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By John Earl
from Surf City Voice, May 29, 2014
That’s all that Director Stephen Sheldon will say about his participation in a recent Orange County Water District discussion that was largely about the financial future of his former employer, Poseidon Resources, Inc.
Specifically, at OCWD’s May 21 board of directors meeting, Sheldon discussed and voted on a proposal to hire consultants to study various cost scenarios, including direct involvement by OCWD, related to an estimated $1 billion ocean desalination plant that Poseidon proposes to build in Huntington Beach.
The OCWD manages the county’s groundwater and provides 75 percent of the water used by ratepayers in its central and northern parts. With its Ground Water Replenishment (sewage recycling) program, the OCWD (with the Orange County Sanitation District) produces enough fresh, clean, drought-proof drinking water for 600,000 people, and there are plans to expand that program in the near future.
Under California’s Political Reform Act, elected officials are prohibited from voting on any project before them in which they have a financial interest or that would affect their economic interests or that financially impacts a company they worked for in the past year.
The ACT also requires elected officials to disclose financial sources and interests that by its definition cause a conflict of interest.
Those disclosures are contained in a yearly Statement of Economic Interests (700 form) that is on file for each board member at the office of the clerk for the Orange County Board of Supervisors.
OCWD meetings are also subject to California Government Code 1090, which is stricter than the ACT.
Recognizing indirect and direct influences that public officials have on decision making, Govt. Code 1090 prohibits any financial conflict of interest by those officials over contracts, even if the official isn’t voting; those officials, it says, “shall not be financially interested in any contract made by them in their official capacity, or by any body or board of which they are members.”
Under 1090, the board is prohibited from voting on any contract which financially enriches any of its members, even if such a member recuses himself from the matter.
Sheldon’s 2013 Statement of Economic Interests reports working for Poseidon, earning between $10,000 and $100,000 yearly. In 2014 he no longer lists Poseidon as a source of income, but does list Faubel Public Affairs, owned by political consultant Roger Faubel (a former director for the Santa Margarita Water District), as a source of $10,000 – $100,000 of income yearly.
On the FPA website, Poseidon Resources is shown on a list of former and current clients. But on April 1, 2013, according to an article in the OC Register, long-time Faubel business associate Brian Lochrie and his wife, Arianna Barrios, took over most of Faubel’s marketing clients and hired most of his staff under a new business name, Communications LAB, which now lists Poseidon as a client on its webpage.
But the break-off from Faubel was little more than a rearrangement of chairs, as both Faubel and Lochrie made clear to OC Register reporter Sarah de Crescenzo:
Faubel…said the two firms will have a strategic partnership.
Added Lochrie: ‘We’ll continue to work together closely. (Roger’s) been a wonderful mentor for the last 12 years, and I look forward to continuing to work with him.’
Consistent with that goal, Faubel’s website lists Communications LAB as its “partner agency”, and the “two” companies are located in the same building in suites 200 and 250 respectively.
Sheldon, carefully waiting for his post-Poseidon one-year voting restriction to end, recused himself at the April 2 (2014) OCWD meeting when the board approved the RFP for the Poseidon financial analysis.
But at the May 21 board meeting, Poseidon CEO Scott Maloni whispered that Sheldon could vote on the matter because his legal restrictions had expired a month ago. What Maloni didn’t say is that by working for Faubel, who Maloni spoke with closely throughout the meeting, Sheldon was again on the hook for potential conflict of interest charges.
Director Philip Anthony started the discussion on the proposed Poseidon study by calling it premature to spend the $150,000 that staff recommended to hire two of the five consulting firms that submitted proposals.
“The Poseidon project is hung up by a couple of big things happening at the state level,” he said. “The sad truth is that the Poseidon project…is not clearly defined at this point. It’s subject to huge change based on what these state agencies do. So I suggest we save our money, your money, for the time being.”
Director Kathryn Barr agreed with Anthony, who, after hearing (pro-study) supporting comments made by directors Green, Denis Bilodeau, Vincent Sarmiento, and Roger Yoh, made a motion to defer consideration of hiring the consultants until the Poseidon project was better defined.
Then Director Jan Flory boldly suggested that the board wait up to two years to see how Poseidon’s nearly identical Carlsbad desalination plant works and in the hope that new and better technology would emerge that will allow Poseidon to bring forth a more environmentally sound project.
At least three of the eight directors present wanted to table the financial analysis until Poseidon finished its obligation – due ten years ago – to properly study sub-surface ocean intakes. Poseidon claimed before the Coastal Commission last November that sub-surface intake is infeasible for is chosen Huntington Beach location due to the local ocean topography, but the Commission called Poseidon’s submitted studies inadequate.
