EL CENTRO - Imperial County District Attorney Gilbert G. Otero announced in a press release dated October 16 that after an investigation by his office, they have decided not to file charges against ZGlobal Power Engineering and Energy Solutions (ZGlobal), it’s owners and employees, arising out of the master agreement between Imperial Irrigation District and ZGlobal entered in October 2015.
The District Attorney also said in the release there was no basis to believe that Michael Abatti or any member of ZGlobal violated any conflict of interest statute in relation to the battery project.
While Government Code § 1090 makes it a crime for certain individuals to enter into or advocate for governmental contracts in which they have an interest, the County believed the interest of justice supported and mandated the decision not to pursue criminal charges.
The DA’s office said the primary duty of the prosecutor is to seek justice within the bounds of the law, not merely to convict. The prosecutor concluded in this case his office should exercise discretion and not pursue criminal charges.
The civil fine that resulted from IID’s partial blame for the blackout in 2011 and CAISO’s decision to reduce IID’s Maximum Import Capability (MIC) to zero caused IID’s Board of Directors and senior management to lose confidence in the energy department and terminate five key employees in what amounted to a major overhaul of that department, according to the release.
It was in this context that IID turned to ZGlobal seeking help with the day-to-day operation of the energy department. ZGlobal was uniquely qualified to step in and fill the void created by the termination of IID employees. The company had a fundamental understanding of IID’s energy department, the issues involving the FERC fine and future reporting requirements, and the expertise surrounding the MIC issue with CAISO to help challenge its July 30, 2014 decision, the release stated.
The master agreement was a three-year consulting contract, the DA's release reported. ZGlobal disclosed to IID all of its pending projects that it would continue to work on outside the master agreement. It identified six embedded ZGlobal employees and instructed those employees not to work on the identified pending projects. Neither IID nor ZGlobal understood or required ZGlobal to cease all its other work in Imperial Valley. Both knew that those projects would intersect and impact IID, the release reported.
While the plan was good, the execution of the plan was not, the release said. Both IID and ZGlobal failed in their attempt to keep the dedicated ZGlobal employees from doing work that impacted ZGlobal’s listed projects, the DA said in the report.
In turn, those failures led to potential allegations of criminal conduct in violation of Government Code § 1090. In the summer of 2017, the California Supreme Court overruled an appellate court case that held Government Code § 1090 did not apply to consultants or independent contractors.
The Supreme Court stated: “In the ordinary case, a contractor who has been retained or appointed by a public entity and whose actual duties include engaging in or advising on public contracting is charged with acting on the government’s behalf. Such a person would therefore be expected to subordinate his or her personal financial interests to those of the public in the same manner as a permanent officer or common law employee tasked with the same duties. . . This general rule might give way in circumstances where a contractor reasonably believed he or she was not expected to subordinate his or her financial interests to the public’s,” the press release stated.
It is clear that the master agreement was entered into by both IID and ZGlobal with the understanding that ZGlobal would continue with its disclosed projects. Neither party expected ZGlobal to subordinate ZGlobal’s financial interest to the public, the report stated.
Allegations of conflict of interest were raised by the Desert Sun reporting on the issue. This led to the parties mutually agreeing to terminate the final year of the Master Agreement, according to the release. IID and ZGlobal agreed to submit any possible 1090 violation to a mediator to ensure that ZGlobal did not exploit and profit from their position under the Master Agreement. IID and ZGlobal executed two settlement agreements in February and August 2018, according to the report.
The release ended saying under these circumstances, the Imperial County District Attorney’s office announced Tuesday, October 16, that they did not believe a criminal case was appropriate.