By Mark Gutglueck
In Week 17 of the Colonies Lawsuit Settlement Public Corruption Case prosecutors and defense attorneys once more, and as intensely as ever, appeared to be relitigating the civil suit that led to the bribery-related charges against the four defendants – developer Jeff Burum, former county supervisor Paul Biane, one-time deputy sheriffs’ union president Jim Erwin and political figure Mark Kirk – as as well as the previous guilty pleas on a host of political corruption charges entered by previous chairman of the board of supervisors Bill Postmus.
The civil suit that led to the filing of the criminal charges related to the drainage issues at the Colonies Partners’ Colonies at San Antonio residential and Colonies Crossroads commercial subdivisions in northeast Upland.
The Colonies Partners purchased 434 acres in northeast Upland from the San Antonio Water Company in 1997 for $16 million, intending to develop that property. Of significance in that effort was that as the first phase of the project, consisting a residential subdivision, was coming to fruition, the California Department of Transportation, known by its acronym Caltrans, was moving ahead with the construction of the below-grade 210 Freeway extension through that area. This was of both benefit and hindrance to the Colonies Partners.
One benefit was that the northernmost strip of the 434 acres the Colonies Partners had purchased would be needed by Caltrans for freeway right-of-way. The outcome of Caltrans’ effort to condemn, take by eminent domain and utilize less than ten percent of the property acquired by the Colonies Partners was that the company was paid $18 million – $2 million more than it had paid for the entire 434 acres – for the roughly 40 acres of land used for the footprint of the freeway. The terms of the agreement between the Colonies Partners and Caltrans for the purchase of the land used for that span of the freeway included a clause that the Colonies Partners accepted this payment as compensation for any damage the Colonies Partners may have sustained as a consequence of the severance, taking and use of that property.
Another benefit to the Colonies Partners was that the immediate proximity of the freeway to the company’s land greatly enhanced the value of the commercial subdivision the company was purposed to establish.
The hindrance to the Colonies Partners was that the development of the freeway and the accompanying improvements in the area resulted in the need to create storm water collection and diversion infrastructure. Long before the Colonies Partners purchased the property, the land had been used for flood control purposes. The county had recorded flood control easements on the Colonies property in 1933, 1934 and 1939 when the property was owned by the San Antonio Water Company. Those easements gave the county the right to use 31 of those acres as a water holding basin and to use another 30 acres on the property for flood control purposes, pursuant to arrangements between the county and the property owner.
In 1999, simultaneous with the City of Upland’s approval of the first phase of the Colonies at San Antonio project, the Colonies Partners and the county entered into an agreement by which the county agreed to relinquish some of the restrictions on the development of the property in return for the Colonies Partners constructing a flood water retention basin on site. When issues with regard to that basin and the devotion of enough property to ensure its functionality arose between the county’s flood control district and the Colonies Partners, slowing the Colonies Partners’ timetable and development schedule, it filed in 2002 a “quiet title” lawsuit against the county, intending to achieve a declaration from the court that the Colonies Partners was entitled to proceed with the development of its property in accordance with the permits it had obtained from the City of Upland. That lawsuit included an assertion that the county no longer held the 1933, 1934 and 1939 flood control easements. When the county contested the quiet title action, the Colonies Partners, alleging the county was in essence seizing the property by utilizing it for flood control purposes and preventing it from being developed, filed an inverse condemnation suit, which maintained that the county had engaged in an illegal “taking” of the Colonies Partners’ land. The inverse condemnation suit was stayed, that is, put on hold by the court, while the quiet title action went forward.
Controversy would erupt in 2006 when a bare 3-2 majority of the county board of supervisors voted to confer a $102 million settlement on the Colonies Partners to end litigation over this matter. The substance of that controversy is the lynchpin of the corruption case. One of the primary issues fueling that controversy pertained to whether the Caltrans damage clause in the $18 million payment to the Colonies Partners covered the county’s liability for its flood control district’s use of existing easements for greater-than-historical amounts of flood water that would be directed through the county’s catchment basins as a result of the new and larger storm drain improvements built to control flooding flowing off of what was then the newly-constructed 210 Freeway.
