2.09.2008

ER - PALCO will pay $6 in whistle-blower lawsuit

From One BILLION to SIX bucks... $1,000,000,000 to $6

PALCO will pay $6 in whistle-blower lawsuit

Pacific Lumber Co. announced this week that it will pay $6 as part of an agreement struck with its accusers to settle an estimated $1 billion “whistle-blower” lawsuit against the timber company alleging federal false claim violations.

The stipulated agreement documents that would resolve PALCO’s single largest claim against the bankrupt company and its subsidiaries were filed in federal bankruptcy court Friday and the matter is expected to be heard by the judge overseeing the case Feb. 28.

The qui tam, or whistle blower, suit was filed under seal in California Superior Court in 2006 by Richard Wilson, the former director of the California Department of Forestry, and CDF forester Chris Maranto, who allege federal False Claim Act violations in the sustained yield plan permit that set harvest levels prepared by PALCO and approved by CDF as part of the Headwaters Agreement.

Nearly eight years after they were approved, Wilson and Maranto said they discovered the SYP permit relied on false computer modeling and the improper inclusion of hardwoods data provided by PALCO.

The lawsuit also alleges the truthful disclosures of growth and yield during the 100-year duration of that SYP would have resulted in significanlty reduced harvest levels.

According to the terms of the settlement, which has the approval of acting assistant U.S. Attorney General Jeffrey Bucholtz, Wilson and Maranto would receive $1 each from PALCO, Scotia Pacific and Salmon Creek.

Similar to another settlement agreement approved by the court last week, the whistle blower lawsuit still leaves the door open to pursue claims against PALCO parent-company MAXXAM and its owner Charles Hurwitz.

Frank Bacik, PALCO vice president and general counsel, stated in a news release announcing the deal that the SYP that set PALCO’s timber harvest levels was subject to an extraordinary administrative process and review that lasted nearly four years and involved some 80,000 pages of documentation detailing the very best information available at the time.

“There was ample opportunity within that process to challenge testimony and exhibits, but these accusations were not raised until eight years later,” Bacik stated in a news release. “We’ve believed from the outset that the claims were without basis in law or fact, and this settlement supports that belief.”

To resolve the issues raised in the claims, PALCO’s attorney’s argue that Texas judge Richard Schmidt would have to apply California’s complex forestry and environmental laws and review voluminous exhibits relating to the three year SYP approval process.

The stipulation agreement resolves the need to do so at almost no cost to the PALCO’s or its affiliate companies’ estates, the court filings state.

The settlement deal follows on the heels of another settlement agreement approved by the federal bankruptcy court Feb. 1 that allowed PALCO to settle for $1 each 60 long-standing flood damage claims from Elk River and Freshwater Creek area residents totaling nearly $100 million.

Area attorney Bill Bertain, who represents the Elk River and Freshwater Creek residents, said previously those flood claim settlements were beneficial for his clients because they freed the matter from the Texas court and allowed them to move forward in Humboldt County against MAXXAM and Charles Hurwitz.

Bertain, along with attorney Philip Gregory from the Bay Area-law firm Cotchett, Pitre and McCarthy that also represents Maranto and Wilson in the whistle blower lawsuit, declined to comment on the matter.

By NATHAN RUSHTON, The Eureka Reporter
Published: Feb 8 2008, 11:17 PM · Updated: Feb 9 2008, 10:28 AM