The San Lorenzo Valley Water District Board of Directors this week directed its attorney to file a legal appeal of a Superior Court ruling that former director Terry Vierra violated California conflict-of-interest laws.
The decision means that district ratepayers will continue to pay Vierra’s legal fees, now pushing $70,000.
“It’s against state law for a board member or his wife to pocket a percentage of a district contract,” said Bruce Holloway, the retired engineer who filed the 2014 lawsuit that resulted in the court ruling against Vierra.
“The San Lorenzo Valley Water District board is wasting public funds defending the indefensible,” he said Wednesday, in his first public comment since the decision.
The board’s 4-1 vote came after several ratepayers – in letters to board, to the Press Banner and at last week’s public meeting – objected to paying legal bills for the improper actions of the former director.
Twelve days before the vote, the board’s lawyer, Marc Hynes – who also is acting as Vierra’s lawyer – had already filed “association of attorney” paperwork with the court, identifying the well-known appellate law firm of Colantuono, Highsmith and Whatley of Grass Valley and Pasadena to assist in the case.
“Ratepayers, reach for your wallets,” was the response of Gary Redenbacher, the Scotts Valley lawyer who is representing Holloway. “If you thought the trial was expensive, wait till you’re done paying for the appeal.”
In the decision at the Dec. 13 bench trial in Santa Cruz, Superior Court Judge John Gallagher ruled that Vierra and his wife, Mary Bischoff, received $12,006 in real estate commissions from the sale of a house in Boulder Creek to the water district in 2010, and that Vierra knowingly participated in the purchase as an elected director. He did not seek re-election in 2012.
Gallagher ordered Vierra to pay half of the total of his $9,004.50 commission and $342.17 of his wife’s decision to the state and half to Holloway.
The water district board action taken in closed session Tuesday evening, Jan. 24, directs Hynes to “request a motion for a new trial,” board president Gene Ratcliffe announced in a two-minute public session that followed the 85-minute closed-door meeting.
Directors also voted unanimously Tuesday to make no comments in the case because it is “ongoing litigation.”
The decision means that SLV ratepayers will continue to pay all of Vierra’s legal bills in an appeal of the Superior Court ruling, carrying forward a decision made in 2015. The district also could choose to pay the award, and faces a bill for the plaintiff’s legal bills, estimated at $70,000.
Newly elected director Bill Smallman cast the lone negative vote in the 4-1 decision, according to Ratcliffe. But because of the board’s self-imposed gag order, Smallman could not discuss his reasons for opposing the appeal on Tuesday
Early this month, in response to an emailed set of questions sent to all board members, Smallman said, “I will not vote to appeal unless I am provided additional information that either Mr. Vierra is innocent, and/or the district (the ratepayers) would benefit from such an expense.”
Ratcliffe offered no explanation for the decision to finance Vierra’s continuing legal appeals.
Despite the unanimous decision to ban any comments by board members on the Vierra case – and the state’s Brown Act that prohibits conversations among elected board majorities outside of advertised public meetings – Ratcliffe and directors Chuck Baughman and Margaret Bruce discussed the Vierra case after the Tuesday meeting with one of Ratcliffe’s Felton neighbors, Cynthia Dzendzel, according to Dzendzel.
Ratcliffe and all other board members except Smallman in December and January had ignored requests to explain why they were paying to defend a former director’s actions in a real estate deal that occurred two years before any of them had been elected to the board.
Ratcliffe’s silence left unanswered whether the board believed, as attorney Hynes has said, that state conflict-of-interest laws don’t always apply to real estate deals like the one that generated Vierra’s commission. Hynes told an interviewer in 2015 that Vierra had acted on his advice.
Ratcliffe’s silence also left unanswered whether she believed, as SLV Water District Manager has said, that Vierra’s decision to participate in the decision that resulted in $12,000 in real estate commissions was “a small mistake,” which did not warrant the judge’s ruling.
Directors Baughman, Bruce, and Eric Hammer joined Ratcliffe in the vote to direct its attorney to file an appeal on behalf of Vierra.
“We have an obligation under section 825 and 995 of the Government Code to defend directors as employees,” said Ratcliffe, reading a brief statement in Tuesday’s public session.
The state laws referenced by Ratcliffe make no reference to “directors as employees.” The laws only refer to “employees.”
Further, the state laws she mentioned make no reference to a requirement that boards finance the legal bills of costly appeals of decisions involving employees.
The state government codes cited by Ratcliffe require governments to pay legal fees of employees if their actions were “within the scope of employment” and do not involve “actual fraud, corruption, or actual malice.”
Ratcliffe also declined comment on whether Vierra had requested that the board appeal Gallagher’s ruling against the former water district director.
Vierra this week ignored offers to comment on the case or the board decision.
Ratcliffe’s description of “directors as employees” apparently is based on the fact that water district directors receive a $100 stipend for each board meeting. Whether or not elected officials are also employees is an unresolved legal question, lawyers say.
“Every board member who testified at trial admitted that they knew that Vierra had a conflict of interest, yet still voted to approve the contract that enriched Vierra, despite admissions from every board member that they regularly receive conflict-of -interest training,” said Redenbacher.
“ As the courts and legislature have repeatedly said, the law is meant to eliminate even the appearance of a conflict, much less an actual conflict as what occurred with Vierra.”
Holloway’s lawsuit was filed under the state’s Political Reform Act, which prohibits public officials from “self-dealing, conflicts of interest or profiting from governmental decisions.”
