City of Teague files lawsuit against City of Fairfield

Posted at 10:02 AM, Sep 18, 2018
and last updated 2018-09-18 19:28:59-04

The City of Teague has filed a lawsuit against the City of Fairfield for breaches in a 1990 facilities agreement and 1992 interlocal agreement between the cities and the Texas Department of Criminal Justice.

The agreements state the Texas Department of Criminal Justice will construct a correctional facility in Freestone County.

The agreement wasn't set to expire until Dec. 30, 2020, regarding the construction of a minimum and medium security facility within the county for the detention, training, education, rehabilitation and reformation of sentences felons. 

It also states that Fairfield and Teague signed an Interlocal Definitive Agreement (IDA) regarding the provision of water and wastewater utilities to the Boyd Unit.

Under the terms of the IDA, Fairfield and Teague will provide the water and sewer utility services to the city. Fairfield agreed to operate and maintain the facility and to pay Teague for 45 percent of the associated revenues.

Fairfield agreed to pay $1.78 million and Teague agreed to $1.5 million. 

The approved 2017-18 budget for Fairfield's beginning fund balance was $1,271,355. The financial statement from April 30, 2018, reflected a fund balance of $1,679,830.40. The lawsuit states that Fairfield has grossly mismanaged the water and sewer accounts for years.

The lawsuit alleges that Fairfield never established a special revenue account, and has failed to pay Teague.

Fairfield recently hired W.D. Brown & Associates, PLLC for a forensic audit of the city's financial statements, accounts and expenditures. According to a statement made on behalf of the City of Teague, the lawsuit will allege the report made by the forensic auditor revealed the following:

  • Waste by Fairfield
  • Transference of funds potentially against the advice of Fairfield's bond counsel
  • The overall operations of Fairfield appear chaotic, with no clear lines of authority
  • The filing records of Fairfield were disorganized
  • Improper allocation of payroll costs
  • An overstatement of $281,790.76 on Sept. 30, 2017
  • Critical documents were missing from Fairfield's records, including mandatory conflict of interest disclosures

In sum, Fairfield has failed to honor its obligations under the agreements. 

Fairfield is requested to disclose within 50 days of service of this request, the information or material described in Rule 194.2 of the Texas Rules of Civil Procedure. The causes of action are as followed:

  • Breach of contract and implied bad faith and fair dealing contractual duties
  • Proprietary function
  • Breach of fiduciary duty
  • Texas open meetings act violations
  • Requests for declaratory relief
  • Request for injunctive relief

The damages sought are within the jurisdictional limits of the court, as Teague seeks monetary relief over $200,000 but not more than $1 million and non-monetary relief pursuant to Rule 47 of the Texas Rules of Civil Procedure.

The statement says Fairfield has failed to honor its obligations under the two agreements. The City of Teague will seek actual damages owed under the agreements, as well as injunctive relief against Fairfield. 

The statement added it is anticipated the actual damages will be significant.

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