By Mark Gutglueck
Next week, on Monday, February 22, the City of Upland is set to hire as its new city attorney Stephen P. Deitsch, who in an earlier phase of his career was involved in structuring financing arrangements for the City of Fontana’s redevelopment agency, at an eventual total cost of $376.8 million to that city’s taxpayers, to allow a massive 9,135-residential unit development to proceed. Instead of assigning that $376.8 million price tag for the infrastructure to the development company that profited from the creation of the subdivision and the sale of the homes built there, Deitsch and his law partner assisted Fontana’s city manager in transferring that burden to the city’s residents.
The financing arrangements that Deitsch put his legal imprimatur upon defrayed $120 million in upfront costs the developer otherwise would have needed to bear. Having been spared the expense of paying for the project’s infrastructure, the owners of the development company invested those savings in the bonds the city issued to pay for 54 percent of the project’s infrastructure, whereby the development company realized an added return of more than $139 million on the project.
Deitsch and his law partner allowed that financing arrangement and its weight upon Fontana’s taxpayers to remain in place even after learning that the development company and city manager had constructed a kickback-laundering arrangement to reward the city manager for obtaining the Fontana City Council’s approval of the project and its one-sided developer dispensation agreement that profited the development company at the city’s expense.
Deitsch, who is at present serving as the city attorney in Arcadia and Big Bear Lake and was formerly the city attorney in Indian Wells and Shafter, has over the course of his 41-year legal career in California cultivated a range of experience with regard to municipal operations that extend to land use, financing, the provision of public services and regulations pertaining to legally required disclosure of governmental operations. He and his law firm, Best Best & Krieger, are being brought in to Upland to replace Steven Flower and his law firm, Richards Watson & Gershon.
Both Best Best & Krieger and Richards Watson & Gershon are full service law firms that specialize in the representation of governmental entities, in particular municipalities. With the hiring of Deitsch, the Richards Watson & Gershon firm is to close out its second run representing the City of Upland, with that most recent tour of duty having lasted from early 2017 to the present. Nearly a generation ago, Richards Watson & Gershon, following the 1996 retirement of longtime Upland City Attorney Don Maroney, was retained to provide legal services to Upland in the person of James Markman, one of the firm’s lawyers, who is also city attorney in Rancho Cucamonga and Brea. In 2004, after concerns emerged about the potential for a conflict of interest arising out of Markman’s dual representation of the adjoining cities of Upland and Rancho Cucamonga, Markman left as Upland’s city attorney, and was replaced by his Richards Watson and Gershon colleague, Bill Curley.
In 2012, after the 2011 federal indictment of then-Mayor John Pomierski on political corruption charges and just prior to the filing of criminal charges against one-time Upland City Manager Robb Quincey, who had been handpicked by Pomierski to serve as Upland’s top municipal administrator and was suspended a little more than a month prior to Pomierski’s indictment and then fired four months later, the city ended its relationship with Richards Watson & Gershon for the first time, retaining the firm of Jones & Mayer in its place. For more than five years, Richard L. Adams II and Kimberly Hall Barlow, both partners with Jones & Mayer, alternated in the role of Upland’s city attorney. When Barlow proved too aggressive in dealing with some of the city’s establishment figures and businesses that were generally thought of or accepted as Upland institutions, the city terminated its relationship with Jones & Mayer, and again took up with Markman and Richards, Watson & Gershon.
In 2018, the city council as it was then composed moved to reduce the city’s recreational centerpiece, Memorial Park, by 12 percent, and sell 4.631 acres of the park to adjoining San Antonio Hospital for use as a parking lot. That council, consisting of four different council members than are now on the panel, relied upon Markman to engineer the sale of the park property without a vote of the city’s residents, as is required by state law with the sale of municipal parkland. Markman formulated the strategy of embarking on a validation effort, effectively inviting anyone opposed to the park acreage sale to challenge the action in Superior Court within 30 days. Markman’s calculation and that of four of the council’s members, was that no city residents would go to the expense of challenging the validation petition, and certainly would not be able to coordinate a fundraising effort to retain an attorney to formulate a response within the time limit. That proved to be wrong, however, as two such challenges to the parkland sale were mounted. Ultimately, the city was rebuffed in court, when Judge David Cohn found in favor of those making the challenge, noting along the way that the effort to make the sale without a vote was illegal. Ultimately, more than two years later, that vote was held, upon which the city’s voters nixed the sale.
As a consequence of the November 2018 and the November 2020 elections, all four of the city council members who supported the parkland sale in 2018 were either voted out of office or opted out of seeking reelection. The lone member of the city council who opposed the sale, Janice Elliott, remains in office.