The only feasible option, according to Poseidon, is to co-locate its desalination plant with the AES power plant, located in southeast Huntington Beach, and use its “once-through-cooling” (OTC) intake pipes to gather the needed 127 million gallons of water that it would convert into 50 million gallons of drinking water daily.
Flory, Anthony, and Barr also wanted to wait for an expected decision by the State Water Board on the future use of OTC, if any, for ocean desalination plants. The board banned once-through-cooling for power-plant use because of its deadly mass effect on marine life.
Also to be resolved before the Commission is an appeal by Poseidon’s opponents of an enabling Coastal Development Plan approved by the city of Huntington Beach in 2006.
Doing all of that would take at least another six months.
Frustrated by the concerns of three of his colleagues, Sheldon said it was unfortunate that they had been “listening to misinformation by some of the opponents of this [Poseidon desalination] project,” potentially causing a delay over environmental issues that had already been asked and answered long ago.
“I think we have an obligation to our ratepayers,” Sheldon said, “[and] to our representatives, that we continue to study, that we spend an amount of money that is necessary to move forward.”
Poseidon’s desalination project is “important”, he added, and “is going to be a great benefit in the years to come.”
Sheldon then called Maloni to the speaker’s podium.
Maloni explained the “urgency”, from Poseidon’s point of view, for the OCWD to act now.
“One of the questions raised at the Coastal Commission meeting [in November] was, who’s the customer? Where’s the water going to go? How do we know the water [production] needs to be a 50 million gallons per day plan?”
Maloni’s list of questions are important because at this time only one water agency in Orange County (Faubel’s former water district, ironically) is indicating a real interest in obligating (per Poseidon’s terms) its ratepayers to buy Poseidon’s desalinated water–which will cost three to four times the normal rate – even if that water isn’t needed.
“That question needs to be answered when we go back to the Coastal Commission,” Maloni told the board, “and it can’t be answered if you don’t take your first step in due diligence to evaluate the financial impacts of the project.”
But Maloni must also be concerned about the public relations momentum that Poseidon has lost in recent years as public skepticism about the need for its Huntington Beach project, if not ocean desalination itself, grows stronger.
That makes Sheldon’s role as the OCWD plant for the partnership of Faubel Public Affairs and Communications LAB vital to the future financial well being of their client, Poseidon Resources, Inc.
But Sheldon is loath to acknowledge his mole-role in public, as shown when he glared, silently, at Director Anthony when he pointedly asked Sheldon, “So, I guess you’re okay to talk about Poseidon now? … You’re free?”
Director Cathy Green answered for Sheldon, injecting his silence with a simple, “Yeah,” as if, “Well, yeah, of course he is!”
After some more discussion (including a hilarious soliloquy by Green about needing to complete the Poseidon desalination project so she wouldn’t have to use Porta-Potties), the board, under pressure from Director Denis Bilodeau, voted 7-1 (Green voted no, Dewayne and Sidhu were absent) to continue the item until June 4.
After the meeting, I approached Sheldon, Samsung tablet in one hand and pen in the other, and asked him what the difference was between past meetings, when he had recused himself from Poseidon related agenda items, and that night (May 21).
Alarmed by the question, he pushed himself back in his chair, and said, firmly, “No comment.” Again, I asked, and again the answer was, “No comment.”
As I started to walk away, Sheldon panicked and demanded to know if I had recorded our “conversation.”
“It’s a public meeting,” I answered, as I continued to walk out of the board room, ignoring him as he called after me. Green, who overheard our exchange, gasped, presumably in Sheldon’s favor.
After following me outside the board room, Sheldon approached and asked, again, “Did you record our private conversation?”
I tried to explain to him that it wasn’t a private conversation, but I did not tell him if I had recorded it or not. But he persisted.
“I don’t have to answer your question,” I told him, adding my own “No comment” when he pressed yet again.
“Alright,” Sheldon warned, “You’re going to hear from our lawyer.”
On Monday, May 26, I sent the following email to Roger Faubel, cc’d to Director Sheldon:
Given Faubel Public Relations’ (sic) past contractual relationship with Poseidon and your firm’s (self professed) partnership relationship with Communications LAB, as well as your continued interest in the Poseidon project, as demonstrated by your presence and frequent close conversation with Poseidon’s VIP (sic), Scott Maloni, at the meeting, as well as Director Sheldon’s response of “No Comment” when I asked about his vote, is there any reason why the public should not assume that the director did not illegally participate in the discussion and subsequent vote on the Poseidon related RFP?
So far, I have not received an answer.