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Monday, Sep 30 2013 09:00 PM

Water company: Kern grand jury libeled us

BY LOIS HENRY Californian columnist lhenry@bakersfield.com

The Kern County grand jury was accused on Monday of libeling a local water district.

Oildale Mutual Water Co. took the first step toward a libel lawsuit by filing a claim against the county. It accuses the grand jury of making numerous false statements about Oildale Mutual, its general manager and its directors.

Among other defamatory statements, the claim asserts, the grand jury wrote that Oildale Mutual had lost $1.5 million each of the past three years, that it had deteriorating infrastructure and that some of its directors have not paid "hook-up" fees for homes built in Oildale.

A claim is the first step to suing a government agency.

Terry Wolfe, the grand jury foreman, declined to comment.

The Oildale Mutual report, which was released June 17 and is still on the grand jury's website, was written by last year's grand jury. Wolfe and five other jurors from last year remain on this year's panel.

Wolfe declined to say which jurors were on the ad hoc committee that wrote the June 17 report.

Deputy County Counsel Devin Brown, who reviewed the report before publication, said he couldn't comment on what advice he gave the jury as that's protected under its attorney-client relationship with the grand jury. He did acknowledge that comments made in grand jury reports are not privileged, or protected from liability.

The civil grand jury routinely issues reports that are assessments of the work done by government agencies. It this case, the grand jury report detailed a decades-long feud between Oildale Mutual and the North of the River Municipal Water District (NOR).

Its conclusion was that both entities should be audited and that they should be consolidated into a new Community Services District.

But why the grand jury delved into this situation at all was baffling to both Oildale Mutual, a private company, and NOR, a public special district.

In particular, Oildale Mutual was incensed by the report's statement that "It was reported to the grand jury some OMWC directors do not pay 'hook-up' fees for homes built in Oildale."

In its Aug. 15 response, Oildale Mutual wrote: "It was bad enough that the grand jury wrongly accused the staff and directors of OMWC of mismanagement based on anonymous and unattributed 'reports'; now it goes so far as to accuse them of what amounts to criminal misconduct (e.g., theft, fraud, embezzlement, or the like). The finding is totally, absolutely and completely false.

"OMWC believes that the accusation is tantamount to libel or slander."

The grand jury has no jurisdiction over a private company and only limited jurisdiction to review NOR's operational procedures.

Both water entities have made that clear in their responses to the grand jury report. Only NOR's response has been put on the grand jury's website.

While NOR's response allows that the grand jury may have authority to look at the district's operations, it says the jury "exceeded its statutory authorization" when the jury discussed a proposed consolidation of some operations between Oildale Mutual and NOR.

Oildale Mutual's response, sent Aug. 15 to the Kern County Superior Court presiding judge, who advises the grand jury, has not been posted, nor has anyone from the county responded to it, according to Oildale Mutual General Manager Doug Nunneley.

It was in that 20-page letter that Oildale Mutual first brought up the issue of libel and demanded a full retraction.

The letter also notes that no one from Oildale Mutual was contacted by the grand jury prior to the report being published and that when errors were brought to the jury's attention, it refused to correct them.

That includes the incorrect statement that Nunneley's father is a newly elected NOR director. Nunneley's father has been dead for five years.

When he called the grand jury forewoman right after the report was published and pointed that out, he said the response was "Dead silence.

"I said, 'Well it looks like you really did your homework. Thanks a lot.' What else can you say at that point?"

Oildale Mutual's claim doesn't list exact damages being sought, and Nunneley said that's not known at this point.

He did note that Oildale Mutual is in negotiations with another company over water quality on one well. The report, which Oildale considered damaging to its reputation, was issued at a time when settlement talks were underway. The other company mentioned that it was aware of the grand jury report.

"So, it's out there," he said of the report. "And it's potentially hurting us."

Libel suits are difficult to prove under even in the most straightforward circumstances.

When you throw in the grand jury, things get even trickier, according to libel attorney Thomas Burke with Davis Wright Tremaine in San Francisco. (Burke often represents The Californian in legal matters regarding news reports.)

Because the grand jury is a citizen watchdog organization, an anti-SLAPP motion might be a logical first line of defense, Burke said.

SLAPP stands for "strategic lawsuits against public participation," and is meant to protect public speech when that speech criticizes a government entity.

Beyond that, Burke said, Oildale Mutual will have to prove the grand jury knowingly, or recklessly, disregarded the truth in making false statements about the company. That's known as "actual malice" and it's tough to prove.

Even the fact that no one from Oildale Mutual was contacted by the jury isn't necessarily proof of malice, Burke said.

"If the jury had reason to believe directors were getting free accounts, and I'm just speculating here, they might not have contacted them for fear the behavior would change and evidence disappear," he said. "It's a different standard when you're talking about an investigative body and how they wrote, or should have written, a report. Because you don't want a grand jury to pull back" on its watchdog role.

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