potential brown act violations and other official misconduct (2010-07-02 colantouno letter and...

8/9/2019 Potential Brown Act Violations and Other Official Misconduct (2010-07-02 Colantouno Letter and Exhibits)

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Attorney-client privilege waived by a vote of the Council on July 6 , 2010document authorized for public release.

Michael G. ColantuonoMColantuonolQCLLA W.(213) 542-5739

Colantuono & Levin, PC11406 Pleasant Valley RoadPenn Valley, CA 95946-9001Main: (530) 432-7357FAX: (530) 432-7356WWW. CLLAW.

CONFIDENTIALBY FEDEX AND ELECTIONIC MAILto ann.diem acgov. org

July 2 , 2010An Diem, Assistant District AttorneyAlameda County District Attorney s Offce1225 Fallon Street, Room 900Oakland, CA 94612

Re: Potential Brown Act Violations and Other Offcial MisconductDear Ms. Diem:

Introduction. I write to supplement my May 26 , 2010 letter regarding potential BrownAct violations and other official misconduct by Alameda City Councilmember Lena Tam.Additional documents have been since brought to our attention which evidence furthermisconduct and we write to provide that additional evidence to assist your review of this matter.Background. The allegations discussed here relate to:Negotiations between the City and Westhoff, Cone & Holmstedt, a financialadvisorylinvestment banking firm, with respect to potential refinancing of Cityassessment bonds , and subsequent attempts by Lonnie Odom of Stinson Securities, aninvestment banking firm, to participate in the refinancing of the bonds.An Exclusive Negotiating Agreement ("ENA") between SunCal, the City, and otherpublic entities regarding Alameda Point, a former naval base and arguably one of themost lucrative development opportunities in California at present.A lawsuit against the City by the International Association of Firefighters (IAFF), theunion which represents the City' s firefighters, regarding retiree medical benefits forpublic safety personnel hired after Januar 2 , 2010.Discussion. As discussed in our May 26 , 2010 letter, a Councilmember can be removedfrom office for willful or corrupt misconduct in office. Gov. Code 99 3060-3075. Themisconduct does not have to constitute a crime and need not necessarily imply corruption or

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Ann Diem, Assistant District AttorneyJuly 2, 2010CONFIDENTIALPage 2

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criminal intent. People v. Harby (1942) 51 Cal.App.2d 759, 767. Willful misconduct in officeincludes, for example, the conduct of an officer who exercises the power of his or her office so asto violate a statute or who engages in any willful malfeasance, misfeasance, or nonfeasance. Id.

1. Official Misconduct Based on Brown Act Violations.A Brown Act violation justifies removal from office pursuant to section 3060. Bradley v.

Lacy, 53 Cal.App.4th 883, 887 n.1 (1997). The Brown Act provides, inter alia, that a majorityof City Councilmembers may not, outside a meeting authorized by the Act, use a series ofcommunications of any kind, directly or through intermediaries, to discuss, deliberate, or take

action on any item of business within the subject matter jurisdiction of the City Council.Government Code section 54952.2. The enclosed documents show that Councilmember Tamused such series of communications, with Mr. Odom as an intermediary, to discuss with amajority of Councilmembers outside an open session of the Council Mr. Odoms desire to profitfrom a City bond refinancing.

