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Attorney-client privilege waived by a vote of the Council on July 6 , 2010;

document authorized for public release.


Colantuono & Levin, PC
11406 Pleasant Valley Road
Michael G. Colantuono Penn Valley, CA 95946- 9001
MColantuonolQCLLA W. Main: (530) 432- 7357
(213) 542-5739 FAX: (530) 432- 7356
WWW. CLLAW.

CONFIDENTIAL
BY FEDEX AND ELECTIONIC MAIL
to ann. diem acgov. org

July 2 , 2010

An Diem, Assistant District Attorney


Alameda County District Attorney s Offce
1225 Fallon Street , Room 900
Oakland, CA 94612

Re: Potential Brown Act Violations and Other Offcial Misconduct

Dear Ms. Diem:

Introduction. I write to supplement my May 26 , 2010 letter regarding potential Brown


Act violations and other official misconduct by Alameda City Councilmember Lena Tam.
Additional documents have been since brought to our attention which evidence further
misconduct and we write to provide that additional evidence to assist your review of this matter.

Background. The allegations discussed here relate to:

Negotiations between the City and Westhoff, Cone & Holmstedt financial,a
advisorylinvestment banking firm, with respect to potential refinancing of City
assessment bonds , and subsequent attempts by Lonnie Odom of Stinson Securities , an
investment banking firm, to participate in the refinancing of the bonds.

An Exclusive Negotiating Agreement (" ENA" ) between SunCal , the City, and other
public entities regarding Alameda Point , a former naval base and arguably one of the
most lucrative development opportunities in California at present.

A lawsuit against the City by the International Association of Firefighters (IAFF), the
union which represents the City' s firefighters , regarding retiree medical benefits for
public safety personnel hired after Januar 2 , 2010.

Discussion. As discussed in our May 26 , 2010 letter, a Councilmember can be removed


from office for willful or corrupt misconduct in office. Gov. Code 99 3060- 3075. The
misconduct does not have to constitute a crime and need not necessarily imply corruption or

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Ann Diem, Assistant District Attorney
July 2, 2010
CONFIDENTIAL
Page 2

criminal intent. People v. Harby (1942) 51 Cal.App.2d 759, 767. Willful misconduct in office
includes, for example, the conduct of an officer who exercises the power of his or her office so as
to violate a statute or who engages in any willful malfeasance, misfeasance, or nonfeasance. Id.

1. Official Misconduct Based on Brown Act Violations.

A Brown Act violation justifies removal from office pursuant to section 3060. Bradley v.
Lacy, 53 Cal.App.4th 883, 887 n.1 (1997). The Brown Act provides, inter alia, that a majority
of City Councilmembers may not, outside a meeting authorized by the Act, use a series of
communications of any kind, directly or through intermediaries, to “discuss, deliberate, or take
action” on any item of business within the subject matter jurisdiction of the City Council.
Government Code section 54952.2. The enclosed documents show that Councilmember Tam
used such series of communications, with Mr. Odom as an intermediary, to discuss with a
majority of Councilmembers outside an open session of the Council Mr. Odom’s desire to profit
from a City bond refinancing.

