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Federal Government, Shakedown Artist

Last year, more than one percent of the total land area of California burned in forest fires. It looks like this year might be worse. Forests take up 33 million acres in the state, one third of its total area. Fully two thirds, or 19 million acres, are owned by the federal government—predominantly the national forests as managed by the U.S. Forest Service.

After the U.S. government declared the spotted owl a threatened species in 1990, sales of its immense timber holdings in northern California and elsewhere in the Pacific Northwest largely dried up. In the decade that ensued, one northern California firm, Sierra Pacific Industries, reacted opportunistically by buying up large areas of private forests, astutely recognizing that they would soon become leading sources of local timber supply.

As journalist Joel Engel relates in Scorched Worth: A True Story of Destruction, Deceit, and Government Corruption, the Moonlight Fire broke out in 2007, eventually burning about 65,000 acres. It started as a small fire on a few acres of private land owned by Sierra Pacific but spread rapidly. Fully 70 percent of the acreage burned was located in the national forest system.

Going for the Deep Pockets

The federal and state governments soon began legal action against Sierra Pacific in hopes of recovering $1 billion or more to help cover the fire damage. The amount sought constituted a significant part of Sierra Pacific’s total value. This was an example of a wider pattern. The feds would later take similar legal actions against British Petroleum in the wake of the 2010 Deepwater Horizon oil spill in the Gulf of Mexico and against Wall Street banks in the wake of the financial crisis of late 2007 to 2009.

The financial benefits could be large even for the federal government. BP in 2015 agreed to a settlement of $19 billion with federal and state governments. But this was only the beginning. BP recently estimated that its ultimate legal and cleanup costs of all kinds relating to Deepwater Horizon will exceed $60 billion. J.P. Morgan settled with the federal government for $13 billion and Bank of America for $17 billion. Worldwide, bank fines and bank settlements are estimated to have been $300 billion.

There was one critical difference, however, in the case of Sierra Pacific. BP and the Wall Street banks are public corporations. The most guilty parties were to be found among some of the top managers of these firms in the leadup to the financial crisis but the government chose to bypass them. Instead, it went where the money was, the corporation itself. As a result, the corporate managers had little to lose from giving in to what might be even extortionate government demands. It was the stockholders who would be left to take the hit.

But Sierra Pacific is a private company. Its founder, Archie Aldis (“Red”) Emmerson, would himself bear the main financial burden of any legal settlement. Unlike the less involved corporate managers, he fought back vigorously, hiring top legal talent and eventually spending tens of millions in defense of his company. As a result, Engel relates, the public was able to learn (in this instance at least) how the government case all along had been built on a house of sand.

Botched Investigations

Determining the cause of a forest fire is not an exact science. Scorched Worth shows how officials in the U.S. Forest Service and the California Department of Forestry and Fire Protection (known as Cal Fire) botched their investigative efforts in their enthusiasm to assign blame to Sierra Pacific and to collect large damage payments. They claimed that a spark from a bulldozer on Sierra Pacific land had caused the fire even though strong evidence later showed that the fire had started somewhere other than the location of the bulldozer.

Sierra Pacific in its defense was able to show wider government failures to follow standard investigative procedures, inconsistencies in resulting documents, and many other deficiencies in the case brought against it. Indeed, the logical thing would have been to abandon this case. But with so much money at stake, the federal and state prosecutors dug in, seeking to cover up the investigative failures, and otherwise behaving in an unethical fashion. This pushed the prosecutors themselves into making contradictory and other embarrassing statements, as would be revealed in retrospect. At the federal level, Engel concludes, the assistant U. S. Attorney Kelli Taylor was particularly culpable.

It was not only federal and state prosecutors whose actions failed to maintain the integrity of the justice system. Federal district judge Kimberly Mueller had sat on the federal bench for only 18 months, nominated and confirmed by the Obama administration in 2010. It might have been that she assumed that Sierra Pacific was likely guilty, given her faith in federal and state officials who asserted their conclusions with such seeming confidence. Judge Mueller also stated her desire to avoid a long and tedious trial. In any case, she ruled that key elements of the defense could not be presented at a trial.