The City of Upland had land use authority within its jurisdiction and had the power of approval of the Colonies Partners’ residential and commercial subdivisions. The county flood control division, at the behest of the City of Upland and Caltrans, had constructed the 20th Street Storm Drain, which was designed to channel rainwater from the watershed area north of the freeway as well as water accumulating within the trough of the 210 Freeway itself. Relying on the easements from the 1930s, the county placed the terminus of the 20th Street Storm Drain on the Colonies Partners property. In giving approval to the Colonies Partners’ projects, the City of Upland had not made clear which entities bore responsibility for the provision of drainage and flood control infrastructure.
As the litigation between the county and the Colonies Partners dragged on, the Colonies Partners engaged in increasingly more intensive efforts to bring the litigation to a close on terms it considered favorable. This included, according to prosecutors, efforts to pressure Bill Postmus, who in 2005 and 2006 was the chairman of the county board of supervisors and the chairman of the San Bernardino County Republican Central Committee, and Paul Biane, who in 2005 and 2006 was the vice chairman of the county board of supervisors and the vice chairman of the San Bernardino County Republican Central Committee, to settle the lawsuit. That pressure, prosecutors allege, included creating “hit piece” mailers which dwelled upon Biane’s financial difficulties and Postmus’s drug use and homosexuality, and threatening to post them to voters throughout San Bernardino County. According to prosecutors, one-time San Bernardino County sheriff’s deputies’ union president Jim Erwin had participated in conveying those extortionary threats, having done so as part of his effort to assist Colonies Partners co-managing principal Jeff Burum in achieving a settlement of the litigation. On November 28, 2006, the board of supervisors in a 3 to 2 vote, with Postmus, Biane and then-supervisor Gary Ovitt voting in the affirmative, approved a $102 million payout to the Colonies Partners to settle the lawsuit. Beginning four months later, in March 2007 and running until the end of June 2007, Burum and the other managing principal in the Colonies Partners, Dan Richards, made three separate $100,000 contributions to political action committees which prosecutors allege were either openly or secretly controlled by Biane, Erwin and Mark Kirk, who was Ovitt’s chief of staff, along with two $50,000 donations to two political action committees secretly controlled by Postmus. By early 2007, Postmus, who had successfully run for county assessor in 2006, was serving in that capacity and had hired Erwin to serve as assistant assessor.
A 29-count indictment handed down by a grand jury in May 2011 alleges that Burum conspired with Erwin to blackmail and extort Postmus and Biane to support the settlement by threatening to mail out the hit piece mailers but ultimately withholding them and that the $100,000 donations to the political action committees were thinly veiled bribes to Postmus and Biane for their votes in favor of the settlement and to Kirk for his having influenced Ovitt to support the settlement. Erwin was rewarded for his effort in having carried out the extortion and bribery scheme, prosecutors allege. Though Burum was indicted, Richards was not. Postmus, who had been charged in February 2010 along with Erwin with involvement in an extortion and bribery scheme growing out of the same set of overt acts laid out in the indictment, initially pleaded not guilty to those charges, as had Erwin. But 13 months later in March 2011, Postmus entered guilty pleas to 14 felony counts and agreed to turn state’s evidence. He was then the star witness before the grand jury that indicted the four current defendants. The charges in the indictment supersede the charges earlier brought against Erwin. It is anticipated that next week Postmus will testify as the central witness for the prosecution in the trial.
Both before the trial and at its outset, indications were that references to the civil litigation underlying the criminal case would be alluded to only sparingly. The judge hearing the matter, Superior Court Judge Michael A. Smith, in his rulings on the pretrial motions in limine which set the parameters of what evidence and testimony would be considered by the jury, excluded much of the material directly related to the civil litigation, leaving enough however, so that the alleged criminal acts could be considered by the jury in some semblance of a logical context. Similarly, the opening statements made by supervising deputy district attorney Lewis Cope downplayed the significance of the merits of the underlying civil case.
