HERCULES -- Instead of getting $3.15 million as part of a lawsuit settlement with its former city manager, who is accused of steering contracts to his family's business, Hercules may end up losing money on the deal.
The city had collected $114,079.87 from Oliva under the settlement and paid $277,120.38 to Bowles & Verna LLP of Walnut Creek, its outside counsel, according to information provided by the city. But since Oliva died in May, the city is unlikely ever to collect on the balance.
"My belief is that we've collected everything we're going to find and that we've thrown out about $150,000 funding the lawsuit," said Councilman Bill Kelly, referencing the net amount the lawsuit has cost the city. "To our knowledge, there are no assets."
David Trotter, the Bowles and Verna attorney who handled the case, and Patrick Tang, the Hercules city attorney, did not immediately respond to an email and voice mail this week asking whether the city expects to collect any additional money under the settlement.
The suit, filed in August 2011 in Contra Costa Superior Court and later moved to Alameda County, accused Oliva of breach of fiduciary duty and conflict of interest when he executed contracts on behalf of the city with a company in which he held a financial interest during his tenure as city manager. Oliva claimed he had divested himself of his interest in the company before he became city manager in April 2007.
The lawsuit originally was filed against Oliva, his daughters Taylor, Adrianna and Gabrielle Oliva; the family's company, NEO Consulting Inc.; and unnamed other parties. The daughters were dropped from the suit as part of the November 2013 settlement.
Kelly, who joined the council in late 2012, more than a year after the decision to sue, said it was the right decision at the time. Noting the Oliva family's bereavement, Kelly said, "There are no winners here."
The $3.15 million settlement represented roughly the total of the city contracts with NEO that Oliva executed during his tenure as city manager until January 2011. It consisted of two parts: a $1.65 million judgment against Oliva and a $1.5 million judgment against NEO.
Who owns NEO had been a matter of dispute. Its former general manager, Walter McKinney, told the Hercules City Council in July 2010 that he, or a company he owned, had purchased NEO. But in a November 2011 sworn declaration in connection with the lawsuit, McKinney said the sale was never consummated, and the Olivas never turned over any stock certificates.
The $114,000 Oliva paid to the city before he died consisted of the $64,000 cash-out value of a CalPERS retirement account, plus $5,000 a month, or half his monthly disability pension, that he assigned to the city starting in August 2013. Oliva's death terminates the disability payments, said Hercules Finance Director Nickie Mastay.
The $1.5 million NEO settlement is backed by a piece of desert real estate in Los Angeles County. Hercules agreed not to go after McKinney's personal property if he abides by the terms of the settlement, which calls for him to put the lot up for sale.
As of Thursday, the lot was still recorded as owned by NEO, which acquired it in 2005, according to the Los Angeles County assessor's branch office in Lancaster. The lot is 2.67 acres and vacant and has a current assessed value of $17,833.
Contact Tom Lochner at 510-262-2760. Follow him at Twitter.com/tomlochner.