READ FIRST: SALZMAN'S PLAN

Do you think it is ok to PRIVATELY fund a PUBLIC prosecution? More than that - to SOLICIT, accept and use SPECIAL INTEREST MONEY to privately fund a public prosecution?

"There have been rumors Gallegos supporters are launching a community fund-raising effort to fund the Palco suit. Gallegos and his staff say while they are open to such a proposal, they're not aware such a fund exists." ..."Salzman says he's heard some talk of a community fund, but he's not involved in that effort." April 30, 2004 Times Standard Front page story by James Tressler

Rumors? Open to such a proposal? How about orchestrating such a Fund.

On March 29, 2004, exactly one month before he made that statement, Paul Gallegos submitted a formal 'Request for Opinion' to the Attorney General's office to pave the way for Richard Salzman and Tim Stoen's plan to solicit special interest money to privately fund a public prosecution.

That plan is shown below.

Before you read it, ask yourself this question: If Stoen and Gallegos were prosecuting Kobe Bryant, and Gallegos' backers and handlers were the Aryan Brotherhood, who were contributing money to fund the prosecution of Kobe Bryant - to "get that black man" - would that be ok? I contend that no same person would say yes.

And should District Attorney Paul Gallegos be acting at the behest of his Campaign Manager to use his public office in the name of a cause?

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The memo included below, dated April 14, 2003, references an attached document given to County CAO Loretta Nickolaus by Tim Stoen. The document, included here is a Memorandum to Richard Salzman dated March 31, 2003. It is available as a public records act request.

In this document RICHARD SALZMAN, GALLEGOS' CHIEF CAMPAIGN FUNDRAISER (March primary 2002) and then CAMPAIGN MANAGER (Recall election, March 2004) and acting head of the so-called "Alliance for Ethical Business" (one of many groups targeting Pacific Lumber Company) is soliciting an opinion for Stoen/Gallegos.

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Cover page:

Interoffice Memo
Date: April 14, 2003
To: Tim Stoen, Assistant District Attorney
CC: Paul Gallegos, District Attorney
Board of Supervisors
Tammy Falor, County Counsel
From: Loretta Nickolaus, CAO

Re: Request for establishment of a Trust Fund expenditure anticipated in the Pacific Lumber Company (Palco) lawsuit.

Last week you stopped by my office to give a "heads up" stating that you were planning to prepare an item for Board approval. You referred to a memo (copy attached) that outlined a proposal. The proposal would include a recommendation to establish a trust fund that would supplement the DAs budget for costs associated with the fraud case you have recently filed against Palco. The memo suggests calling the new trust the Headwaters Litigation Fund.

The memo also points out that the Board has established other trust funds for special purposes and needs. Examples would include a trust fund to widen the Buckhorn Grade or the DAs environmental trust fund used to clean up contaminated properties. The Board has also accepted private donations to cover the cost of buying library books and a gift of funds to study the housing needs in the community.

I am not in a position to weigh in on the Palco case and cannot support establishing this trust fund any more than I could recommend that the Board accept Donations from Palco for the sole purpose of prosecuting tree sitters (for example). However, given these tough budget times and the probability that it is going to get a lot worse before it gets better, why don't you explore (with the assistance of the Attorney General's Office and County Counsel) the creation of a more flexible fund called the DAs Prosecution Fund to be used to supplement the DAs budget not only for fraud cases but also drug, abuse and homicide cases.

I hope this feedback is helpful.

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ATTACHED DOCUMENT
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Page 1 of 7:
MEMORANDUM

To: Richard Salzman "Alliance for Ethical Business"
From: Gail Holder
Re: Legal guidelines for possible fundraising to supplement the District
Attorney's budget for anticipated costs involved in the PL lawsuit
Date: March 31, 2003

QUESTIONS PRESENTED

I. Whether a District Attorney, as a sitting elected official can solicit for, and accept donations to supplement his Agency's budget for anticipated costs associated with the public purpose of prosecution, and if so, what legal guidelines regulate the solicitation, acceptance, and disbursement of such contributions?

II. Whether the Fair Political Practices Commission (FPPC) created by the Political Reform Act of 1974 (Proposition 9) exerts authority or jurisdiction over fundraising not associated with pre-election candidate, campaign fundraising, but rather for expenditures for public purposes, as designated by a sitting public official in executing his legal duties?

