Fraud Alleged in School Board's Lawsuit With Private School

The Cedar Grove Board of Education has amended a lawsuit filed in November against Washington Academy to include fraud, and is seeking damages of nearly $500,000 for back rent, lost rent due to a broken lease, as well as maintenance and legal fees. Officials are saying the budget consequences of that lost revenue could be felt by the district immediately and in the future, no matter the outcome of the suit.

"How do we cover a $500,000 budget shortfall? It could mean layoffs, it could mean some services get cut. Who knows. It may not even come to that, but we have to keep our options open every step of the way. Because of this whole fiasco, someone may lose their job," Cedar Grove School Board Vice President Joseph Cicala told Patch this week.

The lawsuit is one of two the school board and Academy are currently involved in. The first is a landlord-tenant dispute the district has been embroiled with the Pompton Avenue private school since late October, in which the board to repossess the building and for two months back rent rent ($96,250), $24,740.66 in unpaid maintenance and utilities fees, and $9,240 in late fees pursuant to the lease agreement.

The total damages being sought in the second suit, filed in mid-November, includes the original amount for back rent and maintenance fees, (roughly $144,000), and an additional approximately $250,000 in lost revenue from rent the Academy would have paid to the district under the terms of its five-year lease, which wasn't set to expire until June 30, 2012, and additional legal and maintenance fees.

Cicala says even if the board is victorious in its suit against the Academy, collecting the owed money could prove challenging, and it could "take years" before the district saw a dime. Since the district has already budgeted for the current school year based on the anticipated rent revenue from the Academy, the loss of those funds would punch a sizable hole in the current year budget.

According to Cicala, the Academy has been "defiant" in court, and dishonest in the way it has conducted itself, most notably in sending a photocopy of a check for the full amount of the back rent owed to the board, without sending the actual check. A carbon copy was also sent by the Academy to the Department of Education, said Cicala.

"They sent a copy of a check, but they never paid us. They basically defrauded the Department of Education into believing they paid the $138,000 to bring the rent current," he said.

Cicala, himself an attorney, said the lawsuit has been amended to include fraud, stemming from the check that was never received, and conversion, which he explained means the Academy took the money owed to the district in back rent and using it to lease a new building in West Orange.

"Our contention is that they used the money to put down a [security] deposit for rent on a new facility. We can't prove it, but that's our assumption," he said.

Washington Academy is a private school housed in the old Leonard R. Parks School building directly across from Township Hall. It serves approximately 125 students as young as three and as old as 21 with mild to moderate behavioral and learning disabilities. It has been leased from the Board of Education since 2002.

Cedar Grove Superintendent Dr. Gene Polles said the next step is for the Academy to vacate the property, and for the district to reclaim possession of the building, under the terms of an agreement struck this week, which would require Washington Academy to vacate the building by 1 p.m. on Dec. 23. The district will repossess the space completely by Jan. 2, 2012, at which time the Academy's $115,000 security deposit will be released to the board to pay down the back rent.

Cicala noted that although the district has approximately $237,000 in surplus from restored state school aid, much of that money was set aside to make up the anticipated shortfall in rent if a new tenant took over the space currently occupied by Washington Academy. Cicala said the lease was signed five years ago before the economy took a nosedive, and that the next tenant of that building would likely pay considerably less in rent than Washington Academy did. Previous attempts to lease the space for as little as $400,000 per year, or $33,300 per month, less than two-thirds of the $48,125 per month the Academy was paying, went without drawing any bids, Cicala said.

In an interview Thursday, David Schwartz, Director of Washington Academy, expressed surprise to hear of the second lawsuit, and a desire to settle the matter with the board.

"It's been the position of Washington Academy from the beginning that we have every intention of making sure the Cedar Grove School Board is paid in full. We would like to pay them whatever we owe, we just need to sit down and figure out what that is," he said.

"We're waiting for them to let me know when we can sit down."