County Lawyer Offers Overview Of Lawsuit Underlying Colonies Criminal Case

By Mark Gutglueck
Twelve weeks into the Colonies Lawsuit Settlement Public Corruption Trial, the prosecution began direct examination of its witness with the most comprehensive knowledge and understanding of the complex civil case at the basis of the dispute which resulted in alleged extortion and bribery involving four high ranking public officials.
San Bernardino County Deputy County Counsel Mitchell Norton was assigned to oversee and guide the county through a thicket of litigation that grew out of the collision between the interests of the Colonies Partners consortium, which was intent on bringing to fruition residential and commercial subdivisions on 434 acres of land it had purchased from the San Antonio Water Company in northeast Upland, and the county’s flood control division, which had easements recorded in the 1930s granting it the authority to use at least 31 acres of that property to accommodate storm water runoff. The Colonies Partners’ aggressive development scheme clashed with the county’s perceived need to utilize a portion of that property for flood control purposes. The matter was complicated further still by the advent, simultaneous with first phase of the Colonies Partners development effort, of the 210 Freeway Project, which intensified the already existing drainage and flood control problems. Because of the City of Upland’s failure to clearly demark responsibility for the provision of infrastructure to accommodate the Colonies Partners’ development and the freeway construction, when the county interrupted and retarded the progress of the Colonies Partners’ development plan the Colonies Partners responded with litigation.
According to prosecutors as articulated in a 29-count indictment handed down by a grand jury in May 2011, Colonies Partners co-managing principal Jeff Burum, after four years of being unable to resolve the matter with the county so that the project could proceed as he envisioned, conspired with former sheriff’s deputies union president Jim Erwin to extort the then-chairman of the board of supervisors, Bill Postmus, and the then-vice chairman of the board of supervisors, Paul Biane, by threatening to reveal in mailers to be sent to voters throughout the county highly derogatory personal information about both of them. After Postmus and Biane acceded to this blackmail and voted, along with then-supervisor Gary Ovitt, in November 2006 to confer a $102 million payout to the Colonies Partners to settle the lawsuit, according to the indictment, Burum then provided Postmus, Biane, Erwin and Mark Kirk, who had been Ovitt’s chief-of-staff, each with $100,000 bribes in the form of donations made to political action committees they had created or otherwise controlled. Kirk’s bribe, the prosecution alleges, was provided to him by the Colonies Partners in return for having delivered Ovitt’s vote in favor of the $102 million settlement. Erwin, who was not employed by the county at the time of his efforts related to the extortion, was, however, employed as assistant county assessor in 2007 when the $100,000 donation to his political action committee was made.
In February 2010, Postmus and Erwin were charged in the matter, and both pled not guilty. But a year later, Postmus pleaded guilty to 14 felony political corruption charges and turned states evidence, testifying as the star witness before the grand jury that indicted Burum, Biane, Kirk and Erwin. The charges in the indictment supersede the charges originally filed against Erwin, whose fate is being decided by a jury in the same courtroom that is separate from the jury hearing the case against Burum, Erwin and Kirk.
The office of county counsel is the county’s stable of in-house attorneys. The office is headed by the county’s top staff lawyer, who holds the title of county counsel. The lawyers working beneath county counsel, such as Mitch Norton, bear the title deputy county counsel.
Because of a death in the family of one of the jurors hearing the case, testimony was heard this week only on Wednesday. Norton was the only witness and the entire day was taken up by his direct examination by one of the two lead members of the prosecution team, Supervising California Deputy Attorney General Melissa Mandel. Unmolested by defense cross examination, Norton was used by Mandel to illustrate the underlying situation and the basis and much of the substance of the legal wrangling that had been ongoing between the Colonies Partners and the county. In this way, Norton tied together much of the case and filled in many of the blanks that existed between the less-than-fully contexted snippets heretofore provided to the jury by previous prosecution witnesses.
