SAN DIEGO (CN) - The founder of the Utility Consumers' Action Network claims in court that the group dismissed him in a "systematic and calculated plan of character assassination and economic harassment."
Michael Shames, a well-known San Diego gadfly, founded UCAN in 1983 to represent the interests of San Diego County utility customers. Shames sued UCAN and its employee David Peffer in Superior Court, three days after Christmas.
Shames seeks damages for libel, conspiracy, wrongful firing, blacklisting, malicious prosecution, privacy invasion, intentional interference with prospective business relations other charges.
Shames was UCAN's executive director from 1985 until June 2012. He says he informed the organization in 2010 that he planned to step down at the conclusion of a battle over rate increases with San Diego Gas & Electric - expected to conclude in 2011, though the fight is continuing at the California Public Utilities Commission.
In his 27-page complaint, Shames claims he got permission from the UCAN board to hire his own replacement. But the staff opposed his decision to hire an assistant executive director from outside UCAN, Shames says, and defendant Peffer told other employees that "they planned to 'take over' UCAN and threatened any employees who interfered in that endeavor."
In March 2011 - one day before Shames claims he planned to fire Peffer - Peffer filed a whistleblower complaint alleging that Shames was not a member of the State Bar and could not practice before the PUC.
Peffer also told UCAN that Shames "had conspired with assorted class action attorneys to receive kickbacks from those attorneys in exchange for providing them with plaintiffs for consumer class action cases," according to the complaint.
Shames claims that despite his urging, the UCAN board declined to fire Peffer until it completed an investigation into the whistleblower allegations.
Then, Shames says, attorney Michael Aguirre - who later represented Peffer in a lawsuit against UCAN - made the same allegations about Shames to the PUC, which Peffer reiterated before the regulatory body a month later.
Ultimately, Shames says, the PUC rejected both complaints by stating that a valid law license is not necessary to appear before the commission.
UCAN's independent inquiry also cleared Shames, but its board never publicly exonerated him, Shames says. Instead, it shared Peffer's allegations with its new executive director, Kim Malcolm, who ordered Shames to "cease referring cases to private class action attorneys .... [and] further demanded that plaintiff prove he was not attempting to personally profit off of class actions based on complaints received by UCAN," according to Shames' complaint.
Meanwhile, Shames claims, Peffer continued tattling on him to UCAN bosses. He claims that Peffer told UCAN Chief Operating Officer Robert Ames that Shames had put software on UCAN computers to track correspondence and other writings, which Peffer and other UCAN employees demanded be removed "as a condition for them doing any further work."
Shames claims that Peffer also told UCAN's investigator - and the U.S. Attorney's Office - that Shames had conspired with the Nucor Foundation and former UC San Diego economist Peter Navarro to launder money and evade taxes.
According to a report by San Diego-area news organization Voice of San Diego, those accusations led to FBI subpoenas and a dissolution filing by UCAN last February.
"The organization described its filing as a ruse designed to get former city attorney Mike Aguirre to publicly allege what he had privately alleged for months on behalf of whistleblowers," the Voice of San Diego reported
. "According to a complaint from a whistleblower, staff attorney David Peffer, UCAN received $1 million from an American steel company [Nucor] to fund production of a documentary film under the direction of Peter Navarro, a former UC San Diego economist whose latest book is called 'Death By China: Confronting the Dragon.' Peffer's complaint alleges that the money was laundered through UCAN for tax purposes and to disguise the documentary's funding source. His complaint says UCAN received little benefit from funding the film, only the promise of a DVD copy and a producer credit." (Brackets added.)
According to the Voice of San Diego report, UCAN's move to dissolve came on the heels of an FBI subpoena of "UCAN's internal records and nearly a year after two employees alleged that UCAN had embezzled money, awarded illegal bonuses, set up suspicious bank accounts and failed to properly audit its books. The organization says it has investigated those complaints and found them unsubstantiated."
The FBI demanded "years of UCAN records, seeking Shames' salary, bonuses and travel reimbursements .... [and] documents detailing any money UCAN received for a documentary about China and all internal audits and financial reviews," according to the Voice of San Diego.
But Shames claims that, as of the filing of his complaint, the U.S. Attorney's Office "has not sought contact with or any additional information from plaintiff. The allegations that plaintiff was the target of a U.S. Attorney investigation were false."
He continues: "The allegations that plaintiff was the target of a U.S. Attorney's office criminal investigation has been repeated by defendants and the media and has been used by others to discredit plaintiff. Yet there is no truth to the allegation and no action by the U.S. Attorney's office to support the allegation."
According to Shames, UCAN board president Kendall Squires got in on the action in August 2012, informing Shames by letter that UCAN files regarding past intervenor compensation had gone missing - files which Shames previously maintained and were required by state auditors.
