A division has opened up between members of the Grand Terrace City Council over the timing and substance of a review of city manager Betsy Adams’ performance.
Adams was hired by the city council in 2010 as the third full-fledged city manager in the city’s history. Seth Armstead guided the city from its 1978 inception until 1989, at which point he was succeeded by Tom Schwab. Schwab suffered a subdural hematoma in 2008 and was hospitalized. Assistant city manager Steve Berry was appointed fill in as acting city manager during Schwab’s absence. In 2009, after Schwab had recovered, a struggle between Berry and Schwab ensued as to whether Schwab would return or Berry would be promoted from his interim status to actual city manager. The contretemps that ensued led to Schwab’s retirement and a bitter conclusion for Berry, who offended a majority of the city council by his several attempted power ploys in seeking to replace Schwab. He was then succeeded by finance director Bernie Simon as interim city manager. A statewide recruitment was conducted and Adams, who was then deputy city manager with the Riverside County city of Moreno Valley, was chosen to lead the city.
Adams was provided with a $209,001 annual salary and $85,993 in benefits for a total compensation package of $294,994,  but agreed to cut her salary back to $185,500 shortly after being hired and to another set of reductions she and the council agreed they would impose on city staff  that reduced her salary to  $166,950 and her benefits to 77,690, so her total yearly compensation is  $244,640.
Among San Bernardino County’s 24 incorporated cities, Grand Terrace is the third smallest population-wise. It ranks 24th as a producer of tax revenue of all sorts, such that it has the most meager of the city’s 24 municipal budgets.  Adams ranks as the 13th best paid of the county’s 24 city managers. Nevertheless, when the size of Grand Terrace both in terms of its population and operating budget is considered, Adams is the third most expensive of the county’s city managers in terms of per capita cost to taxpayers.
A significant and vocal portion of the city’s residents were long indulgent of Adams and the members of the city council who had hired her. In 2010, then-city councilman Walt Stanckiewitz was elevated to the mayor’s position and two new councilmembers, Darcy McNaboe and Bernardo Sandoval, were elected to the council. Subsequently, Gene Hays was appointed to fill the vacancy created by Stanckiewitz ascendancy to mayor. Thus, Adams now serves at the pleasure of a city council that counts among its current members only two of those – Stanckiewitz and councilwoman Lee Ann Garcia – who hired her.

Walt Stanckiewitz

Adams and the present council enjoyed a honeymoon with most of the city’s voters over most of the last 14 months but in recent weeks, the sentiment of a highly vocal portion of the electorate has turned against both the city’s elected political leadership and the city’s senior management. In particular, these  critics have taken exception to the manner in which the city proceeded with the operation of its redevelopment agency in the latter portion of 2011, even as the state legislature at Governor Jerry Brown’s bidding had moved to phase out all of the state’s municipal redevelopment agencies. Grand Terrace, like many other California cities, had banked on the success of a collective lawsuit challenging that legislation, but in the waning days of 2011, the California Supreme Court ruled that the state had the right to shutter the agencies.
In Grand Terrace in particular, the effort to hang onto redevelopment authority was an abrasive issue, as Stanckiewitz and Sandoval had succeeded in the 2010 election largely on the strength of their pledge to reform redevelopment. That pledge followed the exposure of former city practices that utilized the redevelopment agency in a way considered highly questionable and even illegal – one that saw redevelopment money used not for erasing blight in the community but erasing red ink out of the city’s operating fund ledgers.
To many of the city’s awakening critics, the Stanckiewitz/Adams regime was not acting fast enough to undo the legacy of redevelopment agency abuse and they grew increasingly alarmed when the city, instead of embracing Brown’s and the legislature’s abolition of the agency, fought it.
Seemingly overnight, Stanckiewitz went from being hailed as the city’s last best hope to being celebrated as a pariah who needs to go and to take Adams with him.
The Grand Terrace News, a blog that covers local issues and is overseen by an as-yet unidentified activist know as Grandpa Terrace, took issue with issues as seemingly mundane as an increase in pet license fees to similar increases in rental home inspection fees, business fees and taxes, and propositions to charge local sports groups fees for the use of parks. Similarly, those involved with the blog blasted City Hall for high salaries and pensions for city employees, and increases in general taxes. The blog made clear its sponsors’ had lost faith with city management and the city council and no longer trusted City Hall with the stewardship of taxpayer funds.
Stanckiewitz was likened to Nero playing his fiddle as Rome burned and the blog called for the “End [of]the city of Grand Terrace as an incorporated city” and for “All Grand Terrace City Council Codes and Ordinances [to] be nullified” so the city “would revert to county, state, and federal regulations only.” The blog called for the council to “Stop all payments of any kind to all city council members, and the related costs of all council members. No more medical insurance or co-pay, and any other payments made to them.”
Moreover, the blog issued a call for the termination of Adams, who was portrayed as incompetent and overpaid.
Previously, before the California Supreme Court ruling on municipal redevelopment authority, Stanckiewitz had called for a review of Adams’ performance as city manager. But in the aftermath of that ruling, which triggered the onslaught of disapproval of Grand Terrace City Hall, Stanckiewitz sought to delay that review. This led to a pull in the opposite direction by McNaboe, who insisted that the review proceed.
This week, McNaboe told the Sentinel  the review was proceeding.

Darcy McNaboe

“We are currently in process of doing a review,” she said. “This will be our second  review. It is being done in closed session. I am not at liberty to disclose any part of the process we are undergoing, but we are looking at our responsibility.” McNaboe said a review of the city manager’s performance “is contained within her contract.”
McNaboe was somewhat dismissive of suggestions that Adams was overpaid.
“A couple of years ago she did do a ten percent giveback,” McNaboe said. She said comparing Adams’ salary to that of other city managers on the basis of city population was not a fair measure of worth or value.  “Population and tax base are two differenct things,” she said. The consideration that Adams is struggling with insufficient capital to run the city does not mean she should take a pay cut either, McNaboe suggested. “[Not having money] does make the job tougher. When I look at performance review, I am looking at how the city is doing under her management. I will be looking at her performance.”
Asked whether Adams was going to be given a job performance evaluation, Stanckiewitz said, “Yeah, but no. I was the instigator of that. I tried to get a performance review for her before but [then mayor] Maryetta [Ferré] did not want to do it. Now another year has gone by and we owe her an evaluation. I wanted to do it but given everything we are going through, the last thing I want to do is take time away from her and have her sit down and write up what we have asked her to do and what she has done to meet those expectations and instructions. I do want to accomplish an evaluation. This is not the right time to stop the train to do that. We have a whole bunch of things we are going through at the moment and once we figure out what state our redevelopment agency is in then we can come back and revisit it.”
Stanckiewitz continued, “When I brought it up in early December, that was before the Supreme Court made its decision. Now we are approaching the February First deadline and we are going through this fire drill imposed on us by the state and I do not think we want to distract Betsy with that. Right now we need all hands on deck dealing with the redevelopment wind down and if that means we are going to delay the review for a couple of months, I’m fine with that. I am the person who started this conversation about the review. I think it important that she gets a performance evaluation. I’m not sure that right at this moment is the time to do it. If we can put it on the back burner for another month or two, that is what I hope the other council members will support.”
Stanckiewitz said he has a disagreement with recently emerging criticisms of the council and Adams.
“On the Grand Terrace News blog, Grandpa Terrace, whoever he is or she is or they are – I think it is a group of people – they are saying she is making three times what the average income in Grand Terrace is,” Stanckiewitz said. “The woman took a pay cut to come here and shortly thereafter took another pay cut because we instilled that in all employees. I would say to Grandpa Terrace:  ‘Do you think we can get someone of her caliber for the average income of Grand Terrace, 66 grand? Show me where we can get a person for that kind of pay. I know that salaries for city managers are inflated. But look at what we were paying our old city manager. Tom Schwab was knocking down way more than Betsy is making. I don’t know how to respond to that blog and what they want to do. Reality doesn’t allow us to do what they want us to do. The bottom line is we’re in a competitive environment and you get what you pay for. Sometimes you make a mistake and you end up paying top dollar for someone who is not worth it. I do not believe that is what we have with Betsy. She has been with us for two years, cleaning up minutiae.  Every time we get our heads above water something else comes in at us. It is one financial disaster after another. I am ecstatic with her performance. I have watched over the years how salaries for city managers have escalated. I thought we had done the right thing. We did not inflate her salary. Given her background and what she was paid [in Moreno Valley] it was a lateral to a downward move for her. She got a job closer to home. That was the big bonus for her and we got a good deal.  Had she known what was under the water and all she has ended up dealing with, she would not have come here. At her own recommendation she took a salary reduction. She has never brought that up. She has done a good job here and she has a job to do here and she is still doing it.”