Such serial meetings in violation of the Brown Act are evidenced by emails among Mr.Odom, and Councilmembers Tam and Gilmore, with copies to Councilmember Matarrese (whodid not respond to this unlawful communication but was merely a passive recipient of it). OnMay 21, 2010, Mr. Odom emailed Councilmember Tam (Exhibit DD) about a proposal torefinance City bonds. The email stated Mr. Odom had just met with [Councilmember] Gilmore,who suggested that [he] contact [Councilmember Tam]. He further stated that he would bemeeting with Councilmember Matarrese and that he would also like to meet withCouncilmember Tam. Councilmember Tam replied (Exhibit DD) that she was very interested inmeeting with him and the two negotiated a meeting time. From Councilmember Tams email, itappears that she already discussed the substance of Mr. Odoms email with CouncilmemberGilmore and she copied her email to Councilmember Gilmore. Further, on May 26, 2010, Mr.Odom sent another email to Councilmembers Tam, Gilmore, and Matarrese, with a carbon copyto Councilmember deHaan (Exhibit EE), thanking the Councilmembers for meeting with him.Councilmember Tam responded to this email (Exhibit FF), stating she appreciated theopportunity to meet with Mr. Odom and that she was working to schedule his proposal toprovide bond underwriting services for a closed session of the City Council. (although we canthink of no legal justification for discussion of that topic in closed session). Finally, on June 14,2010, Mr. Odom emailed Councilmember Tam (Exhibit GG) stating that it was troubling thatthe issuance of bonds [had] been placed on the Consent Calendar for the June 15, 2010Council meeting, which he claimed was highly unusual. Councilmember Tam replied to thisemail (Exhibit GG), copying her reply to Councilmembers Gilmore and Matarrese, and invitedMr. Odom to attend the Council meeting and pull the item from the consent calendar for publicdebate to share [his] experience. As such, Councilmember Tam communicated with a majorityof Councilmembers about the refinancing of City bonds, using Mr. Odom as intermediary and


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relying upon his unsupported e-mail statements as fact. This communication related to an issuewithin the Citys subject matter jurisdiction and therefore should have occurred only in aproperly agendized open session of the entire Council.

2. Official Misconduct Based on Violation of Sections 7-2(H) and 7-3 of the CityCharter.

Councilmember Tam has also engaged in official misconduct by interfering with the CityManagers performance of her duties. Section 7-3 of the City Charter1 provides:

Neither the Council nor any of the members thereof shall interfere with theexecution by the City Manager of his or her powers and duties. Except forpurposes of inquiry, the Council and its members shall deal with that portion of theadministrative service for which the City Manager is responsible solely throughhim or her. An attempt by a Councilmember to influence the City Manager inthe making of any appointment or the purchase of any materials or supplies

shall subject such Councilmember to removal from office for malfeasance.(Emphasis added.)

Section 7-2(H) of the City Charter further provides:

The City Manager shall have the power and it shall be his or her duty . . . [t]o see

that all contracts and franchises made under his or her jurisdiction or that of theCouncil are faithfully performed, and to report all violations thereof to theCouncil.

Councilmember Tam interfered with the City Managers duty to provide her bestprofessional recommendation as to the financial advisors best suited to refinance the Citysbonds and directly contacted individuals involved in the transaction in an attempt to influence itfor the apparent benefit of Mr. Odom.

In 2007, the Citys financial advisor William Reynolds provided the City with a report ofits assessment bonds, advising that certain bonds be refinanced (Exhibit HH). Around that time,

Mr. Odom offered then-City Finance Director Juelle Ann Boyer a proposal to refinance thesebonds, but she did not accept the offer (Exhibit II). In 2009, City Manager Ann Marie Gallantbegan reviewing the potential refinancing of the bonds (the transaction) and contacted themunicipal securities underwriting firm Westhoff Cone & Holmstedt as a potential underwritercandidate for the transaction, because of their statewide expertise in land-based securitiestransactions (Exhibit JJ). At one point, Mark Holmstedt, a principal in that firm, discussed

