Wednesday, June 12, 2024

Grand Jury Blasts Eureka Schools' for Lack of Transparency, Due Diligence in Jacobs Deal

Posted By on Wed, Jun 12, 2024 at 3:30 PM

click to enlarge Eureka City Schools' main office. - FILE
  • File
  • Eureka City Schools' main office.
After investigating Eureka City Schools’ decision to offload its former Jacobs Middle School site in a property exchange agreement with a mystery developer, the Humboldt County Civil Grand Jury has issued a report criticizing the district for a lack of transparency and due diligence.

“The Humboldt County Civil Grand Jury concludes that the Eureka City Schools Trustees acted hastily and without sufficient due diligence,” the report states, adding that while the district appears to have complied with the “technical requirements” of California’s open meeting laws, it violated “the law’s general intent for public participation and transparency in decision-making.”

In investigating the Dec. 14 property exchange agreement between Eureka City Schools and AMG Communities-Jacobs, LLC, in which the district agreed to transfer more than 8 acres of the Jacobs site to the mystery developer in exchange for a residential property on I Street and $5.35 million in cash, the grand jury says it interviewed district officials and advisors, reviewed meeting agendas and minutes, as well as media reports, and consulted with an expert in California open meeting laws.

The report charges that the district’s trustees effectively “rubber stamped” former district Superintendent Fred Van Vleck’s negotiated deal, “expressing implicit and unquestioning trust and confidence” in him and the district’s counsel.

“After years of delay, the whole deal was introduced and rushed to completion in less than [two-and-a-half hours] at the Dec. 14, 2023, ECS Trustee meeting,” the report states.

The report details the property exchange agreements’ apparent ties to parallel efforts to thwart the city of Eureka’s plans to replace city-owned downtown and Old Town parking lots into housing developments, concluding that district trustees “have been knowingly or unknowingly roped into the ongoing local housing versus parking controversy.” Specifically, the report details how the same attorney who negotiated the land exchange agreement on behalf of a newly formed LLC looking to acquire the Jacobs property — Bradley B. Johnson — also represented a group that’s filed numerous legal challenges to the city’s housing plans and another seeking to block the plans through a citizen initiative that will appear on the November ballot and, if successful, would also rezone the Jacobs property.

The report also charges that trustees have a fiduciary responsibility under California law to use “all possible skill, care and prudence to make decisions that will produce positive results for the community.” Yet, the report alleges, trustees voted on the property exchange agreement without sufficient time for them and the public to review, understand and question it. Further, the report notes trustees failed to publicly verify the actual identity and finances of whoever is behind AMG Communities-Jacobs, LLC, which was formed two days before the property exchange was approved. The LLC, the report notes, has communicated with the district exclusively through attorneys and its principals have not been publicly identified.

“With a $6 million offer on the table, common sense to assure this offer would come through financially was brushed off,” the report states. “The ECS Trustees did not exercise due diligence and did not inquire about the resolution agreement. … During our investigation, we observed patterns of behavior including interviewee inability to remember important events, inconsistent statements, obfuscation or dissembling, and purported absence of emails, text messages and other records.”

The report concludes with a series of findings and five recommendations. The findings include that the district did not fully vet the LLC before entering the agreement, that it acted “hastily” and it “deprived” the public sufficient opportunity to question the transaction. The report recommends that the district make details of the property exchange agreements public, implement a procedure for complying with open meeting laws and conduct a “comprehensive” training of staff on the subject.

The property exchange, meanwhile, remains in escrow, with a close date of July 11.

The district has 90 days to formally respond. Check out the full grand jury report here, and check the June 19 edition of the North Coast Journal for a more thorough story on the report.
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Thadeus Greenson

Thadeus Greenson is the news editor of the North Coast Journal.

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