A Katy ISD school board candidate has responded to questions regarding to his employer being sued by an area school district over fraud allegations following debris clean-up in the wake of Hurricane Ike.
Katy ISD trustee candidate Bryan Michalsky on Monday said the lawsuit filed by the Clear Creek ISD against his employer, Cotton Commercial USA, was the result of work done by a subcontractor – Cottonwood Debris Company – which was later acquired by Cotton two years after the incidents alleged in the litigation.
According to the lawsuit filed by Clear Creek ISD in Galveston County’s 405th District Court, Cotton Commercial USA created Cottonwood Debris as a “sham” subcontractor following the hurricane, and Cottonwood submitted fraudulent invoices to the district for work never done.
The litigation also contends Cottonwood invoiced the school district for bogus fuel bills and engaged in price gouging.
A recent news story about the lawsuit in a Galveston County newspaper caused a number of Katy area residents to question whether Michalsky should seek to serve on the Katy ISD school board while his company is being sued by a nearby school district.
Michalsky, who is the chief financial officer for Cotton, said he could not discuss details of the case because it remains in litigation, but said the litigation was not relevant to his candidacy school board candidacy.
“As this is pending litigation I cannot discuss the details of the case,” Michalsky said. “I would, however, like to issue a statement of facts related to the case:
- Cottonwood Debris Company was a subcontractor hired by Cotton to perform debris removal and other services.
- The work in question was performed in 2008 in the aftermath of Hurricane Ike. I was and am the CFO of Cotton and had no management responsibilities for Cottonwood in 2008.
- Cottonwood was acquired by Cotton in 2010 at which time this claim came under my responsibility.
- CCISD was satisfied with the work performed in 2008, and their schools re-opened 13 days after the hurricane, much sooner than many in the Houston area had even restored power.
- Cotton has a counterclaim in the amount of $705,123 for services unpaid by CCISD related to the work performed by Cottonwood.”
Michalsky also said news reports of the lawsuit carried in the Galveston Daily News were taken from Clear Creek ISD’s original court document and “one would have to look at subsequent filings by Cotton to get a better picture of what occurred.”
“The only relevance to my candidacy related to this case is the value that my professional experience in matters such as these would bring to our board of trustees,” Michalsky said.
According to the lawsuit filed by Clear Creek ISD, Cotton was hired to remove storm debris and perform restoration services for school district facilities following the hurricane.
The contract allowed Cotton to hire a subcontractor for any work it could not provide. Cotton would then bill the school district at the subcontractor’s cost plus 10 percent overhead and an additional 10 percent profit.
Both the school district and FEMA later questioned the legitimacy of the invoices submitted by Cottonwood for the debris cleanup. FEMA subsequently denied reimbursement of roughly $700,000 to the school district over the discrepancies, according to the lawsuit.
Court documents also noted the highest rate for debris removal allowed by FEMA was $55.62 per cubic yard. Cottonwood Debris charged the district at a rate of $170.73 per cubic yard.
Clear Creek ISD representatives would not discuss the matter due to the pending litigation.