Once the trial was underway in earnest, Cope and the other prosecutor on the case, California Supervising Deputy Attorney General Melissa Mandel, made limited reference to the underlying civil litigation in an effort to provide background to the circumstances that led to the alleged extortion and bribery, and to propound that the $102 million settlement was excessive and unjustifiable. The defense, led by Burum’s attorney, Stephen Larson, seized upon those references, pursuing a strategy of countering the prosecution by selectively exploring the minutiae of the civil litigation in an effort to suggest the $102 million settlement was reasonable. As a consequence, the prosecution has spent a considerable amount of its focus thus far in addressing the defense contentions that the Colonies Partners was due the $102 million. In this way, the criminal trial has taken on in much of its aspect a retrying of civil trial, such that approaching half of the testimony has been devoted to issues with seemingly no relation to the criminal allegations against the defendants.
That pattern prevailed this and last week. During Week 16, Ruth Stringer, the first woman to hold the position of county counsel in San Bernardino County, testified under direct examination by supervising deputy district attorney Lewis Cope. The office of county counsel is the county’s stable of in-house attorneys, with the top ranked attorney holding the title of county counsel. Stringer, who spent her entire legal career as a lawyer with the county, had promoted past the positions of deputy county counsel and then lead and supervising county counsel to become assistant county counsel, the second highest position in the office, in 2003, just as the litigation with the Colonies Partners was heating up. Early in November 2006, just prior to the Colonies Settlement being voted upon, Stringer was made interim county counsel, meaning she was acting in the capacity as the county’s senior attorney. In March 2007, the interim prefix was dropped from her title, and until her retirement in 2010 she served as the county’s top lawyer. Stringer last week recounted that the lawyers in the office of county counsel as well as the outside attorney’s retained to assist the county in the litigation against the Colonies Partners were uniformly convinced that the terms the Colonies Partners were seeking in their settlement proposals were not justified by the facts and the law. She testified to the level of pressure the lawyers within county counsel were being subjected to by Postmus, which she said intensified in the aftermath of his return from a trade mission to China in which he is alleged to have interacted with Burum. Postmus had also openly criticized Ron Reitz, who had been county counsel from September 2003 until April 2006, for not structuring a settlement with the Colonies Partners on terms which the lawyers felt were unjustified but which Postmus and the Colonies Partners were calling for. She testified that one element of this pressure consisted of Postmus calling for the outsourcing of the office of county counsel, that is the firing of the county’s in-house lawyers to be followed by contractual arrangements with outside firms. Ultimately, Stringer testified, Reitz had resigned.
On Monday morning, Cope continued with his direct examination of Stringer, with her reiterating that the lawyers in her office as well as the county’s outside attorneys were holding the line in 2005 and 2006 as the Colonies Partners and their legal team were pushing for the county to simply settle the case short of it going to trial. She enlarged upon her previous testimony with regard to Postmus, as the chairman of the board of supervisors, saying he was aggressively pushing to have the settlement approved. He was, she said, “very adamant” and “angry” in “wanting to get this case settled.”
When she and other county lawyers sought to posit reasons for not settling or to explain why accepting the settlement as it was proposed was contrary to the interest of the county and its taxpayers, she said, Postmus would not listen to the arguments.
In the November 7, 2006 election, Postmus had been elected county assessor, meaning he would be departing as supervisor in early January 2007. The $102 million settlement was approved at the November 28, 2006 meeting. Stringer said that Postmus recognized the November 28 board meeting “was likely his last meeting as a member of the board of supervisors and he wanted it done by that date.”
Stringer testified attorneys representing the county, including all of the members of county counsel working on the litigation against the Colonies Partners as well as the outside law firms were so concerned about the settlement that they refused to sign it.
“We had a conflict that precluded us from signing any settlement agreement,” Stringer said. “We did not believe we could reasonably get to [a] settlement agreement with Colonies ethically, because in our viewpoint, it wasn’t justified.”
