Sunday, August 19, 2018
News Roundup

Only in Florida: Battle over water, free speech pits billionaire vs. activist

This is a story about free speech, government secrecy and a fight over tens of millions in taxpayer funds. The players include a billionaire who once had a hit man kill his horse, two politicians charged with breaking the Sunshine Law and former U.S. Attorney General Janet Reno’s sister.

But the most important aspect of this story is about Florida’s water supply and how a lawsuit involving a company called Lake Point Restoration may upend a fundamental rule about Florida water — namely, that water belongs to the public, not wealthy businessmen.

One of the participants contends that what happened in that years-long suit will open the door for big companies to jump into the water business, driving up prices and starving the environment. Sugar companies, citrus growers and phosphate miners could start commandeering the water on their land and selling it.

Right now, Florida law says fresh water is "a public resource benefiting the entire state," not just big corporations and their owners, said Cynthia Barnett, Environmental Fellow in Residence at the University of Florida’s Bob Graham Center for Public Service and the author of three books on water policy. The law also says water "must be managed in a manner to ensure its sustainability."

No one is allowed to sell water he or she happens to find, not without proving to state officials that doing so is in the public interest, she said.

But that, say water experts, may be changing, thanks in part to this case.

• • •

The story begins with polo ponies.

In 2005, a developer bought 2,200 acres of sugar cane fields near Lake Okeechobee in Martin County. The company planned to turn the land into a residential development called Lake Point that would be marketed to polo players. But by the time the company got the building permits, Florida’s real estate industry had collapsed. Nothing was built, and the property went back on the market.

A broker brought it to the attention of investor George Lindemann Jr., who had made millions restoring and selling old commercial buildings in Miami Beach. He already had plenty of money from family connections — his father made a fortune in the cell phone and cable TV industry.

In 2008, Lindemann put together a consortium of family members and business partners to buy the Lake Point property. Instead of ponies and houses, their plan involved mining and water.

Calling the operation Lake Point Restoration, Lindemann’s group wanted to dig up rocks to sell for building roads and other construction projects. The pits left by the mining would store water from Lake Okeechobee when the lake got too full, as well as clean its pollution.

Lindemann is a self-professed environmentalist who has given more than $10,000 to Audubon Florida and last year was named "Conservationist of the Year" by the Tennessee Wildlife Federation. He said the idea of using the property for both mining and cleaning up pollution is why he wanted in on the deal.

"What attracted me was it was an opportunity to do something in a different way — to be helpful and make money," Lindemann said in his first in-depth interview.

Lindemann had never tackled a real estate project quite like this. But he’s not the typical Florida real estate investor.

Lindemann, 54, is the rare billionaire who has spent time behind bars. In 1995, as he aspired to Olympic equestrian glory, Lindemann was convicted of wire fraud after paying a hit man $25,000 to electrocute his own horse, Charisma. He did it so he could collect $250,000 in insurance money. He was sentenced to 33 months in prison and served about a year.

Going from a life of luxury to being behind bars "was a very traumatizing experience," Lindemann said.

• • •

Lindemann said his group moved carefully with the next step, meeting with officials from the South Florida Water Management District to make sure they would go along with the plan. They were eager to join forces, he said, which is what persuaded his group to spend $50 million buying the land.

"It had never been done before," he said. "That’s what was exciting about it."

The state water agency, which is run by gubernatorial appointees, had been under fire for years for allowing the dumping of polluted lake water into sensitive estuaries, harming the fishing and tourism industries. The agency wanted to buy the Lake Point property, too, but lacked the money.

Lake Point and the agency signed an agreement in 2008 to work together, a move the water district labeled a "significant achievement." Lindemann says it was hailed as a template for future public-private partnerships for Everglades restoration.

Because the property was in Martin County, commissioners there also signed off on the project, agreeing in 2009 that Lake Point could mine the property in exchange for promising it would someday donate the property to the state.

But according to Lindemann, no one from either government agency asked one crucial question: Once the water had been cleaned in Lake Point’s pits, where would it go?

"The eventual destination of the water was purposely left open-ended," he said.

• • •

In 2011, Lake Point contacted the nation’s largest private utility company, American Water, about joining forces to launch a new business venture: selling the water in the pits. The utility liked the idea.

"It was a very unique project and from an environmental perspective it had a lot of promising attributes," said David Orr, American Water’s former vice president for business development.

The following year, as a drought plagued South Florida, American Water and Lake Point approached West Palm Beach officials and offered them water. Their goal: Move up to 35 million gallons per day and collect millions of dollars.

It was a calculated business move. The construction industry demand for rock fluctuates, but the demand for fresh water in Florida is expected to only increase.

Lindemann insists now that they weren’t actually selling the water.

"The money they were going to pay us was for storage, cleaning and conveyance of the water," he said. "You’re not allowed to sell water in Florida."

But that’s not the way others saw it, including the South Florida Water Management District. Lake Point hadn’t sought the permits that utilities are supposed to get.

