The NEWS index
"Reform Board" has its day in court
Retiree benefits reinstatement ordered
by Jay O'Brien
In 2004 the Rio Linda/Elverta Community Water District (RLECWD) General Counsel advised the Board that the District should continue to provide health benefits to retirees, as agreed by the previous Board of Directors.
After giving that advice, the General counsel was relieved of responsibility for health and benefits issues and new outside counsel was hired by the "Reform Board", who are Directors Mary Harris, Jim Strutton, Hal Morris and Darrell Nelson. The Reform Board set out to "correct" the old Board's actions and the previous attorney's "bad advice".
Lone Board Member Doug Cater has consistently voted against the Reform Board actions.
Following that new attorney's advice, the Board passed a resolution on July 18, 2005 withdrawing RLECWD from the Public Employees' Medical and Hospital Care Act (PERS medical) effective at the end of 2005. All of the present RLECWD employees, plus retirees Mason Adams, Tom Ray, Mike Phelan and Jerry Wickham were affected by the Board's action. As a result of this Reform Board action, RLECWD was served with three lawsuits.
By their December 16, 2005 special meeting with their new attorney, the Reform Board was considering and approving agreements to reimburse Mason Adams and Tom Ray for individually purchased health insurance for a limited period of time. But after incurring the expense to hire attorneys and sue the District, both Phelan and Wickham turned down offers from the Reform Board that would only partially pay for their coverage over a limited period of time.
During the December 19, 2005 Board meeting, RLECWD Board President Nelson made a statement explaining the "Reform Board's accomplishments" of the last year: "The previous Board created some problems and were unable, or didn't care, to correct them... The previous attorney gave some bad advice, and created some of this mess, and was an actual road block to the reform board, so we replaced that attorney with a new attorney."
Last Thursday, December 29, 2005, the Reform Board had its day in Court. Sacramento Superior Court Judge Lloyd G. Connelly observed that he has sympathy for both the old Board and for the new Board. He explained, as he ruled against the actions of the Reform Board, that a new Board cannot "correct" actions of the old Board that may be seen by the new Board as incorrect. He concluded, "They are foreclosed from doing so. That's the way the system works."
The first case, filed by retired RLECWD General Manager Mike Phelan, was decided in Phelan's favor, with the judge ordering that Phelan and his family have a vested right to the full cost of PERS medical coverage or a comparable policy, and ordering the Board to provide such forthwith.
Phelan's lawsuit was encouraged by RLECWD Director Mary Harris, who at the October 2003 Board meeting said, "Let's make a loud statement to Mr. Mike Phelan. If he sues us, please encourage him to sue us... we can win big time... we'd be the winner in the lawsuit." Phelan did so, as Harris encouraged. But Phelan won, as predicted by the previous attorney who "gave some bad advice".
The second case, filed by retired Director Jerry Wickham, was also decided in favor of the retiree. The judge ordered that Wickham was also entitled to the full cost of PERS medical coverage or comparable coverage.
The judge directed that coverage "comparable" to PERS medical must be provided to Phelan and Wickham. As directed by the Reform Board, RLECWD was planning to begin group medical coverage through the Association of California Water Agencies (ACWA). General Manager Dave Andres was asked to compare the PERS and ACWA plans; he said, "The plans are very comparable for our employees." However, if RLECWD refuses to continue with PERS and moves to ACWA, some items to be addressed are: (1) the differences in the lifetime maximum coverage (most PERS plans have no limit) and (2) the differences between the plans in handling retirees who qualify for Medicare.
The third case heard by Connelly was the case filed by RLECWD employees. This court action also includes a request to reinstate employee PERS medical benefits. As a result of the Board's action to change health insurance programs, the employees have organized a collective bargaining unit. The judge stayed the employees' case, until an action by the Public Employment Relations Board (PERB) plays out. PERB attorneys were present in Court, and Felix Poggemann, the employees' attorney, said that he anticipated prompt action by PERB.
RLECWD, in their court filings prepared by their new attorneys, suggested that a conspiracy to defraud "the public and the District's ratepayers" may have taken place in 2000, with the alleged conspiracy including past Board members and Phelan. Connelly granted RLECWD six months to prove their claim. Connelly said, "I am skeptical that the Board will be able to demonstrate the fraud that they allege." However, he accepted Stubbs' suggestion that six months be allowed for "discovery". If they are authorized by RLECWD, the Reform Board's new attorneys Richard Chiurazzi and Peter Stubbs now have the opportunity to continue their $195/hour employment for six more months by taking time-consuming depositions.
New attorneys Chiurazzi and Stubbs, hired to give "good advice," have collected $32,598.63 between them from RLECWD as of December 8, 2005, in spite of the original Reform Board decision to cap the cost at $6,000 for their work on health and benefits issues. This cost does not include the legal work related to the court hearing which will be on Chiurazzi and Stubbs next invoices, nor the $100 paid to each of the five directors for attending each of the special meetings with Chiurazzi and Stubbs. Additionally, Phelan, Wickham and the employees have asked for reimbursement of their legal expenses; Judge Connelly stated that he would address that issue when the final judgment papers were signed.
The actual monetary cost of this Reform Board's expensive actions won't be known for some time, but the cost of losing valuable employees Bob Ames and Todd Artrip has already been felt. The remaining employees of this very small water district are now represented by an attorney paid through costly organization dues and are involved in litigation with the Reform Board. Hopefully they won't follow Ames and Artrip to water districts where they would be more valued by the board.