Wednesday, August 19, 2015
C.A. Rejects Citizens’ Bid to Unravel Controversial Settlement
By KENNETH OFGANG, Staff Writer
Citizens’ groups trying to invalidate the controversial settlement of litigation between a developer and San Bernardino County, on the ground that supervisors who approved the deal had a conflict of interest because they had been bribed by the developer, lack standing, the Fourth District Court of Appeal has ruled.
Div. Two ruled Monday that The Inland Oversight Committee and Citizens for Responsible Equitable Environmental Development lack a viable cause of action against the county and Colonies Partners, L.P. over the $102 million settlement.
The panel, which issued three separate opinions, also concluded that the settlement was inoculated from challenge by a 2007 judgment validating the bonds issued by the county in order to pay the developer the agreed sum. The IOC and CREED prevailed in one aspect, as the Court of Appeal ruled that the “public interest” exception to the anti-SLAPP statute applied, so the plaintiffs will not have to pay the defendants’ attorney fees.
The controversial settlement was the culmination of the developer’s claims that it was due compensation from the county in connection with flood control easements on Colonies property in Upland. After a trial court ruling for the developer was overturned on appeal, the parties agreed to mediation, and the settlement was agreed to.
Three years later, however, an investigation into the background of the settlement led to the indictment of Bill Postmus, a county supervisor at the time of the settlement who had been elected the county assessor, on bribery charges. Postmus, who was also facing a drug charge after methamphetamine was seized during the execution of a search warrant, pled guilty to several charges and became a prosecution witness.
Colonies partner Jeff Burum; James Erwin, a former assistant assessor who allegedly acted as Burum’s agent in attempting to persuade supervisors to enter into the developer-friendly settlement; Paul Biane, one of the supervisors who voted to approve the settlement; and Mark Kirk, then chief-of-staff to Supervisor Gary Ovitt, were charged with bribery, conspiracy, embezzlement and other crimes in a 29-count indictment issued in May 2011.
The indictment claimed that the defendants and Postmus conspired to have the county approve the deal in return for $100,000 donations to political committees controlled by Biane, Kirk, Postmus, and Erwin.
The criminal case has had a torturous history, with some charges dismissed but with the indictment largely intact after prosecutors won a December 2013 state Supreme Court ruling adopting their argument that it is possible to be guilty both of offering a bribe and of aiding and abetting its acceptance or conspiring to have it accepted.
The case is set for trial Feb. 1 of next year.
The IOC and CREED alleged in their complaints, filed in 2012, that the settlement should be declared invalid, and Colonies ordered to disgorge the money it had received, under Government Code §1090.
Section 1090 generally prohibits a public official or employee from acting on a contract in which that person has an interest. The state Supreme Court has explained that the law “is concerned with ferreting out any financial conflicts of interest, other than remote or minimal ones, that might impair public officials from discharging their fiduciary duties with undivided loyalty and allegiance to the public entities they are obligated to serve.”
But Justice Thomas Hollenhorst, writing for the Court of Appeal, said there was no support for the plaintiffs’ argument that citizens may sue directly under the statute. Nor does the taxpayer standing statute, Code of Civil Procedure §526a, or the common law provide standing, he said.
As a general rule, the justice explained, taxpayer standing does not extend to actions brought on behalf of a government entity, since allowing standing in that instance would interfere with the entity’s discretion.
Exceptions have been recognized, however, the justice acknowledged.
In Schaefer v. Berinstein (1956) 140 Cal.App.2d 278, he noted, a taxpayer was allowed to sue in a representative capacity under the common law, alleging among other things that the defendant city had failed to instigate legal action relating to certain transactions with private defendants that the taxpayer contended were made in violation of Government Code section 1090. The court noted that the city’s charter imposed a mandatory duty on the city to perform the acts that the plaintiff alleged it failed to perform.
In this case, however, the plaintiffs cited no provision mandating that the county pursue conflict-of-interest claims, the justice said, noting that §1092, which provides for civil actions to enforce §1090, is permissive by its terms.
The plaintiffs’ claim that the county has a nondiscretionary duty not to settle litigation in exchange for bribes, “would be more to the point if plaintiffs were seeking to enjoin the County from entering into such a settlement agreement,” Hollenhorst wrote. “But that ship has long since sailed.”
The cases are Inland Oversight Committee v. County of San Bernardino (Colonies Partners, L.P.), 15 S.O.S. 4226, Colonies Partners, L.P. v. Superior Court (Inland Oversight Committee) 15 S.O.S. 4229, and San Bernardino County v. Superior Court (Inland Oversight Committee), 15 S.O.S. 4232.
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