Ocean City will pay a deputy fire chief more than $200,000 to end his lawsuit against the city.

In a confidential agreement signed Sept. 29, Mark McCulley accepted a $115,000 settlement to dismiss his complaints against the Ocean City Fire Department for wrongful suspensions issued for what the city called "misappropriating funds."

In addition to the $115,000 settlement, Ocean City agreed to pay:

• Backpay for a 90-day unpaid disciplinary suspension (and an additional three days pay for a delay in his return to work) totaling $34,675.46
• Backpay for a 60-day suspension totaling $20,907.72
• McCulley's attorney fees to Jacobs and Barbone, PC, totaling $46,000
• A $500 reimbursement to McCulley for anger management counseling he was required to take
• Reimbursement for 142.18 hours of missed FLSA time at $38.97 per hour, totaling $5,540.76

The total cash payments amount to $222,623.94.

Ocean City also agreed to return to McCulley 100 sick days that were lost as a result of his suspensions. The city agreed to make the appropriate pension contributions not made during his suspensions.

The settlement agreement includes no admission of guilt by anybody related to the city or the fire department.

The lawsuit settlement comes a month after the city paid $50,000 to avoid a trial in an age-discrimination suit filed by a 67-year-old former Ocean City Beach Patrol lifeguard. City Council has been meeting in executive sessions to discuss a handful of other lawsuits filed by city employees.

Both settlements require parties to keep the terms of the agreements confidential. But New Jersey courts have consistently upheld the public's right to know in cases involving public money, and Ocean City Patch was able to obtain a copy of the settlement agreement through an Open Public Requests Act request to the city.

The city is insured through the Atlantic County Municipal Joint Insurance Fund (even though Ocean City is part of Cape May County), which determines its premiums based, in part, on what it pays out on behalf of member municipalities. Ocean City taxpayers likely will bear the brunt of the settlement payments.

MCCULLEY'S LAWSUIT

McCulley sued the City of Ocean City on Jan. 27, 2010, alleging he was suspended without pay for "misappropriating funds," even though the accounting practices he was disciplined for were commonplace in the department.

As the paymaster of the department, Mark McCulley reimbursed firefighters, including himself, for the purchase of goods by paying them overtime for hours they did not work, according to the lawsuit.

The overtime payments McCulley used to reimburse himself amounted to about $7,000 over the course of seven years between 2002 and 2008.

McCulley started work with the Ocean City Fire Department in June 1987, rose through the ranks, served as a deputy chief for 13 years and earned an unblemished record until an incident in June 2008, the suit claims. He worked as paymaster since 1997, even though he never received any formal training or accounting instruction, according to the suit.

Because the payroll deadlines did not always match McCulley's work shifts, he often came to the fire department on his days off to complete several hours of payroll work (but rarely sought compensation for his overtime), according to the suit.

In March 2007, McCulley was the platoon leader and ranking officer responding to a multiple-alarm fire at a property in Ocean City when Fire Chief Joseph Foglio attempted to assume control of the firefighting effort "in midstream," the suit says.

McCulley claims in the suit that he was duty-bound by firefighting protocol to provide continuous command during the fire and that he rebuked the chief's attempt to take over.

"The conscientious action by the plaintiff enraged the fire chief and served as the springboard for a continuous reign of harassment by the chief up to the present day," the lawsuit claims.

McCulley says in the suit that he often paid out of his own pocket for equipment and supplies the department needed for training drills and other operations. He says that it was common practice within the fire department -- "a de facto policy" -- to work around annual "budget freezes" by reimbursing firefighters under the labels of "overtime" and "FLSA pay" (Fair Labor Standards Act).

"The practice and policy of de facto reimbursement by using established labels of 'overtime' and 'FLSA pay' was specifically devised and designed by the Chief of the Fire Department to avoid having to report such expenditures when the budget did not allow it," the suit states.

The suit says overtime payments to McCulley were reported to the chief on standard reporting forms that required the chief's review and initials. The suit says the chief saw biweekly payroll reports prepared by McCulley for a period of about 10 years until 2008.

McCulley says in the suit that after the incident at the fire scene, Foglio started "a microscopic review" of his movements and actions. The suit says the Cape May County Prosecutor's Office looked into the case and refused to go forward with any criminal investigation or charges.

McCulley was suspended without pay from December 2008 to March 2009 and ordered to reimburse the city $7,089.80, according to the suit. He served another three-month suspension in the summer of 2009 for chronic absenteeism. McCulley complied with a city order to secure Employee Assistance Program counseling for anger management and endured other "humiliations," according to the suit.

ADMINISTRATIVE HEARINGS

The New Jersey Civil Service Commission determined in April that the suspensions were improper. The ruling capped two years of Administrative Law hearings (read transcripts) -- part of the standard appeal process for firefighters.

In the hearings, McCulley did not dispute the facts of how he handled the payroll but did demonstrate that he was not the only one in the department to do the same thing.

Foglio testified that he had occasionally authorized overtime to reimburse deputy chiefs for the purchase of materials.

Foglio testified, for instance, that he reimbursed a deputy chief in charge of training for the purchase of two leather shields by paying him overtime for doing grant work. Foglio testified that the deputy chief, on his own time, had done lots of unpaid work securing $550,000 worth of grants for the department.

He recounted similiar situations involving other deputy chiefs. In none of scenarios does it appear that any firefighter received any improper payment, but the process by which the payments were made violated sound financial practice, according to the various rulings.

The questionable practices were part of a formal finding in the city's 2007 audit, according to Frank Donato, who became Ocean City's finance director in 2009.

"Any audit finding requires a corrective action plan to be approved by City Council, and filed with the State Department of Community Affairs, Director of Local Government Services," Donato said.

He said the 2008 plan (based on council resolution 08-45-226) addressed the fire department accounting issues.

Foglio retired on Oct. 1.