An alleged extortion and bribery conspiracy that took place nearly a decade ago and compromised San Bernardino County’s governmental structure at the highest level by  facilitating what prosecutors say was a $102 million act of larceny took center stage at the Fourth District Court of Appeals in Riverside on Tuesday. That afternoon, justices Thomas E. Hollenhorst, Art W. McKinster and Douglas P. Miller heard oral arguments relating to a criminal case and three civil actions that have grown out of the matter.
At the basis of the appeals under consideration is a vote taken by the San Bernardino County Board of Supervisors on November 28, 2006 in which then-supervisors Bill Postmus, Paul Biane and Gary Ovitt conferred a $102 million payment on the Colonies Partners to settle a lawsuit brought by that company against the county over flood control issues at the Colonies at San Antonio residential and Colonies Crossroad commercial subdivisions in northeast Upland. That project had been built on land traditionally used for flood control purposes by the San Antonio Water Company and upon which the county’s flood control division held three flood control easements recorded in 1933, 1934 and 1939. The city of Upland had granted the Colonies Partners approval for the development projects but had also contracted with the county flood control division to construct a project known as the 20th Street Storm Drain, which was intended to carry away flood waters from the northwestern extreme of the city. The lawsuit the Colonies Partners filed grew out of the county flood control district vectoring the water from the 20th Street Storm Drain onto the Colonies Partners’ property.
The county constructed a legal defense of its action, utilizing deputy county counsel Mitch Norton and the law firm of Jones Day. Relatively early on in that legal battle, Judge Peter Norell ruled that the county had abandoned the flood control easements on the property the Colonies Partners had purchased from the San Antonio Water Company for the development but Norell was overturned by the Fourth District Court of Appeals, the same court now entertaining the current appeals, which ruled that the easements were still intact but that the county might need to make compensation to the Colonies Partners if the amount of water channeled there exceeded the capacity of one of the existing basins there. When the case went to trial before Judge Christopher Warner, Warner ruled that the county had exceeded the terms of the easements, thus extinguishing them. Warner had ruled in favor of the Colonies Partners but had made no finding as to the amount of damages. In this atmosphere, with the county’s lawyers urging a further appeal of Warner’s ruling extinguishing the easements, the board of supervisors, with supervisor Josie Gonzales and then-supervisor Dennis Hansberger dissenting, settled the case for the $102 million payout.
The politically-imposed settlement was followed up with a validation procedure carried out before Judge W. Robert Fawke in which any challenges to the settlement were to be heard. An attorney from Upland, Marjorie Mikels, submitted such a challenge which was accepted by Fawke’s court clerk. Subsequently, however, Fawke ordered the acceptance of that challenge rescinded and had his court clerk white out the court’s file stamp on the document Mikel’s had submitted. Fawke then ruled that the settlement had not been adequately challenged and he certified it.
Three years later, in February 2010, the California Attorney General’s Office and the San Bernardino County District Attorney’s Office filed a criminal complaint charging Postmus, who at that point had left the board of supervisors to become county assessor and then resigned that position in 2009, along with one of his political associates, former sheriff’s deputy union president Jim Erwin. The criminal complaint against the pair alleged conspiracy, extortion, bribery, fraud and perjury in connection with the 2006 Colonies lawsuit settlement vote. Both Postmus and Erwin pleaded not guilty to those charges. However, a little over a year later, in March 2011, Postmus pleaded guilty to 14 felony charges, including all of those lodged against him in the February 2010 criminal complaint and other charges relating to malfeasance in office when he was assessor. Postmus then turned state’s evidence and served as the star witness during a grand jury impaneled in April 2011. In May 2011, that grand jury indicted Erwin, one of the Colonies Partners’ managing principals, Jeff Burum, Paul Biane, and Gary Ovitt’s chief of staff, Mark Kirk. The indictment alleged that Burum, using Erwin as a consultant, first extorted Postmus and Biane by using public relations consultant Patrick O’Reilly to create mailers revealing Postmus’ homosexuality and drug use and Biane’s insolvency and threatening to post them to voters during the 2006 election year. The mailers were withheld, according to the indictment, and Postmus and Biane fell into line in supporting the $102 million settlement. Kirk was brought into the conspiracy, according to the indictment and prosecutors, in that he used his position of influence as Ovitt’s chief of staff to cozen Ovitt into supporting the settlement. Ovitt was not charged. After the settlement vote, in the first six months of 2007, Burum or his co-principal in the Colonies Partners, Dan Richards, wrote three separate $100,000 checks to political action committees controlled by Erwin, Biane and Kirk and two $50,000 check to two political action committees controlled by Postmus. These checks were, according to prosecutors, in the case of Postmus, Biane and Kirk, bribes and in the case of Erwin payment for orchestrating and facilitating the extortion and bribery scheme.