Stephen Larson, Burum’s attorney, began his cross examination of Stringer Monday morning upon the conclusion of Cope’s direct examination. Previously, Larson had scored tremendous success by wringing from previous witnesses an acknowledgement that the county’s legal staff, or at least key elements of it, had come to accept the $102 million settlement as a reasonable one, given the totality of circumstances. In cross examining Mitch Norton, the deputy county counsel who had been assigned to the Colonies litigation and was the county lawyer most closely involved in the case, Larson was able to get him to admit that that by 2009 he found the agreement “objectively reasonable,” despite having steadfastly opposed settlement in 2005 and 2006. Judge Smith had given Larson remarkably wide latitude in his questioning of Norton, who was at a tremendous disadvantage because after the settlement he had been assigned to representing the county in the effort after the settlement to recover from its insurers the money the county claims is owed to it over its indemnification policies that are applicable to its $102 million payout to the Colonies Partners. One of those, Travelers Insurance, provided the county flood control district $9.5 million to satisfy its indemnification responsibility with regard to the Colonies Partners’ lawsuit settlement. Another, however, the California State Association of Counties Excess Insurance Authority, has rejected the county’s claim. In the legal action for recovery the county has pursed, lawyers for the California State Association of Counties Excess Insurance Authority have propounded the prosecution’s theory that the settlement vote was tainted by conspiracy, graft, extortion, bribery, collusion and political corruption, which they claim absolves the authority of having to make good on its indemnification of the county. This has put Norton in the position of taking up at least a portion of the position of the Colonies Partners’ lawyers in arguing that the county had wronged the company.
In this way, in attempting to force the California State Association of Counties Excess Insurance Authority to pay on its policy, Norton has, on occasion, filed court documents, and made assertions in court that the county was justified in having conferred the $102 million settlement on the Colonies Partners. Larson took full advantage of this when he had Norton on the stand, finding ways to circle back to the subject or to pose questions along a slightly different tangent to have the jury hear again and again, over the objections of the prosecution, that the settlement could be justified.
In his cross examination of Stringer, who had been Norton’s boss and who had assigned him to recover a percentage of the money it had paid out to the Colonies Partners from the California State Association of Counties Excess Insurance Authority, Larson moved into place to have Stringer repeat Norton’s acknowledgment that the county came around to accept that the $102 million settlement was a reasonable and justifiable one.
After Stringer recounted the efforts by the county lawyers to resist the settlement, Larson asked her if “You have subsequently taken the position the settlement was reasonable and legally justified?” Stringer essentially acknowledged that she had, but managed to deflect the question’s effect by indicating that the change of position was one forced upon the county by circumstance and the need to protect the taxpayers after the fact, implying with her answer that to recover money from that the California State Association of Counties Excess Insurance Authority the county had to represent that the settlement was justifiable and that it was also necessary to represent the settlement as reasonable to Caltrans, the City of Upland and the regional transportation agency, known by its acronym SANBAG, to pursue litigation against those agencies, which the county deemed as much or more responsible for the situation vis-à-vis the vectoring of storm water onto the Colonies property than the county. “We did file an indemnity action subject to the Colonies settlement,” she said. “We did pursue an indemnity action against Caltrans, SANBAG and the City of Upland.”
When Larson sought to take a second bite at the apple and get Stringer to reiterate what she had said in a more direct fashion, Judge Michael A. Smith shut that line of inquiry down when the prosecution objected to the repetition of the questions.
Throughout his cross examination of Stringer, as he had done previously with all of the prosecution witnesses he questioned, Larson posed his questions and used various tactics in a calculated effort to elicit contradictory statements, in so doing carrying out what in legal parlance is referred to as “impeachment,” which is intended to bring the witnesses’ credibility into question. Larson was less successful with Stringer in this vein than he had been with several other witnesses.
Larson took issue with Stringer’s assertion that Postmus had become much more aggressive in pushing for the settlement after returning from a trade mission to China in September 2005, at a time when Burum was also in China. Larson noted in his questioning that Postmus had supported making a settlement with the Colonies Partners in March 2005 that involved a cash payout of $22 million and a transfer of county property valued at $55.5 million to the LLC. Stringer acknowledged that Postmus had made an effort to effectuate the settlement prior to the China trip but she was resolute in maintaining that his approach had changed after his return from China. “That is my opinion,” she said. “In terms of his attitude toward counsel, he became more animated. He became a little bit angrier and he would not accept any option other than what he wanted done. That was the beginning and end of his position on the case. He always supported a settlement, but not with so much intensity and aggression.” When Larson asked how she knew that to be the case, Stringer said it was based on what Reitz had told her, “as well as my own observations.”