To Mandel’s questions, Norton explained that the Colonies Partners in 2002 had filed a lawsuit against the county and the San Antonio Water Company seeking “declaratory relief” as part of a “quiet title” action aimed at “settling the dispute over land rights. At issue were a variety of [flood control] easements on the land the Colonies Partners had purchased.” According to Norton, the Colonies Partners had purchased the property in 1997 for $16 million. Some 67 of the 434 acres, Norton said, were subject to the easements the county had, meaning the property could be used to accommodate flood waters. It was when the county’s intention to continue to use the property for flood control purposes was joined with the county’s creation of another element of flood control infrastructure, the 20th Street Storm Drain, Norton said, that the litigation came about.
The 20th Street Storm Drain was designed and built by the San Bernardino County Flood Control District at the behest of the City of Upland to convey water away from both the area north of the freeway as well as water accumulating on the subgrade freeway during rainstorms. The county, under the aegis of the flood control easements it had recorded against the Colonies property, channeled the water from the 20th Street Storm Drain onto the Colonies property, where an existing basin, consisting of a long-abandoned quarry, was located. Norton said the construction and eventual operation of the “20th Street Storm Drain was the most importantly overwhelming factor that led to the litigation. The Colonies [Partners] purchased the property at almost the precise same time the extension of the 210 Freeway was being planned and built through the area. The entire freeway was to be built undergrade, depressed, if you will.” This would cause water to pool on the freeway when it rained, Norton said. “The solution to that drainage challenge was the 20th Street Storm Drain,” Norton said. “The 20th Street Storm Drain was going to be depositing a lot of water on their property.”
Norton said while the Colonies Partners’ initial suit for quiet title did not involve a monetary component, he was aware early on that the Colonies Partners was requesting that money be provided to it to resolve the matter. He said the first amount the Colonies Partners was requesting was $25 million, which was first mentioned in February and then again in June of 2002. He said the request was considered by the flood control advisory board for that area of the county and that though some members of that panel were in favor of making that payment, the majority prevailed in voting against doing so out of the belief that the construction of the basin “would not cost that much.”
Norton also said that the California Department of Transportation – Caltrans – had required the northernmost strip of the Colonies Partners property for the 210 Freeway right-of-way. A lawsuit between the Colonies Partners and Caltrans ensued, which settled, Norton said, before going to trial and which resulted in Caltrans paying $18 million to the Colonies Partners for that property and any damages to the company as a consequence of both the taking and the use of that land.
Mandel asked Norton if the Caltrans settlement in which the Colonies Partners received $2 million more for fewer than 40 of the 434 acres it had purchased for $16 million had “some significance to you in your analysis of the quiet title action?”
“The facts and issues were interrelated,” said Norton “The Caltrans lawsuit was all about impacts from the freeway project, what the value of the property Caltrans took from them [was] and the value of the damages above and beyond that which the Colonies [Partners] might have suffered. The quiet title action was related because the flood control easements had an impact on how the new basin and the drainage was to be handled.”
In this way, Norton suggested, an argument could be made that the Colonies Partners had already accepted the limitations on the developability of its property and that it would need to dedicate a portion of the property – that part already encumbered by the flood control easements and perhaps more – to hosting the basin, and it had already been compensated monetarily for making that dedication.
The litigation between the Colonies Partners and the county was being heard by Judge Peter Norell.
At issue and at stake in the litigation, Norton explained, was not just the Colonies Partners’ contentions against the county, but the wider issues relating to the circumstance, including that the Colonies Partners’ development plan was not taking place in a vacuum and had impacts of its own, that the Colonies Partners’ property stood to see its value raised as much or even more than it had been damaged over the extension of the freeway, which transformed a portion of that land into valuable prime commercial property, and that most, if not all, of whatever damages the Colonies Partners had suffered had come not at the hands of the county but as a consequence of the action of three other governmental entities – Caltrans, the City of Upland, and the transportation agency for the entire county, San Bernardino Associated Governments, which is an agency independent of the county. The 20th Street Storm Drain had been constructed upon the request of the City of Upland in consultation with Caltrans and the transportation agency to facilitate the freeway construction as well as development such as the Colonies Partners’ Colonies at San Antonio residential and Colonies Crossroads commercial subdivisions.
With regard to the Colonies Partners’ legal action, Norton said, “Ultimately, the underpinning of this action was the cost of the flood control improvements that were necessary because of the 20th Street Storm Drain. The rest of the picture was the 20th Street Storm Drain was going to drain the freeway and bring a large volume of water. What was the flood control basin going to look like and who was going to pay to build it? The county argued they had easements. The 20th Street Storm Drain was developed and planned by four different public agencies. It was necessary to keep cars from being flooded off the freeway. This was significant and important to the size of the basin required to accept that drainage.”
