SAN FRANCISCO — A rural California water district that sued its financial adviser two years ago for alleged malpractice, last week paid the firm $300,000 to settle a counterclaim that the original lawsuit hurt the FA's business.
The Calaveras County Water District, following a string of court defeats this summer, paid $300,000 to C.M. de Crinis & Co. and president Curt de Crinis. In a prepared statement, the district said that settling the claim was a cost-saving measure.
In 1997, the CCWD sued de Crinis for malpractice after $9.6 million of nonrated limited-obligation bonds defaulted in 1996. The district was seeking $2.5 million. The debt was issued to pay for sewer and water improvements at a private subdivision located about 60 miles southeast of Sacramento.
The district alleged that Curt de Crinis breached his fiduciary responsibility; violated good faith and fair business practices; and intentionally misled officials about the project's viability, bond security, and the district's obligations in the event of a default.
De Crinis filed a countersuit claiming his firm was a victim of fraud, negligence, and breach of contract, and that the lawsuit had caused him to lose business. Throughout the two-year litigation, de Crinis contended that CCWD's original lawsuit was a cover up, filed to hide the fact that district officials knew a sewage treatment plant being financed lacked enough capacity to handle all homes paying assessments.
The counterattack paid off.
"You don't have to take it. That's the message here," said de Crinis' attorney, Raymond Buddie, of Peckar & Abramson. "You can stand up and fight."
The case turned in de Crinis' favor earlier this summer, when his attorney's uncovered a memo written by Robert Doty, president of American Government Financial Services, the district's new financial adviser. The memo, addressed to the district's attorneys, Downey, Brand, Seymour & Rohwer, appears to recommend that they squeeze cash out of de Crinis to pay off bondholders.
"CCWD believes that the pressure on de Crinis should be juiced every week," the memo states. "You and CCWD can look for subtle and not-so-subtle ways of doing so. The purpose is to both bring him to the negotiating table with real cash, and also to open wider the door to his actual clients in these transactions -- the developers and property owners who have even more cash to access for the benefit of the bondholders."
Doty said in a telephone interview Monday that the memo, titled "Pressure on Curt de Crinis," was not directed solely at de Crinis and should not be taken out of the context of an effort to make recoveries from all parties to the financing. Doty also said he was speaking on behalf of the district. He said the memo discussed a strategy to impress upon members of the financing party the serious threat of civil and regulatory lawsuits. The memo did not advise the district to sue de Crinis, a course which Doty said he never counseled.
In August, the memo prompted de Crinis to take the unusual step of suing Downey Brand, arguing that they maintained the lawsuit against him even though the firm knew there was no basis for the case.
The settlement ends all of the litigation.