1 The text of the Citys Charter appears on-line at www.ci.alameda.ca.us/gov/city_charter.html.


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potential cooperation with Mr. Odomwho sought to be included in the transactionbutbecause of what Mr. Holmstedt described as Mr. Odoms threatening communication, Mr.Holmstedt ended those discussions (Exhibit JJ). Specifically, Mr. Odom demanded a largershare of the deal before things [got] really ugly (Exhibit LL). On May 21, 2010, Mr. Odomcontacted Councilmember Tam about this transaction (Exhibit DD), whereupon the two met andexchanged multiple emails (Exhibits DD, EE, and GG). On May 26, 2010, Councilmember Tamsent Mr. Odom an email thanking him for meeting with her and stating that, since their meeting,she had discussed the transaction with a number of people, including the Citys financial advisor,Mr. Reynolds, and former Finance Director Juelle Ann Boyer (Exhibit FF). Mr. Odom thankedCouncilmember Tam for her help (Exhibit FF). He further stated that he would like to be in

charge of the sale of the bonds and asked that Councilmember Tam let him know about the nextstep (Exhibit FF). The transaction was agenized for the June 15, 2010 Council meeting (ExhibitYY). Before this meeting, Councilmember Gilmore contacted Mr. Odom by e-mail withfinancial questions about the City Managers staff report (Exhibit ZZ) and copiedCouncilmember Tam on this e-mail. Mr. Odom responded to both Councilmembers Gilmoreand Tam, questioning Mr. Holmstedts role as a co-Financial Advisor, asserting that his fee wastoo high, and that the underwriter on this matter should not be selected through a competitiveprocess but through a negotiation. (Exhibit ZZ). Councilmembers Tam and Gilmore questionedthe transaction at the June 15, 2010 Council meeting, including the financial advisors fee, assuggested by Mr. Odoms previous e-mail. After the June 15th Council meeting, Mr. Odomemailed them both thanking them for fighting the good fight and asking the hard questions and

invited them to have lunch with him after the pricing [so that he could] provide [his] analysis(Exhibit KK).

The City Managers duty with respect to the transaction was to find a competent andreliable candidate to underwrite the Citys bonds and to provide professional, unbiasedrecommendations to the City Council. It was her job to negotiate with potential underwriters and it was not the role of individual Councilmembers to do so, 2 although the ultimate contracting

2 This separation of Councilmembers from the administrative details of City business is requiredby Section 7-3 of the Alameda Charter and other charter and ordinance provisions adopting theCouncil-Manager form of government, which is intended to prevent patronage and corruption incity government: The concept of the council-manager form of government was a product of aconfluence of the prevailing modes of thought during the late 1800s and early 1900s. Probablythe foremost influence was the Progressive Movement; following along the thought lines of themovement, the municipal reformers of that time wanted to rid municipalities of the pervasiveMachine form of government and the abuses of the Spoils system. The thought was to have apolitically impartial administrator or manager to carry out the administrative function.http://en.wikipedia.org/wiki/Council%E2%80%93manager_government (footnotes andhyperlinks deleted).


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decision was for the Council to make in discussions compliant with the Brown Act. The CityManager and the Citys underwriting team excluded Mr. Odom from their recommendations tothe Council for this transaction due to his unprofessional dealings (Exhibit JJ). Instead, thebonds were ultimately sold through a competitive process in which Mr. Odoms firm did not bid.By secretly communicating directly with Mr. Odom, the Citys financial advisor, and otherinterested parties and without disclosing that fact to the City Manager, Councilmember Taminterfered with the City Managers ability to carry out her duty and violated Section 7-3 of theCity Charter. As noted above, that charter provision states that the consequence of suchmisconduct is removal from office for malfeasance. Indeed, this was the basis for the recentremoval from office of the former Mayor of Mountain View by the Santa Clara County Superior

Court in an action filed under Government Code 3060 et seq..

3. Official Misconduct Based on Disclosure of Personnel Matters.Councilmember Tam further engaged in official misconduct by disclosing confidential

personnel information pertaining to the City Manager to the press and other third parties.

Councilmember Tam forwarded emails with confidential personnel information expresslypertained to the City Manager to various individuals, mostly by blind carbon copy. Some ofthese individuals were the local bloggers John Knox White and Lauren Do (Exhibits QQ, SS,and TT), The Island reporter Michelle Ellson (Exhibit SS), the former City Finance DirectorJuelle Ann Boyer (Exhibit SS), and Kate Quick of the League of Women Voters (Exhibit RR).