As a result, Sierra Pacific was now much more exposed to the risk of losing the case and having to meet federal demands. Until Judge Mueller had ruled out a critical part, the expert team of lawyers assembled by the company had considered the case for the defense one of the strongest they had ever brought. Now, however, given her ruling, they saw nontrivial risks that Sierra Pacific might be held liable for damages exceeding $1 billion, which would likely force it into bankruptcy (its assets substantially exceeded $1 billion but they were in non-liquid forms such as forestland holdings).

Confronted with this threat to his company’s existence, Emmerson felt he had no choice but to capitulate. Like a plea bargainer menaced by a prosecutor wielding a life sentence, and despite his strong belief in the innocence of Sierra Pacific, he settled for a $55 million cash payment and the transfer to the government of 22,500 acres of Sierra Pacific land—all this having a value of $122.5 million.

A State Judge to the Rescue

That was not the end of the story, however. A separate case was still being pressed against Sierra Pacific in California’s court system, based on much the same asserted facts and legal arguments as had been presented at the federal level. The judge assigned to the state case was Leslie Nichols, a 71-year-old California senior judge with more than 30 years of prior courtroom  experience often involving environmental cases. As a retired judge, he had the time to examine the court documents in great detail. In a scathing decision statement, he dismissed the California state case outright as offering insufficient evidence even to hold a trial.

In  explaining his decision, Nichols described the state agency Cal Fire as exhibiting “egregious and reprehensible conduct” characterized by “corrupt and tainted” behavior. He titled one section of his decision statement as showing how “Cal Fire’s lead investigator [Josh White] falsified J. W. Bush’s Interview Statement and incorporated that falsification into its ‘interrogatory responses.’” He ordered Cal Fire to pay an almost unprecedented amount for a California state agency of $32 million to Sierra Pacific and other defendants—compensation for prosecutorial malfeasance.

As he summed up his findings concerning the key elements of the case as made by the state of California, Judge Nichols stated that:

The Court finds that throughout this litigation Cal Fire witnesses provided evasive, misleading , contradictory and false deposition testimony on numerous topics, from the origin and cause investigation, to the suppression of witness information, . . . In doing so, Cal Fire’s agents not only betrayed their oath ‘to protect the innocent against deception, . . . but, as it pertains to this Court, they betrayed the primary purpose of [the] judicial system—to reveal the truth.

In 2017, the California Court of Appeal issued a ruling affirming Judge Nichol’s decision to throw out the case. Although the federal case had been based on substantially the same evidence and arguments, this outcome at the state level did nothing to help to restore the $122 million that had previously been extorted from Sierra Pacific through the same duplicitous behavior by prosecutors at the federal level. This spring, the U.S. Supreme Court denied Sierra Pacific’s appeal, so the federal courts’ refusal to review the full record of prosecutorial misconduct will stand.

Conclusion

It is no exaggeration to say that the American criminal justice system today is rife with legalized extortion. As a result of pervasive plea bargaining, prosecutors now routinely act in the combined roles of prosecutor, judge, and jury. The prospect of a long prison term is held over defendants if a case goes to trial, prompting even many innocent people to believe that they have no choice but to plead guilty in exchange for a much reduced sentence. Engel documents how another version of such prosecutorial extortion can now also be found in cases where the government seeks not a guilty plea but large money damages.

In current circumstances, the main limitation on prosecutorial misbehavior is the ethical standards of the prosecutors themselves. Most prosecutors do seek to uphold justice. Nevertheless, while the events that Engel describes may be an extreme example, there is an increasing concern that the justice system offers insufficient protection against prosecutorial extortion. Partly this reflects a growing skepticism among the American public that government officials can be counted on to do the right thing.

This is an important book. It also is padded, however, with many extraneous items such as long passages about the Emmerson family history and the company’s business history. The key points could have been presented in about 50 pages instead of the actual 263 pages. No publisher, of course, would have accepted that length; if it weren’t for the padding, I would not have had a chance to write this review or to present the important information contained in Scorched Worth.

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