Larson sought to counter the suggestion contained in Stringer’s testimony that the behavior Postmus was exhibiting at that time and his rush toward settlement was an outgrowth of pressure being put on him by the Colonies Partners.
“You understand that Mr. Postmus was suffering from major drug addiction during that time, 2005-2006?” Larson inquired.
“I understand he had drug problems,” Stringer said. “I don’t know the dates they started.”
“So you don’t know, then, if any of the anger or agitation that Mr. Postmus was demonstrating may or may not have been contributed to by his drug addiction?” Larson asked.
Stringer said she did not “have any knowledge of that.”
Larson also zeroed in on Stringer’s testimony on direct examination last week to the effect that she had an encounter with Burum and possibly Richards sometime in the fall of 2006. During that exchange, she said, Burum had asserted that she was in error in interpreting the law and county code to the effect that including a land component in a lawsuit settlement such as some of those being contemplated between the county and the Colonies Partners required approval of at least four members of the board of supervisors. Boldly, Larson implied if not quite asserted, that no such meeting between Stringer and Burum had occurred. “Isn’t it true you never met face to face with Mr. Burum prior to the settlement on November 28, 2006?” Larson fairly thundered, his reference being to a session held the day the settlement had been approved, at which the final terms of the agreement that were put into writing were hashed out. That agreement, which was for the county to make the $102 million cash payout, had no land conveyance component. In the face of Larson’s insinuation that she had lied, Stringer stood her ground, saying, “I don’t think that is correct. I believe there was another meeting.”
Larson asked Stringer about the outcome of the trial over the lawsuit that took place before Judge Christopher Warner over 18 days spread out between April and June of 2006. “It was not favorable to the county,” Stringer said.
“Do you think that is a fair assessment?” Larson asked, implying that Stringer was downplaying the seriousness of Warner’s ruling.
“It was an adverse opinion for the county,” she said
With Stringer, Larson brought up the subject of a complaint the county had filed with the California Commission on Judicial Performance against the two judges before whom the lawsuit between the county and the Colonies Partners had been litigated, Peter Norell and Christopher Warner. That complaint alleged the judges had inappropriate contact with the Colonies Partners principals or investors and that the judges were biased in favor of the Colonies Partners as a result. There had been previous testimony that the county’s lawyers had advised the board of supervisors to hold off on settling the lawsuit at least until after the commission had completed its investigation of the judges. Larson displayed a letter from the commission that the county received after the settlement occurred which indicated the commission had grounds to believe Norell had improper contact with the Colonies Partners or had evinced bias but that the investigation of Warner fell short of such a conclusion. “With respect to the judge named in the first paragraph of the September 11, 2006 letter, the commission has considered the matter and taken appropriate corrective action with respect to some but not all of the allegations in your correspondence,” the letter stated. “With respect to the second judge named in the second paragraph of that same letter, the commission found no basis for action against the judge or determined not to proceed further in this matter.” Stringer validated the letter and that Norell was the first judge referenced and that Warner was the second judge.
Stringer testified that the county’s lawyers had told the board of supervisors that it was inadvisable to settle the lawsuit with the Colonies Partners before the indemnification issues involving the other responsible parties – the City of Upland, Caltrans and SANBAG – were worked out.
SANBAG is the region’s transportation agency.
Larson wrung from Stringer a concession that she had not gone out to the Colonies Partners property to look it over herself, that she had neither attended nor participated in any of the mediation sessions with the Colonies Partners and that she had not litigated the matter itself and only attended the trial before Warner on a single occasion when she observed the proceedings from the gallery.
Stringer testified that she felt even more strongly than Norton did that the county should appeal Warner’s decision to the appellate court. “I had the opinion we should take the case up on appeal,” she said.
It was while Warner’s tentative ruling in the case was on the verge of being finalized that the county settled the lawsuit at the $102 million figure. To one of Larson’s questions, Stringer acknowledged that the settlement precluded the language in Warner’s tentative ruling against the county being finalized and that was of some assistance in the county’s indemnification suit against the other three parties.
It is anticipated that the trial’s major witness, Bill Postmus, will begin his testimony next week. Having used Stringer to effectively recover a portion of the momentum it had lost with the defense’s impeachment of some of their earlier witnesses, the prosecution next called to the witness stand a now-retired attorney, Thomas Malcolm, who as outside counsel had worked with Norton in guiding the county in conducting the litigation during the year-and-a-half before the matter was taken out of the hands of the lawyers by the board of supervisors’ vote to settle.