Administrative law judge Jean Vieth has directed Southern California Edison to give serious consideration to an alternative for routing the Tehachapi Line through the city of Chino Hills.
Southern California Edison is committed to completing the Tehachapi Renewable Transmission Project, which consists of a massive wind power field near Tehachapi that will deliver electricity to Southern California’s population centers by means of the Tehachapi Line, a series of 200-foot high transmission towers.
The California Public Utilities Commission in 2009 granted permits to Edison to proceed with the line over protests by the city of Chino Hills, the most densely populated area through which the line will pass. Efforts to have the line rerouted, including lawsuits and by legislation, failed. After 12 of the towers were erected, city officials last fall importuned members of the commission to reconsider the matter. Late last year, the commission, which is now led by Michael Peevey and consists of three new members who were not party to the 2009 approval of the project, put further work on the line, which was scheduled to entail 18 towers through the city upon completion, on hold and asked Edison to study alternative routes.
On January 10, Southern California Edison offered up four variant ways of bringing the electricity through upscale Chino Hills by means other than the 200-foot high towers. Those methods were routing the lines through Chino Hills State Park, undergrounding 500 kilovolt lines through the city, utilizing a route that skirted the perimeter of the city, and using the existing right of way with shorter and more closely-spaced towers.
Vieth, after looking at Edison’s presentation of alternatives, was presented on January 16 with a suggestion by Michael B. Day, the city’s legal counsel, that the utility company could use a single circuit 400 kV underground cable to transmit the electricity.
Day referenced the practice in Europe of utilizing 400 kV-capable cables for high voltage transmission, which is less than the 500 kV voltage design that is standard in the United States and Canada. “There is virtually no difference between 400 and 500 kV lines for purposes of underground construction, maintenance, safety and reliability,” Day stated. “The California Public Utilities Commission should have complete and accurate information on the extensive use of these lines in order to fairly judge their safety and reliability.”
Day requested that Vieth have Edison provide more information about the feasibility of reconfiguring underground methods of conveyance, including spanning the city beneath the utility’s existing right-of-way and beneath the city’s streets.
More than 70 well-heeled city residents sojourned to San Francisco to attend the hearing on the matter January 18.
Vieth called upon the City of Chino Hills and Edison to initiate a mediation of the matter by early February.
Edison officials maintain that even the least expensive alternative at this point will entail an added expense of no less than $8 million, given that twelve of the towers are already erected. Any change to the approval of the overall project already given by the California Public Utilities Commission would boost the project cost considerably, Southern California Edison corporate officers maintain.
According to Edison’s list of alternatives, the cost for completing the portion of the project through Chino Hills per the 2009 approval was projected as $166 million. The alternative of erecting shorter towers would boost that projection to at least $174 million and perhaps as much as $192 million. By skirting the city and going through the state park, the cost would escalate to at least $424 million and could go as high as $589 million. The undergrounding option would be the most expensive, running from $601 million to more than $1 billion, Southern California Edison officials maintain.

