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Grand Jury: Eureka Schools Acted 'Hastily,' Without Due Diligence 

Report blasts trustees for lack of transparency, failing to fulfill fiduciary duty

click to enlarge An overlay of an aerial image shows the former Jacobs school site, differentiating the portion slated to be purchased by a developer from the ball fields, which will be retained by Eureka City Schools.

City of Eureka

An overlay of an aerial image shows the former Jacobs school site, differentiating the portion slated to be purchased by a developer from the ball fields, which will be retained by Eureka City Schools.

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."

Eureka City Schools Superintendent Gary Storts, who took over the position for the retiring Fred Van Vleck just days after the board of trustees voted to enter into the controversial property exchange agreement, offered a brief statement in response to a Journal inquiry about the grand jury report.

"Eureka City Schools was pleased that the grand jury report concluded that there were no legal violations," Storts wrote in an email. "The District will respond directly to the grand jury's findings and recommendations, which will be discussed publicly in an open session at a future board meeting."

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 makes clear from the outset that the grand jury's aim was not to determine whether "the transaction is a good or bad idea for the district," but to look at district trustees' decision-making process. That process saw the district abruptly cut off negotiations with the California Highway Patrol, which had reportedly offered $4 million for the Jacobs campus, hoping to relocate its Northern Humboldt headquarters there, in favor of the more lucrative $6 million deal offered by AMG in the form of a property exchange, which allowed the district to bypass the regimented process of selling off surplus public property. The grand jury report concludes the board of trustees effectively "rubber stamped" Van Vleck's negotiated deal, "expressing implicit and unquestioning trust and confidence" in the former superintendent and the district's counsel, without doing any due diligence of their own.

"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 agreement's 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 notes a "circumstantial pattern of involvement," detailing how Bradley B. Johnson, the same attorney who negotiated the land exchange agreement on behalf of a newly formed LLC looking to acquire the Jacobs property, 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. That initiative would also rezone the Jacobs property to accommodate high-, medium- and low-density residential development, which its proponents have argued would create more housing than Eureka's current parking lot conversion plans.

"Attorney Bradley B. Johnson is the common denominator," the report states, noting that he reportedly initiated contact with Eureka City Schools in August on behalf of AMG.

The connections between Johnson and the efforts to combat Eureka's parking lot plans are well documented in state filings, the report notes. Filings with the California Secretary of State's Office list Johnson as the chief financial officer and secretary for Citizens for a Better Eureka, a group funded by local businessman Robin P. Arkley's company, Security National, to file lawsuits (filed by Johnson) challenging the city's plans. Johnson has also acted as legal counsel for proponents of the Housing for All Eureka initiative, while he also signed the Jacobs land exchange agreement and a separate purchase agreement for the residential property on I Street on behalf of AMG.

AMG Communities-Jacobs LLC, both through its spokespeople and on a website created to share information about the Jacobs site, has repeatedly denied any affiliation with Arkley. The website states AMG is backed by a "small investment firm," though a spokesperson later clarified it is "a private group of small individual and family investors." Through a spokesperson, Johnson has declined to say whether he or his law firm is a principal in AMG.

The report 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 grand jury's finding that Eureka City Schools complied with the "technical requirements" of California's open meeting laws — known collectively as the Ralph M. Brown Act — conflicts with the opinions of a number of experts previously interviewed by the Journal. They opined that the district violated the Brown Act by failing to list the address of the I Street property the district was negotiating to obtain on the Dec. 14 meeting agenda, and also by failing to make drafts of the exchange agreement and an accompanying resolution to authorize it available to the public when they were distributed to trustees, several days prior to the meeting.

The first three of the grand jury's six findings focus on noticing deficiencies that deprived the public of "an opportunity to be informed and to question the details of the pending decision." Other findings charged the board failed to "fully vet" AMG, further denying the public an opportunity to be informed, and that the district "conducted unrecorded, secret, undocumented and undisclosed negotiations," denying the public an opportunity to question the deal and the grand jury the ability to determine whether the district complied with terms of the California Government code.

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 district has until Sept. 10 to formally respond to the grand jury's report.

The property exchange, meanwhile, remains in escrow, with a close date of July 11. Back in February, the district identified a host of "disapproved conditions" with the I Street property that needed to be addressed before the exchange could take place, including unpermitted work, improvements that are not code compliant and potential pest issues. An amended exchange agreement required that all issues be "cured" by June 15, after which the district would have two weeks to reinspect the property.

On June 15, Johnson sent the district a letter on behalf of AMG stating it has "engaged a contractor to complete the required repairs and is in queue for that work. We anticipate providing a final report on the repairs by the first week of July." The district, meanwhile, remains in the process of pursuing a lot line adjustment needed to fulfill its requirements under the agreement, with Storts saying its surveyor is currently completing the district's application.

Thadeus Greenson (he/him) is the Journal's news editor. Reach him at (707) 442-1400, extension 321, or [email protected].

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Thadeus Greenson

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

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