Council Approved Fraud Case Settlement, But Did Not Publicly Record the Vote

Following up on ELi’s report of a $20,000 settlement in a federal fraud case involving City Attorney Tom Yeadon, Lansing State Journal reporter Beth LeBlanc today quotes Mayor Mark Meadows saying that City Council did vote to approve that settlement. But, Meadows says, the November 8 vote was never recorded in the minutes approved by City Council.

According to the Michigan Open Meetings Act, all votes by City Council must occur in open session and must be recorded in minutes. LSJ attorney Herschel Fink “said the decision not to include the settlement in meeting minutes was ‘illegal’ and ‘improper.’”

On November 8, 2017, Council went into closed session to discuss settlement of the lawsuit. It then apparently went back into open session to vote. Meadows told LeBlanc yesterday, “members of the public had left the meeting room at that point, and the vote was not reported in meeting minutes because of the lawsuit’s sealed status.”

As ELi reported yesterday, the court does seal some documents in a whistleblower suit of this type in order to protect whistleblowers. But many of the filed documents in this case, including the original lawsuit filing and the settlement agreement, have been made public by the court.

The agenda for tonight’s City Council meeting has now been changed, showing that Council will move tonight to amend the November 8 minutes.

Meadows also told the LSJ that “the failure to disclose the law firm’s interest in the project was a ‘technical error’ by city staff.” He added, “Staff did not reveal that the City Attorney had an interest in the property that was going to be approved.”

As we reported yesterday, the issue of the conflict of interest in this matter has been a source of open contention for years.

In October 2012, Yeadon failed to disclose his interest at City Council even as Council voted on the matter in a meeting that took place just hours after Yeadon suggested he might sue me for reporting on his conflict of interest in the matter.

It is only following the suit brought by Phil Bellfy and joined by the United States that City Manager George Lahanas is now acting to make formal conflict of interest disclosures. (The type of suit, called Qui Tam, allows whistleblowers to sue under the False Claims Act for alleged misuse of federal funds.)

In his statement to HUD, Lahanas claims: that the City “inadvertently” failed to make the conflict of interest disclosure earlier; that “there was no significant financial benefit that arose to the property owners including the City attorneys from the project”; that the $150,000 cost of the project “would have been cost prohibitive to the property owner”; and that it is reasonable to use $135,000 of HUD taxpayer funds for this project because low- or moderate-income individuals might use the sidewalk that was fixed.

Judging by documents obtained, Yeadon has never himself made a conflict of interest disclosure in the matter, including to City Council. That includes the period when he was actively advising City Council as City Attorney on project-related easements involving the property he co-owned. (Rule 1.7 of the Michigan Rules of Professional Conduct for attorneys lays out what is required in terms of management of conflicts of interest.)

Yeadon told the LSJ yesterday that "he'd heard he was named as a defendant in the lawsuit but had yet to see the actual complaint." He told the LSJ, "I had no involvement with the settlement of the lawsuit."

Court orders obtained by ELi show the court has dismissed this case "without prejudice" in terms of the involvement of the United States. This means the United States (represented by the Department of Justice) has reserved the right to come back with actions against other defendants in the case, including potentially Yeadon and his partners.

The case has cost East Lansing taxpayers about $10,000 in legal fees and $20,000 for the settlement. If HUD determines that East Lansing must now pay back HUD, that will come to about $135,000. An additional $15,000 was provided by East Lansing taxpayers for the original project.

UPDATE by Jessy Gregg, January 10, 2017, 8 a.m.:

Last night, City Council adopted an amended version of the minutes from its November 8, 2017, regular meeting, voting to change the minutes after what Mayor Mark Meadows described as "discussion within the community." (ELi started asking Council on January 3 about the lack of a record of any vote on the signed settlement agreement.)

On November 21, Council approved minutes for November 8 that showed no record of the November 8 vote. The settlement agreement had been signed by the City Manager on November 8 and the settlement check for $20,000 cut on November 13.

The amended November 8 minutes will now show that, after Council went into a closed session to discuss the proposed settlement, Council came back into open session and then authorized the City Manager to sign the settlement agreement. The amended minutes have not yet appeared on the City’s website.

Meadows noted court restrictions with regard to Qui Tam suits and said, "I have to take personal fault with regard to this, because I could have held those minutes up until we received some notice from the federal government that we were able to publicly discuss this matter but I just didn't think of it at the time when the minutes came up and they were approved without any reference." Meadows is an attorney with a long career in Michigan government.