County Posts Funds To Meet Settlement Ruling

SNOW HILL – Silence from the Worcester County Commissioners greeted a reporter’s question on the $1.1 million Beka lawsuit settlement at Tuesday morning’s County Commissioner meeting, before Commission President Louise Gulyas finally said that she did not think the commissioners could discuss the litigation.

The commissioners appeared to not want to discuss the matter. Gerry Mason, Worcester County administrator, then took the question, which concerned whether the county had posted a bond or some other sort of financial guarantee that the lawsuit settlement would be paid.

In late November, Circuit Court Judge Robert Karwacki denied a request from the Worcester County Board of Education to stay enforcement of a $1.1 million breach of contract judgment against the Worcester County Board of Education until the appeals process through the Maryland Court of Special Appeals concluded.

Beka Industries, Inc. had suggested through attorney David D. Gilliss that the school board could arrange for a bond guaranteeing payment of the settlement money if the school board’s appeal proved unsuccessful, but school officials rejected that offer.

In mid-December, the Court of Special Appeals approved a motion by Board of Education to temporarily hold off the enforcement of the $1.1  million judgment. James Almand, school board attorney, argued that payment of the judgment could cause ‘irreparable harm’ to the Worcester County school system, in paperwork filed after Beka Industries sought to garnish school board accounts at local banks. The accounts included those used for salaries and utilities.

A response to the temporary stay of enforcement by Gilliss persuaded the Court of Special Appeals to continue the stay only if the school board provided a letter of credit or a supersedeas bond for $1.1 million by Monday, Jan. 5.

On Tuesday, Mason confirmed that Worcester County had stepped in.

“The county posted those funds yesterday,” he said.

Gilliss confirmed the check had been secured.

“They were required to post a bond or a letter of credit, but they posted cash instead,” Gilliss said. “The Board submitted a check on the account of the County Commissioners to secure judgment pending the outcome of the appeal.”

With the posting of a check for the settlement, there is little danger the school board’s bank accounts will be tapped by the plaintiff. Gilliss said late last week he requested the writs of garnishment be re-issued, partly because of concerns about the board’s ability to find the money, but largely because of timing issues. The writs of garnishment would have allowed Beka to begin tapping school board bank accounts for the settlement if the Board did not satisfy the requirements.

“The garnishment actions were re-issued because they are only good for 30 days,” said Gilliss. “With the money posted and the judgment secured, there is no longer a reason to consider garnishing those accounts for the settlement.”

The question of just where the county funds came from is unclear. Staff confirmed that the check for $1.1 million, now held in escrow pending the outcome of the school board’s appeal, was drawn from the Worcester County General Fund, but could not later say where the money had come from within the General Fund.

County spokesperson Kim Moses confirmed that the money was not taken from an existing project, as was done to cover the school board’s unexpected cost overruns in early summer. Staffers who would know the exact previous assignment of the $1.1 million were at the Maryland Association of Counties conference and not available.

It is also not clear what will happen if the appeal fails.

“If the Board of Education were in fact to lose, [the check] would be the source of the payment, possibly,” Mason said.

Whether the county would absorb that cost, or whether the school board would be required to pay back that money or take a hit on other funding, is speculation at this point. No stipulations were put on the situation when the commissioners agreed to cut the check.

Mason polled the commissioners individually, asking for a yes or not vote, when the deadline for the check was imposed by the court. The commissioners voted 6-1 to authorize the check be cut.

Commissioner Virgil Shockley voted against providing the funds. During Tuesday’s meeting, Shockley said he voted no on providing the check because the school board should have accumulated some contingency funds since the summer, when the commissioners instructed all departments to save 2 percent of their budgets against future expenses.

“They should’ve set 2 percent aside,” Shockley said. “They should have had at least part of the money.”