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KAREDES v. VILLAGE OF ENDICOTT

March 31, 2003

JOHN L. KAREDES, PLAINTIFF,
v.
THE VILLAGE OF ENDICOTT; MICHAEL COLELLA, IN HIS CAPACITY AS MAYOR OF THE VILLAGE OF ENDICOTT AND IN HIS INDIVIDUAL CAPACITY; BINGHAMTON PRESS COMPANY, DIVISION OF GANNETT SATELLITE INFORMATION NETWORK, INC.; GANNETT COMPANY, INC.; WIVT NEWSCHANNEL 34; WBGH NEWSCHANNEL 5; AND THE ACKERLEY GROUP, INC., DEFENDANTS.



The opinion of the court was delivered by: Frederick J. Scullin, Jr., United States Chief District Judge

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

Plaintiff's amended complaint includes eight causes of action, alleging violations of Plaintiff's First and Fourteenth Amendment rights pursuant to § 1983 and state law claims of breach of contract, interference with contract, prima facie tort, libel and defamation. Only Plaintiff's seventh cause of action, which is a state law libel claim, is asserted against Defendants Binghamton Press Company, a Division of Gannett Satellite Information Network, Inc. and Gannet Company, Inc. (collectively "Press & Sun-Bulletin").

II. BACKGROUND

A. Events leading up to the Press & Sun-Bulletin articles

The Village of Endicott (the "Village") owns and operates for profit the En-Joie Golf Club ("En-Joie"), consisting of an 18-hole golf course, a pro shop and a restaurant. See Amended Complaint at ¶¶ 33-34. Each year, En-Joie hosts the B.C. Open, a PGA Tour event that the Broome County Community Charities, Inc. ("BCCC") operates. See id. at ¶¶ 36-37.

In March 1996, the Village Board of Trustees ("Trustees") executed a management-consulting agreement with Plaintiff, under which he managed the golf course.*fn1 See id. at ¶¶ 43, 48. Under that agreement, Plaintiff was responsible for:

(a) preparation of the facilities annual budget following guidelines set forth by the Mayor and Board of Trustees;
(b) preparation of all bills, payroll and accounts payable to be submitted to the Village Treasurer's Office for approval and payment;
(c) scheduling of all staff work schedules and schedules for all tournament play at the facility;
(d) scheduling tournament play and outings at the facilities;
(e) bookkeeping of all revenue of the facility;
(f) advising the Village with respect to the selection, maintenance and replacement of equipment related to the facility;
(g) recommending the hiring and firing of all personnel and staff at the facility; and
(h) training and management of all staff at the facility.

See id. at ¶ 53 and Exhibit "A."*fn2

Throughout his tenure, Plaintiff reported directly to the Mayor and the Trustees. See id. at ¶¶ 176-182. In memoranda he co-signed with the golf course superintendent, Plaintiff submitted the Golf Department's monthly reports on expenditures and revenues. See id. at ¶¶ 178-179 and Exhibits "H" and "I." Plaintiff also served on the Mayor's Golf Course Advisory Committee. See id. at Exhibit "G."

In September 1995, the BCCC requested, and the Village leadership approved, renovations of the golf course that the PGA Tour had requested. See Amended Complaint at ¶ 76. The BCCC agreed to pay nearly all expenditures associated with the renovations. See id. at Exhibit "M" at 20. Concurrently, the Village authorized another set of renovations to be paid at its expense. See id. at ¶ 110. During the renovations, the Village Clerk-Treasurer executed checks in response to invoices from third-party contractors and suppliers. See id. at ¶ 181. Before those payments were made, Plaintiff reviewed and approved the invoices. See id. at ¶ 53 and Exhibit "M" at 26.

In fiscal years 1996-1999, during which the renovations were made, the expenditures for the golf course exceeded the budgeted expenditures and its revenues fell below the budgeted revenues. Overall, the golf course operation expenditures during that time period exceeded golf course revenues by more than $2 million. See id. at Exhibit "M," auditor's letter of August 28, 2000, at 1.

In February 2000, under Mayor Colella's direction, a reconfigured Golf Advisory Committee issued an initial report entitled "John Karedes' Budget Information." See Amended Complaint at ¶¶ 210, 215. The report stated that during 1997 through 1999, the Golf Department spent more than $1 million over the budget. See id. at ¶ 215. Mayor Colella criticized Plaintiff and argued for a full-scale, private audit. See id. at ¶¶ 218-219. The Trustees agreed. See id. at ¶ 233.

At a February 12, 2001 Trustees meeting, which was open to the public, the independent auditors released the results of the audit: "Village of Endicott, New York, General Fund-Golf Department, Audit Report For the Four Years Ended May 31, 1999." See id. at ¶ 328. According to the audit, the Trustees tasked the auditors with examining "golf course operations" for the period July 1, 1995 through May 31, 1999, including the propriety of golf course expenditures, the existence of internal controls for the procurement system, whether any other organization may owe the Village for expenditures made on the organization's behalf, and the reasons and responsibility for the budget overruns. See id. at Exhibit "M" at 41-44.

