BEFORE THE ARIZONA STATE RETIREMENT SYSTEM BOARD

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1 Jaburg & Wilk, P.C. 00 N. Central Avenue, 0th Floor Phoenix, AZ Kraig J. Marton (001) kjm@jaburgwilk.com Jeffrey A. Silence (01) jxs@jaburgwilk.com Attorneys for The Griffin Foundation The Griffin Foundation, v. Appellant, Arizona State Retirement System, Respondent. BEFORE THE ARIZONA STATE RETIREMENT SYSTEM BOARD Case No. Case No. F-00-ARB REPLY IN SUPPORT OF GRIFFIN FOUNDATION S MOTION TO SEVER HEARING (Administrative Law Judge Mike Douglas) Appellant Griffin Foundation, Inc. ( Griffin ) files this Reply in Support of its Motion to Sever Hearing pursuant to the Office of Administrative Hearing Procedural Rule R--(D). As set forth below, the Arizona State Retirement System s ( ASRS ) objections to severance are without support. THE ISSUES ARE NOT INEXTRICABLY INTERTWINED. ASRS argues that the hearing should not be severed because the issue of whether Griffin was required to make contributions to the ASRS during the time in which it only had leased employees is inextricably intertwined with the secondary issue the amount of the allegedly past-due ASRS contributions. ASRS does not explain how or why it believes these two issues are inextricably intertwined they apparently just are \JXS\JXS\.1

2 We have asked the Court to determine whether Griffin was required to make ASRS contributions while it employed only leased employees. This is a very different issue than the amount of any allegedly past-due contributions. The court can decide the first issue without having to determine the amount of any past-due contributions. Indeed, if the court finds that the individuals working for Griffin were leased employees pursuant to A.R.S. -()(f), then it need not determine the exact amount of any supposedly past-due contributions. These is nothing inextricably intertwined about these two issues, at all. SEVERANCE FURTHERS THE INTERESTS OF JUDICIAL ECONOMY. It is in the interests of administrative economy to sever these two issues because if the court finds that the individuals working for Griffin were leased employees pursuant to A.R.S. -()(f), then there would be no reason to have the parties expend valuable time or resources determining the exact amount of any alleged past-due contributions. If for some reason Griffin does not prevail at the hearing, Griffin may be able to work with ASRS to reach a resolution as to the exact amount owed, without court intervention. If a resolution cannot be reached as to the amounts owed, only then should a hearing be held to resolve whatever disputes remain as to the amounts owed. See Office of Administrative Hearing Procedural Rule R--(D) (Issues should be severed if doing so would promote administrative economy). Griffin will need an entire hearing day to address the leased employee issue. If Griffin must also address the amount of the past-due contributions at the hearing, there is no way it can present its case in just one day. For these reasons, it is in the interests of judicial economy to sever the hearing. GRIFFIN WOULD SUFFER UNDUE PREJUDICE. In its Response, the ASRS claims that the audit of Griffin s books and records will not be complete until March, 0, even though it admits that Griffin authorized the release of the necessary documents back on January, 0. ASRS claims that the two companies from which Griffin leased all of its employees did not provide the

3 records to the ASRS until January, 0. Even still, ASRS does not explain why it will take over a month to (hopefully) complete the audit by March, 0. Although ASRS did today produce a two-page report containing a very brief overview of the amount of the alleged past-due contributions, it is unclear whether this report is supposed to be the audit that was promised. The very brief and conclusory report has no supporting documentation. It also contains obvious discrepancies. For example, the report states that the Employer Costs are $1,.0. In another section of the report, it states that the Employer Costs are $0,.0. (See ASRS Report attached as Exhibit 1). Griffin is still waiting for ASRS to produce a detailed audit, with supporting documentation, to determine whether there are any deficiencies in the audit. Griffin should not have to incur further attorney fees and expert fees reviewing the results of an audit in the weeks before the hearing, nor should it have to expend resources on that issue unless and until the court first determines whether it was required to make ASRS contributions in the first place. Even assuming the audit results are produced on March, 0, that will not leave Griffin with adequate time to hire an expert to review the results of the audit and issue a rebuttal expert report. It is unfortunate that the ASRS is unwilling to agree to sever the hearing given the enormous stakes involved for Griffin and its staff and students. If Griffin does not prevail, its low-income charter schools in Tucson will close or go bankrupt because the initial results of the audit show that Griffin supposedly owes the ASRS over $00,000. Teachers and administrative staff will lose their jobs, and the low-income students and their parents may have to find another school to attend. It would be nothing short of a disaster for Griffin and these individuals if Griffin does not prevail. R--(D) (ALJ may sever consolidated matters to... avoid undue prejudice. ). Basic due process requires that a party be given fair notice. Disclosing the results of the audit to Griffin in the weeks leading up the hearing and expecting it to be ready to challenge those results at the hearing does not comport with basic due process.

4 CONCLUSION For these reasons, the ALJ should grant Griffin s Motion to Sever, so that the only issue to be decided at the March, 0 hearing is whether Griffin was required to make contributions to the ASRS during the time in which it employed only leased employees. The Court could set a later hearing, if necessary, where it could determine past due amounts if that later becomes necessary. DATED this th day of February, 0. COPY of the foregoing transmitted electronically this th day of February, 0 to: Clerk of Court Office of Administrative Hearings 0 West Washington #1 Phoenix, Arizona 00 Jothi Beljan, Esq. Assistant Attorney General Arizona State Retirement System 00 North Central Avenue, Suite 0 Phoenix, Arizona 01 jothib@azasrs.gov /s/ K. Rogers Jaburg & Wilk, P.C. /s/ Kraig J. Marton Kraig J. Marton Jeffrey A. Silence 00 N. Central Avenue, 0th Floor Phoenix, AZ 01 Attorneys for The Griffin Foundation

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