The stately, 79-year-old Malcolm represents what is perhaps the prosecution’s last and best chance to set the table for the testimony by Postmus, which prosecutors hope will at last solidify the criminal case against the defendants, in particular the bribery that prosecutors say occurred after the settlement and the threats, blackmail and extortion that preceded it.
For much of the trial, Larson, a high-powered international attorney who formerly worked as assistant U.S. Attorney in Los Angeles before being elevated to the position of federal judge, from which he subsequently resigned to become a top flight litigator with two major establishment law firms before joining with Robert C. O’Brien to form his own firm, had used his gravitas to overpower the witnesses he questioned. In cross examining Malcolm, who had been a managing partner with the law firm of Jones Day and was being paid $900 an hour for his legal services by the time he retired, Larson found himself up against a formidable opponent.
Before Larson was able to begin his cross examination, however, California Supervising Deputy Attorney General Melissa Mandel carried out the direct examination of Malcolm. Though his legal pedigree and experience in representing the county at the civil trial ostensibly put Malcolm in the role of assisting the prosecution in the relitigation of the civil case, he at points went directly to the substantive issues lying at the heart of the case, telling the jury with some of his responses that unmistakable signs of corruption hung about the effort to settle the case, that an effort to engineer a settlement that preceded the $102 million settlement which involved trading valuable land that the county owned to the Colonies Partners for a lesser amount of acreage impacted by the flood control basin was an illegal “gift of public funds,” and that the action constituted “a crime.”
The county retained Jones Day as outside counsel to represent it in the case against the Colonies Partners after the county’s previous outside firm, Munger, Tolles & Olson, resigned when four members of the board of supervisors gave indication in April 2005 they were going to support a $77.5 million deal with the Colonies Partners calling for a $22 million cash payment and the county handing over 1,400 acres of surplus flood control land in north Rancho Cucamonga the Colonies Partners claimed was worth $55 million to offset the damages the Colonies Partners claimed had been done to it by the flood control district monopolizing 67 of its acres on its Upland property.
Immediately after Munger Tolles & Olson’s departure in May 2006, Jones Day came in to represent the county. The following month, an internal memo from Jones Day to the board of supervisors cautioning against making the $77.5 million settlement went public, and the board of supervisors backed out of it.
Malcolm, who had represented the Los Angeles Flood Control District and had extensive experience in real estate litigation as well as inverse condemnation proceedings which pertain to disputes over the government’s seizure of a private landowner’s property, told Mandel that he had participated in several phone conferences with retired California Supreme Court Justice Edward A. Panelli, who was working as a mediator between the county and the Colonies Partners, and that he had attended one mediation session involving the Colonies Partners principals, its lawyers, the members of the county board of supervisors and the county’s legal team. He testified that he had declined to personally participate in another settlement session mediated by Panelli.
Malcolm echoed a criticism deputy county counsel Mitch Norton made of Panelli’s approach toward mediation, which was that Panelli did not focus on the basis, issues and facts of a dispute as much as he pressed the parties to compromise on the demands to come to a resolution. In the context of the Colonies case, Malcolm suggested that the Colonies Partners’ claims were fraudulent and complying with them would make the county a party to that crime. “Justice Panelli, to our surprise, didn’t dig into the merits of the case,” he said. “Justice Panelli was intent on blessing the amount of money [the Colonies Partners was demanding]. I was very concerned personally that this would be tantamount to our law firm aiding and abetting a crime.”
Malcolm’s characterization brought howls of objection from several of the defense attorneys. Judge Smith, instructing jurors that the statement was not being offered as truth but rather as Malcolm’s perception, let it stand.
Malcolm clarified that he did not leave the county in the lurch and that another Jones Day attorney accompanied county officials to the Panelli-led mediation session. Malcolm said he had “decided they had gone too far [with concessions to the Colonies Partners during the mediation sessions]. I did not want personally to participate.”
