George Rebane
After many months of legal wrangling, internal investigations, external investigation, lawsuit, and God knows what else went on behind closed doors, it appears the AtPac lawsuit (background here) has been settled in favor of AtPac. This was reported to the Board of Supervisors by County CEO Rick Haffey (here).
The bottom line of the out-of-court settlement indicates that the county screwed up badly in the process, but was able to duck the heavy financial hit because its insurance company did step in to pay the $2.75M total bill while getting its $100K deductible, the only out-of-pocket cost to our local government (and us taxpayers). RR readers will recall that early on I predicted the cost to be way north of $2M while the Maidu Mavens were still dismissing this as a nuisance suit.
I received notification of this from a correspondent whose analysis of the settlement is, in my opinion, on the mark – it is reproduced below.
It appears that the County settled with AtPac in the amount of $1.9 million on the eve of the hearing on the motion for summary judgment. The insurance for the County will be paying AtPac the settlement amount. The insurance will be reimbursing the county for its attorney fees in the amount of $845,000. The County pays a $100,000 deductible.
Insurance companies are the stingiest companies on the planet. They do not pay out unless there is significant risk...especially with an attorney fees clause. If the County was successful at trial, AtPac would have had to pay the County's attorney fees and the insurance company would have been off the hook. For the insurance to pay $1.9 million in settlement means that the County was exposed to far greater damages than $1.9 million and AtPac's attorney fees.
This settlement is a win for the County in only $100,000 of exposure (except for increased rates) and the case goes away. The settlment amount alone shows that the County screwed up and the case was by no means frivolous. AtPac was willing to settle for a million. While the County avoids a determination of liability by the court, it is clear by the amount alone that they had a ton of liability.
But no one should walk away from this with the feeling that the county has been vindicated – far from it. The only thing that has occurred is that a $15,000 expense turned into a year-plus saga that cost the county $100K out-of-pocket and untold staff hours responding to litigation requirements, finding out what happened, and keeping a lid on the whole thing. And what really transpired subsequent to the mismanagement of this software vendor changeover, we now will never know.
[19jul2011 update] ‘Be there or be square’, that was the message from our Supes about when they were going make their AtPac settlement announcement at today’s special meeting. They told The Union that it would be at the end of their meeting which usually goes into the afternoon. Not today, the announcement was made in the morning before the special meeting ended, and the chambers were dark this afternoon. Well OK, next time check the agenda schedule.
The announcement itself was delivered by soon-to-retire County Counsel Michael Jamison and is transcribed on The Union’s website here.
Bottom line - for what are now obvious reasons, the county did not want the judge to render a verdict on the summary judgment sought by plaintiff AtPac. Instead, after due consideration of the strength of the county’s defense and who actually knew what when, it was decided to capitulate and give AtPac what it sought from the start - $1M damages and its legal fees paid, totaling $1.9M. The insurance company would pay that plus the county’s legal fees for a total distribution of $2,745,000.
In return the county got AtPac to agree to the settlement wording “The Parties acknowledge and agree that there has not been any finding of liability for or against any party.” (For the lexicographically curious, given that the case didn't go to trial, this is known as a tautology.)
Nevertheless, this little piece of literary legerdemain is supposed to mollify the mindless on what really went down in the back rooms of the Rood Center. Commenters Chuck Whitten, Barry Pruett, and Russ Steele have some observations (see below) that make me think this thing has a lot more settling to do before Nevada County voters can go to bed without having nightmares of loose million dollar cannons rolling around on Maidu.
[20jul2011 update] After posting my somewhat cautionary assessment (see 938AM comment below) on what The Union may or not do next, I received an email from publisher Jeff Ackerman who stated that the newspaper will file a Freedom of Information Act (FOIA) with the county to get it to release the records on this case. I'm sure that other FOIAs would also contribute to pulling back the shades. We recall that the law says only that the county 'may' but not 'must' keep certain records confidential whose release it considers may harm the county. Now that the suit is settled in favor of AtPac, the only harm that could possibly come out of making the records public is not to the county, but to the electeds and staff who managed to make a mountain out of a very small molehill.
