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Bibb County School District v. Dallemand

United States District Court, M.D. Georgia, Macon Division

April 8, 2019

BIBB COUNTY SCHOOL DISTRICT, Plaintiff,
v.
ROMAIN DALLEMAND, et al., Defendants.

          ORDER

          MARC T. TREADWELL, UNITED STATES DISTRICT COURT JUDGE

         Newly added Defendants Harold Knowles and Knowles and Randolph, P.A. (“the Knowles Defendants”) have moved to dismiss Plaintiff Bibb County School District's (“BCSD”) second amended complaint. Docs. 232; 241. For the following reasons, their motion is DENIED.

         I. BACKGROUND

         BCSD filed its initial complaint on December 15, 2016. Doc. 1. On November 20, 2017, BCSD filed its second amended complaint and joined new Defendants, including the Knowles Defendants.[1] Doc. 162. The amended complaint asserts the following claims against the Knowles Defendants: (1) federal RICO violation (Count I); (2) Georgia RICO violation (Count II); (3) fraud (Count III); (4) Unjust Enrichment (Count IX); and (5) aiding and abetting a breach of fiduciary duties (Count XI). See generally id.

         The amended complaint followed the June 13, 2017 indictment of Isaac J. Culver, Dave Carty, and Progressive Consulting Technologies, Inc., and the August 10, 2017 indictment of Cliffard Whitby, Harold Knowles, Central Georgia Partnership for Individual and Community Development (“PICD”), and Positiventures Initiative, LLC (“PVI”). See generally Doc. 136-5. Incorporating in large part the allegations made in both indictments, the amended complaint asserts that the Defendants engaged in multiple schemes to defraud BCSD, causing BCSD over $8 million in damages. See generally Doc. 162. BCSD claims it learned of the new Defendants' involvement in the fraudulent schemes from the indictments. Doc. 136 at 3-9. BCSD also learned that Dallemand was not indicted and that Dallemand entered into a plea agreement with the Government in which Dallemand stated he received a $100, 000.00 check from “Cliffard Whitby, with assistance from Harold Knowles, as a bribe for Dallemand to perform certain actions in his official capacity as the Superintendent of the Bibb County School District in Bibb County, Georgia.” Id. at 5. Indeed, Dallemand cooperated with the Government in its prosecution of the Defendants, which explains why the indictments and the amended complaint were as detailed as they were regarding the Defendants' alleged involvement in the fraudulent schemes.

         Since the filing of the amended complaint, the following events took place:

• BCSD reached a settlement agreement with all of the Defendants except Defendant Romain Dallemand, the Knowles Defendants, and Defendants Pinnacle/CSG Inc. and Cory McFarlane (the “Pinnacle Defendants”). Docs. 293; 296; 318; 319.
• The Pinnacle Defendants filed without leave of Court a counterclaim, then later moved to amend their answer to assert that counterclaim.[2] Docs. 201; 289.
• The Court stayed the case pending the resolution of the criminal trials involving some of the Defendants. Doc. 221. There were three trials in total. On July 24, 2018, Defendants Culver and Progressive Consulting Technologies, Inc. were convicted of conspiracy to commit wire and mail fraud, wire fraud, mail fraud, and conspiracy to launder money. United States v. Culver and Progressive Consulting Technologies, Inc., No. 5:17-cr-26, Doc. 117 (M.D. Ga. July 24, 2018). On October 9, 2018, Defendants Whitby, Knowles, PICD, and PVI were found not guilty on charges of bribery, and conspiracy to commit bribery and launder money. United States v. Whitby, et al., No. 5:17-cr-43, Doc. 176 (M.D. Ga. Oct. 9, 2018). On February 1, 2019, Defendant Carty was convicted of wire fraud. United States v. Carty, No. 5:17-cr-26, Doc. 272 (M.D. Ga. Feb. 1, 2019).
• During the stay on June 1, 2018, the Court held a status conference to address primarily the arguments raised in the Knowles Defendants' motion to dismiss, particularly the issue of whether BCSD's claims are barred by the statutes of limitations. See generally Doc. 291. As the Court explained at the status conference, the Knowles Defendants' motion is decided on the allegations raised in the second amended complaint. Id. at 35.