All four of the defendants – Erwin, Burum, Biane and Kirk – have pleaded not guilty and put on spirited defenses, including the filing of demurrers on a number of charges, some of which were sustained by Judge Brian McCarville and then appealed to the Fourth Appellate Court in 2011, with most but not all of those demurrers being upheld by the appellate court in 2012. Last year, the trial court judge, Michael A. Smith, dismissed the conspiracy charge lodged against all four defendants, while upholding the lion’s share of the remaining charges. The conspiracy charge lies at the heart of the case, upon which the primary narrative propounded by prosecutors is hinged, including 43 overt acts. This conspiracy allegation represents the gravitas of the case, in particular that pertaining to Burum, considered the linchpin of the entire matter as he is the prime mover in all of the criminal action alleged. The prosecution last year appealed Smith’s dismissal of the conspiracy charge against all four defendants to the Fourth Appellate Court.
In the meantime, the Inland Oversight Committee and Citizens for Responsible and Equitable Environmental Development, represented by attorneys Cory Briggs and John McClendon, filed suit against the Colonies Partners in San Bernardino County Superior Court in February 2012, seeking the return of the $102 million. That lawsuit was followed up with two similar actions. Those matters, too, have wended their way before the Fourth Appellate Court in Riverside.
Because of the complexity of both the criminal and civil cases and their basis in the same set of events and personalities, the troika of Hollenhorst, McKinster and Miller are considering all four cases, in effect simultaneously.
Tentative decisions have been rendered on all matters but on Tuesday, the attorneys for all parties came to Riverside to make oral arguments and perhaps change the justices’ minds.
Smith’s July 2014 decision to toss the conspiracy charge was based on his determination that the charge, lodged in May 2011, came too late, nearly four years after the last overt act in the conspiracy – the writing of the last check alleged to be a bribe. The statute on conspiracy is three years, Smith ruled.
Not so, contended Supervising Deputy California Attorney General Melissa Mandel, who is prosecuting the case with San Bernardino County deputy prosecutors Lewis Cope, Michael Abney and Reza Sadeghi. Mandel insisted that the statute of limitations for the crime of conspiracy runs to four years if the crime around which the conspiracy revolves relates to a crime by a public official.
A violation of the public trust involving conspiracy, Mandel said, “is completely covered by the statute.”
Burum’s attorney, Stephen Larson, countered that conspiracy is a stand-alone offense and as such is subject to a three-year statute of limitations.
The prosecution is under severe challenge, however, as the record has developed beyond the initial allegations contained in the indictment as the case is proceeding toward trial. The lion’s share of those developments cast doubt on key elements of the prosecution’s contentions.
Ovitt, whose vote like that of Postmus and Biane was crucial to the settlement, has rejected the prosecution’s assertion that he was persuaded or in any way influenced by Kirk to vote in favor of the settlement.
A central premise of prosecutors is that the $102 million payout was not justified and as such constituted an illegal gift of public funds. County officials, however, in an adjudicated claim brought against the California State Association of Counties Excess Insurance Authority to force that entity to make good on its obligation to provide partial reimbursement of the $102 million payout, represented the settlement as reasonable and necessary to offset the potential liability the county faced in the lawsuit brought by the Colonies Partners. Costa Mesa-based lawyer Todd Theodora and Mitch Norton, the in-house county attorney who defended the county against the lawsuit brought by the Colonies Partners, represented the county in its indemnification claim against the California State Association of Counties Excess Insurance Authority. Theodora and Norton stated in court papers filed with a panel of arbitrators with the Judicial Arbitration and Mediation Services based in Ontario and before the Orange County Superior Court Judge Franz Miller that San Bernardino County had engaged in actions or “offenses or wrongful acts” against the Colonies Partners which resulted in “physical damage” to the Colonies Partners’ property and/or assets, such that the $102 million settlement was a reasonable one given that the value of one of the basins constructed on the Colonies Partners’ property to hold the storm water was $85 million, the Colonies Partners had estimated the cost of managing the basin over time at $75 million, the Colonies Partners valued at $43 million the lots the company claimed were devalued due to the cloud on the company’s title which came about because of the county flood control district’s interpretation of its easements, the $36 million cost of the three-year delay the construction of Phase II of the project, and the $11 million loss the Colonies Partners claimed to have sustained because of higher infrastructure development costs as a result of the county’s action.
