Articles

Based in Los Angeles, California, Gumport | Mastan provides legal and fiduciary services to major creditors, bankruptcy trustees, receivers, and other parties to bankruptcy proceedings, as well as represents businesses and governmental entities in matters involving bankruptcy litigation, government and corporate investigations, fraud, public corruption litigation, and commercial and business litigation.

Articles of Interest

The firm's attorneys have an in-depth understanding of the law and the latest legal developments in their practice areas, and have published articles and given presentations on a wide range of relevant topics, including the selected articles and presentations listed below:

  • In December 2009, Leonard Gumport was appointed as the examiner in the Fremont General Bankruptcy Case.  Click here to read a report of his examination.
  • April 2009, Leonard Gumport published an article on FinCen, Ponzi schemes, and the Bank Secrecy Act. "Banking on Compliance," (about FinCEN and Ponzi Scheme banks) published in The Daily Journal
  • Asset Freeze Order Litigation in Federal Court, presented at a seminar of the American Bar Association Criminal Justice, White Collar Crime Committee. Click here to read the written materials from that presentation on asset freeze litigation.
  • Public Corruption: Maximizing the Recovery Of Damages, presented at a conference of the County Counsels' Association of California.  Click here to read the written materials from that presentation on legal remedies for public corruption.
  • "The Bankruptcy Examiner," published in the California Bankruptcy Journal. Click here to read that article on the bankruptcy examiner.

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From time to time, the firm and its cases are featured in the news.  Selected articles can be viewed by clicking on the links below:

  • For 2016-17, Peter Mastan has been elected as the Vice-president of the California Bankruptcy Forum.
  • For 2016, Leonard Gumport was recognized by Super Lawyers magazine for the tenth consecutive year.
  • For 2016, Peter Mastan was recognized by Super Lawyers magazine for the fourth consecutive year.
  • "S.B. County Wins More Damages," by Ashley Powers, LATimes.com, May 25, 2005
  • "Inquiry: Noise study obscured," by Michelle DeArmond and Kimberly Trone, The Press-Enterprise, March 2, 2006
  • "Defendants in S.B. County bribery case lose appeal," The Press-Enterprise, December 29, 2007

"S.B. County Wins More Damages"

May 25, 2005 latimes.com : California

S.B. County Wins More Damages The latest court victory brings its total awarded to $10.6 million in corruption cases against former officials and contractors.

By Ashley Powers, Times Staff Writer

A judge has awarded San Bernardino County a total of $10.6 million in damages against former county officials and contractors who traded bribes and kickbacks for profitable contracts, the county announced Tuesday.

Judge Vincent J. O'Neill Jr. last week officially approved two preliminary judgments in favor of the county, including $1.75 million in punitive damages against former County Administrative Officer James Hlawek, his predecessor Harry Mays and former landfill executive Kenneth James Walsh.

Hlawek, Mays and Walsh were central figures in a mid-1990s corruption scandal. A former county supervisor, Gerald "Jerry" Eaves, was convicted of a felony conspiracy charge. Mays and Walsh served time in prison and Hlawek pleaded guilty to federal bribery charges.

"The goal was to make sure none of the defendants profited from their misconduct. It's a just result," said Leonard Gumport, a Los Angeles attorney who acted as the county's co-counsel.

Gumport and Michael Sachs, the county's chief deputy counsel, successfully argued during the civil trial that the defendants should pay the county profits they made from tainted deals.

"We went after them and said, 'You hurt us and you're going to pay for that,' " said Supervisor Dennis Hansberger.

Hansberger said that scandal and a series of others involving county officials tainted the county's image as badly as the Watergate scandal blackened the Nixon presidency.

The attorney for Mays and Walsh said he would appeal because the county had no right to ask for his clients' profits.

"The county is getting money it did not pay," said Randall Waier, a Newport Beach lawyer. "They're trying to carve out a remedy that doesn't exist."

The county has been awarded $35 million in its two scandal-related civil suits.

The corruption saga began in 1999 with a criminal indictment of several high-ranking officials and contractors — including Hlawek, Mays and Walsh — that accused them of illegally influencing county decisions.

The county filed a pair of civil suits the next year — one naming nearly two dozen current and former county employees and contractors. Most of them eventually paid settlements and criminal restitution totaling $9.7 million.