Despite long-lingering questions over whether Cedar Glen residents were ever provided with the improvements to the water system they have been paying for over the last three decades, the board of supervisors this week made a crucial commitment toward proceeding with revamping  that system at further expense to those residents. The county’s insistence on proceeding with the improvements without redressing the underlying reasons for the current inadequacy of the system, some of those residents say, will likely result in an even more widespread refusal on the part of local property owners  to pay their escalating water bills.
The county in 2009 initiated the first phase of improvements to the area’s water system. With that portion of the project now reported as completed, the county will move on with phases II and III, which are to consist of continued improvements, including the replacement of existing water storage facilities with additional steel water storage reservoirs; construction of a new domestic water well; and replacement of approximately 7.7 miles of existing distribution pipeline to bring the Cedar Glen water system into compliance with the California Safe Drinking Water Act and California Department of Health Services requirements.
In May of 2009, county special districts division managing engineer Jim Oravets reported that one well was successfully drilled off of Coulter Drive where there was no electricity service to the area in order to operate a water pump. Oravets said the special districts division was in discussions with Southern California Edison to extend electrical service to the area.
It is this well and its location that has led some of the residents to question the motives of the special districts division, in that the well is located on the southern boundary of the San Bernardino National Forest and is surrounded by San Bernardino National Forest. Some citizens have expressed their belief that they are paying for infrastructure to benefit developers.
The community of Cedar Glen located in the San Bernardino Mountains was provided with water service by investor owned Arrowhead Manor Water Company (AMWC) until May of 2003, when the company went into receivership.
Six months later, in October of 2003, the community was devastated by the Old Fire, which burned over 300 homes. Based on the disaster, the San Bernardino County Board of Supervisors adopted the Cedar Glen Redevelopment Area on November 23, 2004.
The board approved a loan from the county general fund in the amount of $800,000 for a proposed improvement zone on June 7, 2005 and shortly thereafter, an improvement zone was formed by the county under County Service Area 70 to provide water to the residents of Cedar Glen to be governed by the San Bernardino Special Districts Department (SDD).
On November 15, 2005, before the county had even purchased Arrowhead Manor, the county submitted an application for funding to the California State Department of Housing and Community Development for a Community Development Block Grant (CDBG) through the United States Department of Housing and Urban Development.
In February 2006, the county of San Bernardino was provided with $3,091,270 in federal Community Development Block Grant funds as part of a disaster recovery initiative to pay for the proposed repairs to the water system in the Cedar Glen community.
The board of supervisors approved the purchasing Arrowhead Manor Water Company for the price of $305,000 through the court appointed bankruptcy receiver on October 17, 2006. The county finalized the purchase on January 28, 2009.
Shortly after the purchase of the water company, Phase 1 of the water improvements funded by the CDBG funds began.
At a meeting of the Cedar Glen Redevelopment Project Area Committee on April 24, 2009, special districts director Jeff Rigney said 14,000 feet of water line had been completed, a well had been drilled and they were repairing a water tank.
Many Cedar Glen residents have refused to pay their water bills over the last couple of years.
This refusal has grown out of the circumstances under which the county obtained ownership of the water facilities. Shortly after Arrowhead Manor was placed into receivership in 2003, water rates were raised over 400 percent. The county borrowed $800,000 to acquire the water company and its assets and to make necessary improvements to it. $305,000 of that loan money was used to buy Arrowhead Manor. By 2008, the loan principal, penalties, and interest had risen to approximately $2,000,000.
At present, the $800,000 loan is not being repaid, but local water users are still paying greatly inflated prices for water.
“The Cedar Glen water situation is based on several layers of fraud and the county supervisors are now in jeopardy of becoming accomplices in this fraud,” said area resident Hugh Campbell. “There is a reason people are not paying these bills and it is the responsibility of the board of supervisors to investigate the reason. The original fraud took place in 1980 when through the Safe Drinking Water Bond Act the owners of the Arrowhead Manor Water Company, Ernie and Jean Schoettmer, were awarded $910,510. The fraud consisted of how that money was ‘not used,’” Campbell said.
“Amazingly, the 1980 improvement plan involved three phases, much like the current three phase plan in Cedar Glen,” Campbell said. “One phase was to build a pump house, a water tank and pipelines off of Balsam Ave. According to the plans, there was an existing tank on site and a new tank was to be built. As per the plans only the existing tank is currently on the property. A notice of completion was sent to the Department of Water Resources stating that all work had been completed. That work, in fact, was never completed.”
“Another phase of the project was to put new 8- inch pipelines on Juniper Drive, Maple Drive and Pineridge Drive,” Campbell continued. “These are the exact locations where the current phase 1 was just completed. The original notice of completion was dated January 9, 1981. There are even more questions on the billing as there were hundreds and hundreds of hours charged for expensive office labor, field inspectors that obviously didn’t inspect anything and travel charges at .50 a mile in 1980! The fact is that at least half or more of the project was never done. The fraud here is in excess of $400,000.”
The board of supervisors is being misled by the falsehoods contained in the record and by county staff members, who have examined the circumstances and know about the fraud, said Campbell.
“The reason that the county and its special districts division have been so quiet about this is that the engineering was done by Albert Webb and Associates and the final permits were signed off at the time by what was the county’s Department of Transportation and Flood Control in 1982. The letter from the Department of Transportation and Flood Control stated, ‘This letter is to confirm that the work performed in the Cedar Glen area under Permits E31696 and E30957 with Arrowhead Manor Water Company has been satisfactorily completed.’”
Current staff is compounding the problem and layering more fraud on top of the existing fraud, Campbell charged.
“Phase 1 was designed to cover up the fact that pipes were not laid in 1981 and the money was embezzled,” Campbell said. “The county even went as far as to give themselves an out by stating in a preliminary system evaluation dated July 20, 2004 that ‘Based on conversations with Mr. Darel Davis (the engineer hired by the receiver), 6 & 8-inch piping installed was not installed correctly and needs to be replaced.’ This was never mentioned in Mr. Davis’s official report to Thomas Sutton a month earlier on June 17, 2004. This is far from where the fraud stops. In July of 2002 the Public Utilities Commission made Decision 02-07-009 and the significant thing stated is that Arrowhead Manor was found to ‘have improperly diverted Safe Drinking Water Bond Act surcharge funds…’ and ‘The Commission concludes that all penalties imposed by the California Department of Water Resources (DWR) on Arrowhead for failure to make timely loan payments are Arrowhead’s obligations under its DWR contract and are not recoverable from ratepayers.’ Further in Resolution W-4407 dated July 10, 2003 when the PUC reinstated the Safe Drinking Water Bond Act surcharges it also stated ‘As a condition of re-establishing the Safe Drinking Water Bond Act surcharge, the decision put Arrowhead on notice that it would be held responsible for refunding or applying on behalf of customers any surcharge revenues not applied to repaying the loan.’ So the surcharge was reinstated in July of 2003 two months after the Superior Court appointed John Richardson as the receiver of Arrowhead Manor Water and from that time nothing was paid to the Department of Water Resources.”
Campbell told the board of supervisors, “The reason that the county worked so hard to pass a bill to eliminate the interest and penalties is that the customers of Arrowhead Manor could not legally be charged. The fact is that all money collected by the court appointed receiver and the Special District since 2003 needs to be refunded to the residents of Cedar Glen, because it is obvious that it was never paid to the Department of Water Resources. While receiving information through a public information request, I met with James Oravets of the Special Districts division on March 3, 2009 and told him of my concerns with fraud and even downloaded the files I obtained from the Department of Water Resources through a public information request. Mr. Oravets stated that they laid two miles of pipe during the loan. I told him that according to invoices charged against the loan that over 14 miles of pipe were supposedly purchased. Mr. Oravets could then only seem to find page one of the original plans for Cedar Glen. This was a sad attempt to again cover up the fraud that the Special Districts was aware of. In spite of this, I downloaded all the information I received from the Department of Water Resources onto Mr. Oravets’ computer and I mentioned to him that it would be nice if County Special Districts looked into the fraud for the benefit of the people of Cedar Glen instead of showing that they are just another corrupt county organization.”
But, according to Campbell, “Of course this was not the end of the fraud. In January 2009 a bill was sent to residents to collect $504 on the Safe Drinking Water Bond Act surcharge.  This constituted more fraud. In February 2009, a facilities charge showed up on the bill for the first time for $17.35. In April 2009, the facilities charge grew to $36.60. In August 2009, the facilities charge grew again to $123.60, where it now appears on each statement.”
Campbell said that the board of supervisors had failed to provide legal notice to residents that there would be a facilities charge. “What legal mechanism was used to implement these charges and how did the charges go from $17.35 to $123.60 in 6 months?” Campbell askied. “Was the board of supervisors aware of these charges?”
Campbell said he is now taking action – i.e., refusing to pay his bill, as the next logical step in forcing the county to come to terms with the fraud that has been perpetuated.
“After the April 2009  bill I gave up and quit paying, as it was obvious that there will be no end to new charges and the public has no input to what Special Districts does.”
Campbell offered his opinion that “If the board of supervisors place these charges onto the taxes of Cedar Glen residents, they are guilty of a conspiracy to commit fraud. The county was involved with this conspiracy in the beginning and steps have been taken recently to cover up the fraud. The board of supervisors needs to initiate an immediate investigation into these allegations. The board of supervisors is also bound by PUC resolution W-4407, which stipulated the conditions of the reinstatement of the surcharges and the county is thus bound to repay every resident in Cedar Glen all surcharge monies collected since July 10, 2003. The other option is that the county can drop the surcharge payments altogether.”
The board of supervisors, functioning on a different tack, authorized using taxing authority to collect water bills two years ago.
This week the board voted to file environmental documents certifying the completion of the California Environmental Quality Act compliance process with respect to the construction of phases II and III of the water system improvement.
“The existing water system does not meet the requirements of the California Safe Drinking Water Act and the California Department of Health Services requirements and work has been phased to provide capital improvements as funding becomes available. The first phase of improvements (Phase I) was approved with the adoption of a Mitigated Negative Declaration in 2008, and included a new domestic water well, construction of a 425,000-gallon water tank and 3.8 miles of replacement water lines,” Rigney told the board this week.