"Lake Point’s idea wasn’t so bad," the water agency’s general counsel, Brian Accardo, told state officials during a closed-door session four years later. "It’s just, you know, they didn’t have the legal right to do it."

In states east of the Mississippi, including Florida, "water is considered to be ‘held’ by the state in trust for all the people," explained Christine Klein, director of the University of Florida’s program in environmental law.

Nobody can sell water without getting permission from one of the state’s five water management districts, which examine whether the proposed sale is for a "beneficial use" that’s "in the public interest," said David Still, former executive director of the Suwannee River Water Management District. That includes considering what impact it might have on the environment.

If landowners or companies were to sell any water they found on their land, as Lake Point was proposing, it would undermine Florida’s longstanding water rules, said Emilio "Sonny" Vergara, who has served as executive director of both the St. Johns River Water Management District and the Southwest Florida Water Management District.

However, Vergara said, "over the last eight years everything has been evolving."

For instance, he said, some Florida cities have been claiming that reclaimed water from their sewer plants belongs to them, not to the public, so they can sell it for a profit. Utilities have been pushing to bend the rules so they can supply water to paying customers they weren’t supposed to serve. Lake Point was just taking this evolution further.

In Vergara’s opinion, though, the Lake Point water plan was "clearly against the law."

• • •

The Palm Beach Post broke the story on the Lake Point-American Water proposal in 2012. To critics, the revelation raised doubts about how environmentally friendly Lake Point really was.

Because of concerns about the fluctuating water level in Lake Okeechobee, the South Florida district stopped allowing any additional use of the lake for drinking and irrigation in 2008. Yet now here was Lake Point trying to do just that.

Still, some water district officials actually liked the Lake Point proposal — and that led to problems. They let the owners slide on completing other jobs they were supposed be doing, such as building artificial wetlands to clean the water, according to another water district attorney, James Nutt.

Meanwhile, Martin County officials were horrified. To them it sounded like Lake Point had been a Trojan horse, promising environmental benefits and then sneaking in to steal water they regarded as theirs. An uproar ensued.

"All hell started breaking loose," Lindemann said. "All of us all of a sudden were living in the Twilight Zone," as the story turned them from heroes to villains.

• • •

The Post story certainly made Maggy Hurchalla take notice.

Hurchalla is a former Martin County commissioner and a prominent environmental activist. She had briefly met with Lindemann before Lake Point bought its property. She says she advised him against trying to hold water in mining pits because they often leak.

But she said she missed much of the subsequent deal-making with Lake Point because she was in Miami caring for her dying sister, former U.S. Attorney General Janet Reno, as well as her brother Robert Reno, a newspaper columnist who died in 2012. She was also coping with her own health woes, including a diagnosis of breast cancer.

She saw Lake Point’s water-sale idea as a bad omen for Florida. If allowed to stand, she said, "I’m sure the sugar companies would quit growing sugar cane and just sell their water." Other big companies with ponds or pits could follow suit, she said.

Hurchalla warned the Stuart News that what Lake Point wanted to do would be a bad deal, increasing pressure on Lake Okeechobee. She began sending emails to the Martin County commissioners urging them to get out of their agreement with Lake Point. To her, she was just exercising free speech.

"You have a right to communicate with your elected representatives," Hurchalla, 77, said in an interview.

From Lindemann’s viewpoint, though, she went beyond what’s legally allowed by giving the commissioners directions on how to get out of the agreement. He also contends she lied, telling commissioners Lake Point’s mining was damaging wetlands so they would be angry enough to break with his company. (Hurchalla insists the wetlands damage was real.)

If Hurchalla had made her anti-Lake Point comments in an open commission meeting, then she would have been protected by the First Amendment, Lindemann contended, "but she did it in hidden emails. The notion that this is just someone speaking her mind — that’s not the case."

The commissioners followed Hurchalla’s suggestions, with one of them calling Lake Point’s water move "environmental treachery." Hurchalla scoffs at the idea that she played puppet master with Martin’s commissioners. She says they canceled the contract because Lake Point wasn’t following through on all the projects it had promised to complete, not because she told them to.

Lake Point’s agreement with the water agency was thrown into jeopardy as well. Water district officials were unhappy that while pursuing its water deal, Lake Point had failed to build the artificial wetlands. Lake Point blamed Martin County.

The loss of its two government agreements meant Lake Point’s partnership with American Water fell apart before it got started. In 2013, Lake Point sued the water agency, Martin County and Hurchalla. The company contended the two agencies had reneged without cause, and it accused Hurchalla of interfering in a legal contract.

At first, all three defendants fought back hard. Lindemann’s fraud conviction came up repeatedly in discussions about the suit. Some questioned why, with that background, the government had gone into partnership with his company.

"They are, you know, they’re not the most trustworthy folks," Accardo, the water district attorney, said during one closed-door meeting. "I mean, the principal of Lake Point, he has a criminal record, right?" He suggested they avoid ever doing business with Lake Point again.

• • •

As is usual with a lawsuit involving Florida government agencies, Lake Point’s attorneys demanded to see all emails relevant to the case. Under the state’s Sunshine Law, they were entitled to them. Martin County turned over the ones from the commissioners’ official accounts.

