Ponzi scheme victims left waiting years for restitution due to delays by ousted California judge
The presiding justice of California’s appeals court in Sacramento agreed to retire as part of his punishment for delaying decisions in some 200 cases, a sweeping mix of civil lawsuits involving high-profile parties in the capital region along with criminal cases resulting in long sentences.
In one of the most egregious cases, a multi-year delay in the appeal process put a hold on restitution payments to victims of a large securities fraud scheme.
At least one victim in that scheme, a 78-year-old Santa Rosa woman eligible for as much as $50,000 in compensation, died before receiving her payout, now-retired California attorney Jon Eisenberg said.
Delays at the Third District Court of Appeal also, according to Eisenberg, whose complaint set the disciplinary matter in motion, resulted in more than a dozen criminal defendants having their sentences reversed or reduced – after already serving them.
Justice Vance Raye stepped down Wednesday from the Third District, part of a stipulated agreement with the Commission on Judicial Performance.
In its decision and statement of admonishment, the commission wrote that Raye “engaged in a pattern of delay in deciding around 200 appellate matters over a 10-year period.” At least four cases took more than seven years from appeal filing to decision.
From January 2011 to March 2021, “Justice Raye failed to properly exercise his administrative and supervisory authority to provide a forum for the expeditious resolution of appellate disputes,” the commission wrote.
Raye had been the administrative presiding justice of the Third District since 2010, after joining the court as an associate justice in 1991.
The watchdog commission wrote that the long delays created prejudice in several cases decided by Sacramento-area trial courts, including some involving high-profile local entities such as Sacramento Municipal Utilities District and Raley’s.
An attorney for Raye did not immediately respond to a request for comment.
‘Cardinal sin of appellate judging’
Eisenberg, who retired at the end of 2021 after 43 years as an appellate lawyer based in the Bay Area, said he filed a complaint to the commission in January 2021, then spent weeks helping an investigator uncover the scale of delays.
Eisenberg said he helped uncover 18 criminal cases with appeal decisions made between 2018 and 2020 in which Raye reduced or reversed sentences for defendants who had already served them in full.
“This is a cardinal sin of appellate judging,” Eisenberg said in a Thursday phone interview. “To reverse a sentence of imprisonment after it’s been served, is just a travesty.”
The longest delay recorded, involving a lawsuit filed by the Environmental Law Foundation against the State Water Resources Control Board, was assigned to Raye in September 2011 and left pending for nearly eight years, with the matter dismissed in June 2019. The case involved a dispute over groundwater regulations in Siskiyou County.
The commission’s report said Raye’s delays affected the outcome of at least six cases.
Three of those six were appeals of decisions handed down in Sacramento County, and one was an appeal of a decision out of Yolo County in a wage case involving Raley’s supermarkets.
Victim dies awaiting restitution
The case involving an elderly fraud victim dying while awaiting a payout stemmed from a conviction out of Shasta County.
Defendant James Stanley Koenig, of Redding, was convicted and sentenced in 2013 to more than 42 years in state prison for running a $250 million Ponzi scheme.
Attorneys for Koenig filed an appeal in 2013, which was fully briefed in 2016 and finally adjudicated in December 2020 by Justice William Murray, Jr., an associate justice under Raye. Murray affirmed the initial judgment.
Eisenberg said that victims in the scheme – dozens of residents, many of them in their 70s and 80s – were each eligible for up to $50,000 from the California Victims of Corporate Fraud Compensation Fund.
This was contingent on the appeal court affirming the judgment.
“Between 2018 and 2020, some two dozen victims wrote letters to the Court of Appeal imploring the court to expedite the appeal’s adjudication because the delay was preventing their recovery of restitution,” Eisenberg wrote in an email.
The case does not appear on the list of 200 prepared by the commission because it was decided by Murray. But the letters went to Raye as the presiding justice, Eisenberg said.
They went unanswered, he said.
“Several told the court that ‘this restitution would substantially increase the quality of my remaining life’ and “I would like to see this resolved in my lifetime,’” Eisenberg wrote.
One victim, Linda Lee Trapanese, died in 2019 at age 78, according to Eisenberg. She never received restitution.
Eisenberg last year wrote a petition to the California Supreme Court regarding the delayed appeals in the People v. Koenig case, arguing that the “Third District’s decisional delay in the Koenig appeal harmed the victims of securities fraud in that case by stalling their long-pending applications for compensation.”
His petition included declaration from two other victims, both 81 years old. One of the two finally received a $20,000 payout from the compensation fund last year; the other is awaiting $20,000 following a clerical error, Eisenberg said.
Cordova Hills development
According to the disciplinary order, a civil case in which the Environmental Council of Sacramento sued Sacramento County regarding the Cordova Hills development in Rancho Cordova was assigned to Raye in February 2015 but not decided until January 2020.
Attorneys in May 2017 penned a joint request for oral arguments to be scheduled in the case, but it still took more than two more years for Raye to rule.
“The absence of a final decision in this matter creates substantial uncertainty for the parties at a critical juncture for the long term development of the Cordova Hills project that was approved in January, 2013,” both sides’ attorneys wrote in 2017.
Cordova Hills is a planned 2,700-acre development in eastern Rancho Cordova, between Grant Line and Scott roads. The landmark development would include about 8,000 homes and a 225-acre college campus.
Lawsuit by Raley’s technicians
The case involving Raley’s, Meyers et al. v. Raley’s, was assigned to Murray in October 2014, reassigned to Raye in June 2018 and finally decided in February 2019.
Several Raley’s maintenance technicians sued the West Sacramento-headquartered company, alleging the supermarket chain’s uniform policies denied them fair compensation for working during meal breaks and reimbursement for personal tools. A trial court ruled in favor of Raley’s.
In a September 2018 inquiry about the status of the appeal, attorney Michael Righetti noted that a similar Third District appeal his office was involved in took only four months from briefing to oral arguments, “which is striking as compared to almost four years in the present case.”
“I appreciate that there is a backlog of appeals, especially in the Third District (this is no secret),” Righetti wrote. “Nevertheless, I feel it would be remiss of me not to notify Your Honor of the situation, especially given the angst felt by my clients as the years go by without a resolution in this case.”
SMUD lawsuit over power theft
Another civil case, Sacramento Municipal Utility District v. Kwan, was assigned to Murray in September 2016, reassigned to Raye in early January 2019 and decided in May 2019.
SMUD had sued defendant David Kwan alleging power theft; Kwan argued he had been the victim of identity theft and was not responsible for the actions on his SMUD account.
A Sacramento trial court ruled in favor of SMUD, but then granted Kwan’s motion for a new trial. SMUD appealed, arguing insufficient evidence to warrant a new trial.
Attorney Suzanne M. Nicholson in March 2018 wrote to the court in a status inquiry: “I understand and appreciate the volume of cases before the court, but have never had a case fully briefed for quite so long with no further activity.”
This story was originally published June 2, 2022 at 11:51 AM.
