law, the SEC charged the city and its former finance director.

“Do we expect there to be additional dollars spent after this?” asked committee chair Mitch Gruber.

“Hopefully not. Potentially yes,” said Patrick Beath, the city’s corporation counsel. “If this goes to trial it will probably cost more.”
Beath says the city is fighting the SEC because settling the case would make every city employee open to being personally charged for doing their job in the future even if a mistake was made by a different government entity, like the school district.

“We need folks who are going to be empowered to make tough decisions,” Beath said. “And we’re not going to be able to do that if people who come to work for the city think their personal liability is on the line every time they’re asked to make a hard choice.”

The SEC declined to talk to News10NBC for this story but pointed me to its news release from two years ago.

The SEC says the school district’s former finance director, the city, and its former finance director “mislead investors.”

The school district employee settled in 2022 for a $25,000 fine. The city is fighting and it’s costing taxpayers up to $800,000 in legal fees.

Berkeley Brean: “The SEC won’t answer this question for me so I’ll ask it to you – why do you think they’re going after the city and individual employees?”

Patrick Beath: “I couldn’t tell you. And yet we are paying hundreds of thousands of dollars just so the SEC can, I don’t know, seem like the big guns.”

Lawyers are still filing paperwork in this case and going through evidence. The trail is a long way off.

Beath says the city and SEC have had settlement talks but the city says the SEC demands that it be able to charge the former finance director personally. The city says its charter protects employees so it’s not willing to set that precedent.

The city council budget and finance committee voted to approve the additional $400,000 for legal fees. The full council votes at its meeting on April 24.