March 05, 2008

The Kaselehlie Press

Pohnpei's Governor John Ehsa has issued his very first Executive Directive dated February 22, 2008 and numbered 01-2008. Some have raised questions about the legality of the directive.

The directive, written in the language of a legal resolution as Executive Directives are says "And now wherefore, to assist with the efforts to conserve the meager funds that Pohnpei Government's departments, offices, agencies, authorities, public corporations and other components of what constitutionally (Section 10 of Article 9 and Section 11 of Article 9 of the Pohnpei Constitution) and statutory comprise the Executive Branch have and to safeguard Pohnpei's funds by sharing legal expenses as currently practiced with other constitutional and statutory entities, all legal representation of the Executive Branch shall henceforth be done by the Office of the Attorney General in the following manner:

"1. All pending and future legal cases and/or legal matters arising in the domains of the departments, offices, agencies, authorities, public corporations, commissions and bureaus shall be immediately handled by the Office of the Attorney General for legal representation; "2. In the event of that (sic) the Attorney General would not be able to handle by reason of conflict of interest, the Attorney General shall undertake steps necessary to assign the matter to another attorney."

The second, "Whereas" clause of the Governor's Directive is worded in a way that is difficult if not impossible to understand.

"Whereas certain agencies, commissions, authorities and other components of the Executive Branch were created by statutes, aside from the Executive Reorganization Act of 2000, and that those office-creating statutes, who in turn were permitted for creation by the Pohnpei Constitution, allow such agencies, commissions, authorities and public corporations to sue and be sued in their own names…"

As best as we could determine from our reading it means that after the Executive Reorganization Act of 2000 there were still several commissions, authorities and public corporations that could "sue and be sued in their own names," which meant that those agencies needed attorneys to represent them for any legal actions that arose.

Some of those entities hired "inhouse" legal representation. Pohnpei Utilities Corporation was one of them. They hired Joe Phillip to do the job for them. They were within their legal right to do so and according to the two attorneys we consulted they still are despite the Governor's Directive.

The Governor's reorganization plan if it had been approved by Congress would have among other things created a new Department of Agriculture. If the placement of PPA on the revised organization chart submitted by the executive branch was not a typographical error the plan also would have changed Pohnpei Port Authorities status from that of a Public Corporation with a Board of Directors to that of an agency directly under the control of the governor. PUC would have remained a public corporation under the plan.

Pohnpei State Legislature in its session passed a resolution rejecting the plan in its entirety. Among other things they said that the plan carries with it "concerns with respect to requisite amendments and modifications to State laws and budgetary systems as would be needed for proper implementation of the original Plan that was transmitted to the Legislature by means of Governor Communication No. 24-08.

Governor Ehsa was off island and unavailable for comment on his first directive. Lt. Governor Churchill Edward said that the Attorney General's office was short staffed and that the directive was one possible way of solving the problem and simultaneously cutting costs. They would do that by "folding in" the attorneys that currently work for Executive Branch entities. As an example, the in house attorneys for PUC and the Finance Department would be brought into the Attorney General's office so that they could work on legal work related to the entity for which they were hired and would then also be able to work on other cases for the AG's department.

The Executive Directive says, "Whereas all of these specific agencies, commissions, authorities and public corporations and other specific parts of the Executive Branch were permitted by the current individual enabling laws to share legal counsel with [the] rest of the Executive Branch (those that were created by the Pohnpei Constitution and the Reorganization act of 2000)…"

The attorneys we consulted said that the directive is illegal under the enabling legislative initiatives that set up, among other entities, Pohnpei Utilities Corporation and the Pohnpei Port Authority. Those laws, they say, specifically allow those entities to hire their own attorneys to handle legal issues.

PPA has a contract with the Law Offices of Sipos and Berman. Eleven days before Ehsa issued his directive, Mike Sipos wrote a letter to Lorrie Johnson Asher who is in an acting capacity as the Attorney General. The letter had as its subject "PPA-3d Request for Privileged Material".

