City of Lee’s Summit Now Faces Crime-Fraud Hearing
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Lee’s Summit Now Faces Crime-Fraud Hearing
By Debbie Van Pelt
Late Friday afternoon, U.S. District Judge Nanette Laughrey handed down an order in the Ted White, Jr. case. Although the order was entered on April 1, Laughrey’s mandate is no April Fool’s joke. Laughrey says she intends to conduct an in camera crime-fraud hearing to determine whether the City of Lee’s Summit committed fraud in August, 2006 when it entered into an Indemnification Agreement with White, only to later say that honoring the signed agreement would violate city ordinances. An “in camera” hearing is one held in private to protect one party’s privacy until a determination is made that the information and testimony should be shared with the other party.
In 2005, Ted White, Jr., a former Lee’s Summit businessman, filed a federal lawsuit against the City of Lee’s Summit, former Lee’s Summit detective Richard McKinley, former Lee’s Summit Police Chief Kenneth Conlee, and Tina (White) McKinley, Ted’s former wife. The defendants in the 2005 lawsuit were accused of being part of and/or allowing a cover-up in 1998 when White was accused of molesting his adopted step-daughter, thereby preventing him from having a fair trial. Richard McKinley allegedly began an affair with Ted’s wife, Tina, during his investigation of the molestation charges against White. Testimony indicates McKinley had possession of and then mishandled some evidence in the case. Court records show that Chief Conlee knew about the affair, but took no action to stop it and that he failed to remove McKinley from the case. White was initially convicted and spent nearly six years in prison before being exonerated in 2005. He filed the lawsuit a few months later.
The 2006 Indemnification Agreement released the city and the police chief as defendants in White’s lawsuit, in exchange for the city’s commitment to pay Richard McKinley’s judgment, should he lose. McKinley lost the initial trial and has lost every possible appeal since that time – all the way to the U.S. Supreme Court. According to the Indemnification Agreement, the City of Lee’s Summit and MARCIT, the city’s former liability insurer, are responsible for paying White $14 million in compensatory damages, plus interest, court costs and attorney fees. Interest charges, mounting at approximately $6,000 every week the judgment goes unpaid, plus attorneys’ fees have brought the amount now owed White to nearly $17 million. But, on July 6, 2010, the date the United States Court of Appeals for the Eighth Circuit denied McKinley’s appeal and affirmed the multi-million-dollar award, Mayor Randy Rhoads issued a public statement saying that despite signing the agreement, “paying any damages in this case would be a violation of city ordinances.” Rhoads was a council member, but not mayor, at the time the agreement was signed.
In a hearing before Judge Laughrey on March 8, White’s attorneys argued that the city committed fraud if it agreed to indemnify McKinley, knowing an ordinance would later prevent the city from paying as agreed. However, in depositions, city officials have refused to answer questions about the agreement and the ordinance, citing attorney-client privilege. Meeting minutes from the August 4, 2006 closed session in which the agreement was discussed indicate the ordinance was reviewed at that time as well. David Baker, an outside attorney for the city, presented White’s Indemnification Agreement to (then) Mayor Karen Messerli and the full council. According to the minutes, Baker informed the council that he had seen no evidence that McKinley had exceeded or abused his authority, failed to act within written city policy or violated anyone’s rights. Baker was given permission to proceed with the agreement. Joe Rebein, from Shook, Hardy and Bacon, LLP is now representing the city.
At the March 8 hearing, Judge Laughrey grew frustrated with Rebein’s reluctance to answer her questions. She gave both sides five days to file briefs regarding legal authority and how a crime-fraud hearing would progress. In the April 1 order, she stated that the plaintiff’s (White’s) brief provided a factual basis to support a “belief by a reasonable person that in camera review” may reveal evidence “that the crime-fraud exception applies.” The crime-fraud exception states that the attorney-client privilege ceases to exist when a lawyer enables or aids someone to commit or plan a crime or fraud.
The parties have ten days to submit proposed procedures for conducting the upcoming crime-fraud hearing. In the meantime, White’s motion to bring the city and Conlee back into the lawsuit as defendants has been continued, “pending a ruling on White’s forthcoming garnishment action”. White was excited about the April 1 order, saying, “It looks like a can of worms is getting ready to be opened.”
PLEASE NOTE:
City officials present during the August 4, 2006 closed session meeting when the Indemnification Agreement was signed were:Mayor Karen Messerli, Kathy Hofmann, Ed Cockrell, James Freeman, James Hallam, Nick Swearngin, Randy Rhoads, Joseph Spallo, Ron Williams.
The Indemnification Agreement was signed on behalf of the city by (then) City Administrator Steve Lewis and (then) Chief of Police Kenneth Conlee later that month. Robert Handley was the city's attorney.
FURTHER NOTE:
On July 6, 2010, when Mayor Rhoads released the public statement saying that "paying any damages in this case would be a violation of city ordinances", Karen Messerli, James Freeman, Nick Swearngin and Ron Williams were no longer in office. Brian Whitley, Allan Gray II, Bob Johnson and Dave Mosby had joined Kathy Hofmann, Ed Cockrell, James Hallam and Joseph Spallo on the Council. 
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