Settlement cash pays district bills
June 25, 2008 · Updated 4:20 PM
A settlement between the Holmes Harbor Sewer District and one of the attorneys it sued over a $20 million bond scandal has given the district the money it needs to continue its legal fight.
On April 24, Island County Superior Judge Alan Hancock ruled that the $675,000 in damages McCall agreed to pay the district is reasonable. McCall was one of two bond attorneys who recommended in 2000 that the district sell $20 million in illegal municipal bonds to finance a private construction project in Everett. McCall received a $150,000 fee out of the proceeds from the bond sale.
Stan Walker, president of the sewer district's board of trustees, said this week the money was deposited in the district's account and is available to pay the district's legal expenditures as it defends itself against lawsuits over the bond sale, and sues other parties responsible for the scandal.
Out of the settlement, the district paid Seattle attorney Robert Gould $208,819. Gould negotiated the settlement with McCall's attorney last month and took a 25-percent share, plus expenses. The remainder -- $466,181 -- went into the district's account.
Walker said the money has already been used to bring the district current on its legal bills with its regular attorney, Michael Ruark. The district recently paid his firm $154,379 for services performed over the past year and a half.
While the money from the settlement could technically be used to pay any district expenses, Walker said it will go toward just one purpose.
"It gives us the ability to pay some legal bills," he said.
To this point, the district has largely been getting its legal help on credit, which Walker said is expensive.
The settlement comes in a suit that has the potential -- under the worst circumstances -- to saddle the the district with $31 million in liability. Walker said this liability would only pile up if "everything went wrong."
However, that high figure can be used by the district in its suits against the attorneys, developer, bond companies and others involved in pushing the bond sale.
Settlements, like the one the district reached with McCall, must be declared "reasonable" by a judge before the district can take a defendant's money. In addition to the cash payment, McCall will testify in legal proceedings regarding the bond sale at his own expense.
During the reasonableness hearing, Judge Hancock denied a motion from attorneys representing a class action lawsuit in the bond case to sequester the money for a future settlement in that case.
The settlement is the first made in the bond case.