Details emerge in investigation into former Black Diamond city employees | Read Documents

Some of missing pieces in the story surrounding the abrupt departures of former Black Diamond City Attorney Loren Combs and City Administrator Leonard Smith have come to light, but more details are on the way.

The final resolution to the story is still in doubt.

A couple of facts can be stated clearly – primarily, that Combs is no longer city attorney. While the city has stated he resigned, Combs insisted during a phone interview he was terminated Nov. 21. He also stated the allegations made against him are false.

Combs had been the city attorney for 15 years prior to Nov. 21. He had previously worked for the firm McGavick Graves before starting the VSI Law Group. The city contracted with VSI and Combs for legal services in 2007 after he left McGavick Graves.

Smith was placed on paid administrative leave Nov. 20, pending a city investigation into his background.

It appears the starting line for the saga was a May 29 letter sent to the city from the Seattle law firm Byrnes & Keller.

The Kirkland-based developer YarrowBay had hired Byrnes & Keller due to questions concerning Combs’ billing practices. The May 29 letter from Byrnes & Keller laid out the allegations in clear terms.

YarrowBay is planning two large developments in the Black Diamond area, The Villages and Lawson Hills.

In June 2007, the city signed a funding agreement with YarrowBay. The agreement stated YarrowBay would pay for core city staff, city code consultants, related support facilities, equipment expenses and legal costs.

The agreement stated YarrowBay “commits to fund the Core City Staff, including the salary and benefit costs of each Core City Staff person, up to a maximum of $2 million per year.”

The agreement also stated YarrowBay would pay an additional $450,000 for legal costs “over the Agreement Term.”

The May 29 letter from Byrnes & Keller was addressed to Gwendolyn Voelpel, the city administrator at the time, and copies were forwarded to Mayor Howard Botts and all the City Council members.

The letter stated Combs’ firm, VSI, had billed for legal work not covered in the agreement.

According to the letter, YarrowBay had identified $56,974 of legal costs outside the funding agreement.

The letter also stated VSI charged $110,000 “in billings that relate to other development projects.”

Byrnes & Keller went on to state VSI doubled-billed the city and YarrowBay for the same legal work.

The letter pointed out the city has duties of oversight and “must terminate VSI” and hire a “full-time city attorney.”

The letter concluded by stating YarrowBay believes it is due a refund or credit and was requesting an investigation into VSI’s billing practices.

According to Councilwoman Rebecca Olness, who will take over as mayor in January, representatives from YarrowBay met with Council members concerning the allegations in the letter and the members took the issues seriously.

Another letter from Byrnes & Keller dated July 8 was addressed to Botts and copies were sent to Council members and Voelpel.

The July letter was in response to a June 8 letter from the city. Byrnes & Keller stated in the July 8 letter, “ does not appear that the city and YarrowBay are close to a common understanding of the severity of these concerns and the problems identified with VSI’s invoices.”

Byrnes & Keller wrote that the city should “retain an independent third party to conduct an investigation into VSI’s over billing and rate structure.”

Olness said at that time the City Council and city officials were searching for a mediator.

“We were going down that road when the letter came out on the 8th (of July),” Olness said. “We needed to find some answers.”

Olness said there were meetings going on with YarrowBay and the city, “but the City Council was not getting all the information.”

An Aug. 14 letter sent to Brian Ross, managing partner for YarrowBay, signed by Botts, stated mediation was the method to resolve the billing issue.

Botts’ letter pointed out, “To the issue of the City retaining other legal counsel, I want to be clear that I will be continuing to call upon the expertise of Loren Combs...”

A Sept. 3 letter from Ross – addressed to Botts and copied both to Council members and Voelpel – outlined seven issues for mediation between the city and YarrowBay.

Ross stated the city’s “one-time” costs assessed to YarrowBay were unauthorized.

“Yarrow Bay has tracked these ‘one-time’ costs and provided periodic summaries to the City. Yarrow Bay has identified $575,324.99 and attached the City’s description of these ‘one-time’ cost hereto.”

Ross also objected to the city using Combs as legal counsel for mediation.

“...if you choose to use Mr. Combs, Yarrow Bay believes the ability for the City to obtain an independent review of the issues for mediation will be severely constrained.”

Olness said she thought the issue would have to be settled in the mediation process.

“We were convinced we were OK (with mediation),” Olness said. “Because Loren was not being paid direct checks from YarrowBay, Loren said he could represent the city. He wanted to represent the city in mediation (with YarrowBay).”

The series of events from the end of September to November proved there were serious problems brewing inside City Hall.

Voelpel, the city administrator, was terminated without cause Sept. 25. The firing came because she had started looking for another job.

Smith was appointed city administrator a few days later, hired pending a background check. Details surrounding that background check are still be reviewed.

The issue with Combs reached a breaking point the week of Nov. 21, the same week Smith was placed on administrative leave.

In a phone interview Tuesday, Combs stated, “I showed up at the beginning (of the Nov. 21 special council meeting). I was there as the city attorney. I was handed a one-sentence note signed by the mayor that terminated my employment with the city and then I was told that I was not supposed to be in the executive session and was asked to leave, which I did.”

Combs said, “The allegations I read are false. I considered it an honor working with this city for the last 15 years. They have been great people to work with.”

He said during his 33 years as an attorney he never received a reprimand.

Olness said despite the challenges the city is facing, “things are moving. We are still working on the day-to-day projects. People need to know this is a hurdle, but it will be taken care of.”

Interim City Attorney Yvonne Ward sent an e-mail Nov. 27 to Jim Brittain at the State Auditor’s Office stating, “...the City of Black Diamond joins in the request for an investigation by the State Auditor’s Office into the billing practices and related conduct of VSI.”

The initial request for an investigation into the issue came from 31st District state Rep. Chris Hurst, D-Greenwater, who contacted the State Auditor’s office, Attorney General Rob McKenna and King County Prosecutor Dan Satterberg. Hurst, now retired, was a commander with the Black Diamond Police Department.

Olness said it is her understanding the auditor’s office is still collecting information.

May 29 Funding Agreement Dispute-1

June 8 Funding Agreement Dispute-2

July 8 Funding Agreement Dispute-3

Aug. 14 Funding Agreement Dispute-4

Sept. 3 Funding Agreement Dispute-5

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