Malcolm told Mandel his initial assessment of the extent of the damages sustained by the Colonies Partners to be $15 million to $20 million and that the county and its flood control district’s share of that liability was roughly ten to fifteen percent of that amount, with Upland, Caltrans and SANBAG being responsible for the rest.
With regard to the water retention basin on the Colonies Partners’ property, Malcolm said the county’s flood control easements there were valid and the county “had the right but not the obligation” to construct the basin. He said the Colonies Partners woefully overvalued the 67 acres of property used to accommodate the basin at $1.5 million per acre. He said the appraisal of the property done by Michael Waldon to support that claim had “no basis in reality. At the time it was not a realistic appraisal.” He offered the view that the property, which was zoned as open space by the City of Upland, was worth $15,000 an acre as a storm basin.
Malcolm acknowledged having taken part in an analysis and a resulting memo dated August 30, 2005 that concluded the county, by agreeing to a settlement with the Colonies that conferred $77.5 million on the company in exchange for the county taking possession of the basin the Colonies Partners had built on its property, known as Basin A, “may be walking into a trap that would impose liabilities that are not related to flood control, compromise the district’s ability to defend Colonies claims and undermine the district’s claims against Upland, Caltrans and SANBAG. The district does not have enough information about the current condition of Basin A, what additional work the district might be required to do, the estimated cost and whether the district has the resources necessary to complete this work.”
Mandel asked Malcom about the board of supervisors and his perception about their level of engagement with regard to the substantive issues of the litigation with the Colonies Partners. He said he had meaningful exchanges with Josie Gonzales that took place mostly outside the scope of closed sessions in her office. He said that supervisor Dennis Hansberger was engaged and “extremely conscientious.” He remembered Paul Biane as asking occasional questions. He said Biane more often offered feedback “with respect to the politics involved and what was going on with regard to the Colonies political involvement in the county.” He said supervisor Gary Ovitt asked no questions at all about the case.
When Mandel asked about Postmus, Malcolm described the chairman of the board of supervisors as being restlessly disengaged. “He would basically be texting or reading a newspaper and getting up and walking around the room, and he did not pay any attention at all to our presentation,” Malcolm said. “He had a very short fuse. He was at least on one occasion very rude and dismissive of county counsel.”
When Mandel finished with her direct examination of Malcolm, Larson at last had the opportunity to attempt to dismantle the support network the older attorney had constructed for the prosecution’s theory of guilt. Larson started off deferentially, inquiring about Malcolm’s history, background and various areas of legal expertise. He then moved to questioning Malcolm’s recollection of his firm’s early involvement in the case. Larson intensified the probing gradually, at times confronting the witness or quibbling with his answers. Malcolm on occasion dodged some obviously barbed and hooked questions by asserting a lack of recollection. Larson appeared to be stymied by this, as well as by Malcolm’s manner, which incorporated at times a self-deprecating humor that referenced his age, memory and lawyering skills. Malcolm engaged well with the jury, often addressing his answers not to Mandel or Larson but to, it seemed, the jury, which he would face by slightly turning in his position on the witness stand, as he would endeavor to make eye contact with its members.
Nevertheless, Malcolm asserted himself sometimes calmly and other times forcefully with regard to his recollections and certain points of law.
Larson tried to challenge Malcolm with regard to Jones Day’s overly optimistic assessment of the county’s position in the lawsuit, which was penultimately decided in the Colonies Partners’ favor by Judge Warner. Larson asked if he had told the supervisors the county’s “exposure was very minimal?”
Malcolm acknowledged he had. Larson further asked if “you in fact advised the county they had an 85 percent chance of success in the retrial?”
“I think I made that statement,” said Malcolm. “I also indicated we didn’t know which way the judge is going to go. We were optimistic it would turn out well.” The outcome would be, Malcolm said, “subject to the vaguery of the judge.”
When Larson pointed out that Warner had entered a tentative decision against the county and made findings that the county had misled and coerced the Colonies Partners in its dealings with the company, and that county flood control district department head Ken Miller had not been a credible witness, Malcolm acknowledged that Warner’s decision so found and stated. But he said, “I disagreed with the judge’s decision.”