San Bernardino County’s transportation officials are giving more than casual consideration to the concept of incorporating toll lanes along Interstate-10, Interstate-215 and Interstate-15, the Sentinel has learned.
While such additions are not likely to be put in place for a half-decade, roughly three quarters of the 29 voting board members of San Bernardino Associated Governments, which serves as San Bernardino County’s transportation agency, have indicated they are open to examining toll roads as an alternative for improving transportation options in the county.
In August, the transportation agency board, also known by its acronym SANBAG, voted to spend  $13.7 million to facilitate studies and planning toward toll road development in conjunction with private sector companies that would participate in such projects.
Proposals now being entertained, the Sentinel has learned, would provide for a toll lane from Ontario to Redlands on I-10 and from the Riverside County Line to Victorville on the I-215 and I-15 Freeways. A condition to the construction of the new toll lanes would include the construction of new general use lanes along the same stretches.
The most feasible concept for the program, which would cost $2.4 billion for the improvements to all three freeways, would be to bond against the future revenues from the toll lanes. Part of the ongoing study is to determine if the debt from just such a bond funding mechanism could be serviced by the toll road income.
SANBAG was drawn into examining the toll road concept by the consideration that Orange County already has toll lanes in place and a larger system of toll roads that would include San Bernardino County, Riverside County, Los Angeles County and Orange County freeways is being pushed by regional transportation officials, who insist that for the entire system to work there must be uniform participation.
There is resistance to the concept, however. On the Atlantic Seaboard and in the Midwest, toll roads are referred to as turnpikes, not freeways. In California, freeways have historically been maintained by the state and federal government through taxes, not toll charges.
Southern California Associated Governments, which serves as the regional planning agency for Southern California, supports the toll road concept. Within SANBAG there is some resistance to the concept.
The SANBAG board consists of all five members of the county board of supervisors and representatives from each of the city councils of the county’s 24 cities.
Highland mayor Larry McCallon, Rancho Cucamonga mayor L. Dennis Michael, Redlands mayor Pete Aguilar, Adelanto councilwoman Cari Thomas, Rialto councilman Ed Scott, Apple Valley Town councilman Rick Roelle, San Bernardino mayor Patrick Morris, Barstow councilwoman Julie McIntyre, Twentynine Palms councilman  Jim Harris, Big Bear councilman Bill Jahn, Upland mayor Ray Musser, Chino mayor Dennis Yates, Victorville mayor Ryan McEachron, Chino Hills mayor Ed Graham, Yucaipa mayor Dick Riddell, Yucca Valley mayor George Huntington, San Bernardino County supervisor Gary Ovitt, San Bernardino County supervisor Brad Mitzelfelt, Hesperia councilman Mike Leonard, San Bernardino County supervisor Neil Derry, Needles mayor Edward Paget and Ontario councilman Alan Wapner all have supported at least exploring the possibility of constructing the toll roads.
The concept has been opposed by San Bernardino County supervisor Josie Gonzales, San Bernardino County supervisor Janice Rutherford, Montclair mayor Paul Eaton, Loma Linda mayor Rhodes Rigsby, Grand Terrace mayor Walt Stanckiewitz, Fontana councilman Michael Tahan and Colton councilwoman Deirdre Bennett.

In a piece of bureaucratic sleight-of-hand by the city of Victorville, the Victorville Water District was this week included as a member entity to the Southern California Logistics Airport Authority.
The Southern California Logistics Airport Authority (SCLAA) was established as a joint powers authority on  February 21, 2001 as comprised of the city of Victorville and the city of Victorville’s redevelopment agency for the purpose of serving as the redevelopment authority devoted to the conversion of the former George Air Force Base into a civilian airport.
Last year, as part of the 2011-12 state budget bill, the California Legislature enacted and Governor Jerry Brown signed AB IX 26, which requires that all municipal redevelopment agencies be dissolved. A collective of the state’s cities challenged that law, but on December 29, 2011, the California Supreme Court issued an opinion which effectively upheld the provisions of AB IX 26. Since AB IX 26 prohibits a redevelopment agency from taking any actions and since the Southern California Logistics Airport Authority was comprised of only two member entities, the Victorville Redevelopment Agency and the city, the authority was on the brink of demise.
Section 6502 of the Joint Powers Act provides that “two or more public agencies” are required to form a joint powers authority and exercise powers thereunder. With the expiration of the Victorville Redevelopment Agency’s charter, the Southern California Logistics Airport Authority was likewise on the brink of extinction.
By absorbing the Victorville Water District into the Southern California Logistics Airport Authority, city officials believe they can preserve its status as a joint powers authority.
In 2007, the Local Agency Formation Commission of the county of San Bernardino approved a reorganization consolidating the formerly independent Baldy Mesa Water District and the Victor Valley Water District into the Victorville Water District as a division of the city of Victorville.
According to a resolution passed by he Victorville city council this week, “in order to ensure the continued existence of the SCLAA given the mandates of AB IX 26 and in order to avoid defaults and or any unlawful or unintended termination of the SCLAA under the Joint Powers Act, it is deemed important and desirable to have the VWD become a member of the SCLAA.”
Accordingly, the resolution stipulates, “The Victorville Water District is hereby added as a member of the Southern California Logistics Airport Authority and shall possess all of the rights and privileges and assume all of the obligations and responsibilities associated with being a member of the Southern California Logistics Airport Authority.”
A question stands as to whether it is in the interest of the customers of the Victorville Water District for the purveyor of the water they utilize to have entangled itself in the effort to finance infrastructure and other improvements at the airport, undertakings that have no connection to the provision of water to customers outside the airport. The resolution, in tortured bureaucratese, references that consideration without, precisely, eliminating the possibility that water customers may end up paying for improvements at the airfield.
“The Victorville Water District and the city recognize and agree that as set forth in Section 31 of the Southern California Logistics Airport Authority Joint Exercise of Powers Agreement, all assets and liabilities of the Southern California Logistics Airport Authority are in fact the assets and liabilities of the Southern California Logistics Airport Authority, and such assets and liabilities are not and shall not be those of the members,” the resolution states.
The resolution also openly suggests that the absorption of the water district into the authority is an opportunistic ploy to preserve the airport authority and that the water district’s participation as a member will be terminated at such time as another member can be found.
“To the extent deemed necessary, the city has the right, at its sole discretion, to remove the Victorville Water District from the Southern California Logistics Airport Authority, and replace it with another appropriate body,” the resolution states.
The directors of the Victorville Water District are the members of the Victorville city council.