III. Whether a District Attorney's acceptance of pro bono legal assistance tendered by attorneys, law firms, or paralegals constitutes the acceptance of "gifts" or "bequests" by a sitting elected official and if so, what legal authority, if any may regulate, limit, or prohibit acceptance of such pro bono assistance by the District attorney in the instant matter of the PL lawsuit?

BRIEF ANSWERS

I. Yes. Contributions designated for the public purpose of proceeding with the PL lawsuit may be accepted by the District Attorney's office, via establishment of an Agency-fun approved by the Humboldt County Board of Supervisors, which Board is empowered to approve or deny the District Attorney's proposal. If denied, an alternative plan for acceptance of contributions will be the formulation of an Agency fund held in trust through an Escrow account.

II. Probably not. The FPPC is a bipartisan, independent body which administers and enforces the Political Reform Act's rules on conflicts of interest, campaign contributions and expenditures, and lobbying disclosure, while the commission exerts...

Pg. 2 of 7:

...jurisdiction over *Conflicts of interests *Mass mailing violations *Campaign disclosure violations *State lobbying violations *Personal use campaign funds and *Money laundering, all but the latter have relevance exclusively to issues related to candidates for office, and campaign fundraising issues. California Government Code _82015 addressing payments made "at the behest " of an elected official to be used for legislative or governmental purposes may be an FPPC issue and will be discussed below.

III. No. Pro bono assistance presents no conflicts of interest, as such assistance constitutes a benefit to the county, and to the people, rather than to the elected official personally. Pro bono assistance does not constitiute a "gift," "bequest," or "devise," within the meaning of FPPC rules.

STATEMENT OF FACTS:

On February 24, 2003, Paul V. Gallegos, District Attorney of Humboldt County (DA) acting to protect the general public from unfair business practices, filed a complaint for civil penalties, injunction and restitution against THE PACIFIC LUMBER COMPANY (PL), and its subsidiaries, in the Superior Court of California, County of Humboldt. Complaint: People v. Pacific Lumber Company on behalf of The PEOPLE OF THE STATE OF CALIFORNIA, pursuant to sections 17204 and 17206 of the Business and Professions Code.

District Attorney Gallegos and Assistant District Attorney Tim Stoen subsequently appeared before the Humboldt County Board of Supervisors (March 12, 2003) for the purpose of requesting permission of the Board for the DA's office to retain outside counsel to assist with the PL litigation. The Board opposed the allocation of any County monies to the PL lawsuit. Standing alone, Third District Supervisor, John Wooley put forth a motion to allow the District Attorney to present a finalized proposal supporting his request, but the rest of the Board voted the motion down. Although the Board rejected the DA's request for special counsel, Mr. Gallegos stands by his decsion to proceed with the lawsuit, and now seeks to supplement his budget for anticipated costs of the suit, inclusive of witness fees, travel expenditures, depositions, et cetera. Presently, the District Attorney's office is engaged in pursuing a lawful course by which to solicit, accept, and utilize contributions so crucial to supplementation to the Agency's budget, and to the success of the PL litigation. The District Attorney's office seeks now to delineate and resolve all of the issues involved in establishing a lawful procedure for accepting, reporting, depositing, and disbursing monetary contributions to support the PL lawsuit.

pg 3 of 7:

DISCUSSION:

I. Whether a District Attorney, as a sitting elected official can solicit for, and accept donations to supplement his Agency's budget for anticipated costs associated with the public purpose of prosecution, and if so, what legal guidelines regulate the solicitation, acceptance and disbursement of such contributions?

As an elected official, acting within the scope of his official duties, and to satisfy a public purpose such as proceeding with the Pacific Lumber Company Lawsuit, the District Attorney may accept contributions from both individual and organizational donors. the preferred method is the establishment of a Trust Fund through the Humboldt County Board of Supervisors.