Such serial meetings in violation of the Brown Act are evidenced by emails among Mr.
Odom, and Councilmembers Tam and Gilmore, with copies to Councilmember Matarrese (who
did not respond to this unlawful communication but was merely a passive recipient of it). On
May 21, 2010, Mr. Odom emailed Councilmember Tam (Exhibit DD) about a proposal to
refinance City bonds. The email stated Mr. Odom had “just met with [Councilmember] Gilmore,
who suggested that [he] contact [Councilmember Tam].” He further stated that he would be
meeting with Councilmember Matarrese and that he would also like to meet with
Councilmember Tam. Councilmember Tam replied (Exhibit DD) that she was very interested in
meeting with him and the two negotiated a meeting time. From Councilmember Tam’s email, it
appears that she already discussed the substance of Mr. Odom’s email with Councilmember
Gilmore and she copied her email to Councilmember Gilmore. Further, on May 26, 2010, Mr.
Odom sent another email to Councilmembers Tam, Gilmore, and Matarrese, with a carbon copy
to Councilmember deHaan (Exhibit EE), thanking the Councilmembers for meeting with him.
Councilmember Tam responded to this email (Exhibit FF), stating she appreciated the
opportunity to meet with Mr. Odom and that she was working to schedule his proposal to
provide bond underwriting services for a closed session of the City Council. (although we can
think of no legal justification for discussion of that topic in closed session). Finally, on June 14,
2010, Mr. Odom emailed Councilmember Tam (Exhibit GG) stating that it was troubling that
“the issuance of bonds [had] been placed on the Consent Calendar” for the June 15, 2010
Council meeting, which he claimed was highly unusual. Councilmember Tam replied to this
email (Exhibit GG), copying her reply to Councilmembers Gilmore and Matarrese, and invited
Mr. Odom to attend the Council meeting and “pull” the item from the consent calendar for public
debate to “share [his] experience.” As such, Councilmember Tam communicated with a majority
of Councilmembers about the refinancing of City bonds, using Mr. Odom as intermediary and

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Ann Diem, Assistant District Attorney
July 2, 2010
CONFIDENTIAL
Page 3

relying upon his unsupported e-mail statements as fact. This communication related to an issue
within the City’s subject matter jurisdiction and therefore should have occurred only in a
properly agendized open session of the entire Council.

2. Official Misconduct Based on Violation of Sections 7-2(H) and 7-3 of the City
Charter.

Councilmember Tam has also engaged in official misconduct by interfering with the City
Manager’s performance of her duties. Section 7-3 of the City Charter1 provides:

Neither the Council nor any of the members thereof shall interfere with the
execution by the City Manager of his or her powers and duties. Except for
purposes of inquiry, the Council and its members shall deal with that portion of the
administrative service for which the City Manager is responsible solely through
him or her. An attempt by a Councilmember to influence the City Manager in
the making of any appointment or the purchase of any materials or supplies
shall subject such Councilmember to removal from office for malfeasance.
(Emphasis added.)

Section 7-2(H) of the City Charter further provides:

The City Manager shall have the power and it shall be his or her duty . . . [t]o see
that all contracts and franchises made under his or her jurisdiction or that of the
Council are faithfully performed, and to report all violations thereof to the
Council.

Councilmember Tam interfered with the City Manager’s duty to provide her best
professional recommendation as to the financial advisors best suited to refinance the City’s
bonds and directly contacted individuals involved in the transaction in an attempt to influence it
for the apparent benefit of Mr. Odom.

In 2007, the City’s financial advisor William Reynolds provided the City with a report of
its assessment bonds, advising that certain bonds be refinanced (Exhibit HH). Around that time,
Mr. Odom offered then-City Finance Director Juelle Ann Boyer a proposal to refinance these
bonds, but she did not accept the offer (Exhibit II). In 2009, City Manager Ann Marie Gallant
began reviewing the potential refinancing of the bonds (the “transaction”) and contacted the
municipal securities underwriting firm Westhoff Cone & Holmstedt as a potential underwriter
candidate for the transaction, because of their statewide expertise in land-based securities
transactions (Exhibit JJ). At one point, Mark Holmstedt, a principal in that firm, discussed

1
The text of the City’s Charter appears on-line at www.ci.alameda.ca.us/gov/city_charter.html.

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Ann Diem, Assistant District Attorney
July 2, 2010
CONFIDENTIAL
Page 4

potential cooperation with Mr. Odom—who sought to be included in the transaction—but