According to the letter, before Ehsa was Governor he asked Johnson Asher to get PPA's record of Sipos' billings for work he had performed for the agency. Those records are guarded by attorney client privilege and PPA did not provide those records. According to Sipos' letter, Ehsa, after he became Governor made the same request through informal channels; once, when he asked "PPA Seaport Manager Nelperson Etse to request PPA's General Manager Ieske Iehsi to produce the documents, and again by repeating the same request to Dais Lorrin, PPA's Board Chairman." Sipos said in his letter to Johnson- Asher, "this information was first requested prior to the time Governor Ehsa took office at a point when PPA was highly adverse to the Governor's brother, Timakio Ehsa d.b.a. (doing business as) Pohnpei Marine Services. And a few weeks before that request was made, PMS's private lawyer made an informal request of you for at least some of the same information without going through formal discovery channels, even though PPA was at that point litigating two claims against PMS, which the lawyer apparently failed to tell you about."

Sipos has for the last several years been defending PPA in a large number of lawsuits filed by Pohnpei Marine Services (see The Kaselehlie Press Vol 6, Issue 16, "PPA Moves to Dismiss 'Harrassing' Case of PMS" by Jessica Chapman). He goes on to say in his letter that PPA has maintained that most if not all of PMS's filings were made for the improper purpose of burdening PPA and driving up the costs of litigation. "The point to be made is, in part, that PPA has withstood repeated attacks by PMS and others that were by all accounts economically driven and misguided. Now PPA is confronting a request made by the Governor, which began before he even took office, that suggests his first PPA-related priority is to access privileged documents that will done to prevail against his brother."

He said that there is an apparent conflict of interest problem that dictates that PPA should approach the release of information with caution. Discovery documents in the lawsuit favoring PPA against PMS includes bank records obtained by a subpoena. The documents were filed with the court documents at the FSM Supreme Court which makes them publicly accessible. The thousands of pages of financial data show that while PPA was trying to collect on a PMS debt that in November of last year stood in excess of $800,000, thousands of dollars were spent by PMS to help fund Governor Ehsa's campaign for the position of governor.

Sipos concluded his letter by saying that if the AG's office put their request for information in writing explaining "what is sought, why it is sought, who is going to see it, and what safeguards will be put in place to make sure it does not get into the wrong hands, PPA will respond accordingly…If you want summaries of legal fee expenditures that do not show substantive details of attorney opinions or work product PPA should be able to provide that." There has been no response to the letter to date.

Ehsa's Executive Directive points to the "anticipated slump down of financial assistance" of Compact dollars that will occur in 2009 and the need to conserve Pohnpei's financial resources as one of the motivations for his directive. Neither Pohnpei Port Authority nor Pohnpei Utitilies Company receives allocations from the Compact.

The Directive says, "reliable evidence shows that the current practice of retaining private attorneys and/or in house counsel, both also permitted by law, is costing too much…" When we asked Lt. Governor Churchill Edward why a member of the AG's office would categorically tell us that Sipos billed PPA $100,000 in 2006 when PPA had not yet released any records regarding those billings he said that the staff member probably got that number from PPA's budget. By law, the Governor approves PPA's budget. Edward said that PPA's budget for legal representation is $140,000. That figure actually covers professional fees and includes many other expense items including the salaries for the port's pilots.

Rumors regarding Sipos' billings of PPA for legal representation vary upwards from $70,000 to one published report in which the reporter claimed, "I know for a fact that Sipos billed PPA $100,000 last year." In Sipos' letter to Johnson Asher he said that PMS's attorney, Joseph Phillip argued in an earlier case "that PPA's approach for litigation against PMS was being influenced by my personal desire for financial gain." Phillips argument was unsuccessful. On Friday, February 29, Sipos cleared up the matter. Having received no response to his letter to the AG he delivered what he had said in his letter that he would have been willing to provide by written request. He provided a summary of his billing records for PPA for the last three and a half years. That summary shows that Sipos billed PPA for all legal work just over $38,000 last year, over $37,000 the year before, over $14,000 the year before that and, $12,000 in the first year. He charges by the hour at the going rate for lawyers on the island of $100 per hour and does not receive a retainer from PPA.

He said that the fee was higher in the last two years because of the work that he did to defend PPA against multiple lawsuits filed by PMS. During those two years he won all but one claim against PPA and collected or received judgments resulting in hundreds of thousands of dollars for PPA. Lt. Governor Edward said that the Directive was not aimed at anyone in particular but was a cost saving method for the Government.

The Executive Directive was issued to all Government Agencies, Public Corporations, and Executive departments and offices. One government official who to remain unnamed said that the Directive was not a means of influencing the outcome of court proceedings between PPA and PMS.