AUTHORITY FOR LEGAL GUIDELINES:

AUTHORITY: SUBJECT:

Government Code Section 25355 Acceptance of gifts by the Board
Government Code Section 25356 Treatment of specified and unspecified donations

California Government Code Section 25355, West 2003,

"The Board may accept or reject any gift, bequest, or devise made to or in favor of the County, or to or in favor of the Board in trust for any public purpose. The Board may delegate to any County officer or employee the power to accept any gift, bequest, or devise made to or in favor of the County. The officer or employee shall file with the Board each quarter a report that describes the source and value of each gift valued in excess of ten thousand dollars ($10,000) or any other amount as determined by the Board. The Board may hold and dispose of the property and the income and increase thereof for those lawful uses and purposes as are prescribed in the terms of the gift, bequest or devise. In accounting for or inventorying gifts, bequests, or devises, the officer or employee shall follow the appropriate procedures contained in the State Controller's manual entitled "Accounting Standards and Procedures for Counties.:

California Government Code Section 25356, West 2003,

"If any gift, bequest or devise is unaccompanied by any provision prescribing or limiting the uses and purposes to which the property is received, or the income or increase

pg 4 of 7:

Page four is missing. No one seems to have a copy of this except perhaps Tim Stoen, Salzman or Holder

pg 5 of 7

...first step to be undertaken by the DA's office is to formalize a request to the Board of Supervisors for the establishment of a Trust Fund for expenditures anticipated in the PL lawsuit.

PROCEDURE TO BE USED BY DISTRICT ATTORNEY IN REQUESTING TRUST FUND.

As per instructions of County Treasurer, Steve Stawn (sp) offered via phone conference March 20, 2003, the following process must be followed: Initially, three (3) weeks before the proposal is made before the Board, the Clerk of the Board of Supervisors must be notified of intent of DA's office to present a proposal for establishment of agency/trust fund to be used for the PL lawsuit. the clerk will make this request a future Agenda Item.

Secondly, the DA appears before the Board with a formalized, written proposal delineating the necessity of a Trust Fund to supplement anticipated costs associated with the Pl lawsuit. A working title of the Trust Fund might be Headwaters Litigation Fund (HLF). The DA requests approval of the Board for the proposed HLF.

Thirdly, after consideration of the proposal, the Board will do a status report which is a recommendation for approval or denial of the proposal; (see attached documents (A) Agenda Item No. E-5; and (B) Agenda Item No. C-3) In both cases, the Board approved. Also see Times Standard article, Trust Fund to Widen Buckhorn Grade Backed March 26, 2003 for clarification of Trust Funds.

Lastly, after approval (1) the Trust Fund is set up, and (2) the Agency is oriented on how funds will be accessed. Mr Strawn stated that the Auditor/Controller's office oversees the disbursement of all County monies, and as such, will monitor the disbursement of the HLF. (3) the DA's office will be advised on budgeting matters, and of how to access the HLF Funds. Generally, after approval and establishment of the Trust Fund, expenditures are accessed via presentation of a budget.

In the event that the Board of supervisors denies the District Attorney's proposal for a trust fund to be established as per Government Code _ 25355, for the public purpose of the PL litigation, the alternative plan will be a trust fund set up as an Escrow account. Escrow law is contained in Division California Finance Code commencing with the regulations, are contained in Subchapter 9, title 10 of the California Code of Regulations with section 1700 (10 C.C.R. _1700 et seq).

!!. Whether the Fair Political Practices Commission (FPPC) created by the Political Reform Act of 1974 (Proposition 9) exerts authority or jurisdiction over fundraising not associated with pre-election candidate, campaign fundraising, but rather for expenditures for public purposes, as designated by a sitting public official in executing his official duties?

According to FPPC spokesperson and researcher, "Trish," via phone conference on April 1, 2003, the FPPC, the FPPC almost exclusively oversees fundraising issues associated with candidates, and pre-election fundraising. Trish's response to an inquiry regarding...

pg 6 of 7

...Government Code _ 82015 (B) (iii), was that this section is a "relatively new" and "gray area" of the law, which "should not be a problem or an issue in the instant matter."

Government Code _ 82015 (B) (iii), reads

"A payment not covered by clause (i), made principally for legislative, governmental or charitable purposes, in which case it is neither a gift nor a contribution. However, payments of this type that are made at the behest of a candidate who is an elected officer shall be reported within 30 days following the date on which the payment or payments equal or exceed five thousand dollars ($5,000) in the aggregate from the same source in the calendar year in which they are made..." (see attached document marked "C" to review section 82015.)