In October 2019, after Judge Cohn’s ruling against the city on the park property sale, the city council moved toward firing Markman. In an effort to preserve Richard Watson & Gershon’s legal representation contract with Upland, Markman resigned as city attorney and was replaced by another member of his firm, Steven Flower. Over the last 16 months, Flower has provided legal advice and engaged in efforts to either justify action by the city council as it was previously composed or made efforts to insulate city staff members from challenges that ensued from their actions unpopular with a significant cross section of the city’s residents. With the resignation of Councilman Ricky Felix in May 2020 and the the electoral defeat of Mayor Debbie Stone in November 2020, Flower lost support on the council that was crucial to his survival as city attorney and the prospect that Richards Watson & Gershon would maintain its contract to provide legal services to City Hall. Additionally, since December 2020, when the two most recently elected members of the council, First District Councilwoman Shannan Maust and Third District Councilman Carlos Garcia, were installed, Flower has found himself in the position of being somewhat out of synchronicity with three of his five current political masters – Elliott, Maust and Garcia. Flower had established a rapport with the previous council, which had taken a direction on key issues that has now fallen out of vogue with a majority of the current council. In particular, Elliott, Maust and Garcia are on record as having opposed a massive warehouse project on the city’s west side intended to serve as a distribution center for online retail behemoth Amazon that the previously-composed council approved in April 2020. The Amazon project and the city’s approval of it is now the subject of costly litigation. Moreover, another project approved under Flower’s watch less than a months after the Amazon project was given go-ahead, a residential subdivision to be built on the city’s east side near 15th Street on what was formerly considered to be flood control property, is likewise undergoing a legal challenge that has delayed that project, resulting in further legal costs to the city that are enhancing Richard Waston & Gershon’s revenues. Last year, when a majority of the city council supported the warehouse and 15th Street projects, Flower made a political calculation to slip into his legal advice statements or findings favorable to those projects. The changeover on the council since then has made Flower’s political maneuvering now appear unwise.
Mayor Bill Velto, who as a councilman last year supported the two projects now under legal challenge and therefore might otherwise be considered one of Flower’s pillars of support on the council, earlier this month questioned the soundness of Flower’s legal advice on other issues. With at least four-fifths and perhaps even all five members of the city council less than confident in Flower’s legal acumen and the quality and integrity of his counsel to them, it is now apparent that Upland is done with him and for the second time is done with his law firm.
Last year, prior to the November election and the addition of Upland’s two new council members and the elevation of Councilman Bill Velto to the status of mayor, the city council as it was then composed signaled that the city was to conduct a competitive process to seek legal representation going forward.
Not quite able to discern the writing on the wall, Flower and Richards, Watson and Gershon took part in that competition, as did the law firms of Best Best and Krieger; Jones and Meyer; Aleshire and Wyndler; Collantuano, Highsmith, & Whatley; Burke, Williams & Sorenson; Woodruff, Spradlin & Smart; and Casse & Sparks.
It was announced this week that the winner in the Upland legal representation sweepstakes is the law firm of Best Best & Krieger and that Deitsch, one of the firm’s partners, is to take on the assignment of Upland city attorney.
Given certain elements of Best Best & Krieger’s and Deitsch’s respective separate and now combined histories, the choice to hire them stands as a statement that any disputes that emerge between a majority of the Upland City Council and Upland’s residents over vision, priorities, policy or interests will be resolved without question in accordance with the wishes of the city council majority.
In the world of governmental legal representation, there are two schools of thought, two distinct philosophies, with regard to how a city attorney is to function.
The first of those embodies the approach that the city attorney represents all of the residents or citizens of the city in which he or she has the contract or assignment as city attorney, and owes his or her loyalty to those citizens. Under that philosophy, the city attorney examines all contemplated action and actual action by the city’s elected officials and its staff, and ensures that the actions of those at City Hall conform with the law and remain within the bounds of constitutionality. Such a city attorney strives to prevent the actions of city officials elected and hired from interfering with or harming the interests of the city’s residents, taxpayers and citizens, so that the city’s official policies and practices are consistent with the collective interests of the city’s residents.
The second school of thought is that a city attorney represents all of the citizens and residents of the city in which he or she is has the contract for providing legal services only insofar as the city’s elected political leadership embodies the citizenry’s will and expressed interests. Under that approach the city attorney examines all action and contemplated action by the city’s elected officials and its employees with an eye to ensuring that their actions conform with the law and remain within the bounds of constitutionality, but goes no further than that in terms of looking after the citizenry’s interests. Rather, city attorneys of the second school do not consider the city’s residents and citizens to be their clients but rather see themselves as working for the city’s elected officials, those primarily being the mayor and city council. Such city attorneys conceive of their role as being one of enabling the mayor and city council to put into play their vision of what they want and are determined to do without regard to whether that action actually corresponds to the preferences of the citizens who elected the city’s political leadership or those who did not participate in the political process.