The trial for the remaining defendants began a year ago in Ventura County Superior Court, where it was moved in part because of pretrial publicity in San Bernardino County.&

The civil trial's first phase resulted in a judge tentatively awarding the county a total of $9 million. The second phase resulted in a $450,000 settlement and the judgment for punitive damages.

The county won the following:

  • $4.2 million combined from Walsh, Hlawek and Mays and his company, Bio-Reclamation Technologies Inc.
  • $3.8 million from Hlawek and Oakridge Group Corp., a billboard company whose executive is accused of brokering backroom deals. The county can also end its contract with Oakridge.
  • $1 million from Mays and Bio-Reclamation, $500,000 from Walsh and $250,000 from Hlawek, all for punitive damages.
  • $800,000 total from judgments against Mays, Hlawek, Oakridge and consultant Richard Tisdale and his company.

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"Inquiry: Noise study obscured"

March 2, 2006 - PE.COM

Inquiry: Noise study obscured

DHL: The authority balked at disclosing information at a public meeting, the report says.

By Michelle DeArmond and Kimberly Trone / The Press-Enterprise

Before the DHL cargo port was approved, a developer and top managers with the March Joint Powers Authority resisted releasing a noise study that determined hundreds of Riverside residents could be awakened each night by DHL planes, a new report shows.

Efforts to downplay the noise study's findings are detailed in an independent investigation that also concluded that one of the project's developers, Greg Diodati, allowed an erroneous flight-path map to be used in persuading the public that DHL planes would not fly over their neighborhoods. DHL began operations at March Air Reserve Base in October, and its cargo planes actually are flying over Riverside's Orangecrest and Mission Grove neighborhoods.

"If there is another smoking gun in the whole report besides the false flight path (map), it is the apparent deliberate withholding of the information that all the residents were asking us for: whether they were going to be woken up by planes," Riverside County Supervisor

Bob Buster said Thursday. Buster is also one of eight members on the March Joint Powers Commission.

The results of the noise study were not disclosed at a public meeting Sept. 22, 2004, although a representative of the firm that conducted the study briefly mentioned it and said it would be available soon. The commission voted to give initial approval to the project that night.

The commission ordered the investigation into whether inaccurate flight-path maps were used to deliberately deceive the public. The commission hired Los Angeles lawyer Leonard Gumport to conduct the investigation.

The commission governs the authority, which oversees civilian reuse of surplus military land at the joint-use air base.

According to testimony in the report, members of the authority's staff handling the deal and at least one representative of the developer, GlobalPort, obscured the noise study because they feared its release would delay or hurt their effort to seal the competitive air-cargo deal with DHL.

The study focused on how loud a single aircraft would be during the late night and early morning, when most people are sleeping. It determined that about 5 percent of the people in the area of the airport's departure route could be awakened by aircraft noise.

Attorney: No Legal Mandate

Rob Bower, a GlobalPort attorney, said the authority was not legally required to release the noise study because the number of planes DHL planned to fly was well within limits set in a previous environmental study. The company plans to fly 10 planes daily at March when the project is complete, and the previous review was based on about three times as many flights.

The study was prepared to defend the project from a court challenge brought by a coalition of homeowners and environmentalists who had “come out with all guns blazing," he said.

"We all believed their focus was not the (environmental-impact reports); it was to stop the DHL project no matter what. You don't want to give your opponents a bunch of issues to attack you on if you don't have to," Bower said, adding that the inaccurate flight-path map was unrelated to the supplemental noise study.

Testimony in the Gumport report released Feb. 17 shows that the authority's executive director, Philip Rizzo, and staff member Dan Fairbanks opposed the advice of their attorneys, who urged them to disclose the study to the public. Diodati, a developer behind the DHL deal, also wanted the document kept secret.

Steve Anderson, an attorney for the March Joint Powers Authority, said in his interview with the investigator that Diodati and his attorney resisted releasing the study because it showed people could be awakened overnight by the planes.

Rizzo and his staff members said they were not made aware of the draft study until Sept. 22, 2004, the day of a rancorous public hearing at which hundreds of area residents turned out to protest the project.

"None of us had seen the study. We resisted because we had not seen it and we weren't sure it should be in there, and we did not know what was in it," Rizzo said Tuesday.

But on Friday, Rizzo released a written statement saying he did not resist when his attorney said the noise study needed to be made public.

"I agreed and had no hesitation that it should be made public," Rizzo said.

