Former CUSD Trustee Hatton-Hodson’s Undisclosed Financial Conflicts Of Interest And The FPPC
Last fall it was discovered that elected CUSD Trustee Lynn Hatton-Hodson had an undisclosed financial conflict of interest due to her ownership interest in a vendor to Capistrano Unified School District. She apparently did not disclose this conflict in her required filing with the County known as a Form 700 (Statement of Economic Interest). A citizen made a complaint to the FPPC (the Fair Political Practices Commission) about Ms. Hatton-Hodson’s failure to disclose the obvious conflict.
Normally the filling out and defending of a Form 700 is completely on the shoulders of the person who files it – whether a successful candidate for office like Ms. Hatton-Hudson or the losing candidate who is not elected to office. In this case the CUSD Board of Trustees had an attorney opine that filling out a Form 700 was an official act of a Trustee and any challenge regarding the form entitles the Trustee to a taxpayer funded defense by attorneys who specialize in this field.
Trustee Hatton-Hodson’s Undisclosed Financial Conflicts of Interest and the FPPC
In September 2016, the Board of Trustees voted 6 to 0 (Ms. Hatton-Hodson did not vote) to retain the law firm of Olson, Hagel & Fishburn, LLP of Sacramento to defend their colleague before the FPPC. The Board of Trustees authorized the District to spend $15,000.00 of taxpayer money to defend her.
The Olson firm was specifically requested by Ms. Hatton-Hodson in a letter addressed to CUSD’s general counsel Mr. David Huff of the law firm of Orbach, Huff, Saurez & Henderson, LLP. [Hatton-Hodson ltr to Huff]. Interestingly the fee agreement between the Olson firm and the District identified the District as the Client not Ms. Hatton-Hodson. [9-28-16 Professional Services Agreement]. Yet they apparently defended Ms. Hatton-Hodson, not the District, before the FPPC.
Conflict of Interest – What Conflict of Interest!
The California Policy Center, Inc. sent Public Records Act requests to CUSD and the FPPC after the FPPC closed its file in this matter in late February 2017.
Most of the time a contract between a client and an attorney firm is required under Business and Professions Code section 6148. CUSD disclosed to CPC the agreement between itself and the Olson firm. Again, oddly, this agreement identifies the District not Trustee Hatton-Hodson as the Client of the firm. The FPPC complaint was the sole scope of work listed for the Olson firm.
In addition, an attorney is not allowed to represent clients with conflicting interests. Rules of Professional Conduct, Rule 3-310. The attorney may represent two clients where the conflict of interest between them is only a potential one. But the attorney should obtain a written Waiver of the Potential Conflict of Interest. Rules of Professional Conduct, Rule 3-310 (c).
A potential conflict of interest is something that is very foreseeable in this situation and where the interests if the District and Ms. Hatton-Hodson could become adverse requiring the attorney to withdraw from the representation at any time. However when we received the documents from CUSD, while the 9/26/17 Agreement was produced, no signed off letters or notices to either the District or Ms. Hatton-Hodson of the Potential Conflict of Interest for the Olson firm were disclosed. Thus it appears no written waiver was obtained even though one Trustee apparently understood this and brought it to the attention to the Superintendent. [9-26-16 E-mail].
Public Records Act requests by CPC to CUSD and the FPPC – Surprise: Three Law Firms for One Matter!
When CPC sought records under the Public Records Act the requests included attorney fee invoices related to the FPPC matter from CUSD. In documents disclosed by CUSD we received invoices from not one but three law firms. Importantly there was one invoice from the Olson firm dated October 31, 2016 for just over $15,000 – the entire amount authorized by the Board of Trustees just one half of one month earlier. [10-31-16 Olson Invoice].
But there were two other firms sending CUSD invoices for this matter: The Orbach firm apparently to give legal advice that the Board could spend taxpayer funds to defend Trustee Hatton-Hodson and presumably to watch over the Olson firm. Also billing on this matter was the law firm of Werksman, Jackson, Hathaway & Quinn acting as an expert to the Orbach firm. The hourly rate for the Werksman firm’s senior partner is $750 per hour! [Werksman Invoices]. All three law firm’s invoices were heavily redacted (blocked out) so that we could not read what these law firms did for Ms. Hatton-Hodson’s defense. We asked CUSD to give us un-redacted versions of these invoices and it refused.
In Part Two of Two – More Public Money for Attorneys, And for What? Plus Serious Questions Remain from this Episode.