HESPERIA—The San Bernardino County Fire Department has shuttered one of the three fire stations providing fire protection to this 72 square mile city with a population of  90,173.
Fire Station 301, located at 9430 11th Avenue, was shut down on January 14. Previously, one paramedic engine, one brush engine, one paramedic ambulance and one heavy rescue vehicle was staged out of the station.
The decision to close the station was made by county fire chief Mark Hartwig in the wake of the city’s inability to provide more funding. Three of the city’s council members and the fire union sponsored a citywide ballot measure in November that would have imposed an $85 per parcel per year tax to pay for augmenting fire service levels. That measure was defeated soundly, garnering only 19 percent support.

Mark Hartwig

That leaves only Fire Station 302, at 17288 Olive Street, with  one paramedic engine, one brush engine and two paramedic ambulances, and Fire Station 304, at 15660 Eucalyptus Street, with one paramedic engine, one ladder truck, one paramedic ambulance, one water truck and one chief’s vehicle, still manned and running as city fire stations.
Station 301’s fire engine will be maintained as reserve capital equipment.
There is another fire station in Hesperia, Fire Station 305, located on Caliente Road, west of Interstate 15. While a city fire department paramedic unit, which uses the paramedic ambulance formerly staged out of Station 301, is housed at that station, the rest of the equipment and personnel there are intended to provide fire suppression for the Oak Hills area.
Indeed, it is the county fire division’s devotion of Fire Station 305 to firefighting service outside the city that fueled much of the citizen opposition to the passage of Measure F.
Fire Station 305, at 18,478 square feet, is the largest fire station in the county. The city of Hesperia covered $4.5 million of the $6.7 million cost of constructing the facility. Those positing arguments against Measure F maintained that Hesperia residents had already made financial sacrifices to beef up the fire department and that they had been abused by fire department management and fire department union leaders, who had made hefty political contributions to three of the city’s five council members and had received overly-generous salaries and benefits in return. It is the excessive personnel costs that are an outgrowth of the salaries, Measure F opponents propounded, that drained the fire division of the revenue needed to maintain appropriate staffing, equipment and facility levels.
Nine firefighter positions were cut out of Hesperia’s operations after the voters rejected Measure F. Those three fire captains, three engineers and three firefighter/paramedics were not laid off, but were transferred elsewhere in the county.
The closure of Fire Station 301, the city’s smallest, will result in savings of $752,000 in the department’s $9.2 million budget for the remainder of the 2011-12 fiscal year, which ends on June 30. The closure will net the district savings of $1.4 million in 2012-13.
Councilman Mike Leonard, who closed out his tenure as Hesperia mayor last month, said the closure of Fire Station 301 was “brought about by a $1.2 million shortfall in our budget. Our fire district basically survives on property tax, and assessed value is down by 28 percent. There’s the problem. When times were supposedly good, we had false highs and homes were assessed accordingly. Right now they are assessed way lower and that is what is hurting us. We have a $1.2 shortfall and we can’t continue to supplement the fire department out of the budget because we would be out of money in two or three years. We have to keep our whole city operating.”
Leonard, who was a Hesperia firefighter himself before the city closed out its own department to contract with the county for fire service, has an acute understanding of the issues related to fire safety in Hesperia.
“What we did is we had to cut nine position from the department,” Leonard said. “We left it up to the San Bernardino County fire chief as to what to do. He could have done layoffs. He could cut one paramedic off all the engines. He did not do that. Instead he chose to downstaff one engine completely. He shut down the engine at 301 and since the engine is no longer staffed, he shut down the station and moved one paramedic team to 305. They respond from there now. I am not going to say eliminating one engine is better than downstaffing three engines but something had to give and from a certain standpoint, it is better to have full teams than teams that are cut by fifty percent each. I think the biggest problem is medical response is now different. We have moved our main ambulance away from the center of town. That is going to increase response times. People have to be aware. If grandpa  is experiencing chest pains, they have to be more alert and call for help at once.

Mike Leonard

“We still have Station 302 on the east side of the city, where we have an engine and two paramedic ambulances,” Leonard continued. “There is station 22 in Spring Valley Lake, which is a county station, and it can cover our northeastern area with its engine. Station 305 in the southwest portion of the city is a combination county city station. We both kicked out money to build it. If there is a fire in the southern part of Hesperia, an engine from 305 is going to respond to it. If there is a fire in Oak Hills, the city of Hesperia is going to respond there. When I was with the city fire department, we responded to Oak Hills fires all the time. We still have auto-aid or mutual aid or whatever you want to call it. We don’t bill them and they don’t bill us. The fact is, Hesperia has never had the fire stations it needs. We have never been adequately staffed. And now the state has come in and further robbed our budget. I don’t know what we can do. The bottom line is dollars and cents. Property tax is down. We are not doing any development. What can you do? Apparently people have set the level of fire protection they want. I don’t blame people for not passing Measure F because I realize times are hard for everybody. It affects us all, the cut in fire protection. I hated to see Station 301 go. That was my career for so many years. I see what the fire guys are up against and I also see the other side of the problem. It is all dollars and cents.”

The wrongful termination claim filed against the city of Upland by former city manager Robb Quincey has put the Upland City Council in an awkward position that will result in the city finding someone other than city attorney Bill Curley to dispute the demands made in Quincey’s claim, the Sentinel has learned.

Bill Curley

The city council relied upon  Curley for guidance in firing Quincey last year.
The city council on November 28 rejected Quincey’s claim notice seeking unlimited damages over his May 4 termination filed on his behalf by attorney Joseph Wohrle on November 1. In that claim, Quincey maintains the city breached his employment contract, violated the labor code and wrongfully terminated him. According to Wohrle, Quincey’s sacking was precipitated in large measure because of his efforts to rein in the legal billings made to the city by Curley and his law firm, Los Angeles-based Richards, Watson and Gershon.
Wohrle has six months from the November 28 rejection of that claim to file a lawsuit on Quincey’s behalf or otherwise seek arbitration on the matter as is specified in Quincey’s employment contract.Wohrle did just that  last month, filing a petition with the San Bernardino County Superior Court at the West Valley Courthouse in Rancho Cucamonga for an arbitrator to be appointed. The court is to consider that request on February 14.
Whether the matter is heard by a arbitrator or in a trial, the consideration that Quincey is citing the activity of Curley and his firm as a central issue in the events leading up to his firing has resulted in a potential or real conflict-of-interest that cannot be laid to rest unless a lawyer or law firm independent of Richards, Watson & Gershon is brought in to advocate on behalf of the city.
Quincey, who was handpicked by then-mayor John Pomierski to serve as city manager in the aftermath of former city manager Mike Milhiser’s forced departure in 2005, had zoomed to a level of unprecedented authority in Upland while working for a city council dominated by Pomierski. But his fortunes shifted shortly after FBI and IRS agents on June 10, 2010 descended on City Hall and Pomierski’s home to serve search warrants in conjunction with a federal probe of political corruption in Upland’s municipal government, including charges that Pomierski, with the assistance of city staff, was shaking down developers and others with business proposals or permits pending before the city.
In the aftermath of those law enforcement raids, information about questionable actions involving Quincey circulated in Upland, including a report he had retaliated against a police sergeant, John Moore, who had investigated an alleged domestic disturbance incident involving the city manager, by preventing Moore from being promoted to  lieutenant and that he then acted improperly to create a third captain position in the department and promoted one of the department’s lieutenants into that newly formed post to ultimately promote Moore after Moore began to prepare a legal complaint alleging retaliation.