Best Best & Krieger and Deitsch represent the latter approach to the role of a city attorney.
Deitsch believes his assignment as a municipal lawyer is to enable the city’s political leadership to accomplish whatever it wants to achieve, whether those goals are perfect or imperfect, high-minded or low-minded, sincere or insincere, corrupt or honest, well thought through or ill-considered. An illustration of his attitude in this regard consists of the work Deitsch did in Fontana in the 1980s when the law firm he was a member of, Sabo & Deitsch, represented the Fontana Redevelopment Agency.
At that time, Fontana suffered from a seemingly intractable image problem. The western unincorporated portion of Fontana was home to the Kaiser Steel Mill, an extremely heavy industrial operation that generated a substantial degree of air pollution and had resulted in the contamination of the mill property and the surrounding area. The mill, which at its peak employed more than 2,500 workers, ceased operations in 1983, throwing more than 1,800 steelworkers onto the unemployment rolls. Fontana was also the home of the Hells Angels, considered by law enforcement to be an outlaw motorcycle gang. Perhaps most damaging to the city’s reputation was that it featured the headquarters of a chapter of the Ku Klux Klan, led by one of that organization’s grand dragons, George Pepper, a bus driver and Fontana resident who ran unsuccessfully for Fontana mayor in 1982.
Three entrepreneurs, brothers Dick and Bill Ashby and their business associate Larry Redman, saw opportunity in Fontana’s circumstance. They pitched to the city council, the city manager and the city’s planning and development staff the concept of creating a massive residential subdivision on property at the city’s extreme southwest corner. The project, dubbed Southridge Village, would be designed, the Ashby Brothers and Redman said, to appeal to so-called “yuppies,” defined as “young upwardly-mobile professionals.” They dedicated their company, the Ten-Ninety Corporation, and its corporate affiliates, Creative Communities, Inc., General Specifics Corporation and Rak Corporation, to obtaining clearance to undertake the Southridge Village development effort and construct the subdivision, marketing the homes along the way.
The Fontana City Council as it was then composed, encouraged by Fontana’s city manager, Jean Daze Ratelle II, embraced the Southridge village concept, directing Ratelle to explore the possibility.
Ratelle, who went by the name Jack, in consultation with the city’s planning staff, presented the idea to the planning commission, which after a review, gave a recommendation that the city give serious consideration to permitting the undertaking. With that green light, Ratelle pushed forward, full steam ahead. The development of Fontana, with an eye toward the future, was paramount, Ratelle said, and Southridge Village was Fontana’s future. Before long, all considerations fell in deference to achieving that imperative.
Standing in the way of the Southridge project were overwhelming infrastructure needs. The city did not have in place the basic improvements the project would require, such as streets, curbs, gutters, sidewalks, storm drains, and sewers to accommodate what Redman and the Ashbys were contemplating. Nor did the City of Fontana have the financial means to pay to construct that infrastructure. Moreover, the local school district, Fontana Unified, did not have schools or available funding to adequately educate the vast number of students the 9,135 units would bring into the city.
Under normal and traditional circumstances, the developer creating the homes, factories or buildings housing commercial enterprises to be constructed in a community was called upon to furnish the necessary infrastructure to logically accommodate that development or otherwise provide the funding to defray the city’s cost of building that infrastructure. In the case of Ten-Ninety, however, Redman, and the Ashby brothers stated unequivocally that they did not have adequate capital on their own nor the availability of financing to pay for constructing both the homes to comprise the Southridge subdivision and its infrastructure. Confident they had the city council on the hook, the Ashby Brothers and Redman told its members that if the city would not underwrite the cost of the infrastructure, the project simply would not get built.
Ratelle had been hired as Fontana city manager on a 3-to-2 vote of the city council in 1973 after impressing a majority of the city council by arriving in the city driving a Pantera, referencing his law degree and more than two years experience as the assistant to San Diego County’s chief administrative officer, his three years experience as an associate administrative analyst with the City of San Diego and his three years as assistant city manager in Chula Vista.
