Federal Agencies

Government Agencies Use Their Power to Bolster Their Own Budgets

A northern California legal case involving state and federal efforts to secure a massive financial settlement from the state's largest land owner is rife with allegations of fraud, corruption, and official misconduct

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SACRAMENTO — Liberals often complain about the greed of profit-seeking corporations, while conservatives likewise complain about abuses by government officials. Both sides might take notice of something that seems to epitomize the worst of both worlds — government agencies that use their power to bolster their own budgets.

An eye-popping example – filled with allegations of fraud, corruption, and official misconduct – is unfolding in a northern California legal case involving state and federal efforts to secure a massive financial settlement from the state's largest land owner, Sierra Pacific Industries.

Authorities say a bulldozer from a subcontractor working for the Shasta County-based lumber company sparked the "Moonlight Fire" that burned 65,000 acres in northeast California in 2007. Sierra Pacific has long denied responsibility for it, but after a courtroom setback, the company agreed to a $55 million settlement and agreed to give the government 22,500 acres — much less than it could have owed if it lost a prolonged court battle.

But earlier this month, the government's case continued to unravel. Sierra Pacific filed a 100-page motion with the U.S. District Court accusing prosecutors of fraud and a cover-up – and asking it to vacate the settlement.

Its filing included a 15-page declaration from a former U.S. Justice Department prosecutor who argued that it was the first time in his long career that he "was pressured to engage in unethical conduct as a lawyer." E. Robert Wright said he was removed from the case given his "zero tolerance of litigation misconduct by the government."

Another former federal prosecutor quoted in the filing resigned from the case after saying: "It's called the Department of Justice. It's not called the Department of Revenue." Sierra Pacific officials say prosecutors covered up information that undermined their account and benefited from funds collected from wildfire defendants.

"The entire original prosecution against Sierra Pacific appears to have been driven by the Department of Justice's interest in hitting a 'deep pocket' for millions of dollars of revenue," argued the New York Observer's Sidney Powell, who views it as a pattern by the department to use "its overwhelming litigation might" as "a tool of extortion."

The company's arguments were bolstered by a Plumas County Superior Court decision in January blasting the behavior of California Department of Forestry and Fire Protection officials, who were working with federal prosecutors on the case and seeking their own damages for fire-related costs.

Writing that he had not been so disappointed and distressed in his 47 years in the courts, Judge Leslie Nichols ruled that CalFire "engaged in a systematic campaign of misdirection with the purpose of recovering money from the defendants." Nichols said "the misconduct in this case is so pervasive that it would serve no purpose for the court to even attempt to recite it all here" — and then awarded Sierra Pacific $32 million in damages, in a case still being appealed.

On October 14, the federal court did something unusual: It recused all judges in the district from handling the case, and referred it to Alex Kozinski, chief judge of the federal Ninth Circuit Court of Appeals, to assign a judge from outside the area to the case.

For those who think the Justice Department might clean up its act in the wake of these allegations and court actions, consider the prosecutors at the center of the controversy were among those who just received top department awards "for the successful settlement negotiations and the predicate fraud investigations" and for securing large settlements in various cases.

The Moonlight Fire case isn't a rare instance where agencies use their power to secure large payments that then benefit government agencies. Local, state and federal officials routinely rely on the proceeds from civil-forfeiture cases to balance their budgets.

As Sierra Pacific noted in its filing, federal prosecutors' legal obligation is "not that it shall win a case, but that justice shall be done." And it's not to use formidable government power and questionable tactics to enhance the bottom line. Regardless of our politics, everyone should agree on that.