The Rhode Island Supreme Court has thrown out a $5.7 million jury trial award for the agency that runs the Central Landfill in Johnston for a lack of supporting expert witness testimony.
In 2007, Michael OConnell became the Executive Director of the Rhode Island Resource Recovery Corporation. He soon found that its accounting firm, Restivo Monacelli L.L.P., had missed numerous issues in its audits. He testified, “I came in in six months and I was tripping over issues; I couldn’t help it, they were everywhere…. And they found nothing.”
One problem was that Resource Recovery trusts were invested in violation of agency policies. OConnell found out that one of the landfill’s commissioners was also serving as a paid board member of the company that managed its trusts.
OConnell let the governor know about the problems he had found and a full forensic audit was conducted. The audit revealed that the agency’s employees, vendors, and commissioners had been compromising their ethical obligations to the agency and the public.
The Rhode Island Resource Recovery Corporation sued Restivo Monacelli L.L.P for professional malpractice, breach of contract, civil conspiracy, aiding and abetting breaches of fiduciary duty by Resource Recovery commissioners, managers, and employees, and knowingly submitting false, erroneous, or incomplete documents or statements to public officials with the intent of misleading the state. It claimed that the accounting firm it had hired to watch its books failed to identify issues such as:
- $10,000 annually for golf junkets,
- improper charitable contributions,
- overpaying for real estate, and
- major trust fund losses.
Restivo disputed the claims of negligence and malpractice and said that the damages were primarily caused by the agency itself. Edmund Restivo, a managing partner in Restivo, said, “We prepared our audit according to generally accepted auditing standards and the corporation signed off on our auditing report at the end of the audit and took responsibility for it… .We do very good work and stand by our record as to what we do.”
At trial, a jury awarded Rhode Island Resource Recovery Corporation $5.7 million. Restivo appealed the award to the Rhode Island Supreme Court. On appeal, the court focused on causation, or whether or not the malpractice claimed in the lawsuit led to the awarded damages. Resource Recovery argued that it didn’t need an expert to explain how Restivo’s malpractice hurt them financially. Resource Recovery argued that a jury could have found that if Restivo did its job, Resource Recovery’s bad actors would have stopped sooner. The court ultimately ruled that Resource Recovery should have provided expert testimony to show how any accounting malpractice by Restivo actually caused the agency to lose money.
Lauren Jones, an attorney for Restivo, said that her client was pleased with the outcome. She said, “We had high hopes it would turn out this way…. We’re glad the court saw it as we thought it should be seen.”