10:36 PM PDT on Tuesday, April 5, 2011

By IMRAN GHORI and DUANE W. GANG
The Press-Enterprise

Special Section: San Bernardino County Corruption Probe

San Bernardino County supervisors discussed the Colonies Partners settlement with their attorneys Tuesday but made no announcement whether they would seek to recover the $102 million payout that prosecutors say was reached through bribery.

But legal experts say the county could have grounds to invalidate the settlement in light of former Assessor and Supervisor Bill Postmus’ guilty pleas last week. A recent state appeals court decision also could bolster efforts to void the settlement, one attorney said.

Tuesday’s closed-session meeting was the supervisors’ first opportunity to discuss the case since Postmus pleaded guilty to 15 felonies, including accepting a bribe and having a conflict of interest when he voted to settle the county’s lawsuit over the Rancho Cucamonga company’s Upland development.

His plea agreement has raised a host of legal questions and renewed focus on how the controversial settlement came together in late November 2006.

In addition, documents made public as part of a related lawsuit suggest the settlement was rushed and, according to one attorney, possibly unenforceable.

District Attorney Mike Ramos stated last week that Postmus’ plea agreement could open the door to having the settlement invalidated. But prosecutors have said that is an issue for the Board of Supervisors to pursue.

A Colonies spokesman has declined to comment on whether the deal could be voided.

Juanda Daniel, a law professor and contracts specialist at the University of La Verne College of Law, said either the county or Colonies could seek to invalidate the settlement as a result of the Postmus conviction.

“Whether it behooves them to void it is another question,” Daniel said.

Supervisors have been silent on the issue over the past week, saying they wanted to first hear from the outside law firm advising them on the case.

County Counsel Jean-Rene Basle announced that the board had nothing to report out of the closed session Tuesday. County spokesman David Wert said the county had no comment.

A case that went before the state’s 2nd District Court of Appeal last year could be a precedent for invalidating contracts as a result of conflict-of-interest convictions, said Gary Goodstein, a Los Angeles attorney who handled the case.

In the case, upheld by the state Supreme Court, the courts found that the city of Compton was entitled to sever a contract with a waste disposal company and recover the $22.5 million the city had paid. That case involved allegations of council members being bribed through campaign contributions.

CONFLICT CASES

Goodstein, who represented Compton in the appeal, said the ruling was clear that in cases involving conflict-of-interest violations, the contract is void.

“The city can keep all the benefits it received under the contract, and it’s entitled to reimbursement of everything it paid,” he said of his case.

In the Compton case, there was no conviction of the public officials accused, but there was enough evidence to show they had a conflict of interest, Goodstein said. Postmus’ guilty admission could give the county a stronger case, he said.

“If the guy’s admitted he took a bribe in return for voting for a settlement, then you’ve got admitted facts that constitute a violation of 1090,” he said, referring to the government code that prohibits public officials from having a financial interest when voting on a contract.

SETTLEMENT INCOMPLETE

For nearly five years, San Bernardino County battled Colonies Partners in court over whether flood-control easements fully covered a 67-acre drainage basin on the company’s Upland development. If the easements didn’t fully cover the basin, the county would have to pay the company for use of the land.

The case was settled following a judge’s tentative ruling that was not in the county’s favor. County officials have long said the $102 million settlement was justified and avoided the risk of losing in court. Colonies contended the county could owe the company as much as $300 million.

The deal was approved on a 3-2 vote with Postmus, former Supervisor Paul Biane and Supervisor Gary Ovitt in favor.

The county paid $22 million immediately from the flood control district’s reserves and used bond financing to pay the remaining $80 million. With interest and financing, the total bond cost is $188.2 million. The county has paid $30.8 million so far and expects to pay off the rest by 2037, Wert said.

But county officials also said other public agencies should shoulder some of the financial burden, including San Bernardino Associated Governments, and have taken them to court to recoup some of the money.

As part of the case involving SANBAG, court documents suggest the county-Colonies settlement was rushed, said Ken MacVey, a lawyer at Best Best & Krieger representing SANBAG, which wants the case against it dismissed.

The signed settlement agreement included in court files does not contain any of the required legal descriptions for the disputed property or the grant deed for a smaller flood-control basin Colonies eventually transferred to the county.

The agreement required the county to transfer the first $22 million of the settlement to Colonies within one business day of the Nov. 28, 2006, deal. Postmus signed a payment voucher, and the money was wired to Colonies’ account by the next day, records show.

But emails between county lawyers and attorneys for Colonies show the two sides were still working on those legal descriptions nearly two months after the signed settlement.

It is a fundamental aspect of any real estate transaction that the legal descriptions and grant deeds are included before anything is signed, MacVey said.

“If you look at the settlement agreement, $22 million was to be wired the next day,” MacVey said. “A condition of that happening was for there to be a grant deed. There was no grant deed.”

Former Supervisor Dennis Hansberger, who voted against the settlement, said he couldn’t speak to the paperwork details. But he said he never fully understood the argument for a payment of $22 million within 24 hours.

‘UNUSUAL AT BEST’

“It is unusual at best,” he said.

Daniel, the La Verne law professor, said that not including the descriptions raises legal questions about whether there was fair notice to the public about what the county and Colonies were actually settling.

“There is nothing attached,” she said after reviewing a copy of the settlement.

“This document doesn’t seem to have any teeth to it without the grant deed,” said Daniel, also a former deputy city attorney in Riverside. “At the very least, it looks incomplete and raises questions in my mind about whether it is enforceable.”

DEED SIGNED, FILED

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