During his tenure as city manager, Jack Ratelle had developed a Svengali-like hold on most of the city council members, beguiling and befriending those newly elected to the panel, remaining constantly on good terms with at least three and usually more of those officeholders, such that he could virtually dictate how those elected officials, constituting a majority of the panel, should and would vote on any matter that came before them. The creativity of his methods in achieving this were legendary. He had arranged to provide a city job to the son-in-law of one of the city council members. For another council member who owned a welding business, Ratelle had arranged to obtain for him work with a substantial number of the industrial operations around the city, boosting that council member’s income. Another council member, an instructor at one of the city’s junior high schools, had gotten himself in trouble with a 13-year-old student. Ratelle had pulled the police department off of him, convincing the police chief and the head of the police officers’ union that going easy on the councilman would be worthwhile for them in terms of funding that would be freed up for the department in upcoming budgetary cycles and in generosity that would be shown to the department’s officers in future employment contract negotiations. Ratelle had an intimate relationship with the woman who had been Fontana’s sole councilwoman in the late 1970s and early 1980s and was thereafter a member of the planning commission that first considered the Southridge village project. He had no trouble convincing the council majority, which was in any event already favorably disposed toward development in the city, that they had to do everything that could be done to make sure the Southridge project was carried through to completion.
The Fontana Unified School District was proving a problem. It was balking at having to accept the estimated 16,000 to 18,000 students the project was likely to generate. It had no schools in place to accommodate elementary school children and did not have available funding to construct a neighborhood school. Moreover, the district’s existing high schools and junior highs had inadequate classroom space to assimilate the adolescents that were to be sent their way. Even when Ratelle offered the district an assurance that Ten-Ninety would construct a grade school for the district, the school balked. Ultimately, after Ratelle approached the Colton Joint Unified School District, that entity agreed to extend its educational coverage to include the southern portion of Fontana.
Ratelle’s advocacy on behalf of the Ten-Ninety Corporation was extraordinary, even given the premium local government often puts on encouraging development. The Ten-Ninety principals and Ratelle had a special relationship. Ratelle had established a credit line at the MGM Grand Hotel in Las Vegas. Ten-Ninety then made a habit of endowing that credit line. Ratelle established a pattern of frequenting Las Vegas on weekends, two or three times a month, making a show of his presence at the craps, roulette and less occasionally the blackjack tables at the MGM Grand. Upon returning to Fontana on Monday, he would regale city staff with tales of his gaming exploits in Sin City, bragging about winning on some occasions, lamenting his losses on others. In this way, Ratelle laundered the money he was receiving from Redman and the Ashbys.
To finance the Southridge infrastructure, the Fontana Redevelopment Agency issued $65 million in certificates of participation, a type of bond, along with securing $55 million in loans from the Glaziers Union.
Ratelle, who had a law degree from the University of San Deigo, was intimately familiar with legal processes and what it was going to take to legally wire the highly questionable arrangements he was making between the city and the Ten-Ninety Corporation. As Fontana’s city manager, however, he could not act as the city’s legal representative or be the attorney of record on the scheme he was cooking up.
It was thus no accident that at that point Ratelle was employing the law firm of Sabo & Deitsch to represent the Fontana Redevelopment Agency.
Sabo, who graduated from Youngstown State University in Ohio magna cum laude in 1969, in time gravitated toward a legal career, in particular finance law. He went to work for the renowned municipal-bond lawyer James Warren Beebe, mastering first the rudiments, then the finer points and in time all of the permutations of public financing instruments and arrangements. He attended the University of Denver College of Law in Colorado, thereafter passing the California bar in 1977. By his late 30s Sabo had earned the sobriquet of “the great enabler” or variously, “the great facilitator.” In the capacity of counsel to municipalities and local governmental agencies in and around San Bernardino County, he was instantly recognized, indeed had grown infamous, for being unwilling, or unable, or refusing, to say “No” to his clients.
During closed sessions, Sabo would assure the elected officials with the public agencies he worked for that as the voters’ choices, they embodied the authority to do virtually anything they wanted to do.
Sabo understood the ins and outs of public financing, forwards and backwards, top to bottom, inside out and upside down, both legitimate and illegitimate. In situations where a public agency needed more money than it could reasonably borrow at an even prohibitive interest rate, he could find a way for some lender somewhere to put the money up. This was often done by an agency borrowing against collateral, the value of which was astronomically inflated, based upon the most overcontrived and creative interpretations and descriptions that might be conceived of, certified by any of a host of sketchy underwriters Sabo had in his Rolodex, who for an extra point or two beyond the standard commission were willing to sign anything.
As the lawyer for a multitude of local cities and agencies, Sabo handled the legal paperwork for financing arrangements on undertakings that were both legitimate and illegitimate, along with ones that fell somewhere in the middle. The legal filings Sabo made for the well-founded and warranted use of governmental reach or redevelopment authority were straightforward and understandable. When Sabo was engaged in assisting governmental entities carry out actions that could not withstand the light of day, he would envelope the action taken in paperwork and legal filings that were so recondite, so convoluted and so incomprehensible that even if someone of his considerable legal skill were to examine it after the fact, it still could not be untangled.
