The city of Cold Spring is suing the Kentucky League of Cities in a class action lawsuit to recoup money that was spent by the group on expenses, high salaries and loans to employees.
"Through their abdication of responsibility, the board of directors allowed the Kentucky League of Cities to spend multimillions of taxpayers' dollars in an unlawful manner," Cold Spring Mayor Mark Stoeber said in a news release.
"The taxpayer dollars wasted were not only hard earned monies from Cold Spring residents, but also from hard-working taxpayers across the entire state of Kentucky, thus the petition for class action status."
Named in the suit are former executive director Sylvia Lovely, who resigned last summer after a series of stories in the Herald-Leader detailed hundreds of thousands of dollars in expenses at the League; deputy director Neil Hackworth; and insurance services director William Hackworth.
A state audit also found numerous conflicts of interest and questionable bonus practices.
The League is a membership organization that provides insurance and financing services to cities around Kentucky.
In a phone interview, Stoeber said he estimated Cold Spring had spent $1 million in the past 10 years on League membership and insurance premiums. He would like that returned.
"The main purpose of the suit is to tell the board to act as a board and get the monies back, and if you don't want to, we will," he said.
Brandon Voelker, city attorney for the Northern Kentucky city, compared the suit to a shareholder derivative suit in which shareholders ask that money misused by executives be returned to shareholders.
"They shouldn't have jacked up insurance rates all those years when they had so much money; they should have returned it to cities," he said.
The suit was filed in Fayette Circuit Court; Voelker said he hopes other cities will join it.
League officials declined to comment Wednesday.
On Tuesday, Attorney General Jack Conway said his office is investigating possible criminal activity at the League based on the state audit.
Voelker said he would like to see money returned to cities or "put back into the League coffers so the entity is more sound than it was before."