The audit identified many problems with the Village's management of golf-course resources that contributed to a four-year, $1.1 million overrun of budgeted Golf Department expenditures. See id. at Exhibit "M" at 17. The auditors concluded that the "Village paid three vendors over $153,000 for invoices billed to [the BCCC]" and also paid other invoices totaling $7,611 that were addressed to the BCCC or the B.C. Open. See id. at Exhibit "M" at 25-36. The auditors also found that Plaintiff, whom they referred to as the "Golf Department Management Consultant" had exceeded the scope of his consulting agreement by approving substantially all expenditures during the audit period and by approving and submitting employee time sheets. See id. at Exhibit "M" at 27, 36. As a result of these deficiencies, the auditors reported that "the Village may have paid for goods and services, which were not received or received in an unacceptable condition or not related to golf department operations. See id. at Exhibit "M" at 29.

At the February 12, 2001 Trustees meeting, Kenneth Coleman, a representative of the auditing firm fielded Trustees' questions about the audit. See Amended Complaint at ¶¶ 335-338. According to Plaintiff, when asked to rate the golf course's business procedures and accountability, Mr. Coleman responded:

Well, for the Village as a whole, in terms of the golf department, and now I'm going to encompass everything, all of the things that I have talked about, which encompasses a great deal more perhaps than that question really raises, but I would say that I have never ever in 30 years of doing work both in private and in the governmental environment seen record keeping as poor as this.
See id. at ¶ 337.

With respect to the audit's findings regarding invoices that the Village paid but were billed to BCCC, Mr. Coleman told the Trustees:

I said that those bills were invoiced to and addressed to somebody else. . . . But I did not say that those bills were necessarily somebody else's bills, and I don't want to leave anybody with the impression that we've come to that conclusion. . . . We are not in a position to pass judgment one way or the other on that, but the record to us is clear that those bills are not in the name of the Village and therefore we have treated them as a question of costs.
See id.

B. The Press & Sun-Bulletin articles

On February 13, 2001, February 25, 2001, and March 8, 2001, the Press & Sun-Bulletin reported on the audit and the February 12, 2001 Trustees' meeting. See Amended Complaint at Exhibits "O," "P," and "Q."

1. The February 13, 2001 article

The February 13, 2001 article is captioned "Audit blasts En-Joie bookkeeping." See id. at Exhibit "O." The article reported that the audit of the "En-Joie Golf Club was sharply critical . . . of the club's bookkeeping." See id. The article also quoted Mr. Coleman as saying, "Never, ever in 30 years (as an accountant) have I seen record-keeping as poor as En-Joie's[.]" See id. The article also noted that Mr. Coleman had stated that "no one person is to blame for the bookkeeping nightmare. . . . [I]t was a failure of the club's — and the village's — internal control systems. `No one ever addressed these problems as they came up.'" See id. The article also mentioned that Mr. Coleman had said that "[w]hen the invoices were examined, . . . auditors found $151,000 in bills from three vendors that were addressed to another entity [BCCC] but paid by the village." See id. The article only mentioned Plaintiff once, noting that

En-Joie Manager John L. Karedes said late Monday night that he did not think it would be fair to comment on the audit until he has a chance to read the final report. Karedes said he read the preliminary audit two weeks ago, but doesn't know what might be different in the final version. He has managed the club since March 29, 1996.
See id.

Finally, the article noted that certain former and current Trustees criticized the audit, believing that Mayor Colella had engaged in a long-running battle against the golf course operator and had improperly influenced the audit's findings. See id.

2. The February 25, 2001 article

The February 25, 2001 article is entitled "Taxpayers footed B.C. Open bills." See Amended Complaint at Exhibit "P." The article begins by noting that before major renovations began, "the architects of a major overhaul of Endicott's En-Joie Golf Club's course pledged that their plans to mold it into a world-class course would not cost taxpayers a dime." See id. The article then noted that

Now auditors estimate the village shouldered more than $170,000 of the cost. It paid to rent backhoes and plant grass. It signed checks to contractors who were pouring concrete and others who were delivering gravel, even though many of the bills were addressed to [BCCC], which runs the B.C. Open and had agreed to fund the work.
Why Endicott paid the bills is unclear. Former officials say the payments were authorized by village lawmakers; others insist they should never have been paid in the first place. The village's records are so sloppy that neither side can say for certain which of them is right.
See id.

The article then noted Plaintiff's involvement in these events:

[H]ow the village paid bills addressed to someone else is no mystery. John Karedes, who has a management consultant agreement with the village to run its golf course, signed voucher after voucher that effectively passed the cost on to taxpayers. Two of the bills he signed away were addressed to the man who runs [BCCC], Alex Alexander.
In the last two years alone, Karedes signed more than a dozen vouchers that prompted the village to pay at least $151,676.47 worth of bills addressed to the B.C. Open, a review of Endicott's financial records shows.
Village officials had countless chances to step in and stop the bills from being paid. But a stack of cashed checks and signed invoices shows that they didn't.
See id.

In the next paragraph, the article quoted Plaintiff as stating, "`Could it have been done better? There were obviously some system problems, and I'm sure improvements could be made[.]' . . . `But those are system problems. It's not just me and it's not just the golf course.'" See id.

The article then noted that the Press & Sun-Bulletin had "examined dozens of bills, vouchers and checks that were singled out by accountants at the [auditing] firm. . . ." See id. After stating that the audit had "detailed widespread financial problems at ...


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