Fairbanks said in a written statement Friday that the attorneys recommended he not review the draft document Sept. 22, 2004.

Public Materials

At a meeting Oct. 6, 2004, the final written version of the study, along with a letter from Diodati that the March authority's attorneys called "cryptic," was inserted in a public packet of materials.

Commissioners gave final approval to the project at that sparsely attended morning meeting.

Barrington Daltrey, a Mission Grove environmental lawyer who filed an unsuccessful lawsuit challenging the project in 2004, contends the authority's staff and attorneys deliberately misled the public about the project's impacts by obscuring the study.

"They slipped it in when nobody was paying attention," Daltrey said. "This is a public agency, and they have duties to the public. It's not simply a developer trying to get his own piece of property through the red tape. This is use of public property for public purposes."

Eric Garner of Best Best & Krieger's Riverside office, which represents the authority, said his firm's lawyers fought -- even yelling at their clients at one point -- to make sure the study was made public and insisted the noise consultant make a presentation at the Sept. 22, 2004, hearing.

Garner said his firm's attorneys overrode the initial objections of the developer by insisting the noise study be put in public documents at the Oct. 6, 2004, meeting and by having the noise consultant mention it during the Sept. 22, 2004, hearing.

"We were determined to make sure that it was included in the public record, and we moved heaven and earth to make it sure that it was," he said.

One Orangecrest resident who supports air traffic at March said he's not bothered by which flight path the planes take, but he does have concerns about the public being misled.

The developers should stick to the initial flight plan they presented to the public, said Charles Hopkins, who noted that he doesn't hear the planes in his two-story home.

"Anytime you have people with money, it seems they always have some piece of wool they're trying to pull over the people's eyes," Hopkins said. "Does it upset me? Certainly, but that's politics."

Hopkins said he feels bad for the people who purchased homes in that area and now can't sleep because of the noise. But he wonders how they could not expect air traffic when they bought property near an air base.

Future Actions

Buster, the only commissioner to vote against the DHL project in the fall of 2004, wants the March commission to submit Gumport's investigation to the state attorney general to determine whether any laws were violated.

He also has called for a revision of the noise study, taking into account the true takeoff pattern of DHL planes. The study assumed all DHL planes would stay on the same single path during their departure.

The commission has not met to consider those options since Gumport released his report Feb. 17.

Buster also said he wants the State Bar of California to review the case to see whether there were any ethics violations by the Best Best & Krieger attorneys representing the authority.

He said Best Best & Krieger lawyer John Brown did not make the commission aware of issues surrounding the noise study or tell commissioners that the document had been introduced into the public record.

Garner said the firm works directly with the authority staff, not the commissioners, except at commission meetings.

A coalition of homeowners and environmentalists behind the failed 2004 lawsuit is considering its options. In the suit, the group accused the March authority and GlobalPort of failing to conduct adequate environmental reviews and misrepresenting the flight path.

"On the surface, there is an implication that genuine fraud occurred. Whenever there is fraud, you have the legal right to revisit the litigation," said Daltrey, who represented the residents.

But Moreno Valley Councilman Richard Stewart, chairman of the commission, said the DHL deal is in no jeopardy. Stewart said the commissioners intend to meet with Best Best & Krieger lawyers next week to settle how future communications between legal counsel and commissioners should be handled.

And Stewart said personnel issues should not be played out in the press. The commission intends to meet with Rizzo on Wednesday in a closed-door meeting to assess his performance.

The DHL project is "a done deal, not imperiled, not hurt. This had to do with whether or not somebody intentionally drew or misdrew a flight plan," Stewart said. "Our biggest concern was whether our own staff had done something wrong, and the report says they did not know they were using a wrong map."

Orangecrest resident Leslie Osburn said she is routinely awakened about 3 a.m. by departing DHL planes.

Many area residents knew all along that cargo planes were going to fly overhead, she said. About 20,000 people live in the Orangecrest and Mission Grove neighborhoods.

"There should be some sort of disciplinary action. I don't know what that should be, but we were lied to," Osburn said.

Redeveloping March

The commissioners -- elected officials from Riverside County and the cities of Perris, Moreno Valley and Riverside -- approved the cargo port for German shipping giant DHL in the fall of 2004.

In September 2005, the Federal Aviation Administration said false information had been presented about the standard departure of commercial planes from March.

