Big payday for Lenz Former CFO settles defamation, whistleblower suit for $183K

Jul 29, 2004 - Hoboken Reporter
by:  Tom Jennemann Reporter staff writer
 
City officials were reacting last week to a $183,000 settlement reached in a lawsuit filed by the city's former acting chief financial officer.

Michael Lenz, who was only on the job for around eight months, will be awarded the money in return for dropping his "whistleblower" and defamation suit against the city.

"A lot of statements were made implying that I misled the council or my advice was in some way biased or political, none of which was ever true," said Lenz Thursday. "If others are willing to make me whole financially and put this behind us, then so am I."

Even though the city did not admit wrongdoing, it has agreed to pay a lump sum payment of $150,000 and around $8,000 in lost pension to Lenz. His attorney, David B. Rubin of Metuchen, will collect $25,000 in legal fees.

Lenz has agreed to drop his suit against the City of Hoboken, Mayor David Roberts, Business Administrator Robert Drasheff, and the Roberts-aligned City Council members who first voted for Lenz's termination. Lenz is currently working as the CFO of Mansfield Township, a small town in central New Jersey.

Why the suit?

Lenz served as current Mayor David Roberts' campaign manager during the 2001 mayoral election. A year after Roberts won, Lenz, a CPA, was hired as the city's Chief Financial Officer.

Among Lenz's jobs was to put together the city's budget. The budget was passed in January of 2003. A few months later, the city realized it had underbudgeted and was forced to appropriate additional emergency money. In May, Lenz supported a council ticket that was in opposition to the mayor's ticket. At the time, there were political accusations made in public by several pro-Roberts council members and administration officials that CFO Lenz, who supported a ticket opposing the mayor, was purposely making the city's books look worse than they really were.

On Election Day in May of 2003, the Roberts administration fired Lenz based on an internal investigation by their auditors, Ernst and Young. The administration charged that the city's Finance Department, under Lenz, had miscalculated how much in emergency appropriations would be needed to finish the fiscal year that ran from July 1, 2002 to June 30, 2003.

The accusation that Lenz was making the city's books look worse was one that Lenz has continually denied. Lenz said that he did his job in a professional manner and, based on the data he had before him, made an honest estimation of how much more money would be needed to finish the year.

Lenz's position was later strengthened by a city audit for the fiscal year 2003, which was released in April of this year. According to the audit, Lenz did not overestimate how much was needed; in fact, he underestimated it. The audit showed that the city's fiscal shape at the time was even worse than his "conservative" estimate, therefore Lenz was not responsible of overestimating the state of the books for political gain.

Three counts

In April of this year, Lenz filed a three-count suit against the city.

The first count alleged that the city violated the state's whistleblower laws. A whistleblower is an employee who reports the illegal or wrongful activities of his employer or refuses to participate in those activities.

Federal and state whistleblower protection laws were enacted in the 1980s to protect employees from retaliation such as discharge or demotion when they reported hazards, violations of laws, governmental fraud, waste or abuse.

"[Lenz's termination] was a retaliatory action for [Lenz] having complained of unlawful overexpenditures of budgeted items," reads the complaint.

The second count alleged defamation. According to the complaint, Roberts and Drasheff allegedly said through press releases and statements that Lenz "had purposely attempted to undermine the fiscal integrity of the city" and has "otherwise engaged in fiscal improprieties or other unprofessional behavior." The suit adds that the statements were made with "malicious intent to injure."

The third count alleges that Lenz's First Amendment rights were violated because, according to the suit, one reason he was fired was in retaliation for not providing political support for Roberts and because of their perception that he was actively supporting the mayor's opposition.

According to the suit, Lenz, under the First Amendment, should be "free from termination of public employment based on political affiliation or lack thereof."

No admission of wrongdoing

City attorney Joseph Sherman and the mayor's office declined to comment on the suit, but he did point to several paragraphs in the settlement that state that the defendants are not required to admit any wrongdoing or liability. According to the settlement obtained from the city's Law Department, any admission of liability "is expressly denied." It adds that the city entered into the settlement "for the purpose of avoiding continued expense, inconvenience and risk of continued litigation."

Words of warning

Lenz added that the city's settlement with him does not resolve Hoboken's current financial issues. "We continue our annual ritual of overspending our budget and after substantial progress of reducing it," Lenz said last week. "2004 looks to be the worst year ever. I hope the council, who has ultimate authority to appoint a CFO, who will take strong action to get our financial house in order. You can be sure that I will continue to be involved."

While the city did not have to admit that it was liable, the opposition to the mayor said this lawsuit could have been avoided in the first place.

When Lenz was hired, he was still studying and taking classes to become a licensed CFO. His official title was acting CFO, and his position was a provisional one, meaning that the city had the authority to terminate him without reason.

Councilwoman Carol Marsh said Wednesday that instead of just terminating his employment, Lenz was made a scapegoat for a budget controversy that was happening just days before a contentious City Council election. "This administration has the habit of shooting the messenger," said Marsh.

Councilman Tony Soares added that all the city had to do was fire Lenz, but instead, because of personal and political dislike for Lenz, the administration made disparaging remarks in public meetings and to the newspaper. "They wanted Lenz out because the mayor didn't believe that he was on their side politically," said Soares.

Read more: Hudson Reporter - Big payday for Lenz Former CFO settles defamation whistleblower suit for 183K