San Lorenzo Valley Water District
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Judge Finds Conflict in San Lorenzo Valley Water Scandal

Former San Lorenzo Valley Water District board member ordered to pay back profits

San Lorenzo Valley Water District’s financials have faced scrutiny in the past two years. Last week, a judge ordered a former board member to pay profits in a conflict-of-interest suit.

A California superior court judge has fined former San Lorenzo Valley Water District board member Terry Vierra $9,300, the amount that he and his wife profited from a district board decision which Vierra influenced.

Vierra and his wife, Molly Bischoff, are partners in a Boulder Creek real estate business. In 2010, Bischoff was the listing agent for a house that the district bought.

The problem was that while a district board member, Vierra influenced the board’s decision to buy the property, a decision in which Vierra had a financial interest, and profited from.

The judge chose not to order the maximum penalty, which would have been three times the amount. The prosecutor, in a Dec. 13 statement, wrote: “The court does not believe that the defendant had evil intent in violating 91005 [the law] and finds that it is not necessary to set the maximum fine. Still, the legislature has set strict guidelines to prevent conflicts of interest with public officials and the court cannot ignore the law.”

Vierra declined to comment, since the case is ongoing. Sometime in late 2017, the second part of the lawsuit against Vierra will be heard, on the district’s alleged violation of government code Section 1090, which the League of California Cities calls the “When in Doubt, Sit it Out” code.

The court initially found that the Section 1090 charges against Vierra and the district were wrongfully issued, but it’s on appeal.

If the court finds that the district entered into a contract in which Vierra had a financial interest, more penalties could be issued. One possibility is the 2010 home sale could be voided, and the sellers, or more likely Vierra, could be ordered to return $522,000 to the district. The district also could be liable for the prosecutor’s legal fees.

 

NOT ON MY WATCH

The lawsuit was filed two years ago by Boulder Creek resident Bruce Holloway, a retired Silicon Valley computer engineer who heard about the house sale after he began attending water district meetings in 2011.

“I thought, ‘That’s really strange. Why would the water district buy a house?’” says Holloway.

He heard the reasons: The district was replacing nearby water tanks and wanted a staging area for construction and an extension of the property line, since the new tanks would need more space. But Holloway thought it didn’t make sense. Why couldn’t the district get an easement, like other utility companies do to install public equipment, or rent a dumpster and put it on the road for construction debris?

Holloway began digging through old meeting notes and asking board members in public sessions. Eventually, months later, a group with access to the real estate records tipped him off about Bischoff’s involvement as an agent.

That’s when Holloway made a records request for the house sale contracts and got proof of Vierra’s profit from the sale. Holloway studied the law, and zeroed in on what was illegal about Vierra’s actions.

Meanwhile, the district was embroiled in another controversy: in 2014, it fired its district manager, two days after a civil grand jury report was released, blasting the district for its lack of financial and operational oversight.

Holloway knew the district board was going to choose the next manager, and he didn’t think Vierra had a right to take part in that important decision. Holloway approached Vierra at his office, a month before Vierra’s term ended.

“I told him he should pay the money back and resign,” says Holloway, which Vierra didn’t do.

Holloway filed the lawsuit against Vierra. And to Holloway’s dismay, Vierra took part in the decision to appoint Brian Lee, the district’s current manager.

 

DEFENDING VIERRA

One of Lee’s first actions as manager, in 2015, was to pay $13,000 for Vierra’s legal defense. 

“Terry was acting as a director of the district at the time of the claim, so we would be hard-pressed not to defend him,” Lee says.“And at this point in time, the district still feels that the judge misunderstood the law. And we think that it’s the right thing to do. We think that Terry—and even the judge said—Terry did not intend to do anything wrong. Terry tried very hard to do it right. So you know it seems kind of obvious that we would pay for his legal defense.”

Lee says the lawsuit has cost the district $59,000 in legal fees.

Several former board members testified on Vierra’s behalf. Margaret Bruce, the newly elected board president, also testified, but was unwilling to comment for this article, since the lawsuit is ongoing.

Former board member Randall Brown wasn’t on the board in 2010 when the sale happened, but read about it and discussed it in the closed session meetings from 2012 to 2016.

Brown says Vierra excused himself a few times from decisions because he was aware of a possible conflict of interest, but mistakenly approved a group of payments that included the house sale.

Brown says the board wanted to pay Vierra’s legal fees because otherwise people may be discouraged to run for office.

“There was consensus on the board that this was one of our own and we had to own it,” Brown says.

Brown says it seemed that the judge was “practically almost embarrassed” to pass his ruling against Vierra, due to “a technicality.”

“The appeal is still pending, and that’s really the joker, is if [Holloway] wins, then that could set a lot of precedence,” Brown says. “I think Terry tried his best not to be in the middle of that. I think he knew he would have been wrong if he was involved more than he was.”

 

BAD ADVICE

Mark Hynes, the district’s counsel, was present in the closed session meeting in 2010 in which the board decided to buy the house. Interestingly, Hynes is also Vierra’s lawyer, paid by the district to defend Vierra’s actions, which might have been avoided if Hynes had properly counseled the district back in 2010.

“Really, my target is the district counsel [Hynes],” says Holloway. “It’s because he’s giving the board really bad advice. And I need to demonstrate that you’re listening to the wrong kind of advice, and I don’t think that’s gotten through to them. I don’t think they’ve gotten it at all.”

Hynes was reached for comment, but did not reply before this article went to print.

According to law, as a plaintiff, Holloway received $4,600 of the $9,300 that Vierra was ordered to pay. The state’s general fund received the other roughly $4,600. Vierra also may be asked to pay for Holloway’s legal fees accrued thus far.

If Holloway wins his appeal, and the court orders the home sale void, the $522,000 would be returned entirely to the water district. Holloway says he really doesn’t understand why the district is defending Vierra’s actions.

“I feel like I’ve got the pieces to a puzzle, and I think it might be worth half a million dollars to the public, and I need to illustrate to this agency that they’re really going in the wrong direction. They’re really taking the wrong advice and they’re spending money for the wrong purpose.”

 

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