(This is an expanded version of a previously published article.)
By Renee Batti
Almanac News Editor
The public school districts serving children in Menlo Park, Atherton, Woodside and Portola Valley are among the 12 districts in the county suing San Mateo County and its former treasurer, Lee Buffington, in an effort to recover about $20 million lost by the treasurer when Lehman Brothers filed for bankruptcy in September 2008.
The districts are joined by the
county Office of Education, now headed by former Portola Valley School District superintendent Anne Campbell, who is the spokesperson for the plaintiffs.
The money in question was placed in the county's investment pool, along with money from other government agencies. The total investment-pool loss resulting from the Lehman Brothers collapse was about $155 million.
Unlike some investment pool participants, however, the school districts were required to put their bond revenue and other working funds into the pool.
"The money lost by the county treasurer included funds for instruction and operations, taxpayer-approved bonds, and other funds critical to educating San Mateo County's children," Superintendent Campbell's office said in a written statement. "The county treasurer charged the districts substantial fees to manage their money, for which the county treasurer was required to provide competent, professional investment services."
Locally, the Menlo Park City School District took the biggest hit by far: It lost nearly $4 million. The Ravenswood School District lost about $854,500; the Las Lomitas district, almost $400,000; the Portola Valley district, nearly $150,000; and the Woodside district, about $100,000.
The lawsuit alleges that the county failed to act "with care, skill, prudence and diligence" in managing the investment pool.
It asserts that the treasurer's office violated state and county investment policies; failed to adhere to legally required prudent investment practices; failed to properly diversify the $155 million in investments "among sectors of the economy"; and failed to sell the Lehman notes "after learning of deterioration in the finances, credit rating, and stock price of Lehman."
The school districts and Office of Education had filed a claim against the defendants in September, putting them on notice that a lawsuit was likely to be filed unless an agreement could be reached.
"The districts have attempted to resolve the dispute without litigation, but the county has not come forward with any offer to address the losses suffered by the districts," according to the prepared statement.
After filing the claim last year, Superintendent Campbell told The Almanac that her office, school district representatives and the county had been working together for nearly two years to find ways to recover the money, but that the talks were not producing a satisfactory result. She said the districts not only want their money back, but want "to be sure that the policies of the county investment pool have been changed to make sure this doesn't happen again."
County Manager David Boesch said at the time that the county had brought in a firm to do a forensic analysis of investment practices, and would be presenting new policies, based in part on the firm's recommendations, to the Board of Supervisors early this year.
He said, however, that "the county feels it's in a very strong position" to defend itself against a lawsuit. "We can demonstrate that the office has used best practices" in investing funds, he said.
Click on this link to read the lawsuit.