Robb Quincey

It was action Quincey took in the aftermath of Moore’s promotion in which he went beyond his legal authority as city manager to make maximum $25,000 disbursements without prior council authority to cover $50,000 of a $57,816 bill for services rendered to Moore by the law firm  Lackie, Dammeier & McGill that formed the basis of the city council’s decision to fire him. In his claim, Quincey maintained the payments to the law firm were properly processed by the city’s finance department. In firing Quincey, the city also relied on information pertaining to Quincey’s relationship with former assistant finance director Ruby Carrillo, who was reportedly involved in providing and documenting the payments to Lackie, Dammeir & McGill. Carrillo is no longer employed by Upland.
The claim asserts Quincey’s contention that he was actually terminated because in the latter part of 2010 he had undertaken a critical evaluation of the billing practices of the city’s legal counsel, the law firm of Richards, Watson & Gershon, which employs city attorney Curley.  “For years, claimant expressed concern to his staff and the city council about legal fees generated by Richards, Watson & Gerschon,” the claim states. “[D]uring October 2010 claimant engaged the city’s independent, third-party claims investigator, NovaPro, to audit one month of Richard, Watson & Gershon’s legal fees on two litigation matters it was handling for the city. The results of NovaPro’s audit shocked claimant. The NovaPro’s audit disclosed that on one litigation matter brought by the San Bernardino County Flood Control District against the City of Upland, Richards, Watson & Gershon racked up charges of $105,830 for September only. On this matter alone, just for this month, Richards, Watson & Gershon billed for the time of seven partners and employees who charged up to $348 per hour; the total hours billed were 367.3 at $288 per hour. The NovaPro audit also disclosed that on another litigation matter, People v. G3 Holistics, Inc., Richards, Watson & Gershon generated billings of $72.973.20, again, for September only. On this matter alone, just for this month, Richards, Watson & Gershon billed for the time of nine partners and employees who charged up to $348 per hour; the total hours billed were 269.5 at an average rate of $271 per hour. Notably again, just during September 2010, in the San Bernardino County Flood Control District matter, Richards, Watson & Gershon billed 22.5 hours for discussions amongst six partners and/or employees, at a cost of $6.079.60. During September 2010, in People vs. G3 Holistic, Inc., Richards, Watson & Gershon billed 20 hours for discussions amongst seven partners at a cost to the city of Upland of $5,954.80. The NovaPro auditors found that the city of Upland should not have been charged for conversations between Richards, Watson & Gershon, and it should have been charged a maximum hourly rate of $250 per hour per ICRMA [Independent Cities Risk Management Association] guidelines. Had Richards, Watson & Gershon merely refrained from charging for employee conversations and billed at the appropriate rate, the city of Upland would have saved $42,428.40 just during September 2010 and just on the two cases mentioned above.”
In his claim, Quincey furthermore maintains that “On December 2, 2010, claimant was provided with an additional report regarding the NovaPro audit by Mr. [Stephen] Dunn [who was then the city’s finance director and who has now succeeded Quincy as city manager]. The same day, claimant corresponded with the mayor and city council regarding his concerns over Richards, Watson & Gershon’s billings, which approached $250,000 per month, an enormous sum for a municipality of approximately 70,000 residents. Claimant also expressed concern over city attorney Curley’s recent actions toward claimant, Mr. Dunn and their support staff.  On December 8, claimant advised the mayor and city council that a. City attorney Curley was requesting information from claimant’s staff without claimant’s consent; b. The information Curley was requesting involved, for example, a list of federal projects approved for the city of Upland; and c. The list of federal projects budgeted for the city of Upland that city attorney Curley was requesting was far beyond the scope of records sought by the federal grand jury subpoena served on the city of Upland on November 30, 2010. Claimant was concerned city attorney Curley was retaliating against claimant because of claimant’s audit of the billings of Richards, Watson & Gershon, and because of claimant’s refusal to execute any waiver of conflicts of interest that would allow Richards, Watson & Gershon to represent other local municipalities and/or water agencies of which the city of Upland was a member, in some instances, in litigation matters against the city of Upland. Such conflict waivers were requested by city attorney Curley and/or his law partner, James Markman.”
It thus appears that Curley and his firm will be a focus of the case Wohrle will be attempting to make on Quincey’s behalf. A platitude in the legal profession is that no one should ever represent himself or herself in a legal matter, as differing rights and privileges are extended to litigants and those who represent them. An oft-quoted witticism reflecting this principal is that “Anyone who serves as his own lawyer has a fool for a client.”
Experts in the realm of legal practice and legal ethics consulted by the Sentinel suggested that having Curley or anyone from Richards, Watson & Gershon representing the city could become problematic.
Stephen C. Yeazell, a professor at the UCLA School of Law who teaches theory of legal procedure and the dynamics of modern civil litigation, told the Sentinel that a lawyer or firm representing an entity in an arbitration or litigation in which the action of that lawyer or firm on behalf of the entity is an issue “would not necessarily be a violation of legal ethics, although it could be. I would think if you were the city you would want to get a second opinion from a disinterested source. I think it would be bad judgment by the city council not to check with someone else before going ahead with a defense.”
Yeazell’s colleague at the UCLA School of Law, Scott Cummings, who lectures on professional responsibility and legal ethics, told the Sentinel  that Curley and Richard, Watson & Gershon’s circumstance vis-à-vis Quincey’s claim against Upland, “presents an interesting fact pattern which certainly tests whether the city attorney should be prohibited from representing the city because of a conflict.  Without having read the complaint with great care, there doesn’t seem to be any current direct conflict that would disqualify the city attorney.”
Nevertheless, Cummings said, “One issue is that the city attorney might be called to testify against its own client, the city, and I suppose that, at some point, the city attorney could be named as a defendant itself.  So a potential for conflict does exist if that is true.”
Cummings said that Curley and/or his firm could be permitted to represent Upland with regard to Quincey’s claim, but only if the city council fully understands the implications and consents to the arrangement and waives its reservations with regard to the potential conflict.  “Their representation is fine, so long as the city is informed and agrees,” Cummings said.
Upland city manager Stephen Dunn told the Sentinel the city will not make that waiver or give its consent to Curley and Richards, Watson & Gershon representing it with regard to Quincey’s contention that he was wrongfully terminated.
“They will not be representing us because we look at them as a potential witness and we want to avoid any kind of conflict,” Dunn said of Curley and Richards, Watson & Gershon. “We are in the process of selecting an attorney to represent the city in this. We have not chosen an attorney yet and that is why Robb and his attorney have not gotten a response from us yet. Robb gave us until December 23 to come up with a list of arbitrators in response to a list of four arbitrators he wants to have us use. We did not meet that deadline because we are not going to go with Richards, Watson & Gershon or Bill Curley to represent us. After we select an attorney we will file the appropriate responses at that time.”
Repeated attempts by the Sentinel to reach Curley for comment were unsuccessful.