[Coverage of this embarrassing saga continues on RR in 'Listen up you idiots ...' .]
Dr. Rebane, our lefty bloggers...opps...they are not lefties they say...well, our lefty wing nut bloggers were quite voluminous is pooh-poohing the notion that this frivolous lawsuit had one iota of credibility. It is not nice to rub it in and say "I told you so". They are getting a bit sensitive to hearing that phrase over and over again since the Stimulus Package launched, Keynesian Economics failed as always (that was one of the easiest predictions in decades) and the long awaited Summer Recovery Tour never materialized last year...or was it the year before? So, Dr. Rebane, lets not be childish and spike the ball in the end zone. That is not the way to win friends and be neighborly. Words can cut deeply. I have an more apt suggestion, if I may. Take 4 pieces of bread (white, wheat, or sourdough)and put some Miracle Whip on one side of each slice. Add a couple of scoops of local crow (organic, of course) to two of the slices. Top with the remaining two slices of the bread of your choice. Send one sandwich to the FUE and the other to the Jolly Rancher in North San Juan. Include a nice note that says something short and sweet like "thinking of you" or "wish you were here" No need for hurtful words or name calling.
Posted by: bill tozer | 18 July 2011 at 04:42 PM
Wise words as always BillT. Admonishment taken.
Posted by: George Rebane | 18 July 2011 at 07:38 PM
I still think there's a fat lady waiting to sing out there. But at least we won't have to wait until December for a trial, no small reward.
Posted by: Michael Anderson | 18 July 2011 at 08:49 PM
I agree that the "fat lady" has yet to sing. Many questions remain: What, if anything, is Aptitude Solutions paying What, if anything, is Gregory Diaz paying? How much will the county's premiums on its insurance increase? What are the actual damages being paid by the three defendants? What are the fees being paid to Downey, Brand (Plaintiff's Attorneys), and are all three defendants sharing those expenses, or only one (Aptitude?)? Is it possible to determine what happened in the numerous closed sessions on this matter, i.e. how did each of the supervisors vote whenever a vote was required? What is the total settlement? And, probably most important, who should be held responsible for this fiasco? I have a feeling that this whole thing is going to be about as transparent as lead. I also suspect that someone is going to take the fall, with little consequence for those who are truly responsible. The fact is that the "buck" stops with the Board, however, the CEO, County Counsel, and Gregory Diaz should be sweating blood. All three should resign immediately. Each of the board members should be asking themselves if they too should resign. It may have only cost the county $100k for this, but that's a lot of money in these times, and there's no telling what it will cost the county in loss of credibility.
At the very least, each of the members of the Board of Supervisors should beg forgiveness from the citizens of Nevada County. What a disgusting, pitiful display of incompetence!
Posted by: Chuck Whitten | 18 July 2011 at 09:22 PM
Chuck, your analysis seems a tad overheated. But keep looking for fat ladies, they're out there somewhere.
Posted by: Michael Anderson | 18 July 2011 at 09:55 PM
Below are relevant portions of a comment from Pelline's blog that Pelline deleted this morning. The comment does not fit Pelline's story.
"If you read the depositions, it appears as though the IS (Information Services) managers, namely Mr. Phil Russ and Mr. Steve Monaghan possibly working with Diaz, authorized an illegal (breach of contract) secret login (ISPHYDOUX) that allowed the new vendor Aptitude to have unauthorized access to the old vendor’s server.
"While I am not privy to all of the facts in the case and do not know what actually happened, I did read the 700 pages of depositions from Kathy Barale and Dan Evers and from their depos it is pretty clear that the County IS managers were either complicit or negligent on a pretty important matter. Possibly when Mr. Russ and Mr. Monaghan were depo’d (were they?), it became undeniable – hence the settlement, The two of them supervised Barale, McCluskey (Russ) and Evers (Monaghan) and these managers would most likely have played a direct role in authorizing the illegal login. We taxpayers are now paying $100K for the possible, perhaps likely incompetence and unethical actons of Russ and Monaghan (and maybe Diaz).