This provided more than just the typical legal insulation that public agencies provide to their operations.
Only rarely were these masterpieces of falsification challenged, as when the FBI descended upon the offices at San Bernardino International Airport in 2011, armed with search warrants to look into the misdirection of funding by the San Bernardino International Airport Authority, a joint powers agency consisting of the County of San Bernardino and the cities of San Bernardino, Highland, Loma Linda and Colton, who were pooling their available tax revenue to effectuate the civilian use conversion of the former Norton Air Force Base that had been shuttered by the Department of Defense in 1994. The San Bernardino International Airport debacle was perhaps the one time in his career when the abuse of the governmental and legal system that Sabo was so skilled at perpetuating approached the point of redounding to a legal or professional castigation that threatened his licensing as a lawyer or which might have conceivably sent him to prison. Any possibility of that occurring passed, as the FBI and Securities Exchange Commission investigation into the misdeeds at San Bernardino International Airport by the airport authority had not concluded when, mercifully as far as Sabo was concerned, he died in December 2012.
Deitsch, a 1969 cum laude graduate of Brandeis University who went on to earn his law degree at the University of Pennsylvania in 1974, after passing the New Jersey Bar went to work for three years as a prosecutor with the New Jersey Attorney General’s Office. He thereafter moved to California, where he passed the California Bar in November 1979, going to work shortly thereafter as an attorney in the Office of Special Counsel for the United States Department of Energy in its Los Angeles office.
In 1981, Sabo and Deitsch formed a formed a partnership.
Just like Sabo’s mentor James Warren Beebe had instructed him in the legal intricacies of public finance and the advantages, vulnerabilities and applicability of various financing and investments, including deferred bonds, floating bonds, inverse floating bonds, income bonds, participatory bonds, step-up bonds and step-down bonds, plain vanilla bonds, yield bonds, payment-in-kind bonds, secured bonds and unsecured bonds, as well as extendable bonds, coupons and loans, Sabo imparted to Deitsch virtually all he needed to know to work in the arena of public agency finance law. In relatively short order, the law firm of Sabo & Deitsch was much in demand, and it was representing the cities of San Bernardino, Ontario, Fontana and Rialto, the three largest and the sixth largest population-wise of what are today San Bernardino County’s 24 municipalities.
Because they were willing to carry out things that lawyers with a little more integrity or bounded by ethical or moral principle could not bring themselves to do, Sabo and Deitsch were highly valued by public agencies and the ethically-challenged public officials who headed those agencies in the wide open Wild West atmosphere of San Bernardino County.
It was in Fontana, during his involvement in the highly questionable actions taken in support of Ratelle’s breathtakingly broad corruptions of governmental authority, that Deitsch came out from underneath Sabo’s shadow, demonstrating that his mentor in rigging public financing schemes had nothing on him when it came to facilitating abuses of municipal operations.
Sabo and Deitsch did not participate and enable these depredations at no benefit to themselves, and they extracted their own piece of the action through the highly questionable, indeed what is by many considered to be the illegal, practice of double- and triple-dipping. Double-dipping occurs when an attorney or a law firm, working in the capacity of general counsel, city attorney or formerly in the function of redevelopment attorney to a municipality or agency, after advising the entity it represents on the advisability of issuing and selling bonds as a form of financing or for creating revenue for one reason or another, then takes on the role of being bond counsel when those bonds are issued and sold. Typically, for doing bond issuance work, which consists primarily of rendering a legal opinion as to the tax status of interest payments and the authority of the issuer to sell the bonds as well as preparing certain documents, a bond counsel is paid a commission or fee equal to 0.5 percent of the entire bond issuance. Triple-dipping occurs when an attorney who is already double-dipping in terms of serving as a municipality’s or agency’s city attorney or general counsel while simultaneously functioning as its bond attorney further serves in the role of disclosure counsel. For serving as the draftsman of the official statements relating to such municipal bonds so that they meet all Securities and Exchange Commission requirements in terms of informing buyers about the relevant aspects of the issuance and limitations of the bonds, a disclosure counsel is typically paid 0.25 percent of the total bond issuance upon the sale of those bonds.
Thus, as a consequence of the issuance of the $65 million in certificates of participation to fund a portion of the infrastructure at the Southridge subdivision, the law firm of Sabo & Deitsch netted $487,500. That came in addition to the other pay the two partners received while working on behalf of the Fontana Redevelopment Agency.
Sabo & Deitsch further signed off on the $55,000,000 loan from the glaziers union that was used to finance the balance of the infrastructure built at and around the subdivision. There is nothing in the record available to the Sentinel to show the Sabo & Deitsch firm was paid any more than the standard fees it was paid for advising the city and its redevelopment agency with regard to the loans from the glaziers union to the redevelopment agency.