         Again, according to BCSD, the Defendants engaged in multiple schemes to defraud BCSD. The factual bases for BCSD's allegations are stated in its 549-paragraph second amended complaint. Because of the issues raised by the Knowles Defendants' motion, it is necessary to discuss those factual allegations in detail.

         On February 1, 2011, BCSD entered into an employment contract with Defendant Dallemand. Doc. 162 ¶ 22. Pursuant to that contract, Dallemand became the school district's new superintendent and, during that tenure, was in a relationship of trust and confidence with BCSD and its Board of Education. Id. ¶¶ 22, 24. In April 2011, in one of his first acts as superintendent, Dallemand reorganized the purchasing department so that proposed purchases, like those involved in this case, would be reviewed and approved by employees unfamiliar with BCSD's bid procedures. Id. ¶ 139. According to BCSD, “Dallemand's reorganization was essential to the execution of the Defendants' scheme to defraud BCSD.” Id. For purposes of this Order, the Court need not go into detail as to these alleged schemes other than stating that Dallemand's reorganization allegedly played a role in BCSD paying over $7 million to Culver, Carty, Progressive Consulting, Pinnacle, and McFarlane for a technology upgrade involving computer devices and software that are either unused or nonexistent.[3]

         In addition to technology upgrade schemes, Dallemand also facilitated the Defendants' scheme to defraud BCSD through the Macon Promise Neighborhood (“MPN”). MPN was supposed to be a collaborative effort by thirty-five non-profit or governmental partners, including Defendant PICD, to improve education and quality of life for students living in targeted areas of Macon. Id. ¶ 25. According to BCSD and the indictments, that is not how things turned out. PICD purchased a surplus school building for $220, 000.00 to house the MPN. Id. ¶¶ 26-27. PICD was formed and created by Defendant Whitby. Id. ¶ 8. Whitby was not only the executive director of PICD, but he was also the executive director and fiscal agent of MPN. Id. ¶¶ 6, 59.

         Initially, Dallemand resisted the collaborative MPN concept. Id. ¶ 34. That changed after Whitby “outlined” and “explained” just how Whitby envisioned MPN would work. Id. ¶ 35. That explanation came to include an initial $100, 000.00 bribe paid to Dallemand in exchange for his support of the MPN. Id. ¶ 37. Further, Whitby and Dallemand agreed that Dallemand would receive ten percent of ten annual $1 million payments BCSD would agree to pay to the MPN. Id. ¶ 39. Of course, Dallemand did not disclose that he had been bribed to either BCSD or its Board of Education.

         Understandably, Whitby and Dallemand both had concerns over Whitby directly paying Dallemand the first $100, 000.00. Id. ¶ 76. Whitby suggested they create a company through which they could route the money. Id. Until that was done, they agreed to use Defendants Knowles and Knowles & Randolph as the “middle man.” Id. Knowles is the CFO and general counsel of Pinnacle and an attorney of Knowles & Randolph, a Florida legal entity. Id. ¶¶ 17, 19. Dallemand knew Knowles from an event in Tallahassee, Florida. Id. ¶ 77. After Dallemand gave Knowles's contact information to Whitby, Knowles and Whitby began communicating with one another on how to funnel the money to Dallemand. Id. Dallemand later learned from Whitby and Knowles that the money had been transferred and that Knowles had a check for $100, 000.00 for Dallemand. Id. ¶ 78.

