OC Real Estate Developer Trick to Gouge Taxpayers Fails

Irvine Co. perfected tactic fails this time
Irvine Co. perfected tactic fails this time

After a state regulatory agency ordered an Orange County real estate developer to pay for the toxic contamination cleanup costs in December 2005 on its property in Huntington Beach, the developer sold the property to another state agency and then attempted to stick them, or in reality, taxpayers with the bill.

Today, the Ninth Circuit Court of Appeals rejected Hearthside Residential Corporation's sneaky maneuvers.

And the decision apparently wasn't hard.

The company tried to argue that the state owned the property at the time of the $1 million cleanup and should be responsible for costs.

"If Hearthside's argument were adopted as law, then an owner could sell a recently cleaned piece of property to an innocent owner one day before the statute of limitations runs, with the result that the new owner would bear full cleanup liability . . . ," wrote the federal appellate justices. "Such an unwise and untoward result would undermine the general aim of statutes of limitations to provide notice and predictability to a defendant.

The justices added, "Under the view of liability urged by Hearthside, a landowner seeking to avoid liability by transferring the property before a lawsuit is filed has every incentive to delay completing the cleanup process until it has found a buyer."

Hearthside is owned by California Coastal Communities, whose board of directors includes Geoffrey W. Arens, Phillip R. Burnaman, Marti P. Murray, Raymond J. Pacini and Sandra G. Sciutto. The company president is Michael J. Rafferty. The Irvine-based company has more than $249 million in assets, according to a recent SEC filing.

In the past, Orange County's largest real estate developer, The Irvine Co., has perfected the liability shifting tactic because company owner Donald Bren, the region's wealthiest man with tens of billions of dollars, somehow usually wins the silence of government officials.

--R. Scott Moxley / OC Weekly

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