Diking officials accuse Shepard of breaking law, sharing secrets
January 28, 2010 · Updated 8:39 AM
A Superior Court judge will decide next week if three is truly a crowd when it comes to official discussion of a remaining lawsuit dogging Diking District 1.
Two commissioners of the district, Steve Arnold and Ray Gabelein, are asking for the third commissioner, John Shepard, to be “disqualified” from any executive sessions or talks with the district’s lawyer as officials continue to battle the lawsuit over the district’s controversial Useless Bay pump project.
A second lawsuit against the district commissioners has been dropped.
The disqualification issue was scheduled to be heard in Island County Superior Court two weeks ago, but was pushed back. Judge Pro Tem Carolyn Cliff reset the hearing for Monday, Feb. 1, when Judge Vickie Churchill was to return to court.
Lawyers for the diking district argued that Churchill should decide the matter, since she has considered previous motions in the dispute.
The diking district board has been split for nearly a year, since Shepard — a leading critic of the pump project — was appointed to the board by county commissioners.
Shepard has continued to fight the pump project since taking a seat on the board, echoing the concerns of some in the diking district that the assessments for the pump have not been levied fairly, and that the pump itself is damaging the environment and wildlife at Useless Bay.
Shepard also has repeatedly accused his fellow commissioners of misdeeds, and has called for their resignations and a state investigation.
In court documents recently submitted in the ongoing lawsuit over the pump project, however, the other diking commissioners accuse Shepard of breaking state law by sharing secrets with Citizens in Support of Useless Bay Community (CSUBC), the group that started the lawsuit to stop the assessments on property owners who are paying for the new $430,000 pump project.
Shepard has shown an “extreme pattern of unauthorized disclosures of confidential information,” Scott Ellerby, the diking district’s attorney, claims in a request to have Shepard removed from legal discussions on the lawsuit.
In papers filed in Island County Superior Court, district officials recounted how one of Shepard’s first moves as diking commissioner in early 2009 was to gain access to all of the district’s records. He then demanded a copy of the file the district’s legal firm had kept on the diking district.
Ellerby noted that a confidential letter from the district’s lawyer that was in the file was later used by those who were suing the diking district.
“The letter had not been released by the district in response to any public record request or other request for documents, and had not been disclosed to any other individual or entity,” Diking Commissioner Steve Arnold said in court documents. “I believe that the most likely source of the inappropriate disclosure was Commissioner Shepard, who has openly disclosed communications from the district’s legal counsel.”
Arnold and Ellerby, the district’s attorney, also noted that Shepard is married to Coyla Shepard, a board member of CSUBC — the group suing the district over the pump assessments — and that the couple had helped pay for the lawsuit.
The diking district lawyer also alleges that Shepard has shared draft minutes of district meetings with Elizabeth Derrig, the attorney in another lawsuit against the district, and Shepard has also shared details on his talks with district officials.
One lawsuit dropped
Derrig, however, said that her clients were dropping their lawsuit.
The suit, filed in late October on behalf of five other property owners, focused on district commissioners Arnold and Gabelein. It also included Island County Treasurer Linda Riffe.
Derrig said dismissal of the suit would allow for a further official state investigation into allegations. State officials had told her earlier that they couldn’t investigate the issue while legal action was pending. Derrig also said the litigation “had become a money pit.”
That lawsuit — which had asked for the removal of Arnold and Gabelein from the three-member board for “breach of duty” — claimed diking commissioners acted illegally when they approved the new drainage pump and tried to collect money from property owners to pay for the project.
Meanwhile, Ellerby pointed out that state law prohibits diking commissioners — and other municipal officers — from disclosing confidential information they learn while in their positions.
“Commissioner Shepard’s conduct, and his indisputable conflict of interest, have violated his statutory duty of confidentiality to the district and placed the district and its legal counsel in an intolerable situation,” Ellerby said in a motion filed with the court to have Shepard “disqualified” from any involvement or talk of the lawsuits.
“The district and its legal counsel cannot exchange candid attorney-client communications because of the threat of unauthorized disclosure,” Ellerby said, adding that diking commissioners could also not talk in executive session without the threat that Shepard would tell others about what was said.
Early e-mails cited
As part of the motion to have Shepard removed from any participation in the district’s defense against the lawsuits, district officials included e-mails sent by Shepard and his wife to property owners in the diking district, asking for help with legal action to have the sitting commissioners removed from office.
One e-mail from the couple, dated Oct. 13, 2008, recalled a meeting of residents opposed to the diking district’s leadership and talk of hiring Derrig at an hourly rate of $180.
Shepard declined to discuss the details of the latest court action, except to say that it may not have been filed properly, since the decision to do so was not made at a public meeting.
He also said he was served notice of the latest court action in late afternoon on Christmas Eve, and that he had to scramble to find an attorney to represent him, at his own expense, and to file the required response.
“I don’t think that’s fair,” he said.
Shepard said he would have been happy to excuse himself from discussions about the lawsuits.
“I’ve been more than willing to grant them what they want,” he said. “If I were there, they could accuse me of leaking information to the other side. I certainly don’t want that.”
A long-running dispute
The controversy in Diking District 1 began in 2008 after diking commissioners ordered a new pump to handle stormwater in the district, which spans 743 acres and includes the neighborhoods of Sunlight Beach, Olympic View and Sun Vista and Useless Bay Golf
& Country Club.
The $430,000 pump was installed a year ago, but only those property owners who were expected to benefit from the project — the owners of roughly 460 acres — received special assessments to pay for it.
In a declaration filed in response to the attempt to remove him from participation in district officials’ discussions of the lawsuits, Shepard disputed Arnold’s claim that the new commissioner shared sensitive information with critics of the board.
“I am mindful of my obligations as a commissioner and I take them seriously,” he said in the Jan. 8 declaration.
“I would not intentionally disclose confidential information or otherwise protected information about this litigation or anything else,” he said, adding that he disagreed with his fellow commissioners and sided with those who were suing the diking district.
Shepard acknowledged asking to see all of the diking district’s records, but also said he was concerned that the district’s files in Freeland “may have been compromised and were incomplete.” Shepard also said he was “reluctant” to review the records at the Freeland office because the diking district had accused Derrig, the attorney who filed the most recent lawsuit against district officials, of improperly gaining access to diking district documents in November 2008 and filed a complaint against her with the Washington State Bar Association.
Though Shepard denied giving any diking district documents to the law firm of Rowley & Klauser, he did acknowledge releasing records from 2008 that he thought were not confidential.
He also recounted a visit to diking district offices he made with his wife and Derrig to review records and make copies of district documents.
Shepard’s declaration also offers an echo of his earlier claims about diking officials acting in secrecy. Shepard said he brought his own tape recorder to the Dec. 3 meeting of the district, but Arnold asked him and anyone else in the room with a recorder to shut it off.
Shepard said Arnold maintained the diking board must approve any recordings of its meetings, and that Arnold tried to adjourn the meeting when Shepard refused to shut off his recorder.
Record writer Roy Jacobson contributed to this report.