The Maricopa County Community College District governing board has voted to extend the contract of the law firm it hired to deal with the fallout from last year's massive computer-security breach, but with an amendment that a Phoenix law firm must help.
The vote was 3-2, with two board members objecting to retaining Wilson Elser, whose cyberliability practice is based in Chicago, because its lawyers have been "condescending" and "overstepping their bounds."
The board hired Wilson Elser last year after the security breach in which the personal information, including Social Security numbers, of current and former faculty was exposed, along with academic information of current and former students. A total of 2.4 million people, including vendors, were affected.
So far, the board has authorized spending up to $17 million to address the data-breach fallout. Of that, the governing board so far has voted to pay Wilson Elser $2.7 million, plus $7 million for the firm that Wilson Elser hired, Kroll Advisory Services, to send letters and monitor credit for the people affected.
Tuesday's vote extends Wilson Elser's contract through Dec. 31 But doesn't include any additional payment. The district has paid Wilson Elser $920,000 of the $2.7 million so far.
Chancellor Rufus Glasper proposed adding the provision that the district would hire a Phoenix firm to assist with public-records matters and litigation.
On March 7, The Republic asked the district to provide a copy of the Wilson Elser contract.
On Friday, after the governing-board vote, the district released a redacted version of the contract, which lists the hourly rates charged, ranging from $100 for a paralegal to $385 for a partner.
TheRepublic has requested several other documents, including reports and e-mails related to the data breach, but the district has not turned over most of those, citing the ongoing disciplinary process with several employees or saying that the contents could make it easier for hackers to invade the system.
Others also are seeking records that have been denied. The Phoenix law firm Gallagher & Kennedy has filed a lawsuit that seeks to compel the district to turn over records related to the breach. In January, the firm notified the district that it intends to file a class-action lawsuit on behalf of two people affected by the breach.
Board members Debra Pearson and Randolph Lumm voted against extending Wilson Elser's contract on Tuesday night after questioning the way the firm has dealt with the district.
"I have confidence that we can find a Phoenix firm that will not be condescending and talking down to us and doing things that are inappropriate and out of order," Pearson said.
She proposed terminating the Wilson Elser contract and hiring a local firm exclusively to handle the security matters. That motion failed.
The district's staff attorney, Lee Combs, said that Wilson Elser has projects under way and that dropping the firm would be "extremely inadvisable and wasteful."
Lumm said he felt as though Wilson Elser's lawyers were telling the district what to do.
"My concern is that I don't want a law firm telling us how to run IT, telling us how to run HR," he said. "I think they've overstepped their bounds. I think it's inappropriate for out-of-state lawyers to come in here and say, 'You need to structure your IT this way.'
"We asked them for security advice only, and when they start reshaping our IT, that's out of order."
The 2013 security breach occurred after a similar, but smaller-scale, breach occurred in 2011 but never was addressed, leaving the district vulnerable to a more massive breach, The Republic has previously reported. The district has said that an unspecified number of employees in the information-technology department were at fault and are facing disciplinary action.
Combs cautioned the board members to watch what they said during the meeting Tuesday night because much of the discussion with the Wilson Elser lawyers had occurred in executive session, not open to the public.
Pearson said she was frustrated by not being able to openly discuss some of what transpired in those sessions.
When asked byThe Republic to respond to the board members' statements, Wilson Elser released a statement saying the firm is delighted that the contract was extended but wouldn't comment further.
Combs, the district's staff attorney, said he couldn't specifically address the board members' expressions of frustration, but he released a statement to The Republic saying that when a public institution has to pay for a security breach, it creates "internal tension."
"Because the stakes are so high, clients facing these choices can easily feel that attorneys are directing rather than advising and recommending," he said.
Voting for the contract extension were board President Dana Saar and members Doyle Burke and Alfredo Gutierrez.
Gutierrez, who joined the board in December after the death of member Ben Miranda, expressed his fears about the possibility of a multimillion-dollar liability from the breach.
"Potentially, the numbers could go into figures that would greatly damage the capacity of this district to provide and maintain its academic mission," he said. "Potentially, figures so great that the 2 percent allowed property-tax increase would be insufficient and we would begin to close colleges or at least cut way beyond the fat in the system."
Tuition, tax hikes in budget proposal
The Maricopa County Community College District presented a preliminary budget for 2014-15 on Tuesday that's based on increases in both tuition and property taxes.
The district is proposing a $5-a-credit increase in tuition, to $86 per credit.
The proposed 2-percent hike in the property tax levy would mean an increase of about $5.15 per year for a person whose house is assessed at $200,000, for a total of $263.06.
Those measures together would generate about $20.7 million, with an additional $5.2 million expected from new-construction taxes.
State aid is expected to decrease by about $500,000 to $7.4 million — less than 1 percent of revenue.
The operating budget is proposed to be about $774 million, about $59 million more than this year.
The district is planning to spend the largest portion of the additional revenue, $6.8 million, on information technology upgrades.
The 10-college district increased both tuition and the property tax last year. The governing board will vote on the latest tuition increase next month and the property tax proposal in May.
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