To retire that bonded indebtedness through constant payments to the bondholders and to pay off the loans provided by the glaziers union, the City of Fontana shelled out $376.8 million over thirty years, at a rate of $3.14 million per quarter or $12.56 million per year.
Thus, through the arrangement the Ten Ninety Corporation brokered with Ratelle, instead of paying to provide their development with its required infrastructure, the Ashley Brothers and Redman instead purchased $65 million worth of certificates of participation that, in addition to defraying 54 percent of the cost of providing the Southridge Village project’s $120 million in infrastructure, brought back to Redman and the Ashbys a return of approximately $204.1 million on their investments in those bonds. The Ashleys and Redman kicked back an unknown amount to Ratelle, and the legal team of Sabo & Deitsch was paid $487,500 for going along with the bond issuances.
At some point after the issuance of the certificates of participation and prior to the sale of those bonds, both Sabo and Deitsch became aware that the Ten Ninety Corporation was purchasing the certificates of participation. Deitsch had been present during public hearings at Fontana City Hall when Redman and the Ashby Brothers asserted they did not have sufficient capital to pay for the infrastructure improvements to facilitate the construction of Southridge Village. Neither Sabo nor Deitsch sought to rescind the bond issuance or block the sale of the certificates of participation upon learning that the Ten Ninety Corporation indeed had at least $65 million available to be spent toward the provision of infrastructure which they instead used to invest in the certificates of participation. Subsequent to the issuance of those bonds and their sale, both Sabo and Deitsch learned of the kickback arrangement between Ratelle and the Ten Ninety Corporation principals and the use of Ratelle’s credit line at the MGM Grand Hotel in Las Vegas to launder those kickbacks.
While it would have doubtless proven to be complicated to de-issue the certificates of participation or cancel out the bonds once they had been sold, given that the Ten-Ninety Corporation was the purchaser of the certificates of participation and the entire deal involved graft, bribery and collusion, Sabo and Deitsch could have involved legal and civil authorities such as the district attorney, California Attorney General, the FBI or the SEC to redress what had become an obvious corruption of the public process. They did not.
There was another depredation involving the Fontana Redevelopment Agency in the 1980s that occurred during the Sabo & Deitsch firm’s watch.
Neil Stone at that time served in the capacity of Fontana’s director of development and director of redevelopment. There were nine redevelopment project areas in Fontana, all of which had been created by Ratelle during the course of his run as city manager. One of those included the property upon which the Southridge Village development took place at the south end of the city. Stone owned property in the name of his children, which was different from his own, in another redevelopment area in the northwest quadrant of the city. Upon learning of that circumstance, Deitsch elected to take no action.
Deitsch ended his partnership with Sabo in 1989, at which point he joined Best Best & Krieger.
As was the case with Sabo & Deitsch, Best Best & Krieger has an established reputation for double and triple-dipping.
Many elected officials in San Bernardino County are not sophisticated enough to recognize the conflict of interest inherent in double-dipping as well as in triple-dipping. Essentially, when an attorney or a law firm has a financial interest in the issuance of bonds, the advice that lawyer or members of that law firm will provide tends to usher the elected decision-makers he/she or the firm is advising toward bond financing when the municipality or agency is in the position of seeking an infusion of money, even if there is a more advisable means of obtaining funding. Over the last four decades, the California Attorney General’s Office has issued differing opinions with regard to the practice of double- and triple-dipping. One opinion holds that double- or triple-dipping is a clear violation of the State of California Government Code relating to a public conflict of interest. Another opinion holds that there is no specific admonition against double- or triple-dipping, but that it is nonetheless inadvisable for a city or agency to allow its legal counsel to engage in such arrangements.
Currently, six of San Bernardino County’s 24 municipalities – Apple Valley, Big Bear, Colton, Fontana, Ontario and San Bernadino – employ town/city attorneys who are partners with the Best Best & Krieger firm. Best Best & Krieger also does legal work for the City of Redlands. Next week, upon Deitsch taking on the Upland assignment, seven of the county’s cities will have city/town attorneys employed by the firm.
Where those cities or the Town of Apple Valley will permit it to do so, Best Best & Krieger will double- and triple dip.
Sonia Carvalho, a lawyer with Best Best & Krieger who is currently the city attorney in San Bernardino and was formerly the city attorney in Colton, said it is entirely up to a majority of a city council’s members if that city is going to permit the city attorney it employs or the firm in which the city attorney is a partner to double- or triple-dip. “It’s their decision,” Carvalho said.
