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Lynn

Retaliation lawsuit set to go to trial

A tug-of-war over Lynn’s top financial post heads to trial next Monday as the former comptroller brings a whistle-blower lawsuit against the city and the man who fired him.

In his suit, John Pace, 63, alleges that his termination in 2011 was payback for testimony against his boss, Richard Fortucci, during a thwarted attempt earlier that year to fire Fortucci as the city’s chief financial officer, a charge the defendants deny.

“This was obviously a retaliation for my testimony against him at the [City Council] hearing,” Pace said at his home in Lynn’s Ward 1 neighborhood.

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Lawyers for Fortucci and the city said the firing was justified when Pace continued to accept extra pay for several weeks after a city attorney told him he was not entitled to it.

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“His termination was based on legitimate reasons that have nothing to do with any sort of retaliatory claim and motive,” said Thomas Drechsler of Byrne & Drechsler, a Boston law firm representing the city in the lawsuit.

The overpayment involved a weekly stipend of $507.10 that Pace had received for about six weeks — a total of $2,839.76 — while acting as chief financial officer after the city’s new mayor, Judith Flanagan Kennedy, suspended Fortucci with pay in January 2011 and began proceedings to fire him.

To remove Fortucci, the mayor needed the approval of the City Council.

In a Jan. 28, 2011, letter to councilors, Kennedy listed 15 allegations against Fortucci, among them that he had made errors in payroll, accounting, and grant compliance and had disobeyed her direct order to change department passwords.

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Kennedy and Fortucci did not respond to multiple requests for comment.

In the early hours of Feb. 17, 2011, after three days of marathon hearings during which Pace testified against Fortucci, the City Council voted unanimously to overrule Kennedy and reinstate Fortucci as CFO.

The next day, Pace said, he called James Lamanna, a lawyer for the city, to inquire about the status of his temporary position.

“We looked into it, and the law was very clear that the CFO [Fortucci] was restored immediately and Mr. Pace’s acting position ended immediately,” Lamanna said in a recent interview. “And I told him so.”

In court documents, Pace said he then went to the mayor’s office for further guidance but received none before leaving on vacation.

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Upon his return March 25, he was surprised, he said, that neither the mayor nor City Council had taken action to end his stipend.

The dispute mirrored another shakeup nearly a decade earlier, when Judith Flanagan Kennedy’s predecessor as mayor, Edward Clancy Jr., moved to fire the city’s chief financial officer.

He said he drafted a letter for the mayor to sign, officially ending his temporary appointment, and offered to return any overpayment that resulted from the delay.

It was the last he heard of the matter, Pace said, until Fortucci began his termination in May 2011.

“Mr. Pace was the comptroller of the city of Lynn,” said Fortucci’s lawyer, Ronald Ranta of Fisette & Ranta in Danvers. “To claim that it was a mere oversight that his pay was, quote, ‘wrong’ flies in the face of the responsibilities he had to the people of Lynn in his capacity as comptroller.”

In a confidential statement of findings issued May 8, 2012, obtained by the Globe, the state inspector general also concluded that Pace, who signed off on his own payroll sheets, knew he was not entitled to the money. The inspector general’s report states Pace returned his salary to the previous level on the payroll dated April 2, 2011.

“It appears that Pace was well aware of the fact that his position of acting CFO ended on Feb. 17, 2011,” then-Inspector General Gregory Sullivan wrote to the Essex district attorney, in reply to an inquiry from Lynn police.

Pace’s lawyer, Harold Lichten of Lichten & Liss-Riordan, disputed that conclusion and said the inspector general’s letter, sent more than a year after Pace was fired, reflected an effort by city officials to have Pace sanctioned in order to discourage him from pursuing his wrongful termination suit.

“They shopped it around,” Lichten said. “First to the Lynn police and then to the district attorney’s office and then to the attorney general and then to the Ethics Commission, and nobody found any problem.”

In his lawsuit, filed in July 2011, Pace is asking to be reinstated as city auditor, and awarded compensation for lost pay, benefits, and damages for emotional distress. He is also seeking punitive damages, attorneys fees, and other related financial compensation.

The dispute mirrored another shakeup nearly a decade earlier, when Kennedy’s predecessor as mayor, Edward “Chip” Clancy Jr., moved to fire the city’s chief financial officer and replace him with a political ally.

The chief financial officer was John Pace. The replacement was Richard Fortucci.

“I cannot trust or rely upon John Pace,” Clancy wrote in a 2003 affidavit, after Pace sued to keep his job. “We are not on speaking terms, let alone working together in a harmonious fashion.”

What Clancy distrusted, Pace said in a recent interview, was Pace: an independent auditor, born in East Boston and hired from outside Lynn’s tight web of political and family ties. Even before the start of the mayor’s term, Pace said, Clancy had begun maneuvering to replace him with Fortucci, the mayor’s next-door neighbor.

“When you bring someone into a city like me, who doesn’t have those connections, you get independent oversight,” Pace said. “A lot of people don’t like that.”

Clancy, now retired, rejected that account. “John Pace had an inability to work with the financial people in my office,” Clancy said in a recent interview. “But I didn’t oust him from his comptroller position. All I did was demote him from CFO.”

Even that wasn’t easy, as Kennedy would later discover. The position was protected by the terms of a 1985 state bailout, when the struggling city appeared to be weeks from defaulting on its debts.

The $3.5 million rescue package also created the position of chief financial officer, who would hold one of the city’s top six financial positions and oversee the others with a degree of independence; only agreement by the mayor and City Council, or a two-thirds vote by the council, could remove a chief financial officer before the end of the five-year term.

Pace and the city settled before his 2003 suit went to trial. Pace lost the chief financial officer job but remained comptroller. Fortucci became his boss.

The City Council supported the move by a vote of 8-2. One of the two votes against was cast by then-Councilor Judith Flanagan Kennedy.

In 2009, Kennedy challenged Clancy in the mayoral election and won by a margin of 27 votes, out of 16,104 cast.

Court documents and testimony from Fortucci’s termination hearing suggest that as Kennedy lost confidence in her chief financial officer over the course of her first year in office, she relied increasingly on Pace to help her manage the city’s finances.

In a deposition given in relation to Pace’s lawsuit, Kennedy said she had been unaware of Fortucci’s decision to fire Pace and did not support it.

When Fortucci’s five years as chief financial officer ended last summer, Kennedy did not reappoint him. He remains treasurer of Lynn.

Earlier this year, lawyers for Pace and the city negotiated a settlement agreement, which the City Council rejected, according to court documents.

Alan Leo can be reached at alanleo@gmail.com.