"Perhaps [Russ] was fired for this fiasco too – AtPac’s Lawyers were sure going after that angle. But now it is time for Monaghan to go too. He’s been there too long, he’s costing the County money now and he’s a poor manager when it comes to working with staff.
"Full disclosure. I worked in the County IS Department for 8 years while this was going down. I left the County because it is a professional backwater for my profession (GIS).
"Yes all right there in the Rood.
Posted by: Barry Pruett | 19 July 2011 at 05:40 AM
Pelline asks the particular commenter above to "stay on topic." LOL. It does not get anymore "on topic" than that comment.
Posted by: Barry Pruett | 19 July 2011 at 05:45 AM
Barry,
That is not the comment I deleted, and you know it.
The one I deleted made reference to allegations of sexual relations that were totally inappropriate (except perhaps to you) and very much off topic.
The comment was revised by the commenter to stay on topic and is now posted.
You owe me an apology and a retraction.
-Jeff Pelline
Posted by: Jeff Pellne | 19 July 2011 at 06:24 AM
"Below are relevant portions of a comment from Pelline's blog..." Please learn how to read.
Posted by: Barry Pruett | 19 July 2011 at 06:27 AM
No, then you wrote: "Pelline asks the particular commenter above to 'stay on topic' It does not get anymore 'on topic' than that comment."
But in your earlier post — ie, "that comment" — you purposely deleted the very information that caused the post to be deleted for being off topic. (The reference to alleged sexual relations).
You purposely misled the readers here to create the false impression that I was "censoring" information to "fit Pelline's story." But I was not; in fact, the revised comment (without the off-topic reference) is now posted on my blog.
You owe me an apology and a retraction.
-Jeff Pelline
Posted by: Jeff Pellne | 19 July 2011 at 06:37 AM
Once again, Mr Pelline is trying to change the topic from the lawsuit and the long term consequences of the suit to something that Barry wrote about his editing policy. Lets get back to the subject. I think that Chuck Whitten brings up a very important point, this suit has exposed incompetence at the Rood Center, resulting in the loss of public confidence in how our County Government leaders are discharge their responsibilities. Citizens of Nevada County need more answers, more transparency, so they can once again regain confidence in governance at the Rood Center. I am on the edge of my seat waiting for the "fat lady" to sing.
Posted by: Russ Steele | 19 July 2011 at 07:31 AM
Mr Pelline is off topic? Mr Pelline did not originate the conversation, Mr. Pruett did. The only reason he is here is to truth what Barry posted, which was clearly intentionally twisted and selectively edited to make Mr. Pelline look bad. If you guys don't want us over here then engage in a truce, and stop referring to us negatively, and I am sure we would reciprocate. Until then, STFU.
Posted by: Steve Frisch | 19 July 2011 at 07:40 AM
Truce?
Frisch, if you can't bring yourself to write the words, you shouldn't
use the acronym. STFU indeed.
Posted by: Greg Goodknight | 19 July 2011 at 08:10 AM
You know what Greg, you are right. I should not have used the acronym and I apologize,
Posted by: Steve Frisch | 19 July 2011 at 08:44 AM
Pelline could have redacted the irrelevant portions like I did...but he chose to delete the entire comment. Since 2009, Pelline, the former editor of The Union, attempted to paint a picture of what happened with Diaz which did not pan out. Instead of investigating and reporting like a real journalist would do, Pelline propogandized. Better yet, he did exactly that of which he has accused The Union since his departure therefrom. "Where is the counter-point?" Please...spare me the faux outrage.
Posted by: Barry Pruett | 19 July 2011 at 08:48 AM
I see in that other blog Frisch has stated the suit was politically motivated, but on the face of it, it seems to have been motivated by millions of dollars being there for the taking.