Because city council members generally rely exclusively on the city attorney for legal guidance, and because a city attorney is not required by law to inform the city council he or she serves of the California Attorney General’s Office’s opinions on the matter, when a city attorney suggests that the city may want to consider using bond financing and that his or her firm offers a full range of services including those of bond counsel and disclosure counsel, city council members tend to go along with hiring a member of the city attorney’s firm to provide those services.
In 2011, the California Legislature passed two laws which essentially shuttered all of the redevelopment agencies throughout California. Previously, redevelopment agencies that engaged in bond financing accounted for a considerable degree of the double- and triple-dipping that occurred in California. With the passage of the 2011 law, the frequency of double-dipping and triple-dipping in California lessened.
While the amount of double- and triple-dipping in California has diminished, it still takes place when a governmental entity elects to utilize bond financing and does not take steps to retain bond or disclosure counsel unconnected to the law firm providing that particular city with legal services.
In the contract that the Upland City Council is set to approve on Monday night, there is nothing that will prevent Best Best & Krieger from engaging in double-dipping or triple-dipping.
Shortly after it was publicly revealed that Deitsch is to become Upland’s next city attorney, the Sentinel dashed off a letter to him about his experience in Fontana and his history and the history of the firm he worked for and the firm he now works for engaging in double- and triple-dipping, specifically working as a municipality’s or agency’s legal counsel while simultaneously serving in the role of bond counsel as well as disclosure counsel in those instances where those entities utilized bond financing.
The Sentinel asked Deitsch about his recollections of the depredations Jack Ratelle engaged in as Fontana’s city manager, in particular how he had indulged Larry Redman, Bill Ashby and Dick Ashby in having the city and its redevelopment agency defray the cost of the infrastructure that needed to be built to allow the Southridge Village project to proceed.
The Sentinel asked Deitsch about the inconsistency between the assertion by Redman and the Ashby Brothers that they did not have the financing to undertake the infrastructure improvements the Southridge Village project required and the Ten-Ninety Corporation’s principals’ purchase of the certificates of participation issued to defray the cost of that infrastructure.
The Sentinel inquired as to whether Deitsch and his partner Sabo had learned that the Ashby Brothers and Larry Redmond were purposed to purchase the certificates of participation issued in conjunction with the project before those purchases were made or afterward.
Noting that both Deitsch and Sabo more than three decades ago said they were reluctant to or otherwise constrained from speaking about the graft involving the Southridge Village project and Redman’s and the Ashby brothers’ endowment of the credit line Ratelle had set up at the MGM Grand Hotel in Las Vegas as a way of laundering the kickbacks he was receiving, the Sentinel asked if Deitsch was now at liberty to comment on that issue.
The Sentinel asked Deitsch if the arrangements to have the Fontana Redevelopment Agency cover the infrastructure costs at the Southridge development were completely on the up and up, and whether he had any misgivings about those arrangements.
The Sentinel asked if at any point during his having been the Fontana Redevelopment Agency attorney, Deitsch in private or in closed sessions or in the backroom had tried to dissuade the Fontana City Council, which doubled in the role of the city’s redevelopment agency board, from underwriting the infrastructure costs for the Southridge project.
The Sentinel asked Deitsch why he and Sabo had gone along with the Fontana Redevelopment Agency’s continued subsidization of the Southridge Village development through the issuing of bonds and the securing of loans to cover the cost of infrastructure after the graft involving Ratelle, Redman and the Ashby brothers became apparent.
The Sentinel asked Deistsch when he learned about the bribery and graft that was taking place.
The Sentinel asked if, when the information about Ten-Ninety kicking back to Ratelle surfaced, the discovery had given Deitsch pause.
The Sentinel asked why, in the aftermath of the discoveries about the bribes and kickbacks passing from Redman and the Ashby brothers to Ratelle, why Deitsch did not take some action to end the redevelopment agency’s subsidization of the Southridge Village project.
The Sentinel asked Deitsch if, essentially, he believed then and now believes that the belated discovery of the collusion between Ratelle and the Ten-Ninety Corporation’s principals, coming after the bonds were issued and the loans made, administratively precluded action from being taken to in some fashion rescind the infrastructure subsidization.
The Sentinel asked Deitsch why, after he learned that the Ten-Ninety Corporation was the purchaser of the certificates of participation and the deal involved graft, bribery and collusion as well as the misrepresentation that the Ten-Ninety Corporation could not secure financing to carry out the provision of infrastructure, he did not involve legal and civil authorities such as the district attorney, the California Attorney General, the FBI or the Securities and Exchange Commission in redressing the situation.
The Sentinel asked Deitsch why he and Sabo did not take some steps to address the criminality Ratelle and Ten-Ninety were engaged in.
