Appellate Court Cites Central Basin Director Vasquez’ Conflict of Interest, Reverses Whistleblower Lawsuit Decision

Central Basin Director Leticia Vasquez.

By Brian Hews

A California appellate court today handed down a wide-ranging decision on the Central Basin Water (CB) “Qui Tam” whistleblower lawsuit, referring the matter back to lower court and dealing a lethal blow to its chance of success.

The lawsuit has cost CB over $275,000.

In their ruling, the judges wrote that CB Director Leticia Vasquez violated the Political Reform Act’s (PRA) conflict of interest laws by motioning in Oct 2014, and then voting, to waive the attorney-client privilege with respect to the qui tam lawsuit.

“I told people the vote was illegal,” CB Director Art Chacon told HMG-CN, “and the attorneys said it was illegal too.”

The court cited the fact that Vazquez “acknowledged she is in a dual capacity, representing Central Basin and herself,” and thus violated the PRA reversing a lower court’s ruling against Buchalter Nemer (Buchalter) and Douglas E. Wance and Sedgwick LLP (Sedgwick).

The court stated, “We conclude that Vasquez, in her capacity as a member of the governing board of CB, should not have voted on a motion to have the district waive the attorney-client privilege with respect to this litigation…. Vasquez should not have voted on the privilege waiver motion pursuant to the requirements of the PRA.”

In August 2013, Vasquez filed the qui tam in the name of CB alleging that $2,750,000 in CB funds had been transferred “secretly, improperly, illegally and without authority” to bank accounts controlled by Sedgwick and Buchalter; the transferred funds became known as “the ‘Slush Fund.”

Former employees Ron Bielke and Chuck Fuentes contend they found the slush fund, but were fired by Vasquez, Bob Apodaca and James Roybal after they reported it to the board.

In the complaint, Vasquez sought $2.75 million in damages, treble damages, civil penalties, and other relief under the California False Claims Act.

Vasquez always denied that she was part of the lawsuit but the court thought different.

Vasquez sought damages for herself with the court saying, “the complaint sought a percentage damages for Qui Tam Plaintiff Vasquez as provided by law.”

Below is a March 2014 interview of Vasquez with HMG-CN attempting to get clarification on the qui tam lawsuit.
Video by Brian Hews, interview by Randy Economy.

Sedgwick and Buchalter objected to the complaint and filed a motion to dismiss.

The first objection was upheld but Vasquez was allowed to amend her complaint saying that the CB board ignored an investigative report by the law firm of Arent Fox.

Vasquez claimed the act of ignoring the report “implicitly waived attorney-client privilege.”

The two sides litigated the issue until a hearing was scheduled for October 14, 2014.

Possibly sensing a loss, on Oct 10, 2014 Vasquez introduced a motion at a CB board meeting seeking to have CB waive the attorney-client privilege.

When the item came to a vote, Directors Art Chacon and Phil Hawkins walked out in protest, leaving Bob Apodaca, James Roybal, and Vasquez.

All three voted to waive the privilege and the motion was passed.

19 months went by and the lower court, citing that Oct. 2014 vote, overruled Sedgwick and Buchalter’s objection and denied the motion to dismiss, handing Vasquez a victory.

But that vote would come back to haunt Vasquez.

Sedgwick and Buchalter filed another petition arguing that Vasquez violated the conflict of interest provisions of the PRA by participating in the Oct. 10, 2014 vote to waive attorney client privilege.

Oral arguments with respect to that petition took place on May 22, 2017.

Then, weeks later, possibly once again sensing a loss, Vasquez suddenly filed a “Notice of New Authority” on the court.

She cited the June 26, 2017 CB meeting where the new CB board “ratified” the earlier Oct. 10, 2014 vote to waive attorney-client privilege.

As before, Chacon and Hawkins abstained from voting.

This time Vasquez did not vote instead “excusing herself from the room and discussion.”

Enough board member remained, due to the three new board members that were appointed by CB General Manager Kevin Hunt, and they called a vote.

The remaining five members, Bob Apodaca, Pedro Acietuno, and newcomers John Oskoui, Mark Grajeda, and William Gedney voted 5-0 to waive the privilege.

But that did not matter to the court; it was the Oct 10 vote they were focusing on.

The court focused on the PRA and a litany of Fair Political Practices advice letters, finishing with a decision that Vasquez violated the conflict of interest provisions of the PRA.

The main reason was that one year prior to the Oct. 10, 2014 vote, CB had declined to participate in the qui tam.

That decision by CB made Vasquez the only party “advancing” the lawsuit.

“…given that Vasquez herself introduced the motion (to waive attorney-client privilege), the conflict presented here is clear; Vasquez has a material financial interest in the outcome of the privilege waiver.”

Having a material financial interest and then voting to influence the outcome of that interest violated the PRA.

The court vacated the order of May 19, 2016 against Sedgwick and Buchalter and sent it back down to the lower court, this time without consideration of the attorney-client privilege.

Without the privilege being waived, chances are good the Sedgwick and Buchalter’s first objection and motion to dismiss will be upheld.

All parties will have to bear their own cost meaning CB ratepayer will be on the hook for over $250,000 in fees.

See ruling click here.

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