Shames claims that Squires released that letter to the media, to the president of the PUC and - for reasons the complaint doesn't state - to an Assemblyman from California's Central Valley - days before Squires sent it to Shames.
"Mr. Squires made this allegation even though UCAN had been advised twice in July 2012, by plaintiff's attorney Suzy Moore, that plaintiff had complied with defendant UCAN's written demand that all requested UCAN files (electronic and paper) in the possession of plaintiff had returned to UCAN and electronic versions of them had been destroyed," the complaint states.
"Defendant UCAN's letter was false. Mr. Squires knew that plaintiff had been relieved as custodian of documents in mid-2011. Mr. Squires directed Robert Ames (UCAN's COO) to take control of all documents except for payroll records. Mr. Ames did and, with Mr. Squires consent, removed many of UCAN's records and brought them to his house in light of the evidence that UCAN files had been tampered with by Does 1-10 and defendant Peffer.
"Mr. Squires had been alerted many times by Mr. Ames and plaintiff that UCAN's records were missing, and that UCAN employees were stealing documents. On or about April 2012, Mr. Squires directed Mr. Ames to send a formal letter to UCAN staff persons demanding that UCAN documents in his possession be returned to UCAN. According to representations made by Mr. Ames, the employees refused to return the documents. Mr. Ames stated to plaintiff that he was not authorized by Mr. Squires to pursue the matter any further." (Parentheses in complaint.)
Shames claims he discovered the "missing" files at the base of his stairs when he arrived home, a month after Squires' letter. He claims that UCAN officials told him an employee would pick up the files, but three months later they remain in his possession.
He also claims that Squires leaked demands that Shames return $474,000 in incentive compensation, which allegedly violated state law, days before he actually received the letter.
UCAN's independent investigator already had found that the payments "did not violate any law" and the incentive program had been in place at UCAN since the mid-1990s, Shames says in his complaint.
"Mr. Squires wrote and published the Oct. 3 letter even though he had knowledge of all of the information stated above, including the Feb. 3, 2012 e-mail by UCAN's independent counsel that indicated a technical violation with no substantive harm," the complaint states. "Mr. Squires wrote and published the letter even though the board had publicly stated on Feb. 28, 2012 in a posting on its website that the assorted allegations raised by the 'whistleblower' complaints relating to plaintiffs incentive payments were without merit. It stated that 'no evidence confirming such allegations was provided by those lodging allegations, nor discovered by any of the professionals retained by UCAN's board.' Mr. Squires' public publication of his Oct. 3 demand letter could achieve nothing other than impugning plaintiff's reputation."
UCAN fired Shames in June 2012, and though it invited him and his new group - San Diego Consumers' Action Network, or SDCAN - to join them in the ongoing regulatory fight against SDG&E, it declined his demands to take over as the successor agency, according to the North County Times, a daily newspaper based in Escondido.
"'Specifically, the work performed by Michael Shames during his employment and the work of other UCAN employees are assets that belong to UCAN and the costs UCAN incurred for that work cannot be recovered by any party except UCAN without a court order or formal assignment. SDCAN has neither,'" the North County Times reported
in July 2012, citing a UCAN filing with the PUC.
"'UCAN does not understand Mr. Shames' representation that he is 'sorry to hear about all of the financial problems besetting UCAN' since Mr. Shames was executive director of UCAN until May 23, 2012, and knew or should have known about UCAN's financial circumstances, which did not change in any significant way between May 24, 2012 and June 21, 2012,'" the Times reported, citing the UCAN filing with the PUC.
Also in July 2012, the San Diego Union-Tribune reported
that Shames had "registered the domain name SanDiegoCAN.org on Jan. 31" and that "a month later, UCAN announced it was the subject of an FBI inquiry and asked a superior court judge to dissolve the nonprofit corporation."
"By January 2012, the board had decided they needed to file dissolution," Shames told the Union-Tribune. "There was no conflict of interest. (SDCAN) is a mechanism by which I would be able to complete the commitment I made" to pursue the case against SDG&E.
The Union-Tribune reported that SDCAN is one of at least four other businesses listing Shames' condominium as their company headquarters in state records.
Shames seeks compensatory, general, special and punitive damages and a declaration that "plaintiff has a right to future payments as they become due" - his share of future PUC awards under UCAN's incentive program.
Shames is represented by Hallen Rosner and Sharon Glassey of the San Diego firm Rosner, Barry & Babbitt.
UCAN has long been a political gadfly, nipping at San Diego Gas & Electric Co. and its corporate parent, Sempra Energy, particularly during the California electricity crisis of 2000-2001, when utilities companies, particularly Enron, used deregulation to gouge consumers for billions of dollars.
Though California's electricity market was deregulated in 1996, under Gov. Pete Wilson, a Republican, the price-gouging fiasco, which sent electricity prices up more than twentyfold, was a major influence on the recall of Gov. Gray Davis, a Democrat.