The Sentinel asked Deitsch if he and Sabo were concerned that if they raised the issue of the untoward arrangements involving Ratelle and the Ten-Ninety Corporation, Ratelle would terminate the Sabo & Deitsch law firm’s contract for the provision of legal services to the city.
The Sentinel inquired if it was the consideration that Sabo & Deitsch had a lucrative contract with the city for the provision of legal services to the city and Ratelle’s ability as city manager to terminate the law firm’s contract which purchased his and Sabo’s silence.
The Sentinel asked Deitsch if he could defend his action or lack thereof with regard to his involvement as the Fontana Redevelopment Agency attorney during the Southridge Village development chapter of Fontana’s history.
The Sentinel asked if from his perspective at this point Deitsch believes that it was his relative youth and inexperience in the 1980s that accounted for his lack of confidence in himself and his standing which stopped him from preventing Ratelle and the Ten-Ninety Corporation from bilking the City of Fontana and its taxpayers out of the $376.8 million total paid to retire the bonded and loan indebtedness in full or the $204.1 million paid to the Ten-Ninety Corporation to retire the bonded indebtedness.
The Sentinel asked Deitsch if he and Sabo had shrunk from taking action because of threats made by the principals of the Ten-Ninety Corporation against him or his law firm.
The Sentinel asked Deitsch if, with more than three decades of hindsight, he now wishes he and Sabo had handled the situation in Fontana in the 1980s differently, and if he were confronted with that situation today, what he would do.
With regard to Fontana Redevelopment Agency Director Neil Stone’s ownership of property within a redevelopment project area in the city, Deitsch was asked if he considered that circumstance to be legal. Deitsch was asked why he and Sabo did not redress that situation at the time.
The Sentinel also sought from Deitsch his attitude with regard to the double- and triple-dipping he and Sabo engaged in and the double and triple-dipping Best Best & Krieger has engaged in. He was asked point blank if he considered double- and triple-dipping to be a lawful practice. He was asked if he considered double-dipping or triple-dipping to be ethical.
The Sentinel asked Deitsch if he sees any conflict in a lawyer to a public agency or municipality serving in the capacity of agency counsel or city attorney who is advising that entity with regard to means of financing and making recommendations in that regard, followed by that attorney serving as bond counsel when that agency or municipality issues bonds as a means of financing. He was asked a similar question with regard to such an attorney serving as disclosure counsel with regard to the issuance of bonds.
Deitsch was asked if he believed it to be legal or ethical for one member of a firm to advise a public agency or municipality with regard to its financing options and for another member of that attorney’s firm to subsequently function in the capacity of bond counsel or disclosure counsel if and when that agency or city resolved to issue bonds to meet its financing needs.
Deitsch was asked if he sees a conflict in an attorney offering advice to a client to engage in the issuance of bonds when that attorney and/or that attorney’s firm stands to derive income by providing a service ancillary to the issuance of those bonds, such as fees or a percentage paid to bond counsel or disclosure council with regard to the bonds’ issuance.
Deitsch was asked if he could offer a defense of both the Sabo & Deitsch and the Best Best & Krieger firms’ patterns, when redevelopment agencies yet existed, of engaging in double- and triple-dipping with regard to the city attorney’s function, redevelopment agency attorney’s function and the bond counsel’s function. He was asked about his awareness of the conflicting California Attorney General’s Office opinions with regard to the practice of double- and triple-dipping.
The Sentinel asked Deitsch if he believed his past history of double- and triple-dripping compromised his integrity and could yet damage his credibility with Upland’s mayor and city council.
Deitsch was asked if he could be relied upon to properly ride herd on city staff in Upland should one or more of the employees at Upland City Hall run afoul of the law, given the manner in which he and Sabo allowed Jack Ratelle and Neil Stone to engage in illegal or highly questionable activity in their capacities as high ranking staff in Fontana.
Just prior to press time, the Sentinel had not heard back from Deitsch, at which point an attempt to reach him by phone was made. That effort proved successful. Deitsch was pleasant, and straightforwardly confirmed that he had received the Sentinel’s email. Asked if he could speak to the issues in the email, Deitsch said, “I appreciate the email. I have no comment, but I thank you very much. I appreciate the call.”
Within the legal community, Deitsch is well thought of. The Best Lawyers in America®, a publication which highlights what its publisher and editors say are the top six percent of private practicing attorneys in the United States, has consistently included Deitsch in its 2012 through 2021 editions in the publication’s sections relating to lawyers engaged in practicing land use and zoning law as well as municipal law.
Incoming Upland City Attorney Had A Hand In The 1980s Southridge Graftfest
By Mark Gutglueck