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Gene Fisch, Jr v. New Heights Academy Charter School

September 13, 2012

GENE FISCH, JR., PLAINTIFF,
v.
NEW HEIGHTS ACADEMY CHARTER SCHOOL, A CORPORATION; STACY WINITT, INDIVIDUALLY AND AS EXECUTIVE DIRECTOR OF NEW HEIGHTS ACADEMY CHARTER SCHOOL; GAIL GROSSMAN, INDIVIDUALLY AND AS BOARD PRESIDENT OF NEW HEIGHTS ACADEMY CHARTER SCHOOL; JENNIFER DAVIS, INDIVIDUALLY AND AS BOARD VICE PRESIDENT OF NEW HEIGHTS ACADEMY CHARTER SCHOOL; AND JOEL RAMPOLDT, INDIVIDUALLY AND AS A BOARD MEMBER OF NEW HEIGHTS ACADEMY CHARTER SCHOOL, DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge:

OPINION & ORDER

Plaintiff Gene Fisch, Jr. ("Fisch") brings this action against defendants New Heights Academy Charter School (the "School"), Stacy Winnitt ("Winnitt"), Gail Grossmann ("Grossmann"), Jennifer Davis ("Davis"), and Joel Rampoldt ("Rampoltd") pursuant to the whistleblower provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3730(h), and New York State law. The defendants have moved to dismiss Fisch's complaint (the "Complaint") in part, pursuant to Rule 12(b)(6), Fed. R. Civ. P. For the following reasons, the motion is granted in part.

BACKGROUND The following facts are drawn from the complaint and are presumed to be true for purposes of this motion. The School is a charter school in New York City. It submits requests for and receives federal funding to support its operations. Fisch alleges that under the relevant federal regulations, the School is required to use proper fiscal control and fund accounting procedures to ensure that expenditures reimbursed by federal funds are authorized in advance, are made for eligible expenditures only, and are actually reported. See 34 C.F.R. Part 80. In order to justify receipt of funds and avoid having to repay them, Fisch claims, the School is required to account for its expenditures accurately and fully. See id. at §§ 80.20, 80.21.

Winnitt, Grossmann, Davis, and Rampoltd (collectively, the "Individual Defendants") are members of the School's Board of Trustees (the "Board"). Winnitt is the School's Executive Director.

In July 2008, Fisch was hired to serve as the School's Chief Operating Officer ("COO") in order to help the School handle its finances. At this time, the School had stated policies on "Separation" and "Code of Ethics and Conduct," as well as a "Whistleblower Policy." Fisch alleges that these policies and other School policies were incorporated into his employment contract. When Fisch began his employment, the School was in the process of providing information to an outside firm for an annual independent audit. Once completed, the results of that audit would serve as the School's statement to the federal government justifying its receipt of federal funds.

Upon becoming COO, Fisch conducted his own internal audit of the School's finances. He soon uncovered a number of financial accounting improprieties. Specifically, he discovered that the School had not required the regular use of purchase orders prepared and approved in advance, had not reviewed and separately approved invoices before payments were made, and had falsified, forged, and backdated certain approved purchase orders and invoices at the direction of Winnitt. Fisch also discovered that approximately $250,000 in invoices, many of them past due, had not been paid by the School, and that Winnitt had directed that a demolition take place in relation to a construction project at the School without the requisite permits and authorizations.

In July 2008, Fisch reported these financial improprieties to Winnitt, Grossmann, Rampoltd, and other members of the Board, and argued that the improper practices should be halted and corrected. Winnitt responded that the School was "too small to get caught." Fisch also reported his concerns at a meeting of the Board's Finance Committee.

In August and September, Fisch again spoke with Winnitt about the School's improper financial and unauthorized construction practices, and stated his intention to follow up with the Finance Committee. Winnitt responded with hostility. She told Fisch not to worry about the past and repeated her belief that the School was "too small to get caught." She also instructed Fisch not to speak with the Finance Committee about any improprieties and to clear any communications with the Finance Committee with her. She informed him that she would sit in on all his conference calls with the Finance Committee in the future, and threatened his employment.

In September, Fisch informed the Board and the Finance Committee that the School's accounting for federal funds from 2007-08 was inaccurate, that the numbers used for the 2008 audit were not credible, and that he did not want to sign off on the audit without redoing the numbers. That same month, he told Grossmann and Ramboldt that he believed the School was misappropriating funds, that "someone could go to jail," that he had seen a lawyer about the School's practices, and that Winnitt was retaliating against him for investigating and reporting these issues. Fisch again expressed his concerns to Winnitt in October, and she again brushed them aside. She instructed him never again to discuss his concerns with the Board and to remove references to improper accounting practices from his Finance and Operations Report to the Board.

The 2008 audit by the outside firm was produced in October. It found a number of deficiencies in the School's fiscal control and accounting practices, which supported many of Fisch's findings. The deficiencies included a lack of approval signatures on purchase orders and invoices, and the School's inability to locate certain purchase invoices.

Fisch continued to voice his concerns about the School's financial practices from October to December. He received a negative mid-year performance review from Winnitt on December 29. Winnitt said that she would provide Fisch with an improvement plan for him to follow, but failed to do so.

From January through March 2009, Fisch prepared a synopsis of the 2008 audit findings. During this period, he informed Winnitt of his discomfort with the figures in the audit and with submitting those figures to the federal government. Nevertheless, the audit was submitted to the federal government with Winnitt's signature. Fisch alleges that this submission, along with the submission of other statements regarding amounts to be paid or reimbursed to the School with federal funds, violated the FCA, 31 U.S.C. § 3729(a)(1).

In mid-March, after Fisch informed the Finance Committee that expenditures did not match grant budgets, Winnitt became angry with him. On March 18, the Board's treasurer agreed with Fisch regarding certain of the School's financial improprieties and indicated that he would raise the matter with the Board. On March 20, 2009, Winnitt terminated Fisch's employment in retaliation for his investigation and reports, stating that he was "not a good fit" at the School. Fisch's last day at work was May 15 and his last day on payroll was May 31.

Fisch filed the Complaint on March 19, 2012, alleging claims against the School and the Individual Defendants for violations of the whistleblower provisions of the FCA, 31 U.S.C. ยง 3730(h), and for breach of his employment contract with the School. On May 15, the defendants moved to dismiss the FCA claims against all defendants and the breach of contract claims ...


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