Sierra Pacific levels corruption allegations in renewed legal fight over Moonlight fire

A canopy of burned pine trees in June 2008 shows the damage caused by the Moonlight fire in Plumas County, where two fires the year before burned a huge chunk of the heavily forested county.
A canopy of burned pine trees in June 2008 shows the damage caused by the Moonlight fire in Plumas County, where two fires the year before burned a huge chunk of the heavily forested county. Sacramento Bee file

The incendiary legal battle over responsibility for the Moonlight wildfire, which scorched 65,000 acres in the Sierra Nevada seven years ago, has flared anew with charges of corruption and cover-up leveled at federal prosecutors, and state and federal investigators.

The allegations are contained in hundreds of pages of documents filed Thursday in U.S. District Court in Sacramento seeking to wipe out a 2012 settlement calling for timber giant Sierra Pacific Industries to pay the federal government $47 million and deed it 22,500 acres of its land to compensate for the devastation of more than 40,000 acres in two national forests in Plumas and Lassen counties, as well as the U.S. Forest Service’s firefighting costs.

Another $7 million was paid to the government by owners of the private property where the fire is alleged to have started and an additional $1 million by a logging company, bringing the total cash settlement to $55 million. The property owners had hired Sierra Pacific for a timber project and the company in turn had hired the logger.

Even as the fire was in its early stages, federal and state investigators decided that Sierra Pacific was responsible for the blaze. They concluded it was started on Labor Day 2007 by sparks from the blade of a bulldozer hitting a rock. An employee of the logging company working in the area for Sierra Pacific was operating the bulldozer.

But Sierra Pacific, the state’s largest private landowner, has heatedly denied responsibility for the fire and fought the government’s 2009 civil lawsuit for three years before agreeing to a settlement after U.S. District Judge Kimberly J. Mueller made a critical ruling against the Shasta County-based company.

On Thursday, the company took the rare step of asking Mueller to “vacate the settlement” due to “fraud upon the court.”

Sierra Pacific has already paid the government $29 million under the terms of the settlement, with another $3 million payment due Jan. 1. It also has conveyed approximately 1,500 acres of its property to the government, owing roughly 21,000 more acres.

The company contends federal prosecutors sat by in pretrial depositions and knowingly allowed the California Department of Forestry and Fire Protection and U.S. Forest Service investigators to “repeatedly lie under oath about the very foundation of their investigation.”

It insists in its motion that the investigators’ origin-and-cause report is a fraudulent document that omits or distorts all information that might have hurt the government’s case.

One of the documents Sierra Pacific filed is a declaration from a veteran former assistant U.S. attorney, who says he was forced to give up his position as the government’s lead lawyer in the Moonlight case, apparently because he rebuffed pressure from a superior to “engage in unethical conduct as a lawyer.”

The declaration from E. Robert Wright says he was bounced out of the case by his boss, David Shelledy, chief of the civil division in the U.S. attorney’s office, and replaced by a prosecutor with no previous experience in wildland fire recovery cases.

Wright joined the U.S. attorney’s office in 1997 and, because of his experience in environmental law, he was chosen in 2008 to lead a litigation team formed to recover damages caused by fires on federal lands.

His declaration describes his conclusion in connection with another wildland fire recovery matter in 2009 that he was ethically obligated to disclose a document to the defense that called into question the viability of the government’s prosecution.

He sought confirmation from the U.S. Department of Justice’s professional responsibility advisory office, which “strongly supported my view. … As a result, we dismissed that action,” the declaration says.

Later in 2009, it says, a dispute arose between Wright and Shelledy in the context of another wildland fire case over whether the office had an obligation to disclose to the defense the fact that the Forest Service had miscalculated the damages, which were $10 million less than the government was claiming.

Wright again sought the advice of the professional responsibility office and again the office supported his view that the error had to be disclosed, according to the declaration.

Shelledy first sent an email to the office in Washington, D.C., questioning its advice.

“When that failed,” Wright’s declaration relates, Shelledy sent Wright an email saying, “OK, Bob, that’s a beginning. Now what can you do to avoid creating an ethical obligation to volunteer a harmful document?”

In response, Wright told Shelledy, “David, pursuing our theory of timber loss requires disclosure. The only way I am aware of to moot the disclosure requirement would be to drop the claim for timber losses …”

Shelledy passed off Wright’s comment as “flippant,” the declaration says.

At this point, it says, an attorney in the professional responsibility office weighed in “with a directive that could not have been clearer: ‘Part of the issue in making a false statement means not only an affirmative misstatement but deliberately withholding information which refutes the position you assert.’”

The information was turned over to the defense and the case settled.

“Thereafter, Mr. Shelledy treated me with hostility,” Wright’s declaration states. Those internal struggles “marked the first time in my 40 years of practicing law that I felt pressured to engage in unethical conduct as a lawyer.”

Wright filed the Moonlight complaint on Aug. 31, 2009, and was the lead counsel for the government in the case until Jan. 4, 2010.

U.S. Attorney Benjamin Wagner sent an email that day commending Wright for his outstanding work in a wildland fire action that recently had been settled. Later that day, Shelledy approached Wright and said he was removing him from the Moonlight case. He stressed that Wright was precluded from working on the case “in any capacity.”

Shelledy filled the vacancy with Assistant U.S. Attorney Kelli Taylor, “who had about 25 less years of experience than I did, no previous experience known to me on wildland fire matters, and who had what I understand to be remarkably little trial experience,” the declaration says.

“There is something wrong here,” Wright recalled telling Wagner after Shelledy removed him, but Wagner refused to overturn Shelledy’s action.

“While I have not had an opportunity to review the details of the filing, I can tell you that I have the highest confidence in David Shelledy and Kelli Taylor. Next week, they will be in Washington to each receive an attorney general’s award, the highest honor bestowed by the U.S. Department of Justice,” Wagner said Thursday.

Wright retired in December 2010 at age 66.

Although Sierra Pacific agreed to a settlement in 2012 to end its legal fight with federal authorities, it has always contended the fire investigation was flawed and that investigators manipulated evidence and lied under oath about where and how the blaze began.

According to Sierra Pacific, the government could reach into the company’s deep pockets for a big recovery only if it could blame the company for the fire, and that is what motivated investigators to move the blaze’s place of origin to the area where the bulldozer was working and then falsely deny they had originally settled on a different location.

The company’s position was bolstered by a ruling in February from a Plumas County judge who found Cal Fire guilty of “egregious and reprehensible conduct” in investigating the fire and ordered the agency to pay more than $32 million in penalties to the defendants.

An appeal of that ruling is pending.

The state had sued Sierra Pacific and others to recover $8 million in firefighting costs. But, in a blistering decision, retired Superior Court Judge Leslie C. Nichols threw the suit out.

Cal Fire, the judge said, withheld some documents, destroyed other evidence and “engaged in a systematic campaign of misdirection with the purpose of recovering money” from Sierra Pacific.

Call The Bee’s Denny Walsh, (916) 321-1189.