In addition to forwarding emails, Councilmember Tam also telephoned City financialadvisor Mr. Reynolds on May 25, 2010 and told him confidential personnel information sheclaimed to have obtained from individuals previously associated with the City Manager (ExhibitUU). Councilmember Tam made similar statements to Mr. Odom, who provided similarinformation to Mr. Reynolds in a June 3, 2010 conversation, stating that it was his understandinghe would be given part of the bond underwriting work and the City Manager would be fired(Exhibits VV and XX). Disclosing this information to Messrs. Odom and Reynolds without theCity Managers prior written consent was a clear violation of the City Managers privacy rights.

3

While a City Manager is a public official and subject to public criticism and Councilmembersare, collectively, the appointing authority for the City Manager, discussing her performance in

this way, and leaking confidential information via blind carbon copies and without disclosing tothe Manager and other City officials that she was doing so, Councilmember Tam jeopardized theCitys legal interests, violated the City Managers privacy rights, and exposed the City to claimsby the City Manager, including but not limited to, defamation, constructive discharge and otheremployment claims. Each of these is a breach of fiduciary duty and official misconduct with themeaning of Government Code Section 3060.

3 Ms. Gallant has provided her written consent to the release of this information to you.


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4. Official Misconduct Based on Breach of Fiduciary Duty and Further CharterViolation.

Councilmember Tam further used her position to advance SunCals interests in theAlameda Point project at the expense of the City and its residents and taxpayers. A publicofficial acts as trustee for the public, and thus cannot use his or her official position to benefit aprivate party. Terry v. Bender, 143 Cal. App. 2d 198 (1956); People v. Harby, 51 Cal.App.2d759, 770 (1942). Councilmember Tam violated this trust by making statements on behalf ofSunCal in response to a public records request from David Howard, a City resident and blogger.

In directly responding to a public records act request, purportedly on behalf of the City,Councilmember Tam also interfered with the City Managers administration of City affairs inviolation of section 7-3 of the City Charter.

On May 25, 2010, Mr. Howard emailed a public records request to the City Manager andthe City Council (Exhibit MM), asking whether SunCal had made any financial commitment tothe Alameda Point project and stating that SunCal might be committing fraud on the residentsby falsely representing that it had financing for the project. The City Manager replied to Mr.Howards email (Exhibit MM), with carbon copies to relevant City staff, stating that publicrecords requests are handled by the City Clerks office. Although Councilmembers may notrespond to public records requests under the Council-Manager form of government,Councilmember Tam replied to Mr. Howards email on May 26, 2010 (Exhibit NN), stating that[f]rom the records and filings, DE Shaw and SunCal (Cal Land) spent $183 million in non-borrowed equity in New Mexico and that [i]n the discussions with the Navy and the publicproforma that we have reviewed, SunCal/D.E. Shaw is ready, willing and able to spend the$108.5M in conveyance costs requested by the Navy. This information was not available fromany City records and it appears that Councilmember Tam obtained this information from SunCaland provided it on behalf of SunCal, especially because she blind-carbon-copied her reply to thepublic records request to SunCal representative Frank Faye (Exhibit NN). BecauseCouncilmember Tam used her official position to present on behalf of the City what wasultimately SunCals position without revealing her discussions with SunCal officials, shebreached her fiduciary duty to the public and violated section 7-3 of the City Charter.

5. Possible Disclosure of Closed Session Information.Although additional investigation is required to establish this, recent emails suggest that

Councilmember Tam may be continuing to leak closed session information in violation of theBrown Act. Our May 26, 2010 letter included emails which evidence that Councilmember Tamleaked closed session information to various third parties and that she has covertly acted onbehalf of the IAFF. On June 12, 2010, Councilmember Tam forwarded to her personal g-mailaccount (Exhibit OO) closed session information relating to a lawsuit IAFF has filed against the


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