Thus, Norton said, “The question of the continuing viability of the easements was important because if the public agencies could not rely on those easements, then the county would need to pay money to maintain the validity of the easements.”
In this way, Norton said, the Colonies Partners’ claim of monetary damages against the county hinged on the contention that the easements were not valid. And indeed, Judge Norell entered a ruling that the county had abandoned the easements. Based upon the analysis he carried out with another member of the office of county counsel, Charles Scolastico, as well as the county’s outside counsel at that time, Thomas Winfield, they recommended to the county board of supervisors to have the county appeal Norell’s ruling to the Fourth District Court of Appeal in Riverside. The board voted to do so.
Mandel asked Norton what had occurred at that point.
“I believe that soon after Judge Norell issued his ruling there was a big increase in construction activities at the property,” Norton said. “I got the general impression there was a lot of heavy equipment out there.” That activity included efforts to effectuate “the removal of two levies,” which, he said, raised the concern of county officials that the Colonies Partners were “compromising flood control protection there.” His office quickly moved to file a writ to get an injunction halting the Colonies Partners’ action, Norton said. The injunction was granted but was in effect only a short time, he said, and the Colonies Partners construction activity at the property never stopped.
While the appeal was pending, Norton said, efforts continued toward negotiating a settlement. In those discussions, he said, the Colonies Partners made demands for compensation which were more than the $25 million they had been asking for previously and some of the discussions involved an element of the deal consisting of the county deeding over to the Colonies Partners some of the surplus property it held elsewhere.
Norton said that Paul Biane was at that time the member of the board of supervisors who was most involved in the settlement discussions. He said that though it was not illegal for members of the board to be involving themselves directly in discussions with the principals in an entity against whom the county is engaged in litigation, there was concern about Biane’s conversations with Burum in a circumstance in which an attorney to represent the county was not present.
“I will say I have a general recollection that Mr. Biane made it very clear that he had a lot of conversations with Mr. Burum about settlement,” Norton testified.
“Were there concerns expressed about these meetings?” Mandel asked.
“I don’t know if I can narrow it down to a particular time or specific discussion. I would just say it had been communicated to Mr. Biane and the whole board this is a delicate legal matter… and to use discretion,” Norton said.
Ultimately, the county grew disenchanted with Winfield as its legal representative and brought in the law firm of Munger, Tolles & Olson to represent it in the litigation with the Colonies Partners. Penultimately, the Fourth District Court of Appeal issued a tentative ruling reversing Norell in his decision that the easements had been abandoned. This undercut the Colonies Partners in its assertions that the county, by insisting it had the right to use the existing basin on the Colonies Partners’ property for water runoff, was illegally “taking” property. The appellate court ruled that the county was entitled to use 31 acres specified in a 1934 easement for flood control purposes and would need to work out terms relating to its use of another 30 acres specified under another easement recorded in 1939, as well as another six acres involved so the 67 acre basin could be accommodated on the Colonies Partners property.
Mandel produced an email from Norton to Steve Kristovich and Paul Watford with the Munger Tolles & Olson firm dated March 21, 2005 in which was given a glimpse into the high pressure atmosphere and browbeating Biane was being subjected to at this point during his meetings with the Colonies Partners principals, who had been the largest donors to his campaign for supervisor in 2002, when he unseated his predecessor as Second District county supervisor, Jon Mikels. In the memo, Norton tells Kristovich and Watford that Biane “is enthusiastic about telling Dan [Richards, Burum’s co-managing partner] how they may have no taking claim, since Dan continues to bend his ear on that point, and mentioned that Dan may play more ‘good cop’ to Jeff’s “all geared up to battle approach.”
Norton confirmed the email’s validity and that Biane had met with Richards and Burum at the Red Hill Country Club in Rancho Cucamonga.
Despite the relative victory the county had achieved with the appellate court’s reversal of Norell’s ruling and the reestablishment of the validity of the flood control easements on the Colonies property, the Colonies partners continued to press for a high dollar settlement, Norton testified.
