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Resident alleges conflict of interest by Claremont city attorneys

[UPDATE: Best, Best & Krieger General Counsel Richard Egger has responded to the story with the following statement:

“We have reviewed the complaint against Best Best & Krieger LLP filed by a citizen with the Fair Political Practices Commission. It is not unusual in high-profile and controversial city projects involving litigation that an individual may file a complaint.
 
“We are confident that Best Best & Krieger and all its attorneys have fully complied with the law and all ethical requirements. This is confirmed by internal review by the firm’s ethics counsel and also by a review by independent counsel. There is nothing unusual about city attorneys, as part of their duties, undertaking litigation on behalf of their clients. The allegation that such representation may constitute a violation of law is both novel and without merit.
 
“We look forward to participating in the process so this matter can be resolved expeditiously. We also look forward to providing any information the FPPC may  request and  will cooperate fully with the Commission if an inquiry is ever  undertaken.”]

Claremont’s legal counsel may have violated state government codes in the water system takeover case, according to one resident.

In an April 19 letter emailed to Claremont City Attorney Sonia Carvalho and copied to the entire city council and City Manager Tony Ramos, James Belna outlined what he called “serious concerns about Best, Best & Krieger’s conduct in the course of Claremont’s attempt to acquire the local water system.”

In particular, Mr. Belna accuses the law firm of violating Government Code section 1090—a part of California state law that prohibits a municipal employee from having a financial interest in a city contract. Ms. Carvalho is also partner with Best, Best & Krieger (BB&K) while acting as the city attorney for both Claremont and Santa Ana.

“I am writing to you today to direct your attention to the fact that you and your firm continue to have a conflict of interest with the city of Claremont, and to remind you of your professional obligation to take immediate action to resolve the conflict,” Mr. Belna wrote.

Subdivision A of section 1090 states that, “Members of the Legislature, state, county, district, judicial district, and city officers or employees shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members. Nor shall state, county, district, judicial district, and city officers or employees be purchasers at any sale or vendors at any purchase made by them in their official capacity.”

Mr. Belna believes Ms. Carvalho violated the code in entering into an agreement with other partners in BB&K to serve as counsel in the city’s efforts to take over the water system. The findings under section 1090, according to Mr. Belna, present a clear conflict of interest on the part of BB&K.

“BB&K had a material financial interest in the proposed acquisition, as it was foreseeable that your firm would be able to bill several million dollars in fees to handle the litigation,” Mr. Belna wrote.

Multiple interview requests to Ms. Carvalho by email were not returned by press time. When reached for comment, Mr. Ramos told the COURIER by phone that the city is currently looking over the claims made in Mr. Belna’s letter and will draft a response at a later date.

LA Superior Court Judge Richard Fruin ruled against Claremont in its initial effort to take over the system from Golden State Water Company (GSWC) in December 2016 after a 21-day jury trial. The city is in the midst of an appeal.

Claremont is currently on the hook for around $13.5 million in legal fees stemming from the trial—$6.2 million to BB&K and $7.2 million to GSWC’s legal counsel Manatt, Phelps & Phillips. The city is currently appealing the decision to pay all of GSW fees. 

The city entered into a $450,000 contract with appellate firm Horvitz & Levy in February, up to $50,000 of which was allocated to BB&K for consulting and assistance.

Mr. Belna has been at the forefront in opposition to the water takeover from the beginning, speaking at numerous city council meetings against the acquisition effort.

He told the COURIER in a phone interview that he first brought up the conflict of interest issue several years ago, and even broached the topic during a meeting with Ms. Carvalho, Mr. Ramos and councilmembers Opanyi Nasiali and Joe Lyons in March 2014.

“No one at the meeting shared my view,” he said.

Mr. Belna noted that since then, nobody from the council or city staff has responded to his concerns about the issue, including the letter sent on April 19.

Mr. Belna cites a number of articles that support his claim, including a California Attorney General Opinion written last year that presents the hypothetical situation of a city attorney having a financial interest in the issuance of bonds.

“Government Code section 1090 prohibits an arrangement under which a contract city attorney’s compensation for providing the city with additional ‘bond counsel’ services is based on a percentage of the city’s bond issuances,” the opinion concluded.

Mr. Belna believes the funds used to purchase the water system fall under the “expansive” meaning of the term “contract” under section 1090.

Mr. Belna contends the city’s initial legal services contract with BB&K, entered in May 2015, was itself a violation of section 1090. The contract, which Mr. Belna states is a provision for an enhanced billing rate for the firm’s work on the water system acquisition, “was agreed to less than a month before the city council approved the amended resolutions of necessity on June 23, 2015,” according to Mr. Belna.

Mr. Belna noted that BB&K could indirectly be inviolation of section 1090.

“As discussed in the [CA Attorney General] opinion, it does not matter that BB&K is not a party to the prospective water system acquisition contract,” he wrote. “It is enough that the members of the firm who participated in the decision to pursue the acquisition had even an indirect self-interest in its approval.”

Mr. Belna believes the violation of section 1090 continues as the city moves forward in its quest to take over the water system by appealing Judge Fruin’s decision.

A consequence of the code violation would undo much of the work the city has undertaken—retroactive voidability of any contract that a city official has had an unlawful interest in, according to Mr. Belna, adding that Claremont has the “immediate right” to recoup the millions of dollars paid to BB&K over the water system takeover.

In the letter, he accused the firm of acting under its “best interest to dissuade city officials from seeking independent legal advice or questioning the competence of BB&K’s performance in any way—even though the unexpected loss of $14 million in the preliminary stages of a lawsuit demands scrutiny.”

Mr. Belna concluded that Claremont has a right to independent and conflict-free legal counsel, “even if its officials are unaware of or indifferent to the existence of a conflict.”

—Matthew Bramlett

news@claremont-courier.com