I've no doubt the county will be paying for this for years in increased insurance rates.
Posted by: Greg Goodknight | 19 July 2011 at 08:50 AM
Barry owes me a retraction and apology for twisting my words.
I allowed the commenter to make the same point in a subsequent post without the off-topic remark that was totally inappropriate. The new remark, which came after my warning, is posted on my blog for all to see.
As for propaganda, there has never been any proof of "corruption" by Greg Diaz or his office as more facts of this case have come to light.
Why have there been no apologies to Diaz for the inflammatory "corruption" remarks that have appeared?
In fact, there is no evidence of "corruption" at the Rood Center, either. That's a very loaded word.
Let's not forget Barry ran unsuccessfully against Diaz for clerk-recorder and received campaign contributions from AtPac.
I never come here anymore except when statements are made like Pruett's. Steve is right about that.
Posted by: Jeff Pellne | 19 July 2011 at 09:08 AM
Now that the suit is settled, I'd like to see the deposition of Gregory Diaz. The fact is that Diaz is responsible for this fiasco; he's in charge of the department that caused this problem. If he didn't know what was going on, he should have. If he did know what was going on, he's complicit. From the depositions and documents I've read, it appears Aptitude Solutions did not have the capability of creating "bonded documents." AtPac did, and someone in the clerk recorder's office allowed Aptitude access to the server that would allow it access to AtPac's proprietary software to give Aptitude the ability to generate those "bonded documents."
Does anyone think it's coincidental that Michael Jamison, just last week, announced his retirement? All appearances are that his advice to the board was bad, but I have to ask why board members apparently did not read documents concerning the case? The Union and KNCO were both quoting from those documents, and yet the members of the board ignored media efforts to get them to pay attention.
It really does not matter that the county is paying only $100k for this mess. SOMEONE is laying out at least a couple of million dollars, and, eventually it's the taxpayer, pays that bill. In any event, it's an incredibly irresponsible waste of time and money.
Michael, you may think my comments are a bit heated, but I believe incompetence in government is something that is absolutely unacceptable. You bet I'm heated. The board is spending MY money . . . and yours.
Posted by: Chuck Whitten | 19 July 2011 at 09:27 AM
Mr Pelline writes:
"As for propaganda, there has never been any proof of "corruption" by Greg Diaz or his office as more facts of this case have come to light."
Really, it is obvious that Mr. Peline has not read the depositions. It was Diaz or his office that requested the password account for Aptitude Solutions that gave access to AtPac software before the BOS approved had approved their contract. Is that common practice at the County?
I am sure that Mr Diaz can add some more facts to this case by publishing his deposition. I am sure that his deposition will point the finger at the real corruption.
If the BOS cannot clean house and restore our confidence in their ability to lead, we will do it during the next election.
Posted by: Russ Steele | 19 July 2011 at 10:15 AM
Thanks Russ for confirming a political agenda on a narrow IT issue. Best of luck with your "house cleaning!" at the ballot box. Hope you can improve on your recent mediocre batting average. The county is changing. Come join us!
Posted by: Jeff Pelline | 19 July 2011 at 10:24 AM
Well, the deed is done. The county released the text of its announcement of settlement in AtPac v Aptitude Solutions: "The parties acknowledge and agree that there has not been any finding of liability for or against any party." And yet, " . . . the case is being settled by payment of $1.9mill. to plaintiff in return for a dismissal of the lawsuit and release of all claims." Yes, and the Tooth Fairy will come by tonight to pick up all the teeth. Whitewash? You bet it's a whitewash. The question is, "Why?" Diaz' deposition would destroy him AND the board. It will never officially be released.
Posted by: Chuck Whitten | 19 July 2011 at 01:11 PM
It sure does seem like the $1.9M settlement to AtPac was just a goodness-of-their-heart payment by the insurance company. I was not aware that those folks were a 501c3 non-porift. And now that we're in settlement, does anyone know how deep into the muck does the county want the facts of this case to settle?