Norton gave an illustration of that point by his account of a March 25, 2005 meeting at Biane’s Rancho Cucamonga district office, located within the ground floor of the Rancho Cucamonga Courthouse. Present at that Friday meeting, were the county’s representatives consisting of Postmus, Biane, Norton, Kristovich and Watford and the Colonies principals Burum and Richards; the company’s consultant, former state senator Jim Brulte; and Colonies attorneys Scott Sommer and Heidi Timken.
Norton said he was under the impression that “the purpose of the meeting was to have a free flowing debate and discussion about the tentative opinion that had just come out” because the Colonies Partners “did not agree with the county’s view of the tentative opinion.”
Mandel asked Norton, “When the meeting first began, did Mr. Postmus make an unusual announcement?”
“At the outset to the meeting, he made some introductory remarks, saying ‘Thank you, everyone, for coming,’ and saying we were going to have a debate and that after a while, when that portion of the meeting is concluded, he would ask the attorneys to be excused from the room so they could talk to the Colonies [Partners] about settling,” said Norton. “It was more of a table setting remark, as ‘Here’s what we’re going to do this afternoon,’” Norton said. “It was a surprise.”
Mandel asked if Norton had perceived it as more than just a surprise. She referenced his testimony before the grand jury on February 24, 2011, when he characterized Postmus’ move as “bizarre, surreal and quite unusual.” Norton acknowledged, “It did strike us as being unusual.”
From their vantage point outside the glass-walled conference room, Norton said he, Kristovich and Watford could see Brulte at the head of the conference table, Postmus and Biane on one side and Burum and Richards on the other. “I remember a spirited conversation with documents and maps on the conference table,” Norton said, estimating the meeting lasted about an hour.
Mandel asked Norton if he noted at that time “anything unusual about Mr. Biane’s appearance and demeanor?”
Norton said Biane was “distressed and disheveled.”
“Then what?” Mandel asked. Norton said Biane said, “We have a tentative deal and want to talk to you about it.” The proposal had two components, Norton said, consisting of $22 million in cash and a $55 million land component.
Mandel asked Norton if Biane had tried to “explain why he decided to settle for $77 million?” Norton said he could not recall. Mandel then returned to the subject of the March 21 email in which Biane had come across as being determined to have the attorneys hammer Richards and Burum with the implication of the appellate court ruling that the county was not taking any property from the Colonies to which the county was not entitled and that it owed the company no money, pointing up the contrast with what had occurred during the March 25 meeting.
“We didn’t discuss the settlement, per se,” said Norton. “I know he was enthusiastic about being aggressive with the Colonies [Partners] about the merits of the case” four days previously.
“Did you explain to Mr. Biane and the other members of the board of supervisors that if there is no taking claim they didn’t owe anything?” Mandel asked Norton.
“I believe we had,” said Norton.
Mandel asked Norton what followed the announcement of the tentative settlement.
“After Mr. Biane informed the lawyers of the tentative deal, he next asked the Munger Tolles lawyers if during the next closed session meeting [of the board of supervisors] they would present a written analysis for proposed settlement and recommend that it be approved,” Norton said.
“What was the reaction?” Mandel asked.
“Their [Watford and Kristovich’s] reaction was ‘Not so fast. We understand your request. Thank you for giving us this information we need to analyze. We need to look at it and see what we come up with,’” Norton said.
In fact, Kristovich and Watford did generate a written analysis, but it was not one that recommended approval. On the contrary, it recommended against the $77 million settlement, laying out that the dollar figure was not justifiable, that the Court of Appeal was leaning toward a ruling in favor of the county and had yet to enter that decision, and that entering into a unilateral settlement with the Colonies Partners on terms that were unreasonable would very likely have the effect of compromising efforts by the county and flood control district to recover its costs from the City of Upland, Caltrans and the regional transportation agency in its indemnification action against those three parties.
After he had left work at 5:15 p.m. on April 4, 2005, the Monday before that memo was to be distributed the following morning to the board of supervisors in a closed session, Norton said he received a conference call from both Postmus and Biane. He remembered the time, he said, because he had just dropped two of his children off for piano lessons.
Mandel asked about the demeanor and tone of voice Postmus and Biane evinced during that call.