because of what Mr. Holmstedt described as Mr. Odom’s “threatening” communication, Mr.
Holmstedt ended those discussions (Exhibit JJ). Specifically, Mr. Odom demanded a larger
share of the deal before “things [got] really ugly” (Exhibit LL). On May 21, 2010, Mr. Odom
contacted Councilmember Tam about this transaction (Exhibit DD), whereupon the two met and
exchanged multiple emails (Exhibits DD, EE, and GG). On May 26, 2010, Councilmember Tam
sent Mr. Odom an email thanking him for meeting with her and stating that, since their meeting,
she had discussed the transaction with a number of people, including the City’s financial advisor,
Mr. Reynolds, and former Finance Director Juelle Ann Boyer (Exhibit FF). Mr. Odom thanked
Councilmember Tam for her help (Exhibit FF). He further stated that he would like to “be in
charge of the sale of the bonds” and asked that Councilmember Tam let him know about the next
step (Exhibit FF). The transaction was agenized for the June 15, 2010 Council meeting (Exhibit
YY). Before this meeting, Councilmember Gilmore contacted Mr. Odom by e-mail with
financial questions about the City Manager’s staff report (Exhibit ZZ) and copied
Councilmember Tam on this e-mail. Mr. Odom responded to both Councilmembers Gilmore
and Tam, questioning Mr. Holmstedt’s role as a co-Financial Advisor, asserting that his fee was
too high, and that the underwriter on this matter should not be selected through a competitive
process but through a negotiation. (Exhibit ZZ). Councilmembers Tam and Gilmore questioned
the transaction at the June 15, 2010 Council meeting, including the financial advisors’ fee, as
suggested by Mr. Odom’s previous e-mail. After the June 15th Council meeting, Mr. Odom
emailed them both thanking them for “fighting the good fight and asking the hard questions” and
invited them to have lunch with him “after the pricing [so that he could] provide [his] analysis”
(Exhibit KK).

The City Manager’s duty with respect to the transaction was to find a competent and
reliable candidate to underwrite the City’s bonds and to provide professional, unbiased
recommendations to the City Council. It was her job to negotiate with potential underwriters –
and it was not the role of individual Councilmembers to do so,2 although the ultimate contracting

2
This separation of Councilmembers from the administrative details of City business is required
by Section 7-3 of the Alameda Charter and other charter and ordinance provisions adopting the
Council-Manager form of government, which is intended to prevent patronage and corruption in
city government: “The concept of the council-manager form of government was a product of a
confluence of the prevailing modes of thought during the late 1800s and early 1900s. Probably
the foremost influence was the Progressive Movement; following along the thought lines of the
movement, the municipal reformers of that time wanted to rid municipalities of the pervasive
“Machine” form of government and the abuses of the Spoils system. The thought was to have a
politically impartial administrator or manager to carry out the administrative function.”
http://en.wikipedia.org/wiki/Council%E2%80%93manager_government (footnotes and
hyperlinks deleted).

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Ann Diem, Assistant District Attorney
July 2, 2010
CONFIDENTIAL
Page 5

decision was for the Council to make in discussions compliant with the Brown Act. The City
Manager and the City’s underwriting team excluded Mr. Odom from their recommendations to
the Council for this transaction due to his unprofessional dealings (Exhibit JJ). Instead, the
bonds were ultimately sold through a competitive process in which Mr. Odom’s firm did not bid.
By secretly communicating directly with Mr. Odom, the City’s financial advisor, and other
interested parties and without disclosing that fact to the City Manager, Councilmember Tam
interfered with the City Manager’s ability to carry out her duty and violated Section 7-3 of the
City Charter. As noted above, that charter provision states that the consequence of such
misconduct is removal from office for malfeasance. Indeed, this was the basis for the recent
removal from office of the former Mayor of Mountain View by the Santa Clara County Superior
Court in an action filed under Government Code §§ 3060 et seq..

3. Official Misconduct Based on Disclosure of Personnel Matters.

Councilmember Tam further engaged in official misconduct by disclosing confidential


personnel information pertaining to the City Manager to the press and other third parties.

Councilmember Tam forwarded emails with confidential personnel information expressly


pertained to the City Manager to various individuals, mostly by blind carbon copy. Some of
these individuals were the local bloggers John Knox White and Lauren Do (Exhibits QQ, SS,
and TT), “The Island” reporter Michelle Ellson (Exhibit SS), the former City Finance Director
Juelle Ann Boyer (Exhibit SS), and Kate Quick of the League of Women Voters (Exhibit RR).

