Hercules is out for big bucks in the lawsuit against its former city manager and his old company, and tentative court rulings on Tuesday suggest the residents of this small town will get their day in court – locally.
NEO Consulting Inc., the company that managed affordable housing programs in Hercules until earlier this year, has dropped its request for a in the lawsuit against the firm and its former managers. The motion was scheduled to be heard in Superior Court today in Martinez.
The company’s lawyer, who represents NEO and its most recent owner, asked a judge in September to move the case outside the county on the grounds that NEO could not receive a fair trial locally. Former City Manager Nelson Oliva and his daughters cued up behind that request last month with a legal filing essentially piggybacking on the arguments in favor of moving the case to another of California’s 58 counties.
Yesterday, the plug was tentatively pulled on both those requests.
“Mr. McKinney has now resigned from his status as agent for service of process for NEO Consulting with the Secretary of State,” McKinney’s lawyer, Eva Plaza, wrote in withdrawing the request to move the case outside Contra Costa County. Her pleading also suggests that McKinney’s contract to buy the company might not have been valid for various reasons and that he has “disavowed” the contract.
“He bought a lemon,” Plaza said. “While Mr. McKinney believed that he was buying a company, and that it was going to be a successful venture, questions arose that he knew nothing about.”
McKinney was an employee of NEO before buying the company, and records filed by the city contain copies of contacts he had signed on behalf of the company going back to 2008. His prior involvement, Plaza said, was that of a “manager” and not an owner.
The argument for moving the case outside the county hinged on the idea that NEO might be perceived as an “outsider,” and that “a local juror pool would align its interests in favor of the recipient of their tax revenues,” Plaza wrote in her earlier request.
In a brief filed the day before Plaza dismissed her request, a private attorney hired to represent the city said the argument didn’t hold water.
“From the administration of the city’s , the city’s business development and financial assistance program, to the residential , to the community beautification program and its services relating to the downtown development project, among others, NEO was out in the community working with residents and businesses,” Walnut Creek attorney David Trotter wrote. “Folks could also drop by NEO’s (offices) with questions, concerns or to receive additional assistance. As such, NEO’s assertion that it is some sort of outsider to the community rings hollow.”
Since 2004, Hercules’ affordable housing program had been run by Affordable Housing Solutions Group, a company later incorporated as NEO, which stands for "Nelson E. Oliva," who ran the firm and then became Hercules' city manager.
The company's invoices to Hercules tripled to a sum of $4.2 million in the years after Oliva was named city manager in 2007. And despite the fact that Oliva claimed to have disavowed any ownership interest in the company when he assumed the city's top management post, public records suggest otherwise.
In 2008, after claiming to have handed the company to his young daughters, Oliva filed documents in San Bernardino County in which he claimed to be president. Following his forced resignation in January, the city canceled its contracts with NEO and brought the affordable housing program, albeit in a suspended state, back in house.
In August, the city sued NEO, McKinney, Oliva and three of his daughters for $3 million alleging breach of fiduciary duty, fraud in the management of the housing program and violation of state conflict laws.
The next phase of the lawsuit will be heard in Contra Costa County Superior Court on January 4, when the Olivas are set to argue that the case against them has no merit.