“I don’t know about demeanor or tone, I just remember the overall message communicated by them was pressure to not have the memo distributed,” Norton said. “I do not recall the exact words they used. They just expressed very strongly they were hoping Munger Tolles would not go forward with the [memo]. They were somehow hopeful I could stop that from happening.”
The memo was presented to the board. Despite the recommendation that the county not proceed with the settlement as worked out at the March 25 negotiation session, the board appeared purposed to settle on the $77 million terms. Norton said that Watford and Kristovich, acutely aware that the board was not following their advice, sought to withdraw as the county’s legal representative, finalizing that move in May 2005. In June 2005, the memo was leaked to the press. Public outrage over the $77 million settlement figure that ensued resulted in the settlement proposal being scrapped.
Norton testified that in attempting to come to terms with the Colonies Partners’ damage claims that were intrinsic to the litigation, county officials undertook an effort to determine the value of the property rendered undevelopable because it was to be devoted to flood control purposes. It was that loss which the Colonies Partners claimed constituted a major portion of the damages it was sustaining. Norton pointed out that in doing its appraisal, the county worked from the assumptions that the property was encumbered by the flood control easements; that it was zoned as open space by the City of Upland, which had land use authority over the property; that arrangements for flood and drainage alleviation had to be made to render the property developable; and that an entitlement to proceed with the development of the property at the intensity envisioned by the Colonies Partners had yet to be granted. This led to the conclusion, Norton said, that the 67 acres of property which the county intended for use as a flood control basin was in its entirety valued in the neighborhood of $1 million. He contrasted this with the $1.5 million per acre estimation of the property’s value, which the Colonies Partners’ appraiser, Michael Waldron, arrived at based upon the assumption the property was entirely and fully developable and entitled to be put to “its highest and best use.” Minus some necessary set-asides, Norton said, this meant the Colonies Partners and Waldron were valuing the 67 acres at $86 million, a difference of $85 million from the county’s assessment.
“The concern with Mr. Waldron’s approach with his appraisal of the Colonies property is one assumption he made for the purposes of his analysis, which was there was no 20th Street Storm Drain in existence,” Norton said, and that “there would be no water flowing [from the freeway] onto the property. That was an inappropriate appraisal to use as the benchmark for a land exchange. His appraisal was not appropriate to use in this context.”
Norton further related what came across as inappropriate characterizations, representations or suggestions by members of the Colonies Partners legal, advisory and lobbying team. Norton said he had been invited by Biane’s chief of staff, Matt Brown, to the Rancho Cucamonga office of one of Burum’s companies, Diversified Pacific, to meet Waldron for a general discussion of issues. Others in attendance at the meeting were Jim Brulte and the Colonies Partners’ attorney Heidi Timken, Norton said. At one point, Norton said, Brulte said something to the effect that establishing the high numbers in the appraisal “would be important to protect the political futures of the board members … to justify a settlement of that magnitude.”
Norton testified that when he expressed doubt as to the validity of the numbers in the appraisal and whether in using standard appraisal criteria the property and all that was related to it could be established at the value Waldron was propounding, “Ms. Timken’s comment was ‘Don’t worry. We’ll make it pencil.”
During the single day he was on the witness stand, Norton was a strong witness for the prosecution, coming across as well-versed in the facts, highly articulate, believable and reliable, and able to put issues, events and circumstances into a perspective that demystified and explained many of the case’s complexities and arcane elements. He is due back to court on Monday. It is unknown precisely how much longer Mandel will carry out her direct examination of him, but given his comprehensive knowledge of the general outline, specific elements and minutiae of the matter and his ability to place those issues in context and orient the two juries to the case’s circumstance, it may suit the prosecution’s purposes to keep him in place another day or two.