In addition to forwarding emails, Councilmember Tam also telephoned City financial


advisor Mr. Reynolds on May 25, 2010 and told him confidential personnel information she
claimed to have obtained from individuals previously associated with the City Manager (Exhibit
UU). Councilmember Tam made similar statements to Mr. Odom, who provided similar
information to Mr. Reynolds in a June 3, 2010 conversation, stating that it was his understanding
he would be given part of the bond underwriting work and the City Manager would be fired
(Exhibits VV and XX). Disclosing this information to Messrs. Odom and Reynolds without the
City Manager’s prior written consent was a clear violation of the City Manager’s privacy rights.3
While a City Manager is a public official and subject to public criticism and Councilmembers
are, collectively, the appointing authority for the City Manager, discussing her performance in
this way, and leaking confidential information via blind carbon copies and without disclosing to
the Manager and other City officials that she was doing so, Councilmember Tam jeopardized the
City’s legal interests, violated the City Manager’s privacy rights, and exposed the City to claims
by the City Manager, including but not limited to, defamation, constructive discharge and other
employment claims. Each of these is a breach of fiduciary duty and official misconduct with the
meaning of Government Code Section 3060.
3
Ms. Gallant has provided her written consent to the release of this information to you.

98578.11
Ann Diem, Assistant District Attorney
July 2, 2010
CONFIDENTIAL
Page 6

4. Official Misconduct Based on Breach of Fiduciary Duty and Further Charter


Violation.

Councilmember Tam further used her position to advance SunCal’s interests in the
Alameda Point project at the expense of the City and its residents and taxpayers. A public
official acts as trustee for the public, and thus cannot use his or her official position to benefit a
private party. Terry v. Bender, 143 Cal. App. 2d 198 (1956); People v. Harby, 51 Cal.App.2d
759, 770 (1942). Councilmember Tam violated this trust by making statements on behalf of
SunCal in response to a public records request from David Howard, a City resident and blogger.

In directly responding to a public records act request, purportedly on behalf of the City,
Councilmember Tam also interfered with the City Manager’s administration of City affairs in
violation of section 7-3 of the City Charter.

On May 25, 2010, Mr. Howard emailed a public records request to the City Manager and
the City Council (Exhibit MM), asking whether SunCal had made any financial commitment to
the Alameda Point project and stating that SunCal might be committing fraud on the residents
by falsely representing that it had financing for the project. The City Manager replied to Mr.
Howard’s email (Exhibit MM), with carbon copies to relevant City staff, stating that public
records requests are handled by the City Clerk’s office. Although Councilmembers may not
respond to public records requests under the Council-Manager form of government,
Councilmember Tam replied to Mr. Howard’s email on May 26, 2010 (Exhibit NN), stating that
“[f]rom the records and filings, DE Shaw and SunCal (Cal Land) spent $183 million in non-
borrowed equity in New Mexico” and that “[i]n the discussions with the Navy and the public
proforma that we have reviewed, SunCal/D.E. Shaw is ready, willing and able to spend the
$108.5M in conveyance costs requested by the Navy.” This information was not available from
any City records and it appears that Councilmember Tam obtained this information from SunCal
and provided it on behalf of SunCal, especially because she blind-carbon-copied her reply to the
public records request to SunCal representative Frank Faye (Exhibit NN). Because
Councilmember Tam used her official position to present on behalf of the City what was
ultimately SunCal’s position without revealing her discussions with SunCal officials, she
breached her fiduciary duty to the public and violated section 7-3 of the City Charter.

5. Possible Disclosure of Closed Session Information.

Although additional investigation is required to establish this, recent emails suggest that
Councilmember Tam may be continuing to leak closed session information in violation of the
Brown Act. Our May 26, 2010 letter included emails which evidence that Councilmember Tam
leaked closed session information to various third parties and that she has covertly acted on
behalf of the IAFF. On June 12, 2010, Councilmember Tam forwarded to her personal g-mail
account (Exhibit OO) closed session information relating to a lawsuit IAFF has filed against the

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