Then, during one of Hurchalla’s pre-trial depositions, she mentioned emails that Lake Point’s attorneys hadn’t seen. That’s when they learned that Hurchalla had discussed Lake Point with some commissioners via their personal email accounts. The county had failed to turn those over.

They also learned Hurchalla had deleted some of her emails.

"They broke the law, and we caught them doing it," Lindemann contended.

Hurchalla said she wasn’t trying to hide anything. She was just using the email addresses in her address book, she said. Some of the emails she jokingly signed as "Deep Rock Pit." She said she deleted some emails because her inbox was full.

Because some commissioners — one of them a former judge — had not given those emails to Lake Point, a grand jury last year charged two of them with criminal violations of the Sunshine Law. A third commissioner was later also charged. They have pleaded not guilty.

Such charges are rare, said Barbara Petersen of the First Amendment Foundation, as prosecutors hardly ever pursue a criminal case for withholding or destroying records.

Soon after the emails were revealed, the water district and Martin County agreed to settle with Lake Point. The water agency agreed to buy at least 50,000 tons of rock a year from Lake Point for 15 years, paying about $21 million total, and said it would continue working with Lake Point for another 50 years.

The 2017 settlement specifically says that Lake Point could "earn and collect all revenue of any kind" including "lease or sale of water storage, water transfer, water transportation, water conveyance, water use or irrigation rights." Accardo contends Lake Point would still need a state permit to sell water, but the settlement agreement makes no mention of that requirement.

Martin County agreed to settle for $12 million. Sarah Heard, one of the commissioners who voted against the settlement — and who was charged with breaking the Sunshine Law — said the decision resulted from the election of new commissioners backed by Lindemann. The other commissioners either declined comment or did not respond to calls for comment.

The county had to borrow $15 million to cover both the payment and attorney’s fees, according to Heard. The settlement also required the commissioners to sign a letter apologizing for "the harsh words and inappropriate deeds" that had "unnecessarily tarnished the reputation of Lake Point."

Why did the water district settle? The decision took place behind closed doors, which state law allows. Once the case ends, a transcript of the meeting is supposed to be made public. However, the water district has fought hard against releasing it, to the point of suing or threatening to subpoena the personal records of anyone who requested it.

Often when a government agency strongly resists turning over a meeting transcript, said Petersen of the First Amendment Foundation, that’s a sign they’re hiding something.

Accardo denies that. He said the water board settled because it was wary of spending more money on a case that had already cost $1 million. He said they kept it secret because Lake Point requested it — but Lake Point’s attorney says the company has no objection to releasing it now.

• • •

The dual settlements left Hurchalla as the lone defendant. Shortly after her February 2018 trial began, Circuit Judge William L. Roby called her and her attorney aside and predicted they would lose. According to Hurchalla and her attorney, the judge said Lindemann would drop the suit if she would apologize and agree never to comment on Lake Point again.

"I want her to correct the record and retract her false statements," Lindemann said in his interview. (He was unable to explain why Lake Point did not demand the water agency apologize, too.)

Hurchalla refused.

The trial took eight days, during which Lake Point’s attorneys read the Martin County apology letter to the jury as part of the evidence against her. The judge ruled that no one could mention that Hurchalla had cancer, or that Lindemann had a criminal background. The commissioners’ criminal charges were ruled off limits, as was any mention of Lake Point selling water.

Lake Point attorney Ethan Loeb of Tampa portrayed Hurchalla as a Machiavellian character who operated in the shadows to get what she wanted, even lying about the wetlands damage. Hurchalla’s attorney, Virginia Sherlock of Stuart, contended Hurchalla was just doing what the Constitution hopes all citizens will do: Get involved in local government.

"You don’t have a First Amendment right to lie," Loeb said in a recent interview.

The jury took just 90 minutes to rule against Hurchalla and award Lake Point damages of $4.4 million. They saw no other choice, according to jury foreman Steve Hursh.

"It didn’t have anything to do with the First Amendment at all, " said Hursh, owner of a carpet-cleaning business. He said the six jurors thought that Hurchalla using the commissioners’ personal email addresses "just looked bad."

Hurchalla compared the jury’s decision to being caught inside a Carl Hiaasen novel.

"We live in a really weird world over here," she said.

Lindemann hopes that now that the suit is over, Lake Point Restoration can go back to doing everything it was doing before the rift with its partners. The company’s website boasts that it’s "bringing green jobs to Florida and restoring the Everglades," but there’s no mention of water.

As for Hurchalla, she’s appealing the verdict with pro bono assistance from former American Bar Association president Talbot "Sandy" D’Alemberte, who calls it "this crazy case."

Even if she loses on appeal, Hurchalla said she can’t pay the billionaire. She joked that really all Lindemann could get from her is "two kayaks and an aging Toyota."

The car used to belong to her sister.

Times senior news researcher Caryn Baird contributed to this report. Contact Craig Pittman at [email protected] Follow @craigtimes.

     
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