More than fifty drums of what is believed to have been napalm were buried at Chino Airport decades ago and remained there until they were discovered in 2010, documents obtained by the Sentinel show.
While the material represented a potential ecological hazard to the ground and groundwater beneath the airport, the prompt removal of the drums and their contents by county officials alleviated that danger and most or all of the contamination has been remediated, a state water resources official said.
On the afternoon of July 22, 2010, three buried drums were discovered at the airport during trenching for installation of a storm drain pipeline for a new Southern California Edison facility. The county of San Bernardino Department of Airports was notified and it contacted the county fire department’s hazardous materials division and TetraTech, an environmental assessment company under contract to the county. TetraTech retained Double Barrel, a commercial hazardous materials emergency responder, to assess the situation.
Additional drums were discovered that day and by sunset on July 22, 2010, eight buried drums had been removed from the excavation. The drums did not have lids and contained soil on top of a tan resinous material. The contents of the drums were field tested using a chemical identification kit and determined to be a non-explosive, flammable, non-corrosive, organic resin-type material. The eight drums were placed in a roll-off bin. Two more drums were visible in the excavation, but were left in place due to limited remaining daylight. Samples were collected of the soil, the material in the drums, and the liquid in one of the drums. The samples were delivered to Microbac Laboratory in Riverside, and analyzed for volatile organic compounds, semi-yolatile organic compounds, total petroleum hydrocarbons carbon range, polynuclear aromatic hydrocarbons, flashpoint and their content of antimony, arsenic, barium, beryllium, cadmium, chromium, cobalt, copper, lead, mercury, molybdenum, nickel, selenium, silver, thallium, vanadium, and zinc. The analytical results indicated that high concentrations of benzene were present in all of the samples. Benzene concentrations ranging from 1,600 milligrams/kilogram (mg/kg) to 6,800 mg/kg were detected in the resinous material in the drums. The benzene concentration in the soil sample was 170 mg/kg. Also detected were toluene, ethylbenzene, xylene, styrene, 1,2,4-trimethylbenzene, and naphthalene. The tan resinous material appeared to be a jellied fuel mixture.
On July 28, 2010, a geophysical survey was conducted in an effort to locate any additional buried drums. During the survey, anomalies were found in several areas to the east and west of the original excavation, and were marked as possible targets for further investigation. TetraTech formulated a removal strategy and submitted it to the California Regional Water Quality Control Board office in Riverside on August 9, 2010 and the staff for the board provided same-day verbal approval of that plan.  Excavation and removal of the remaining drums was conducted between August 16 and August 25, 2010. A total of 51 drums, several aluminum canisters and pieces of wood were removed from the excavation and placed into six vapor tight closed top roll-offbins. Excavated soil without obvious contamination was stockpiled and additional soil was excavated from beneath the drums, placed in stockpiles and covered. The resulting excavation measured approximately 100 feet from east to west and 20 feet from north to south. The bottom of the excavation varied from 10 to 15 feet below ground surface.
Patricia Hannon, a staff member of the California Regional Water Quality Control Board, observed the collection of the final confirmation soil samples on August 26, 2010. Personnel from the U.S. Environmental Protection Agency and the California Department of Toxic Substances Control were also present. The samples were submitted to a California certified laboratory for analysis. The analytical results for the soil samples showed very low concentrations of benzene, ethylbenzene, xylene,  trimethylbenzene,  naphthalene, gasoline, diesel and motor oil.
The analytical results were reviewed by Hannon and discussed by phone with TetraTech employees Ben Wienk and David Bertolacci on August 31, 2010. Hannon informed TetraTech that based on the results of the confirmation samples, no further sampling of the excavation was needed and the excavation could be backfilled.
TetraTech’s analysis of the soil samples for volatile organic compounds, semi-volatile organic compounds, and total petroleum hydrocarbons showed concentrations of benzene up to 17.3 I-Ig/kg, ethylbenzene up to 3.2 I-Ig/kg, toluene up to 17.2 I-Ig/kg, xylene up to 7.54 I-Ig/kg, total petroleum hydrocarbons diesel range up to 32.2 mg/kg, and total petroleum hydrocarbons motor oil range up to 149 mg/kg. 1,2,4-trimethylbenzene was detected in only one sample at 5.91 pg/kg. Based on the analytical results of the stockpiled soil, TetraTech determined that the soil was non-hazardous and it was transported to TPS Technologies in Adelanto, California for disposal on August 20 and 21, 2010.
Based on the high benzene concentrations detected in the contents of the drums, the waste materials placed in the roll-off-bins were classified as hazardous. On October 11, 2010, the sealed bins, containing waste product, drums and debris, were transported and disposed of at Rineco in Benton, Arkansas.
Kurt Bechtold, the executive director at the Riverside office of the California Regional Water Quality Control Board for the Santa Ana Region, told the Sentinel,  “Our staff oversaw and verified the adequacy of the clean-up. We were satisfied the county had done a thorough job of cleaning up. The material that was found in the drums was never conclusively identified. It was a jellied petroleum substance consistent with napalm.  There was a chemical analysis to figure out what was in it and there were a number of petroleum compounds present in the material. The surrounding soil was removed.  It appeared that the contamination of the soil was fairly minimal. The material in the drums was not particularly fluid. It was described as resinous in nature, which meant that was not particularly mobile in the environment. Nearly all of the material appeared to be contained within the drums. There was some amount of contamination in the vicinity of drums but the contaminated soil was removed with the drums.”
The county had acted responsibly with regard to the circumstance, Berchtold said. “We are satisfied the county has adequately investigated any potential source on the airport property and the county is adequately addressing the contamination found to date,” he said.
Chino Airport is an asset of the county overseen by the county’s airports division. Another problem there consists of a plume of perchloroethylene (PCE) and trichloroethene (TCE) that originated at Chino Airport migrating south-southwest from the western end of the airport property. The plume has reached a point about 7,500 feet from the airport, just south of Bickmore Avenue.  There are 28 permanent wells in the area and 33 additional sample ground water collection probes that have monitored the extent of contamination and its movement.  The highest level of TCE detected is 420 parts per billion.  The allowable California safe drinking water standard is 5.0 parts of TCE per billion, such that some of the water in the basin is testing at a level that is 84 times higher than is considered safe.
There are multiple points within the plume where readings of over 100 parts per billion have been encountered.
Some of the plume is being captured by a desalter project that has wells within the area of the plume. The desalter plant was built to capture water and remove the high concentration of salt and nitrates present in the water as a consequence of the significant number of dairies in the area before the water reaches the Santa Ana River. The plant also pulls in TCE, so a portion of the TCE is not making it into the river but the desalter plant is inadequate to the task of effectuating the whole clean-up. The county is working with TetraTech in an effort to devise a plan to remediate the TCE and PCE contamination. That plan has yet to be effectuated.
Berchthold said the TCE and PCE contamination, which is likely to have originated as a consequence of the use of those solvents on aircraft at the airport, is unrelated to the drums of what appears to be napalm that were buried at the airport.

