An employee convinced the Beverly Hills Unified School District to reclassify her as an independent contractor in 2006. Court records say the move resulted in the amount paid to the worker going from a salary of $113,000 to payments that amounted to nearly $1.4 million. In 2008, the independent contractor persuaded the district to award her a no-bid $16 million contract.
On Aug. 13, 2009, after an internal investigation, the district terminated the contract. On Aug. 28, 2009, the worker, Karen Christiansen, sued the school district claiming the agreement did not violate the law and the district breached its contract with her firm Strategic Concepts LLC, according to court records.
Christiansen won the jury trial and was awarded a total judgment of $20.3 million. A reasoning in the trial court was that Christiansen was an independent contractor, not an employee subject to state law, Section 1090, prohibiting conflict of interest for government employees.
However, the Second District Court of Appeal in Los Angeles ruled last Thursday the trial court erred and that Christiansen was still covered under Section 1090 even though she was an independent contractor.
The full opinion is online [1], but here are some of the facts in this case, according to the opinion:
- Christiansen was employed as director of planning and facilities management at the Beverly Hills Unified School District receiving a salary of $113,000 per year plus a $150 per month car allowance. She lobbied district officials to change her position to a consultant from an employee in 2006. Christiansen then entered into a new three-year contract with the district to perform the same duties and use her same office. Compensation under the new contract was $160 per hour with a maximum of $170,000 per year. The contract required approval from the district administration and board for amounts above that.
- Christiansen formed Strategic Concepts LLC. She was the sole owner. Strategic’s invoices, despite the contract limitations, amounted to $253,520 in 2006, $1.3 million in 2007, and $1.39 million in 2008. The invoices appeared on the board’s “consent calendar” reserved for noncontroversial items that are not usually reviewed on an individual basis.
- District Superintendent Kari McVeigh and Assistant Superintendent of Business Services Cheryl Plotkin were required to review and approve Christiansen’s invoices, according to court documents. Plotkin socialized with Christiansen, attended parties at Christiansen’s home and went on trips with her. Christiansen also hired Plotkin’s daughter to work for Strategic.
- “When Christiansen discovered her contract and payments were being questioned by the District’s Citizens’ Oversight Committee, she emailed Plotkin: ‘Let’s just say that the contract was developed by your attorney. … Please shut this down fast,’” according to court documents.
- Christiansen negotiated a new contract in June 2008 with one year on her existing contract because it did not contain a “termination for convenience” clause. Christiansen was friends with the district’s counsel, David Orbach and his law partner David Huff. They often met for drinks after work.
- Later Christiansen led an effort to get a bond passed.
- McVeigh retired in November 2008 and Jerry Gross became the new superintendent. The school board retained a new attorney who in August 2009 advised Christiansen that her contracts were void under section 1090. Strategic was ordered to vacate the premises.
- Christiansen was prosecuted for a criminal violation of section 1090 conflict of interest law. A jury found her guilty. She was sentenced in January 2012 to four years and four months in prison and ordered to pay the district $3.5 million in restitution. However, the Appeals court in this case ruled that Christiansen was an independent contractor and the section did not apply to her. A local newspaper covered the decision [2]. In its new decision last week, the Court of Appeals cited a new ruling by the state Supreme Court in 2017, and found the law did apply to independent contractors in situations such as Christiansen’s.
- The civil case now goes back for further proceedings in the lower court based on the Court of Appeals’ decision.
“Christiansen used her position of trust as an employee to ingratiate herself with the district’s administrators,” according to the Court of Appeals’ decision. “She ‘lobbied hard’ to move from an employee to independent contractor. As a result, she entered into a contract that transformed her from an employee earning $113,000 per year to an independent contractor earning over $1.3 million per year, doing the same work from the same office in the district’s headquarters. Then she used her influence with the district to obtain a $16 million no-bid contract to administer the district’s new bond fund. Using a position of public trust or influence to obtain such contracts is a clear violation of section 1090.”