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Audit finds state district attorney group misspent millions allocated for environment

San Francisco Chronicle logo San Francisco Chronicle 1/16/2021 By Megan Cassidy

The California District Attorneys Association, a statewide advocacy group for prosecutors, siphoned nearly $3 million that was supposed to be used for public-advocacy litigation and used it to fund training and lobbying, according to a recent audit of the group’s finances.

The audit, performed by the San Francisco accounting firm Hemming Morse, found that the association had a practice of “borrowing” funds obtained from workplace and environmental settlements since 2004, “during periods when CDAA experienced cash flow shortfalls.” The agency repeatedly padded its general fund with money earmarked for specific purposes, the audit found.

The practice mostly depleted the group’s accounts established to train prosecutors and retain specialized outside attorneys that county prosecutors hire for help handling complex cases involving environmental violations. Those funds are critical for smaller, rural counties, where district attorneys lack the resources to take on large corporations, like petroleum companies, many of which have huge legal teams tasked with beating back environmental lawsuits.

The shortfall may impact ongoing court cases across California.

“Unfortunately, at this time ... CDAA has no current funding sources and no other personnel available to assist your offices in these types of prosecutions,” wrote Riverside County District Attorney Mike Hestrin, co-chair of the groups’s environmental subcommittee in an email to the group’s members last week. “At this time, the timetable for any future funding is also up in the air.”

“Part of what happened was there just weren’t enough controls over the money that you know how it was being spent,” Hestrin said in an interview with The Chronicle.

One of the affected cases comes from Madera County, where District Attorney Sally Moreno said her office has charged a truck filtering company with mishandling hazardous waste. The outside counsel who was leading the case quit and the association has no funds to replace him.

Moreno said it was “challenging to quantify” how the financial issues will affect the case, adding that it won’t be put on hold and will be assigned to one of her senior deputies.

“It was nice to have somebody to come in with those expertise,” she said.

At least 10 other counties have pending cases that were using the circuit prosecutor program, including Lake, Kings Nevada and Tuolumne counties.

The association’s board of directors said it will reimburse the $2.88 million that was absorbed into the general fund, but allowed for the repayment plan to stretch over several years.

The group’s auditors did not make any accusations of illegal activity, but the results were sent to the state attorney general’s office for review. The attorney general’s office is currently reviewing the audit, said a spokesperson for the department.

The audit was commissioned last summer by the prosecutors’ association after its CEO became concerned that money assigned for specific causes was being improperly spent.

“While the audit revealed no evidence of intentional malfeasance, it did identify a pattern that violated best practices and accepted accounting standards for restricted-purpose funds,” association officials said in a statement.

But the results of the audit and the association’s pledge to repay the funds have not placated the group’s critics, who’ve raised concerns that its involvement in the financial review created potential conflicts of interest.

Largely outside of the public eye, the California District Attorneys Association is perhaps best known for its reliable opposition to — and its lobbying efforts against — criminal justice reform measures. In recent years, the group opposed legislation that would limit the “three strikes” law, one that reduced penalties for most drug possession cases, and another that shortened prison time for nonviolent offenders.

The association is made up of 57 of the state’s 58 district attorneys and around 5,000 nonelected prosecutors, and also provides training and educational resources for its members.

The association’s environmental and workplace funds are meant to replenish themselves through court settlements. When prosecutors win a case, a cut of the payout goes back into its environmental programs, and is supposed to be restricted for use in future environmental cases and training for prosecutors, the report states.

However, the auditors wrote, the group had incorrectly considered those and many other funds received to be “unrestricted and available for general use.” Once in the general fund, money that was supposed to be reserved for environmental legal training and litigation could have been used for any number of wider purposes, including lobbying state legislators.

In recent years, the association has received $210,000 from a 2010 Walmart settlement over improper storage and handling of toxic waste, $350,000 from a 2015 AT&T payout over disposal of hazardous waste, and $450,000 from a 2015 settlement with Phillips 66 over violations of anti-pollution laws with underground storage tanks.

Vern Pierson, El Dorado County district attorney and association president, said the group has regularly returned the borrowed funds throughout the years and has started to pay back some of the $2.88 million. The group “took specific steps,” Pierson said, to stop the improper spending once the practice came to light. Pierson added the association’s regular, annual audits also never noticed the miscategorization of the funds or directed the association to correct the problem.

“What’s been characterized to me is that it’s a poor expensing practice,” Pierson said. “Even though the money was lawfully CDAA money, it had a restriction on it and the restriction should have been honored.”

San Francisco District Attorney Chesa Boudin said he was “shocked and disappointed” to learn about the association’s longstanding accounting practices.

“As elected D.A.s, we understand how to avoid comingling restricted funds and general-purpose funds — we have to do it every day managing our budgets,” he said. “The millions of restricted dollars CDAA improperly dedicated to lobbying and general fund expenditures, deprives Californians of much needed environmental and workplace safety protections.”

San Joaquin County District Attorney Tori Verber Salazar, who quit the group last year over its opposition to criminal justice reform initiatives, blasted the report and its prolonged repayment plan as insufficient. She also raised concerns about the involvement of the group’s board members in the audit process.

“It is pretty clear that having members of CDAA’s board (past and present) lead the investigation — including selection of the auditors, monitoring and releasing the documentation — raises legitimate issues of conflict,” Verber Salazar wrote in a July 22 email to Yolo County District Attorney Jeff Reisig, the first vice president of association’s board of directors.

Verber Salazar also said that the audit should have been be expanded to include association’s entire budget, not just the buckets for environmental and workplace funds.

She also called on the group’s entire board of directors to “resign immediately.”

“They had a duty and a responsibility to oversee this, and they failed to do so,” she said.

Megan Cassidy is a San Francisco Chronicle staff writer. Email: megan.cassidy@sfchronicle.com Twitter: @meganrcassidy

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