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San Francisco City Attorney Dennis Herrera announced Thursday he has joined the San Francisco Unified School District in a $300 million civil suit against a North Carolina energy company that has already been convicted of defrauding the city’s schools out of about $1 million. Progress Energy Corp., formerly known as Strategic Resources Solutions Corp., was convicted in October on two counts of felony grand theft. The convictions stemmed from a scheme by former Progress employees and a school district consultant to skim hundreds of thousands of dollars from a $30 million contract. Attorneys at Pillsbury Winthrop, who are representing Progress, and the city attorney’s office have been in mediation for the past few months trying to reach a settlement. But according to a source close to the mediation, the proceedings broke down acrimoniously on Tuesday. Two days later, the city attorney’s office and attorneys for the school district filed a 52-page complaint in Sacramento County Superior Court. Mark White, a partner at Pillsbury, confirmed that talks with the city attorney had broken down Tuesday. He said he had not yet read the complaint. “Progress Energy’s scheme is another example of the rampant corporate greed that we saw with Enron and WorldCom — only this time the victims were schoolchildren,” said Herrera in a press release. “Even apart from the money it stole that our schools desperately need, Progress Energy failed to provide what the school district paid for, leaving our children to shiver in unheated classrooms.” Progress, a publicly traded Fortune 250 company, was supposed to design, build and install energy-efficient products that the company claimed would save the school about $1.7 million every year in energy costs. According to the complaint, in addition to the theft, much of the work completed was shoddy, and left the district’s schools in worse shape than before. “Progress exacerbated the school district’s facility problems by, among other things, causing new boilers to corrode, mis-wiring computerized controls so that heat did not reach classrooms . . . and blowing up a fully functioning boiler,” the complaint reads. White, Progress’s attorney, said the press release “had some statements that are groundless. The $300 million is groundless, on the merits that [Progress] believes that it has performed under the contract and should be paid.” According to Louise Renne, the school district’s general counsel and former city attorney, the boilers installed by Progress are rusty and require constant, expensive maintenance. “I have been astounded by their chutzpah in this case. They initially sued the school district and then turned around and entered guilty pleas,” she said. “We made every effort to try to settle this case because I thought it was so clear we had a system that wasn’t working,” Renne added. “It’s a shame, and the school district has had to go out and hire contingency counsel.” That is Joseph Cotchett of Cotchett, Pitre, Simon & McCarthy, who was brought into the case Wednesday. “We’re prepared to move ahead aggressively on this,” Cotchett said. “Frankly, the matter should be resolved. This thing will explode into a litigation nightmare.”

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