New Orleans City Hall
NEW ORLEANS – A former New Orleans city employee filed a lawsuit against the city in federal court this month, alleging she was fired in retaliation for uncovering and reporting payroll fraud and the misuse of federal funds.
Plaintiff Sunae Villavaso filed her lawsuit September 10 in the U.S. District Court for the Eastern District of Louisiana.
Villavaso, an Orleans Parish resident, was employed by the city as its director of the Office of Workforce Development.
According to her 10-page complaint, she discovered instances of payroll fraud and the misuse and misallocation of ARPA funds by city employees.
The American Rescue Plan Act, or ARPA, is a federal fiscal recovery aid for state and local governments to mitigate the fiscal effects stemming from the COVID-19 public health emergency.
ARPA was signed into law on March 11, 2021, disbursing $1.9 trillion of relief and support
directly to state and local governments. Some $386 million in federal ARPA funds were disbursed to the city of New Orleans. The city allocated $11 million in ARPA funds to its Office of Workforce Development.
Villavaso claims she sought to stop and remedy instances of payroll fraud and the misuse and misallocation of ARPA funds by reporting the illegal conduct to numerous city employees and officials, including Mayor Latoya Cantrell.
Cantrell
Instead, she was fired, she alleges.
“The City of New Orleans discharged Villavaso because of her objection to and refusal to participate in the above-described acts and practices done in violation of law,” the complaint states.
Villavaso claims she learned that Director of Administration and Planning for the City of New Orleans, Courtney Story, was ignoring the protocol for the disbursement of ARPA funds and instead was directing those funds to recipients selected by Story alone. Among these recipients was Undue Medical Debt LLC, Villavaso alleges.
Villavase claims she reported and complained about the misuse of ARPA funds and about Story’s conduct to numerous city officials, including directly to Cantrell, during a three-hour meeting at Cantrell’s house on Jan. 21, 2024.
Cantrell allegedly told Villavaso that Story would be fired.
Days later, at a meeting attended by Story, Villavaso, then-Chief Administrative Officer Gilbert Mantano – who resigned from his position in July – and others, Story allegedly said Villavaso should not be involved in the allocation of ARPA funds.
The next day, Cantrell allegedly informed Villavaso that Story would not be fired because Montano “needed” her to remain employed by the city.
According to the complaint, Story ended up leaving her position at the city and was hired by Undue Medical Debt, where Story is now the vice president of Government Initiatives.
In a March 2024 meeting, Villavaso was informed she was effectively being demoted. Montano allegedly told Villavaso that she needed “to be managed.”
Villavaso continued to investigate and report the improper use of federal funds. In fact, she sent an email to Cantrell on May 19, 2024 complaining about the ongoing misuse of ARPA funds.
Five days later, she was summoned to Cantrell’s office. Both the mayor and her chief of staff, Clifton Davis, were allegedly “very annoyed” that Villavaso sent the email.
“Mayor Cantrell continuously stated throughout the meeting ‘that was for me baby,’ meaning that Villavaso’s email was meant to implicate Mayor Cantrell in the misuse of ARPA funds,” the complaint states. “Both Mayor Cantrell and Davis objected strenuously to Villavaso’s putting her complaints in writing.
“Mayor Cantrell remarked that Villavaso’s act of putting her complaints in writing meant that ‘maybe Ms. Villavaso needs to find her happiness elsewhere.’”
According to Villavaso’s lawsuit, Cantrell and other city employees dismissed all of her attempts to address and remedy the unlawful conduct.
In August, a federal grand jury indicted Cantrell on multiple charges, including wire fraud, obstruction of justice, and false declarations before a grand jury. She pleaded not guilty. Her term is up this fall, with a new mayor to be elected in October.
The city terminated Villavaso’s employment effective April 18, 2025.
She seeks reinstatement of employment or front pay in lieu of, including wages and benefits, two times the amount of back pay, interest on all back pay, punitive damages, exemplary damages, and costs and attorneys’ fees.
Kearney S. Loughlin and Nanak S. Rai, both New Orleans attorneys, are representing Villavaso in the action.
