County Ignores Proposal To
Save Taxpayers Millions
By Ray A. March
The attorney hired to advise Modoc County officials on how to avoid bankruptcy recently offered a strategy that could fix the problem of a misappropriated treasury and save taxpayers as much as $10 million.
Or did he?
Against a political background of suppressed information, doublespeak or no speak, there is a tangled web of what the attorney said, what he didn’t say or whether he said anything at all.
The Modoc Independent News has learned from reliable sources that Michael Sweet, a bankruptcy attorney retained during the Dan Macsay-led Board of Supervisors, proffered an opinion that the state of California could not legally or constitutionally demand the county to repay $13 million to the misappropriated treasury.
In Sweet’s view, apparently, the argument of legality and constitutionality could give the county leverage to negotiate the $13 million the state mandated be repaid to the treasury down to $3 million to $5 million.
This opinion, reportedly in memo form, was presented to CAO Chester Robertson, Auditor Darcy Locken, Treasurer Cheryl Knoch and Supervisors Dave Allan and Loren “Shorty” Crabtree in November.
All, with the exception of Crabtree who was sitting in for Supervisor Geri Byrne, are members of the subcommittee assigned the task of recommending to the full board methods for resolving the county’s fiscal crisis.
To the amazement of Locken and to the perplexity of Knoch the other subcommittee members are apparently in complete denial or are suffering a memory lapse as to what Sweet actually told them.
To tighten the lid on what transpires between the bankruptcy attorney and members of the subcommittee since the November meeting, the Board of Supervisors in February -- on Byrne’s recommendation -- voted to limit conference calls with Sweet.
The board’s move was supposedly to cut down on attorney expenses, but in effect acts as a monitoring devise that blocks Locken and Knoch -- both publicly-elected officials -- from contacting Sweet without prior approval of either Robertson or a majority vote of the board.
Did Sweet say what he reportedly said at the subcommittee meeting?
“I am unable to comment on this,” Sweet wrote in an e-mail response to the Modoc Independent News.
What did Robertson have to say about Sweet’s alleged opinion on how to leverage the state and potentially save the county millions of dollars?
“No comment,” Robertson said.
What about Allan, another member of the subcommittee present at the Sweet conference?
“I truly don't remember M. Sweet saying anything of that magnitude,” Allan wrote in an e-mail reply to a query from the Modoc Independent News. “If he had, doesn't it seem reasonable that we'd be on that thought like a duck on a June bug?”
“I have gone back over my notes from our conference calls and I do not see anything about this,” she wrote in an e-mail.
Crabtree, who was chair of the board at the time of the Sweet meeting, was not contacted for comment.
Yet, there is another side to the story, other memories and opinions from both Locken and Knoch.
“I can confirm with you that Michael Sweet did give the county financing group an opinion about negotiating a write-off/pay-off of the hospital debt,” Knoch wrote in an e-mail. “My belief is the opinion gave us a starting point to negotiate with the state agencies we owe restricted funds to. After we received the opinion, it was decided to not use or contact the attorney unless we have the CAO's or a majority of Board of Supervisors’ approval. So, needless to say, we are stuck in the mud on this issue.”
“It’s true“ she said. “What the lawyer wanted to do is take it to the state to say you can’t force the county to use taxpayers’ dollars to pay back a debt. The whole thing is illegal, but if you question Chester he turns on you. He works for the Board of Supervisors and we were told not to speak with the attorney.”
“I don’t want to lose our negotiating position with the state, and I’m not saying this to embarrass the Board of Supervisors, they are doing that themselves. They need to be pressured by the public to do the right thing. The public needs to ask the Board of Supervisors to stand up and defend its position.”
Why the embargo on Sweet’s report? In answer, Knoch said there was a deal made and also a personality conflict involved.
“We all agreed to keep the information obtained in the meeting confidential until the county came up with an agreement on how to go forward with the plan based on the legal opinion,” Knoch admits.
“Do I know why this got stymied?” she continued. “Not exactly, just that the majority of the finance committee didn't want to go that route. I know that Chester didn't care for Michael Sweet and the advice he gave us.”
Knoch apparently was not in agreement with the majority of the subcommittee.
“My opinion is that if it opened the door for discussions with state agencies on debt repayment and/or forgiveness that we should take the advice and move forward with it,” she said.
As for the allegations pointed at Robertson? He did not come out from behind his “no comment” posture, but in his defense Allan did.
“We know that with Chester there will not be a penny slipping through his fingers,” Allan said. “Sweet’s thought process coincides with administration. There are some strong parallels.”
And why did Sweet respond with “I am unable to comment on this?” Because he first contacted his clients -- members of the subcommittee -- apparently advising them that he did not think he should make a comment. This has been confirmed by both Byrne and Locken.
Knoch told Sweet she had no objection to Sweet making a comment. Locken wanted to know if the county was going to be billed for his time. And Byrne supported Sweet’s “no comment” position.
“He is the attorney and he knows what he should reply to and what he shouldn't so I agreed,” Byrne said.
It is not known why Robertson, who is generally affable and excessively wordy, would not comment at all.
Tightly wrapped in the county’s fiscal crisis package is Robertson’s most recent update of his fiscal restoration plan, which does not include Sweet’s strategy that the state cannot force the county to pay down the treasury debt.
Instead, Robertson continues to suggest that the county sell off some of its properties but with considerable reservations compared to an early version of the plan.
He acknowledges that the sale of some buildings may not be plausible, such as the Oak Street shop facility. The Belli Building poses higher long term costs. The 4th Street complex “would have varying impacts on different departments.” And the sale-lease back plan could lead to a questionable debt service burden.
Also yet to be resolved under the heading of “Mitigation of threats to Cash Flow” is the potential costly issue of “Compensated Absences Liability.”
Editor’s Note: This article first appeared in the March issue of the Modoc Independent News. In that article there was a typo in the line “…apparently advising them that he did not think he should not make a comment,” in effect a double negative based on “not.” We regret if this caused our readers confusion. The typo has been corrected in the Modoc Independent News blog version.