Conflicts matter

My lawsuit against the Sisters School District (SSD) challenges the legality of issuing the 2007 Full Faith and Credit Obligations (FF&COs) without voter approval. The SSD is represented by the law firm Mersereau & Shannon LLP. This firm has done hundreds of FF&COs that are identical in form and substance to the obligations issued by the SSD. If I prevail, the district's lawyers could be in serious trouble for giving negligent advice to their other clients and for not declaring their conflict of interest to the SSD.

When I learned the SSD lawyers had a conflict of interest I immediately contacted Superintendent Jim Golden and Board Chair Chris Jones. I made clear the following points:

There have been many FF&COs issued over the last 10 years, many involving much more debt than the SSD obligations, and all cited ORS 271.390 for legal authority to issue the obligations without voter approval.

Two law firms do the vast majority of these transactions, K & L Gates that did the SSD deal, and Mersereau & Shannon that is defending the SSD.

The SSD lawyers have a conflict of interest because of potential malpractice claims if they lose.

The SSD, teachers, parents, children, and taxpayers benefit if I win because an injunction will result in prohibiting further debt payments and requiring the SSD to seek reimbursement of all payments made to date. This makes the SSD lawyers that put the deal together, said it was lawful, and gained financially from the transaction liable.

The SSD should seek legal advice from an ethics attorney.

It appears the SSD has chosen to do nothing. On March 5, 2012 the Oregon Supreme Court received oral argument on the issue of legal standing and Peter Mersereau of Mersereau & Shannon LLP represented the SSD. The question before the court is whether a voter and taxpayer in the district has standing to challenge the issuance of a debt obligation that pledges the full faith and credit of the district which obligates taxpayers. The SSD claims a voter and taxpayer can't challenge its decision to sell FF&COs without voter approval.

The pledge of full faith and credit means the debt must be repaid, there can be no default. FF&COs are paid from current funding, there is no new tax, the debt must be serviced from the operating budget. This takes $250,000 per year out of the classroom and equates to the loss of three teachers. The SSD lawyers cited ORS 271.390 for legal authority to issue the 2007 FF&COs without voter approval.

Consider the following in Oregon law:

ORS 287A.001(3) defines "bond" as "... a contractual undertaking or instrument of a public body to repay borrowed moneys." Therefore, money borrowed by issuing FF&COs are "bonds" per Oregon law.

ORS 271.390 has no words granting any tax district authority to issue "bonds" or full faith and credit obligations, or to pledge full faith and credit to secure any debt without voter approval.

ORS 328.205 through 328.230 are specific to school districts incurring debt for facility improvements. These statutes require voter approval prior to incurring any "bond" debt. The requirement for voter approval is unconditional and absolute.

There are three questions this paper should ask and the SSD should answer: 1) Can anyone challenge a district decision that takes money out of the classroom and obligates taxpayers without voter approval? 2) Why engage lawyers with a conflict of interest when the district can benefit by losing? 3) Are the SSD lawyers protecting themselves at the expense of the

district?

Please get involved; citizen oversight works.