VICTORVILLE—St. Mary Medical Center has made a highly competitive bid for Victor Valley Community Hospital, reducing considerably the likelihood that the bankrupt Victorville hospital, which for the last three months has been operating on an infusion of funds from Dr. Prem Reddy’s Prime Healthcare, Incorporated, will not be absorbed into Reddy’s portfolio.
St. Mary’s parent company, St. Joseph Health Systems, offered to purchase Victor Valley Community Hospital for $35 million and then pump an additional $25 million into the faltering hospital to make capital improvements over the next five years.
The St. Joseph/St. Mary offer brings to a total of three the number of health care entities willing to assume either sponsorship or ownership, control and operation of non-profit Victor Valley Community Hospital.

Alan Garrett

In 2010, Victor Valley Community Hospital, staggering under more than $20 million in debt, filed for Chapter 11 bankruptcy protection and the 101-bed hospital was put on the auction block. KPC Global Care, owned by Dr. Kali P. Chaudhuri, outbid Prime Healthcare, tendering a $37 million offer in November 2010 that was $2 million above Reddy’s offer. But after KPC obtained the state attorney general’s approval for the takeover, it failed to finalize the acquisition because it was not able to line up  financing and that deal fell apart in May 2011. Subsequently, a federal bankruptcy court judge approved an agreement allowing the non-profit arm of Reddy’s for-profit venture, known as Prime Healthcare Service Foundation, to purchase the hospital for $35 million.
On September 20, however, the state attorney general’s office intervened, blocking Reddy’s plan. A major consideration was that Victor Valley Community was founded and set up as a non-profit institution.  The attorney general’s office had moved to ensure that the High Desert preserve at least one non-profit hospital in an area with a multiplicity of for-profit medical centers, including one already owned by Reddy, Desert Valley Hospital.
“We have concluded that this proposed sale is not in the public interest and will likely create a significant effect on the availability or accessibility of health care services to the affected community,” acting chief deputy attorney general Michael Troncoso said at that time.
Nevertheless, with Victor Valley Community teetering on the brink of financial collapse, Reddy on October 14, 2011 proffered capital in the form of loans and a consulting arrangement to prevent the hospital from having to close its doors. That assistance was codified in the form of what was called a “post-petition revolving credit and security agreement between Victor Valley Community Hospital as borrower and Prime Healthcare Management, Inc. as lender.”
The California Attorney General’s office redoubled its effort to prevent that agreement from being actuated and filed on October 28 for a temporary restraining order to prevent the hospital from entering into a financing plan and consulting arrangement with Prime Healthcare. On October 31, Superior Court Judge Steve Malone tentatively denied the attorney general’s request for the restraining order. In November, Malone again denied the state attorney general office’s effort to block the $6 million financing and consulting agreement.
The scenario was made more complicated when, also in November, KPC Global reasserted its interest in acquiring Victor Valley Community, filing legal and financial documents to create an entity known as Victor Valley Hospital Acquisition Inc., and indicating it stood ready to put up $31.1 million toward that end. Victor Valley Community Hospital officials were somewhat resistant to the KPC Global offer at that point, and were seemingly more favorably disposed to working with Prime Healthcare.
The St. Joseph/St. Mary bid was provided to the Victor Valley Community Hospital board at its January 9 meeting.
Immediately, the Victor Valley Community Hospital board directed its legal team to open up a dialogue with regard to a sale. The board’s willingness to begin negotiations with St. Joseph/St. Mary demonstrated that Reddy’s grip on Victor Valley Community was tenuous, at best.
A complicating factor now facing Alan Garrett, the CEO of St. Mary Hospital in Apple Valley, is how much of the purchase price will go to Reddy.

Prem Reddy

According to the complaint for injunctive relief filed by the attorney general on October 28, “The consulting agreement transfers control of a material amount of the operations of VVCH [Victor Valley Community Hospital] to Prime Healthcare management. The loan agreement conveys and transfers a material amount of VVCH’s assets to Prime, Inc.  By entering into this loan agreement without the attorney general’s consent, VVCH will incur additional administrative costs by $6 million, thereby increasing the amount of cash necessary for other potential buyers to purchase VVCH. By increasing VVCH’s debt, the parties will be manipulating the market value of the hospital. The loan agreement also subjects VVCH to default. The loan agreement provides that if VVCH subsequently defaults on the loan agreement, all of Prime Inc.’s loan must be paid in full, in cash immediately.”
It thus appears that at least $6 million of the agreed-upon purchase price will go to Prime Healtcare.
Victor Valley Community Hospital officials may be relieved that another viable entity has entered the picture. In recent months, Reddy and Prime Healthcare have been dogged with accusations of improper billing practices.
The Sentinel has learned that the FBI, at the direction of the U.S. Attorney’s Office, is looking into reports that Prime Healthcare facilities consistently billed Medicare for treating elderly patients with specific medical issues at a frequency far beyond the billing patterns of several other comparable hospitals.
One unconfirmed report was that the FBI investigation is touching upon  previous accusations leveled at Prime Healthcare with regard to Medi-Cal and Medicare billing irregularities that were investigated by the state. That probe was closed out with no action when investigators failed to turn up sufficient evidence to warrant a prosecution or further action. According to that report, the referral to the U.S. Attorney’s Office originated with the California Attorney General’s Office.
Publicly obtained documents show that Prime Healthcare facilities have a pattern of billing for rare and serious medical conditions that typically generate bonus payments to the hospital. Elderly patients admitted to three Prime Healthcare facilities –  Chino Valley Medical Center, Alvarado Medical Center in San Diego and  Shasta Regional Medical Center – are listed as suffering from medical conditions such as acute heart failure, kwashiorkor (a form of severe malnutrition), accelerated hypertension, and septicemia at rates that are far beyond the statistical average at hospitals in California.
Medicare payment formulas remunerate doctors and medical facilities with more substantial payments for treating more serious conditions.
Fraudulently inflating Medicare billings by misrepresenting the gravity of a patient’s medical condition, known as “upcoding” in the medical business, is prohibited under federal statute. Prime Healthcare maintains it does not engage in upcoding and that diagnosing patient conditions is carried out by medical doctors and is not a function of the billing department.
While there are reports that the FBI has interested itself in allegations of upcoding at Prime Healthcare facilities, in October the California Department of Public Health closed out an investigation into whether Prime Healthcare Services had artificially inflated reports of its documentation of bloodstream infections, concluding there was insufficient evidence to proceed with a criminal or administrative case against the hospital chain.