FPPC spokesperson Trish conjectures that if the HLF is set up through the County' Government Code 82015 regulations may be negated by the stringent County trust fund regulations. This further research on Government Code 82015 (B) (iii) is forthcoming. Trish will determine whether or not, once the HLF is set up, the District Attorney himself, may lawfully solicit for funding via phone calls and personal letters to perspective (sp) donors. According to the FPPC representative, however, it si established that others in the Agency may solicit for funding on behalf of a public purpose (HLF), which solicitation is outside the scope of the FPPC authority.

III. Whether a District Attorney''s acceptance of pro bono legal assistance tendered by attorney's, law firms, or paralegals constitutes the acceptance of "gifts" or "bequests" by a sitting elected official and if so, what legal authority, if any may regulate, limit, or prohibit acceptance of such pro bono assistance by the District Attorney in the instant matter of the Pl lawsuit?

A phone conference with FPPC representative Adrian on March 28, 2003 revealed that pro bono assistance offered to a sitting elected official for a public purpose, benefit the County and the people of the County, but not the official personally. Such assistance does not constitute a "gift" or "bequest" within the meaning of FPPC regulations, and may, therefore, be accepted without reservation, by the sitting District Attorney in the instant matter. Adrian stated that such acceptance by the Da of pro bono assistance does not constitute a "conflict of interest" within the meaning of FPPC regulations.

CONCLUSION:

Although the District Attorney's prior bid for County approval for the hiring of outside counsel to assist in the PL lawsuit, was rejected by the Board of Supervisors it is herein suggested that the Da go before the Board with a proposal which constitutes an offer the...

pg 7 of 7

...Board 'cannot refuse.' Emphasis should be placed upon the fact that the District Attorney's Office seeks no money, either directly, or indirectly, from the General Fund, but rather requests the establishment of a trust fund whose coffers will abound with contributions from individuals and organizations some of whom have already come forward with spontaneous offers of monetary donations.

It is prudent to make the HLF proposal clear, and comprehensible to the Board, and to render the process of approving and setting up the trust fund as simple as possible. In the improbable event that the Board denies the proposal, the backup plan of the Escrow account should be implemented.

It is concluded that the District Attorney of Humboldt County may lawfully accept contributions for the public purpose of budget supplementation to proceed with the PL lawsuit. The rule of law is California Government Code Sections 25355 and 23556 addressing acceptance of gifts by the Board of Supervisors and treatment of specified and unspecified donations. FPPC Regulations, California Government Code 82015 addressing "behested payments" in excess of five thousand dollars ($5,000) from a single source, are satisfied by simply filling out a form and filing that form with the County Clerk. Applying the relevant rules of law to the facts contained therein, the District Attorney, after lawfully establishing the trust fund, may solicit, accept and utilize unlimited contributions for the public purpose of the PL litigation.

Once the trust fund is established, fundraising plans could include calls and letters to environmentally involved celebrities, and to organizations such as the Sierra Club, Greenpeace, and the Wilderness Society Planning and Conservation League. Full page ads in the Los Angeles Times and the San Francisco Chronicle could attract powerful allies to contribute significantly to the cause. Although local radio, television and newspaper releases might serve to clarify the DA's position on the lawsuit, and perhaps win some measure of support, a controversial, even hostile local environment and the facts appear to indicate that significant budgetary supplementation will likely come from out of the immediate area.

Gail Holder

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RELATED:
Read second - GALLEGOS' REQUEST FOR OPINION
The complete text of Paul Gallegos' REQUEST FOR OPINION, which he submitted to the Attorney General's Office

TIM STOEN'S LETTER TO THE FPPC
Paul Gallegos' and Tim Stoen's efforts to privately fund the PL lawsuit took many forms.

THE FPPC RESPONSE TO STOEN
The full text of the FPPC's response to Tim Stoen's letter regarding "Raising Funds for prosecution of District Attorney Lawsuit Against Pacific Lumber Company."

SUBMISSION TO THE ATTORNEY GENERAL'S OPINIONS DEPARTMENT regarding Gallegos' Request for Opinion and Salzman's Plan