St. Bernard's School Trustees Accused of Securities Violations, Self-Dealing in New Filing
The amended complaint adds new allegations about the executive committee's actions, including alleged securities violations and the misuse of funds donated to the elite Upper East Side boys' school.
May 19, 2020 at 06:26 PM
4 minute read
Three families at St. Bernard's School accused the executive committee of the school's board of trustees of self-dealing, threats and deception in an amended petition filed Monday in Manhattan Supreme Court.
Attorneys from Walden Macht & Haran, which is representing the families in the proposed class action suit, filed an initial petition in March arguing that the school's longtime headmaster, Stuart Johnson, was forced to lie to the school community after board of trustees members compelled him to resign.
The amended complaint adds new allegations about the executive committee's actions, including alleged securities violations and the misuse of funds donated to the elite Upper East Side boys' school.
One trustee has used the school's investment committee for his personal gain, Walden Macht & Haran partner Milton Williams wrote in the amended petition.
"He has used the School's funds to make conflicted investments that benefit himself, and he has diverted investment opportunities away from the School and tried to usurp them for himself or his employer," Williams wrote. "Upon information and belief, Trustee 1 routinely used material non-public information through intra-quarter trading updates on [a New York Stock Exchange]-listed firm and adjusted St. Bernard's investment portfolio based on these updates."
Trustees on the executive committee also spent "enormous" amounts of money hiring attorneys and public relations firm Rubenstein, despite having a different law firm on retainer for the school, according to the amended petition.
Cravath, Swaine & Moore was hired to conduct an internal investigation into St. Bernard's headmaster, while Patterson Belknap Webb & Tyler was hired to negotiate the headmaster's severance, according to court documents.
Williams noted in the complaint that a retired partner at Patterson Belknap is the grandfather of one trustee, who was supposed to become the next headmaster after Johnson was removed.
Patterson Belknap referred requests for comment to a spokesman for St. Bernard's, who dismissed the significance of the connection in a statement Tuesday.
"It is beyond absurdity to suggest that the grandfather of a board member, who retired as a partner of the law firm some 25 years ago, represents a conflict of interest," the spokesman said. "More to the point, the trustees stated as far back as January that there will be an open, robust and competitive search for the next headmaster led by a committee representing a broad cross section of our school community, and who will be assisted by a professional search firm."
The spokesman also described the suit as frivolous.
"Anonymous plaintiffs have amended a frivolous lawsuit to make baseless and slanderous allegations without facts, merit, or a scintilla of evidence to support their claims," he said. "It is a reminder why this lawsuit is anonymous because the only appropriate response would be a lawsuit for libel."
Jim Walden, founder and managing partner of Walden Macht & Haran, said the St. Bernard's families are filing anonymously because they are concerned about retaliation against their sons.
"As you can imagine, there are a lot of parents, particularly parents of kids that are getting financial aid, that are terrified that this board will take action against their children," he said. "From what we understand, the board already thinks that it identified one of the John Does and actually debated whether or not to not invite that student back for next year's school year."
Walden said a "large group" of parents have voiced support for the suit, but many are waiting for the petition to survive St. Bernard's motion to dismiss before joining the class. He said he expects five to 15 more families to join at that point. Williams added that the alleged attempt to identify one John Doe has had "a chilling effect."
A hearing on the motion to dismiss has not yet been scheduled.
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