Larson further sought to undercut Malcolm’s credibility by focusing on one of the defense strategies the county’s legal team had formulated, based on the precedent-setting 1977 case of Ellena vs. the State of California, involving a situation not too unlike the situation with regard to the Colonies Partners property involving severance damage compensation for property near Lytle Creek that was devastated during prolonged rainstorms in 1969. Using the Ellena case, the county was set to maintain that the $18 million paid to the Colonies Partners as the consequence of an inverse condemnation lawsuit filed against Caltrans for the state utilizing 40 acres at the top of Colonies Partners property for the 210 freeway right-of-way included severance damage compensation. Having accepted compensation would, according to the Ellena theory, preclude the Colonies Partners from receiving any further compensation for damages caused by the 20th Street Storm drain, which was put in place to alleviate freeway flooding. Larson pointed out that there were county lawyers who were not convinced the Ellena defense was valid. Malcolm, while acknowledging there was some disagreement on the Ellena isue, indicated he yet felt it was applicable. At any rate, he told Larson, “I don’t think we were limited to one defense.”
In this way, Malcolm seemed to effectively blunt Larson’s forays against him. Like Stringer before him, Malcolm had avoided serious impeachment at the hands of Larson, who continuously pressed forward with his efforts to rattle the older gentleman, sometimes with provocative questions and an occasional show of impatience or skepticism at Malcolm’s usually succinct, though sometimes more lengthy and involved responses. During one of the latter, Larson had cut Malcolm off, moving onto another question. Mandel objected, asking Smith to direct Larson to allow Malcolm to finish his responses. After Smith did so, Malcolm remarked, somewhat self-deprecatingly as if he were apologizing for his longwindedness, “I am a receptacle of information.”
“Selectively, it would appear,” Larson snapped.
Indeed, to the apparent delight of the juries hearing the case, which signaled their approval with occasional laughter, Malcolm, despite his years, had maneuvered at selective times into the persona of a sometimes recalcitrant and somewhat jocular adolescent in response to the authoritarian Larson, who came across as being in the role of a disciplining school headmaster at points of his cross examination.
In one regard, Larson did make a breakthrough with Malcolm. Perhaps because he anticipated a yet-to-manifest attack by the prosecution on his client for having had contact with Panelli, Larson sought and received from Malcolm his acknowledgment that he and other county lawyers had contact with Panelli outside the forum of an official mediation session without any countervailing representation of the Colonies Partners being present. Malcolm said there was nothing improper about such contact.
Toward the end of the court day on Thursday, Larson attempted to dry-gulch Malcolm, presenting what he purported was the Jones Day law firm’s billings for legal services for the month of April 2006. The invoice totaled $895,531.40, covering the services of 31 lawyers a handful of paralegals, printing costs, long distance telephone call, air fare, and lodging charges of $34,855.60 for rooms at the Mission Inn in Riverside. The invoice included 176 billable hours for Malcolm and 279.5 billable hours for Jeffrey Kirzner, another Jones Day attorney heavily involved in the Colonies Partners litigation. The clear implication was that the Jones Day firm was profiteering, and living luxuriously, at the expense of the taxpayers while pursuing an ultimately futile legal strategy. Though the defense team and the defendants themselves temporarily basked in the immediate aftereffect of Larson’s introduction of that piece of evidence, it was short-lived.
Mandel objected to the display of the document, pointing out that while it was dated April 2005, there was nothing in the paperwork to indicate the bill applied to just that month. She suggested the invoice was a canard, and not at all what Larson had represented it as being. Indeed, a close examination of the itemization in the invoice, which was not displayed on the courtroom’s overhead visual projector screens long enough to be comprehensively evaluated, showed that one lawyer had billed for 358.5 of the total 2,675.2 hours contained in the invoice. Courtroom observers noted that it would be highly unlikely that a single lawyer would work an average of 83.533 hours per week consistently throughout a single month.
Moreover, quick-eyed observers would have also been able to note that Malcolm was charging the county $450 an hour for his work, which was well below his going rate at the time, an indication that he was pursuing the case not for mercenary purposes but because he had a belief in the case.
By the day’s end, Larson’s cross examination of Malcolm had not drawn to an end and he was ordered by Judge Smith to return to the witness stand next Monday at 1:30 p.m.
By Mark Gutglueck