         With the bribe arrangements finalized, the Board of Education adopted on June 27, 2012 a resolution to support the MPN. Id. ¶ 52. Pursuant to the resolution, BCSD agreed to offer its “programs, resources, current-budgeted funds, and related in-kind contributions (the “Resources”) for purposes of supporting the MPN initiative and act as matching requirements for the DOEPN grant.” Id. The Resources would help support four schools-Ingram-Pye, Hartley, Ballard and Southwest-in amounts not exceeding $250, 000.00 per school, per year. Id. Thus, at that point, BCSD's contributions to the MPN were to be “in-kind.” On July 17, 2012, Dallemand delivered a $1 million invoice from PICD to Ron Collier, BCSD's Chief Financial Officer at the time. Id. ¶¶ 53-54. The invoice was for a “2012 Macon Children's Promise Neighborhood contribution for PICD.” Id. ¶ 54. Dallemand directed Collier to pay the invoice from BCSD's funds, but Collier had concerns and did not pay the invoice. Id. ¶¶ 54-55. When Dallemand learned Collier had not paid the invoice, he told Collier to contact Jimmie Samuel, the president of PICD. Id. ¶ 56. But before Collier had a chance to contact Samuel, Samuel called him but was unable to allay Collier's concerns. Id. Collier decided to consult Sharon Roberts, BCSD's director of accounting who had worked with the collaborative group. Id. ¶ 57. Roberts told him she did not know anything about the invoice, and Dr. Peter Brown, the co-principal investigator for the MPN, said the same after Roberts emailed a copy of the invoice to Dr. Brown. Id. ¶¶ 33, 57.

         On the morning of July 20, 2012, Dallemand called Collier at home to complain about Collier's failure to pay the invoice. Id. ¶ 58. Dallemand said he was “disappointed” in Collier and that the president of the Board of Education wanted to know why the invoice had not been paid and asked if he needed to hire another Chief Financial Officer. Id. Collier told Dallemand that he-Dallemand-should approve the payment of the invoice, but Dallemand refused to do so. Id. Because Collier still had concerns about the invoice, he refused to pay it. Id.

         On July 25, 2012, Collier received an email from Ebony Harris, the project director of the MPN. Id. ¶ 59. In that email, Harris wrote: “I was asked by Mr. Cliffard Whitby Macon Promise Neighborhood, Executive Director and Mr. Jimmie Samuel Partnership for Individual and Community Development, President to forward a copy of the attached invoice to you.” Id. This second invoice, also for $1 million with PICD as the payee, was issued to the “Bibb County Board of Education” and was for “School System 2012 contribution for Macon Children's Promise Neighborhood match Commitment.” Id. ¶ 61. A few hours after receiving Harris's email, Collier received a letter from Dallemand directing him to prepare a $1 million check or wire transfer to PICD and to “have this check or wire transfer authorization . . . to me no later than 5:00 p.m. on Thursday, July 26, 2012.” Id. ¶ 62.

         In response, Collier sent a letter on July 26, 2012 to Dallemand stating he could not “‘in good conscience write the check'” because he believed doing so would violate “‘Georgia Laws, Rules and Regulations as well as The State Board of Education Rules and Regulations.'” Id. ¶ 63. Consequently, Collier did not pay the invoice, and Dallemand thereafter excluded Collier from all discussions regarding the MPN until after the Board of Education met on October 18, 2012. Id. ¶ 64.

         On July 27, 2012, the president of the Board of Education, with Dallemand's knowledge and consent, signed a lease agreement in which BCSD agreed to lease a portion of the surplus building for a period of ten years from PICD. Id. ¶ 65. Pursuant to the lease agreement, BCSD would pay $575, 000.00 to PICD as rent per year for ten years. Id. ¶ 66.

         On October 18, 2012, upon Dallemand's recommendation, the Board of Education approved a Memorandum of Understanding (“MOU”) between PICD and BCSD. Id. ¶ 67. Pursuant to that MOU, BCSD would pay PICD $1 million to customize the interior of the building that BCSD was already leasing a part of from PICD. Id. BCSD also agreed to provide up to $325, 000.00 per year for ten years to PICD for costs and services incurred in the implementation of the MPN. Id. In sum, BCSD agreed to give PICD a one-time payment of $1 million along with $900, 000.00 per year for ten years for the costs and services and rent of the building. Id. The lease agreement and the MOU were separate from the June 27, 2012 resolution and the invoices that resulted from it.