The commission ordered the independent investigation by Gumport in November to determine whether inaccurate maps were used to deliberately deceive the public about the flight path of DHL commercial cargo planes leaving March.

The investigation, released Feb. 17, focused primarily on the flight-path maps displayed at public hearings in September 2004.

The members of the authority's staff have acknowledged a map they displayed, which was provided by Diodati, did not reflect the standard departure route of commercial planes. The developer deemed the episode an "honest mistake."

Earlier this month, a separate study by an aviation consultant found that financial projections provided by GlobalPort overestimated by $16.5 million, or 64 percent, the amount of landing fees DHL would pay to the March authority over 20 years.

The report said developer GlobalPort's July 2004 projections contained errors in spreadsheet calculations and inaccurate airplane landing weights and they overestimated the number of planes DHL would operate at the joint-use military airfield.

The March commission has been working to redevelop the March base since it was downsized in 1996.

GlobalPort has contracted with the March authority to develop about 400 acres near the military airfield into a commercial cargo hub.

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"Defendants in S.B. County bribery case lose appeal"

December 29, 2007 - PE.COM

Defendants in S.B. County bribery case lose appeal

Two key figures and a billboard company in San Bernardino County's largest bribery and corruption scandal have lost their bid to have a state appellate court overturn multimillion-dollar judgments against them.

The decision Thursday by the Second District Court of Appeals upholds a $10.6 million judgment awarded to the county in May 2005 in its civil suit against former county administrative officer Harry Mays, former waste-services executive Kenneth James Walsh and Oakridge Corp., the billboard company owned by businessman William "Shep" McCook.

Former county administrative officer James Hlawek, who also was part of the lawsuit, did not appeal the judgment against him.

"The county's very pleased but not surprised by the appellate court's ruling," county spokesman David Wert said. "The county felt from the start it had a very strong case."

Attorney Randall Waier, who represented Walsh and Mays in the appeal, said he had not yet spoken to his clients about whether they would continue to appeal.

"I disagree with some of the findings made by the appellate court," Waier said. "I don't believe there was evidence to make those findings."

Attorney William Kopeny, who represented McCook in the appeal, could not be reached for comment.

Mays and Walsh were accused of bribing Hlawek -- Mays' successor as the county's top executive -- to steer $284 million in noncompetitive landfill contracts to Norcal Waste Systems in the 1990s.

In a separate scheme around the same time, McCook was accused of bribing Hlawek and former Colton Councilman Donald Sanders to win lucrative billboard permits along interstates 10 and 215.

Hlawek pleaded guilty in 1999 to accepting bribes. After cooperating with prosecutors in cases against other defendants, he was fined and sentenced in November 2005 to three years probation.

Walsh pleaded guilty in 1999 to paying bribes to Hlawek and served 16 months of an 18-month sentence in federal prison. Mays was convicted in 2000 of paying bribes to Hlawek and served 19 months of a two-year sentence in federal prison.

After the criminal cases, the county pursued the civil suit, seeking compensation for its losses and the ill-gotten gains of the defendants.

After a 22-day trial, Ventura County Superior Court Judge Vincent O'Neill found in favor of the county, ruling that the defendants must turn over the millions of dollars in illegal profits they made through the waste and billboard contracts.

Mays and Walsh were told to pay $4.2 million in compensatory damages. Walsh was ordered to pay $500,000 in punitive damages and Mays $1 million in punitive damages. Oakridge was held liable for $3.8 million.

In the appeal, the defendants disputed the amount owed and whether they were financially able to pay the awards. Both Mays and Walsh were accused of hiding assets by transferring money and property to spouses and, in Mays' case, to an offshore account.

"This (appellate court) said they weren't entitled to overturn that judgment and Judge O'Neill got it right," said Leonard Gumport, a Los Angeles attorney who helped lead the county's civil case.

He said he was pleased with the appellate court's ruling.

"It's been a long, long road," Gumport said.

Among the defendants, only Hlawek, who was assessed $250,000 in punitive damages and a portion of the compensatory damages in both bribery cases, is making monthly payments on the judgment. Waier said he could not say whether Walsh or Mays will pay the judgments.

Wert, the county spokesman, said the county hopes that the defendants realize it's time to pay up.

"The county will continue to pursue every avenue at its disposal to collect everything that is owed to the taxpayers," he said.

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