A financial advisory firm being sued by the Reading Area Water Authority over millions of dollars in bond issuances has filed a new lawsuit against City Council and several current and former council members, arguing they share responsibility for decisions that are at the center of the long-running case.
Concord Public Financial Advisors Inc., doing business as Concord Public Finance, filed the complaint May 22 in Berks County Court against City Council and former council members Vaughn D. Spencer, Stephen Fuhs, Marcia Goodman-Hinnershitz, Dennis Sterner, Maria Baez and Francis Acosta.
The lawsuit stems from a separate case filed by the water authority in 2019 that remains pending.
The authority’s original lawsuit alleges that former solicitor Michael Setley; his law firm, Concord Public Finance; former authority executive director Dean Miller and Miller Environmental; and former authority engineer Tom Weld and BCM Engineers engaged in conduct that led the authority to incur excessive debt, unnecessary expenses and inflated professional fees.
The authority alleged the defendants breached fiduciary duties and acted negligently in a series of bond issuances and other transactions.
According to the 2019 complaint, the authority issued $25 million in bonds in 2007, $50 million in bonds in 2011 and another $25.13 million bond issue in 2015. The authority under later leadership alleged the bonds were larger than necessary and contributed to excessive debt and unnecessary costs for ratepayers.
In the newly filed action, Concord argues that council had final authority to approve the bond issuances and therefore should bear responsibility if the authority succeeds in proving it was harmed by those transactions. The complaint notes that council approved resolutions authorizing approximately $25 million in long-term debt in 2007 and another $50 million in debt in 2011.
Concord contends that under city ordinances and the Municipal Authorities Act, no bond issuance could occur without council approval. The company argues that council members had an independent duty to review the necessity and size of the proposed borrowing before authorizing it.
The lawsuit alleges that if the authority’s claims are true, the council members’ votes were the legally essential actions that enabled the bond issuances and any resulting damages. Concord therefore seeks contribution or indemnification from the council members if it is found liable in the underlying case.
Specifically, Concord asks the court to apportion fault among all responsible parties, including the council members, or require the council members to reimburse Concord for any judgment entered against it. The company also seeks attorneys’ fees and costs.
The council members named in the suit are not accused of personally benefiting from the bond transactions. Rather, Concord argues they exercised independent legislative authority when they voted to approve the debt and therefore should share responsibility for any harm that the authority alleges resulted from those decisions.
The litigation traces back to a 2019 lawsuit filed after a forensic review of authority operations. In that complaint, the authority alleged that Setley, Miller and others maintained control over authority operations for years and approved unnecessary borrowing, excessive fees and transactions involving conflicts of interest. The defendants have denied wrongdoing, and no court has yet determined liability.
The newly filed lawsuit does not specify a dollar amount sought from council or the former council members. Any potential liability would depend on the outcome of the underlying 2019 case, which remains unresolved.