His value to the prosecution notwithstanding, Norton also represents a potential liability in that after the 2006 settlement and for the more than ten years since then, he has been the lead member of county counsel’s office seeking to recover a sizeable portion of the $102 million from the county’s insurers. That litigation over the indemnification has dragged on for more than twice as long as the Colonies Partners’ lawsuit against the county lasted. Some of the county’s insurance carriers have paid on the county’s claims. Others have not, making assertions that parallel those of the prosecution, which hold that the settlement was tainted by graft and bribery, thus excusing them from having to indemnify the county. In response, Norton has made statements in court papers, before hearing officers and in court which in turn parallel some of the defense’s positions, in particular that the $102 million settlement was a justifiable one under the totality of the circumstances. Statements made by Norton in that context contradict some of the testimony he gave before the grand jury that indicted Burum, Biane, Erwin and Kirk. Burum’s lead defense attorney, Stephen Larson, is salivating at the prospect of cross examining Norton, which he will almost assuredly begin to do sometime in the coming week. Of interest to court observers to say nothing of the prosecutors and the defendants is how well Norton, who is not without lawyering skills of his own, will fare under what should prove a withering round of questioning by Larson, and whether he will be able to provide answers which continue to comport with the prosecution’s scenario without losing his equanimity, composure and credibility.
Early this week, on Monday morning, Judge Michael Smith rejected a request for additional courtroom security based on an under-seal motion by prosecutors alleging incidents of intimidation and threatening conduct by the defense team and the defendants. In a motion filed March 23, Mandel referenced what she characterized as “repeated acts of harassment” by Burum toward prosecutors outside the presence of Judge Smith and that Burum has seated himself at the counsel table so he is facing the jury and engaging in eye contact with them. Mandel asserted that at one time, while neither Smith nor the jurors were in the courtroom, Burum expressed his hatred toward her and supervising deputy district attorney Lewis Cope, the other member of the prosecution team.
Larson filed a response to Mandel’s motion in which he acknowledged his client had an “outburst at the conclusion of court proceedings on Tuesday [March 21]” and “Mr. Burum has taken to sitting at the end of the defense table in a position where he is facing the
juries.” Larson said Burum’s outburst should be put in the context of his having been “unjustly indicted for crimes he did not commit” and having been subjected to “biased, self-serving, and deeply uncredible witnesses” providing “hour upon hour, day after day, week after week, of testimony that proves nothing more than that the only reason we are here is that the inherently one-sided nature of the grand jury process allowed the prosecution to manipulate the evidence and trick the grand jury into returning an indictment.”
The incident referenced in Mandel’s motion, according to Larson, was his client’s expression of “his extreme frustration at the gamesmanship and delay” in reaction to hearing that the prosecutors intended to call one of the key witnesses in this case, Mitch Norton, as early as the next day, with less than 24-hours’ notice to the defense team. Mr. Burum’s frustration, and his anger toward these prosecutors, is understandable.” Larson said, “Against this backdrop,” Burum had let the prosecution team know “he was tired of their manipulation and that if they had any evidence of a crime he committed they should bring it forward in the courtroom.”
Larson said “Mr. Burum does regularly watch the jurors during testimony. Mr. Burum is a keen observer of human behavior and reactions, and he has every right to observe the jurors deciding the charges against him so that he can then share his observations with the defense team.”
Moreover, Larson said, “no one on the defense team is attempting to ‘intimidate’ the prosecutors. And to suggest that Mr. Burum would attempt to do so with the courtroom deputy and other court staff looking on is absurd.”
Larson said the prosecution realizes “that they have lost the interest and respect of both juries” and that Mandel’s motion was in itself an “attempt to intimidate the defense by creating a false record of supposedly improper conduct” and “patently false accusations are being leveled in order to set up an excuse for losing this case.”
Judge Smith, who had reviewed the motions over the weekend, said he was not going to grant Mandel’s motion. “I certainly have not seen anything that would indicate to me that any of the defendants have done anything to be intimidating or threatening in any way,” said Judge Smith. “I’m sure the bailiffs haven’t, because if they did, they would have advised me of that.” Nevertheless, he advised the defendants and their attorneys that it is in their own interest to remain as low key as possible.
“This is a case where the prosecution alleges and argues that the defendants have used intimidating and threatening tactics to achieve a particular result with the board of supervisors, so obviously if a juror, rightly or wrongly, correctly or incorrectly, perceives a defendant’s actions or attitude as being intimidating or threatening, that only aids the prosecution in their argument and may well have the juror believe something needs to be done to impress upon that individual the intimidating conduct must be stopped or not rewarded. The only way a juror can do that is with their verdict.”

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