Fulton County agencies sue for $3.1M bonus pay

PHOTOGRAPHER: Michael Lamendola

Fulton County’s main economic development agencies are suing to recover $3.1 million in performance bonuses they claim were obtained fraudulently by their former executive directors.

The Fulton County Economic Development Corp. and its real estate subsidiary, Crossroads Incubator Corp., allege that Jeff Bray and Peter Sciocchetti committed fraud, negligence, breach of contract, breach of fiduciary duties and conversion by “surreptitiously” awarding themselves bonuses without board approval.

In addition, the agencies are seeking $1 million in punitive damages from each man. They are also suing accounting firm Bonadio and Co. and its various entities, plus Dorfman-Robbie, an auditing firm now part of Bonadio, for negligence, malpractice, breach of contract and breach of fiduciary duty. The suit accuses Dorfman-Robbie of not informing the agencies about irregularities auditors found in the executive bonuses obtained by the two men.

The agencies filed suit in State Supreme Court, Fulton County, in October. Bray served as EDC executive vice president and Sciocchetti as CIC executive vice president from 1999 to 2009. Both were fired in August 2010 following disclosures they awarded themselves multiyear bonuses through 2009.

The agencies had performance bonus agreements in place with both men, but their boards had to approve bonuses before they could be issued. The lawsuit said Bray would “systematically sign [his own] bonus checks and that Sciocchetti would sign Bray’s bonuses,” all without board approval.

Bray “issued himself bonuses well in excess of what similarly situated officers of a not-for-profit corporation would ever earn and without obtaining approval as he was contractually and ethically required to do,” according to court papers.

The lawsuit also contends Bray “knowingly, intentionally and maliciously converted to his own use and benefit CIC’s funds under a fake claim of entitlement to a performance bonus.”

In the lawsuit, the agencies claim Dorfman-Robbie committed negligence and malpractice because the firm knew Bray and Sciocchetti were issuing themselves “excessive bonuses, unauthorized by the agencies and in violation of their bylaws” and that they could have stopped the loss and helped recover $3.1 million.

The lawsuit contends Dorfman-Robbie breached its contract by “providing incomplete or misleading disclosures in the audited financial statements” regarding bonuses awarded to the executives.

According to court documents, Sciocchetti in June 2008 hired Dorfman-Robbie for a “special project.” The auditing firm was to determine whether the executives obtained any excess benefit from their bonuses as part of disclosure on the CIC’s IRS Form 990 in 2007.

“Dorfman determined that the bonuses were unauthorized by CIC and rather than communicate the information to the CIC board, Dorfman urged Sciocchetti to schedule a full meeting with the board to explain the correct situation and [Dorfman’s] concerns,” according to the lawsuit. When Sciocchetti failed to comply, Dorfman terminated its contract through a letter, which was never shown to the board.

The lawsuit states “Dorfman knew or should have know that Sciocchetti and Bray were not acting in the best interests of CIC and were not likely to communicate Dorfman’s withdrawal to the CIC and board.”

Following disclosure of the bonuses, several government agencies began reviews of CIC and EDC, looking for irregularities.

Bray, Sciocchetti and Bonadio did not return calls for comment for this story.