This was buttressed by the testimony of Randall Teteak, who was qualified by the county as an expert witness based upon his extensive experience as a developer of master planned communities. In testimony obtained through questioning carried out by Theodora and Norton which was presented to Judge Miller, Teteak stated under oath that the Colonies Partners had a realistic claim of from $249 million to $276 million as a result of the flood control district’s channeling of water onto the Colonies Partners’ subdivisions.
Norton is of significance because he was one of the witnesses called before the grand jury which returned the indictments of Erwin, Burum, Biane and Kirk. Prosecutors made no effort to elicit from him the information he presented to Judge Miller about the liability the county faced in the lawsuit brought by the Colonies Partners or the reasonableness of the $102 million settlement.
Moreover, four months after the indictment was handed down, FBI agents acting in concert with the U.S. Attorney’s Office served search warrants at Burum’s office and numerous other locations, including the places of business and residences of the other defendants and their associates. The U.S. Attorney’s Office, after a review of the matter involving the $102 million settlement and the actions related to it by Erwin, Burum, Biane and Kirk, declined to file criminal charges in the matter.
Part of the U.S. Attorney’s Office’s review involved the questioning of Postmus, considered to be the central witness for the prosecution in the state criminal case, carried out on October 14, 2011 by the FBI and Assistant U.S. Attorney Jerry Behnke. The transcript of that interview/interrogation reflects that Postmus’s drug use was more extensive than he had previously acknowledged, including use within the time frame around his testimony before the grand jury. Though he spoke of “promises” made by Burum to support his political career in the future after the Colonies settlement was reached and that he was being “pushed” to reach a settlement over the lawsuit by Erwin, at points in the interview he seemed to contradict or come very close to recanting his grand jury testimony and statements to district attorney’s office investigators with regard to the alleged bribery, expressing reluctance to embrace the term quid pro quo in reference to the settlement vote and the two $50,000 donations to his political action committee from the Colonies Partners that followed it.
At one point in the interview, Behnke asked him point blank “Now, did you hear from anybody prior to the settlement occurring that $100,000 would be contributed to you or anyone else after the settlement?”
“No,” Postmus responded.
While the defense is well prepared, if indeed the case goes to trial, to explore alternative theories as to the suggestions of criminal culpability in the indictment, the prosecution conversely is yet maintaining that Postmus’s admission that he was involved in the conspiracy and received bribes from Burum makes its case very compelling. Postmus was the chairman of the board of supervisors at the time of the vote and his vote was crucial to the settlement. He was also chairman of the San Bernardino County Republican Central Committee at the time and had built his political career as a rock-ribbed conservative. He has told investigators that he was being subjected to threats that Burum and Erwin would make widespread disclosure of his homosexuality if he did not go along with them. This extends to the extortion element of the indictment.
Also making oral arguments on behalf of the Inland Oversight Committee and Citizens for Responsible and Equitable Environmental Development with regard to the three civil actions those groups brought to have the Colonies Partners disgorge the $102 million the plaintiffs contend represent the ill-gotten proceeds of a multi-faceted extortion and bribery conspiracy was Cory Briggs.
Larson has argued that the lawsuits should never have been filed and that the validation ruling by Judge Fawke with regard to the settlement is “forever binding.” Hollenhorst, McKinster and Miller have issued a tentative opinion siding with Larson, ruling that the Inland Oversight Committee and Citizens for Responsible and Equitable Environmental Development or any other entity or individuals do not have standing to challenge a settlement entered into by a governmental entity once a validation procedure is concluded and upheld by the court.
Briggs said the appellate court is on the brink of “making a very bad decision. What they are saying is that you can bribe public officials and just as long as you keep it secret until after a validation procedure is completed, then a bribe-tainted decision is bullet-proof forever after. If their tentative decision is confirmed, it will set a horrible precedent.”
A final written decision from Hollenhorst, McKinster and Miller on all issues is anticipated by early September.