Posted by: George Rebane | 19 July 2011 at 01:31 PM
Mr Peline,
Yes, it started out as a small IT issue, which could have been solved with a $13,000 contract, which Diaz cancelled. It was the canceled contract that raised suspicion that something was a miss. The suit was filed and then the coverup started, revealing either there was some internal fraud, or incompetence, you choose which one.
Posted by: Russ Steele | 19 July 2011 at 01:48 PM
So Jeff, you've never created a sock puppet to jump into the blogs you love to hate in order to throw some mud? I'm thinking in particular of that "Robert Lou" chap who had your writing style and the same spelling errors. LOL!
$2M down the drain, and all Jeff can do is make excuses for the county and blow smoke.
Posted by: Greg Goodknight | 19 July 2011 at 03:58 PM
No, Greg I haven't.
Posted by: Jeff Pelline | 19 July 2011 at 05:04 PM
Interesting. Never any sock puppet in any local blog?
Posted by: Greg Goodknight | 19 July 2011 at 10:20 PM
Jamison played The Union. Jamison (who recently resigned) released a statment stating that litigation was going to cost the County $1.75 million. Is he lying?! According to the facts he gave The Union...
Cypress total bill was $725,000 of which...
The County paid Cypress $507,500
Aptitude paid Cypress $217,500
According to Jamison, Pillsbury fees were being split by Aptitude and the County...
Where in the world does Jamison get $1.75 million in fees to the County?!
$507,500 to Cypress from the County...then Pillbury was going to get $2.5 million to go to trial ($1.25 million for the county and $1.25 million from Aptitude)???
Trial is set for December. If the total legal fees from now until trial are projected at $2.5 million - that is about 33 attorney hours per day at $500 an hour for every day (including weekends) from now until trial. That is about 6 attorneys working non-stop for five months on only this case. Yeah right.
They have been litigating this for a year and a half. Up until now they have been spending about $47,000 per month...but Jamison says that they were going to spend nearly that much every day until December? Please...that dog don't hunt.
Now, we know why he resigned and shows that The Union needs to dig a little deeper instead of taking the County's public statements as fact...
Posted by: Barry Pruett | 20 July 2011 at 05:42 AM
Sorry...just grabbed a calculator.
They have been litigating this for a year and a half. Up until now they have been spending about $47,000 per month...but Jamison says that they were going to spend nearly that much every three days until December? Please...that dog don't hunt.
Posted by: Barry Pruett | 20 July 2011 at 05:56 AM
There are smoke and mirrors everywhere in this thing. The people need to start demanding that everything be opened to the public. Anyone can file of Freedom of Information Act request of the county, but it will be more effective coming from The Union. If the Board wants to restore faith, it needs to open this thing up.
Posted by: Chuck Whitten | 20 July 2011 at 08:46 AM
Agreed ChuckW. But we do need to understand that Jeff Ackerman is a bit between a rock and a hard place on this case. The Union is operating with very pared down staffing. One of Jeff's professional and valued employees is Angela Diaz, daughter of our county Clerk-Recorder who is a named defendant in the just settled AtPac suit. And Jeff also needs to keep up a good relationship with the Supes and the county staff, both for informational purposes and because the county is a client of the Union, using the paper to publish its formal records and notifications as required by law. Actively seeking to expose incompetence or culpability, instead of just reporting on it, may well create a many-headed problem for The Union.
BTW, on his blog Barry Pruett has an excellent expansion of the numbers pertaining to this suit.
http://barrypruett.blogspot.com/2011/07/nevada-county-settles-gregory-diaz.html
Posted by: George Rebane | 20 July 2011 at 09:38 AM
George- I understand all of that, but the county needs to understand that if this hits the Bee it will be far more painful than if it comes out locally. I've been considering writing this whole fiasco up for the Bee, but I know they'll sensationalize it. It's a delicate balancing act for Ackerman and the Union, but better the Union than one of the larger, more widely accessed, and more powerful media. My whole motivation for doing any of the stories on this that I did was to get the attention of the board members and get a response. That was a huge mistake on my part. I should have gone for their throats. Instead of dealing with the problem they attacked Ackerman and me behind closed doors. What fools! My interviews with previous defense attorneys for the county were unbelievably frustrating. I came to realize that the attorneys and, I'm afraid the county board and administration, think of the people as ignorant. It's all a horrible, wasteful shame. I'm aware of some of the content of Greg Diaz' deposition, and if any of that ever comes out, many heads will roll, not the least of which would be Diaz'.