         On October 30, 2012, BCSD wrote a check for $1 million made payable to PICD. Id. ¶ 68. On November 2, 2012, PICD gave a $950, 000.00 check to Defendant PVI, a Georgia limited liability company that was formed and created by Whitby and whose registered agent was Whitby. Id. ¶¶ 9, 80. On November 9, 2012, PVI gave a $100, 00.00 check to Knowles and Knowles & Randolph to fund the initial bribe payment to Dallemand. Id. ¶ 87. On November 19, 2012, Knowles gave a $100, 000.00 check to Dallemand at a rendezvous in Tifton, Georgia. Id. ¶¶ 96-97. The $100, 000.00 check from Knowles to Dallemand was drawn from the trust account of Knowles & Randolph. Id. ¶ 98. The words “Trust Refund” are written on the memo line of the check. Id. Along with the $100, 000.00 check, Knowles gave Dallemand a letter indicating the $100, 000.00 was being returned as money that Dallemand had put into Knowles & Randolph's trust account to purchase a house. Id. ¶ 99. Dallemand had never used Knowles as an attorney and had never given Knowles money to keep in trust for any purpose. Id.

         Around the time he gave Dallemand the $100, 000.00 check, Knowles offered Dallemand stock in Defendant Pinnacle, a construction firm in Tallahassee, Florida, if Dallemand helped secure future construction contracts for Pinnacle from BCSD. Id. ¶¶ 122, 241. Specifically, on November 11, December 1, and December 2, 2012, Knowles, individually and on behalf of Defendants Pinnacle and McFarlane, emailed Dallemand a draft stock purchase agreement in which Dallemand would pay $500, 000.00 to obtain stock in Pinnacle; however, contrary to what was stated in the purchase agreement and based on conversations between Knowles and Dallemand, Dallemand would not pay any money but instead would obtain stock in Pinnacle in exchange for helping Pinnacle obtain future construction contracts with BCSD. Id. ¶ 123-26. BCSD was not aware of this discussion between Knowles and Dallemand. Id. ¶ 129. In the end, Dallemand resigned from his position as superintendent and BCSD did not enter into any construction contracts with Pinnacle. Id. ¶ 130. Dallemand, therefore, did not obtain any stock in Pinnacle and never signed the stock purchase agreement that Knowles had sent him. Id. However, Knowles and Pinnacle later offered additional bribes to Dallemand in order to obtain computer software business from BCSD related to the technology upgrade project mentioned earlier. Id.

         Specifically, between November 19, 2012 and December 18, 2012, Whitby and Knowles told Dallemand about a financial transaction in which Pinnacle would be the company “on paper” selling an accounting and financial software program to BCSD; however, in reality, the software would be developed by another entity. Id. ¶ 192. Whitby, Knowles, and Pinnacle offered Dallemand $500, 000.00 in exchange for Dallemand ensuring that BCSD purchased the software from Pinnacle. Id. Dallemand accepted the offer “and, in fact, did push through a purchase by BCSD of accounting and financial software from Defendant Pinnacle.” Id. ¶ 193.

         On December 19, 2012, BCSD wired $3, 247, 200.00 to Pinnacle for the software. Id. ¶¶ 213, 215. On January 8, 2013, Pinnacle gave Knowles and Knowles & Randolph $100, 000.00. Id. ¶ 225. On January 10, 2013, Knowles and Knowles & Randolph gave PVI $100, 000.00 as reimbursement for the alleged bribe money that PVI gave to them to give to Dallemand. Id. ¶¶ 226-27.

         After the initial $100, 000.00 bribe payment, Whitby and Dallemand established Belhannes, LLC to facilitate payment of subsequent installments. Id. ¶ 115. A chart in the second amended complaint shows payments made to Belhannes from August 15, 2013 to June 25, 2016 totaling $337, 400.00. Id. ¶ 116. Sometime in 2015, Dallemand contacted Knowles to ask whether he would be paid as Knowles and Whitby promised for helping push through BCSD's purchase of Pinnacle's software. Id. ¶ 232. On April 2, 2017, Whitby met with Dallemand at a restaurant in South Georgia and gave Dallemand $24, 000.00 in cash. Id. ΒΆ 119. ...


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