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Lodi set to file cleanup lawsuit

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Posted: Monday, June 19, 2000 10:00 pm

A $16 million Wall Street bond deal to help the city pay for a pivotal lawsuit in its strategy to clean up underground water and soil contamination appeared clear for final approval Monday.

Both a lawyer and a spokesman for a taxpayer group said they would not file an appeal Monday, the deadline to protest a county court ruling that shot down its challenge of the city's Lehman Bros. financing deal.

Lodi City Attorney Randy Hays said the city was cleared to collect the Lehman money and will ask the City Council soon to file the lawsuit against a handful of local businesses connected to the TCE and PCE contamination.

Through those lawsuits, the city aims to collect millions of dollars in insurance settlements to pay for the chemical cleanup.

TCE and PCE were discovered in 1989 in a handful of city wells and have been found in a plume of soil and groundwater extending from north Lodi to downtown. Both chemicals, used in industry and dry cleaning, respectively, have been linked in some studies to health problems like cancer.

City officials, since starting the legal fight in 1995, have vowed to not touch local businesses' other assets - cash accounts, property and the like - just their insurance.

In December, the San Joaquin County Taxpayer's Association sued the city saying the Lehman Bros. deal was unlawful. City officials questioned whether the lawsuit was the work of the watchdog group or the insurance industry as some of the lawyers who also represent insurance companies fighting the city represented the taxpayers. Among several issues, the association argued that costs associated with the plan, including an interest rate that could reach 26 percent, were a gift of public funds. In May, a Stockton Superior Court judge ruled in the city's favor.

Don Parsons, the taxpayer association's secretary and treasurer, said that while not all association members agreed with the judgment, they believed it was fair and so would not appeal.

An appeal would have stalled collection of the Lehman Bros. funds. Hays said he didn't know when the first Lehman installment will be wired in.

"I don't want people's expectations to get raised unnecessarily," he said. "This thing has too many twists and turns to pick a date."

However, Hays said the first portion will be spent on costs associated with filing the lawsuits, together called the "global lawsuit," and reimbursing the city for expenses already incurred. The Lehman money would be doled out in quarterly installments over four years if the city needs it, Hays said. Hays refused to reveal the amount of insurance proceeds he and a team of attorneys have identified.

"But it's multiple hundreds of thousands of dollars," he said. "It's big bucks. (It) exceeds any number you've ever heard regarding the amount in the cost to clean up."

But hinting at the amount, Hays said one insurance policy alone is worth $40 million.

Hays also wouldn't reveal how many defendants he might name.

"That's litigation strategy information that I need to keep in my head."

He estimated that a judge could issue an order for the defendants to pay for the cleanup within 12 to 18 months of the filing of the federal court lawsuit. The cleanup, however, will take much longer.

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