Posted by: Chuck Whitten | 20 July 2011 at 11:04 AM
Agreed again ChuckW (please see today's update on Ackerman). My experience with the county has been the same - the wagons are tightly circled. Am sure RR readers would enjoy a more comprehensive piece from you on this if you care to write it.
Posted by: George Rebane | 20 July 2011 at 11:40 AM
Thanks George. I really appreciate that. I've been working on a very long piece for the past couple of months, but I don't like it, and it's too long. The story is incredibly complex and requires a "cast of characters" as well as a timeline to understand. That was one of my problems at the station. I was taking huge amounts of my own time to research the thing, read depositions and get perspective. I won't go into the rest of the gruesome details. I like the blogosphere, but it's not suited to the visuals needed for this kind of story. A newspaper or magazine is where this story belongs. I suspect the Bee will pick it up at some point. That's what happened down in L.A. with the City of Bell. The local papers had been working the story for months, but getting nowhere. Then the L.A. Times reporters got word of it, and the rest is now history. I actually like the people on the board of supervisors. I'm afraid they've been more trusting of the staff than they should have been. Unfortunately they should probably pay the price. I've lost a tremendous amount of respect for them.
Posted by: Chuck Whitten | 20 July 2011 at 12:22 PM
George-
I just looked at your update on Ackerman and the Union. Kudos to him for going for the FOIA filing. I suspect the station will not follow suit. That too is very unfortunate. The pressure county officials have been applying has been significant. I like your comment about this starting as a molehill. I'm not sure it was even at that status when it began. I suspect someone just screwed up, and the county decided to cover it up. The cover up is the problem. That and the irresponsible expenditure of funds.
Posted by: Chuck Whitten | 20 July 2011 at 12:28 PM
Does anyone know who the insurance company is? Could it be a state fund? Will we be able to determine if county insurance rates go up because of this settlement? Insurance companies do not pay out of their sense of civic responsibility, they spread the cost among all of us. So, in the end, we are all paying for this. Therefore, we are entitled to answers beyond what the county has provided. The story has not ended.
Posted by: Bob Hobert | 20 July 2011 at 05:28 PM
The Union published the name of the insurance carrier last week. The provider is CSAC-Excess Insurance Authority. According to the Union article, 29 California counties formed a Joint Powers Authority in 1979 to pool their risk. If you want more, the article appeared on July 16, and is headlined, "County Reimbursed $618K for defense of AtPac suit."
I doubt we'll be able to get much, if any, information from the provider. It tends to be more difficult to get information from insurance companies than it is to get information from the CIA.
Posted by: Chuck Whitten | 20 July 2011 at 08:57 PM
The county has thus successfully foisted their personal liability onto a taxpayer funded insurer - http://www.csac-eia.org/
Makes one proud - not.
Posted by: Bob Hobert | 21 July 2011 at 07:42 PM
My understanding is that CSAC is like a risk retention group. The County pays into the group...the money is invested...and payments are made when necessary. Kind of like being self-insured, but with a group. It is definitely taxpayer money, but isn't it indirectly taxpayer money if they were insured by a traditional insurance company?
Also, it is my understanding that this is the first time that CSAC has paid a claim on behalf of Nevada County.
The fact of the matter is that if Diaz would not have authorized the illegal access to AtPac's software and County Counsel did not advise to hide the access in violation of the contract, we never would have arrived to this unsavory destination.
Posted by: Barry Pruett | 21 July 2011 at 08:40 PM