(San Bernardino) No documents to support damages

Witness blasts Colonies settlement
Joe Nelson, Staff Writer
Posted: 07/30/2011 10:12:56 PM PDT

San Bernardino County doled out $102 million to a Rancho Cucamonga developer to settle a land-rights lawsuit based on inflated damage estimates by the developer with no documentation to justify the figures, according to Grand Jury witness testimony.

Former Interim County Counsel Dennis Wagner said the settlement amounted to a gift of public funds, according to recently released Grand Jury transcripts in an ongoing corruption scandal alleging the landmark settlement in November 2006 was tainted by blackmail and bribery.

"How do you settle a $102 million case without documents?" Wagner told prosecutor Lewis Cope during his testimony in April.

Wagner said the three board members who voted in favor of the settlement - Bill Postmus, Paul Biane and Gary Ovitt - relied solely on damage estimates produced by the developer, Colonies Partners LP, and took the developer's word that the county could face damages of more than $300 million if it lost in court.

"Frankly, trying lawsuits, if I just believed the other side, what they told me, I'd be digging ditches now," Wagner said.

Colonies Partners sued the county in March 2002, alleging the county abandoned its flood-control easements on the developer's 434-acre development in Upland and refused to pay for flood-control improvements.

The county, however, maintained throughout the nearly five-year litigation that its easements were both valid and sufficient for the needed flood-control
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improvements, and that the developer was responsible for any improvements.

On May 9, the 19-member Grand Jury handed down a 29-count indictment against Colonies co-managing partner Jeff Burum; Biane, a former county supervisor; Ovitt's former chief of staff Mark Kirk; and Jim Erwin, former union leader turned assistant assessor and the former chief of staff for Supervisor Neil Derry.

The four are charged with multiple felonies including conspiracy to commit a crime, bribery and conflict of interest. Burum is alleged to have conspired with the defendants to secure the settlement in Colonies' favor in exchange for $400,000 in bribes and political favors.

All four have denied the charges.

In late March, Postmus pleaded guilty to all charges filed against him in the Colonies case and a separate criminal case in which he was accused of using the Assessor's Office to coordinate political campaigns and bolster his political career.

Postmus was elected assessor in November 2006, and, as Board of Supervisors chairman, allegedly inflated the assessor's budget in December 2006 by more than $1 million so he could hire cronies to assist him in his political ambitions once he entered the Assessor's Office one month later.

Colonies calls the shots

In a news release issued the day of the settlement on Nov.28, 2006, Postmus acknowledged it was Colonies Partners that claimed the flood-control district's liability could exceed $300million if the case ended up before a jury.

"The settlement is a win for county taxpayers," Postmus said in the release. "If we had not settled this, the (flood control) district could have been responsible for triple the amount of this settlement, and that amount could have compromised the district's ability to protect citizens from flooding."

The Grand Jury testimony paints a different picture. It shows that attorneys defending the county felt Colonies' damage estimates were inflated for the developer's benefit and lacked merit.

During a series of mediation sessions in 2006, Colonies' attorneys presented the county with an itemized list of damages totaling $301.5 million. Damages included $43 million for the devaluation of lots on Colonies' property and $108 million for property needed for a 72-acre flood-control basin.

Those figures were thoroughly disputed by county counsel.

In an email to Wagner dated Oct. 27, 2006, Deputy County Counsel Mitchell Norton said Colonies' $108 million estimate for the basin property was flawed because it valued the basin property as if it could be subdivided for residential development. He said the city of Upland designated the property as open space for floodwater discharges, and was more appropriately valued at roughly $1 million.

As to the devaluation of the lots, Norton said Burum testified during trial that Colonies Partners insured the property around the easements for $1 million, and all parties involved in the litigation acted as if the easements were valid and enforceable.

County Counsel Ruth Stringer said during her testimony that it seemed as if the amounts being requested by Colonies would just show up in the newspaper and be taken at face value.

"It wasn't as if, in a normal lawsuit, one side of attorneys would present it to another side of attorneys with a rational basis in fact and evidence upon which to base that," Stringer said. "There would be some general discussions and very specific discussions. Normally that goes back and forth. Here that was very lacking."

She said Colonies never produced any evidence to justify its numbers, which kept increasing as the years went by.

When asked by prosecutor Cope if there had ever been any trials or court proceedings to seek damages, Stringer said there had been lawsuits relative to damages, but they had not been heard.

"So there was never an evidentiary hearing on the issue of damages, nor was there any meaningful discovery back and forth as to damages," Stringer said.

Settlement rushed

Despite attorneys' insistence that the county stood a good chance of winning in court, the supervisors supporting the settlement, particularly Postmus, were adamant about settling the case, according to the testimony.

"So (Postmus) and I started to have an argument because he was saying, `well, you lawyers are just here trying to scuttle this thing,"' Wagner said. "I said, `Look, you can settle this case, you know. You don't have to take your lawyer's advice."'

He said he warned Postmus that the direction he and other board members were taking could potentially get them in trouble with the law down the road.

Supervisors ultimately approved a cash-only settlement in closed session, which stripped from the deal a land swap that would have required a four-fifths vote from the board. The settlement, Wagner said, was essentially a template document Colonies Partners presented to the county during a prior mediation session.

"And (Postmus) goes, `this is the agreement or whatever, sign it if you want to,"' Wagner said. He said Postmus told him to "take it or leave it."

Wagner refused to ratify the settlement.

http://www.redlandsdailyfacts.com/sanbernardinocounty/ci_18588289