San Francisco Unified School District, City Attorney Sue Progress Energy For $300 Million

Civil Suit Follows Criminal Conviction for Defrauding San Francisco Schools

City Attorney Dennis Herrera today joined the San Francisco Unified School District, represented by its General Counsel Louise H. Renne, and outside counsel Joseph W. Cotchett of the law firm of Cotchett, Pitre, Simon & McCarthy, in filing a multi-million dollar lawsuit against Fortune 250 energy giant Progress Energy Corp. [NYSE:PGN] and its subsidiary, Progress Energy Solutions. Following Progress Energy’s conviction last October to two counts of felony grand theft for stealing $500,000 from the School District, today’s civil suit charges the company with engaging in a sophisticated scheme to defraud the School District in connection with a $21.3 million energy savings contract. The suit seeks more than $300 million in damages and penalties from Progress Energy, its subsidiary as well as the subsidiary’s president, vice-president, a key sales representative and others.

“Progress Energy’s scheme is another example of the rampant corporate greed that we saw with Enron and Worldcom — only this time the victims were school children,” said Herrera. “Even apart from the money it stole that our schools desperately need, Progress Energy failed to provide what the School District paid for, leaving our children to shiver in unheated classrooms.”

Progress Energy has been paid more than $23 million by the school district for a system that today remains incomplete and unreliable. Indeed, corporate negligence detailed in the City’s complaint includes classrooms that have forced school children to don jackets and coats during class; faulty energy control systems; failed heating mechanisms; flooded school basements; corroded new boilers and a heretofore unreported boiler explosion at Visitacion Valley Middle School in August 2002 — a fearsome mishap during which no one, miraculously, was harmed.

“Progress Energy broke promises, committed crimes and actually exacerbated the very problem they contracted to fix — and it’s our school kids who are paying the price for it,” said S.F. Unified School District General Counsel Louise Renne, who served as San Francisco City Attorney from 1986 to 2002. “Today’s joint cross-complaint by the City and the Unified School District involves one of the most venal examples of corporate wrongdoing San Francisco has witnessed in recent memory.”

The Unified School District will also be represented by Joseph W. Cotchett of Burlingame, Calif.-based Cotchett, Pitre, Simon & McCarthy, a nationally known law firm. Described by National Law Journal as “one of the nation’s best trial lawyers,” Cotchett has been named among the 100 most influential lawyers in the United States for the past ten years.

Beyond criminal wrongdoing, civil contract performance wrongdoings by Progress Energy constitute violations of the California False Claims Act, Business and Professions Code § 17200, negligence, and the covenant of good faith and fair dealing.

Should they prevail in state court, the City and Unified School District would be entitled to:

  • Punitive damages in the tens of millions for civil and criminal fraud
  • Liquidated damages of as much as $250,000,000 for failure to complete the contracted work
  • Treble damages and penalties of $10,000 per false claim under the California False Claims Act
  • Compensatory damages, disgorgement of profits and restitution
  • Additional penalties under the Business and Professions Code section 17200
  • Attorneys’ fees and injunctive relief

About The San Francisco City Attorney’s Office
As City Attorney of San Francisco, Dennis Herrera leads an award-winning public law office that has won national acclaim for an aggressive affirmative litigation program that has won civil judgments and settlements on behalf of consumers, citizens and taxpayers totaling into the hundreds of millions of dollars. The office’s affirmative litigation program has successfully sued such corporate giants as Bank of America, Old Republic Title Company and the tobacco industry.