Federal Judges Apologies to California Retirees

U.S. Dist. Judge Marilyn Hall Patel apologized Mar. 7 to a trio of retired steel workers, saying she shouldn’t have trusted a Palo Alto attorney who was supposed to redevelop their plant and use the money to benefit them. During Bruce Train’s nine-year tenure, he and his associates earned $5 million while the pensioners didn’t receive a penny.  It was Patel who in 1990 appointed Train to act as “special master” for the Pacific States Steel Corp. property in Union City, Cal. She is now sorry she did.   “I want to apologize to you — this weighs heavily on my conscience,” said Patel, who has handled a number of high-profile federal cases, including the Napster lawsuit. Turning sideways from the bench, Patel told three pensioners and their wives that Train misled her just as he misled them.

“I should have become aware much earlier that things weren’t what they should be. I feel very, very badly that you have not been paid,” she said. “I know that doesn’t go very far — it’s not money you can take to the bank, but I’m going to try to make up for that now. I have to take responsibility.”

Patel has not yet ruled on Train’s request for an additional $20 million to compensate his work from 1990-99, when she replaced him. But her statements indicate where her sympathies lie. Union City officials have filed a counter-request in that Train return $2 million in public funds he’s already received. Turning to the grim-faced Train, who sat flanked by his two business partners, Ted Sorensen and Hans Lemcke, Patel said: “In all honesty, I’m very, very sorry I relied on you Mr. Train.”

Questions about Train’s performance — including over-billing for his office workers and pocketing the excess, and making campaign contributions to Union City Mayor Mark Green — were first reported in the San Jose Mercury News in 1995.

Patel’s public acknowledgment of such excess astounded the parties involved, many of whom have haggled over this complex real estate deal for decades. A handful of the 164 surviving mill workers — more than 200 have died over the years — who have watched the courtroom proceedings unfold this month and last, reacted with a sense of satisfaction. They’ve waited since the mill closed in 1978 for their benefits and were repeatedly told by Train there was no money.

Train’s attorney Robert Goodin said he wasn’t sure how Patel would rule. Train plans to appeal if he loses. Goodin argues that Train paved the way for homes now being built on the formerly blighted mill site with his years of work, even deferring his pay. But at the same time, Goodin conceded that his client’s conduct “warrants criticism,” particularly when he failed to disclose financial information to firms owed money for the steel mill cleanup. In 1996, Union City gave Train $350,000 to pay RUST Remedial Services. He used the money to pay himself instead.

Train’s job arose from claims the workers filed after the mill closed in 1978. At the time, Patel devised a novel plan to avoid drawn-out bankruptcy proceedings and get the workers paid. She seized the assets of the company and appointed a “special master” to develop the approximately 100-acre mill site. Proceeds would go to pay the workers’ benefits. But Train’s insistence on compensation Union City officials call “obscene,” dragged him back into Patel’s courtroom. Observers said in previous years, Patel took little interest in the project’s progress. But the growing clamor about Train — his conflict of interest as both developer and land overseer; his failure to pay the pensioners, and his stretching of the concept of “essential operating costs” to include private tax sheltering advice — prompted Patel to strip him of his duties in 1999.

Train’s successors — San Francisco real estate consultants Nina & Claude Gruen — have paid workers in their first year on the job. Claude Gruen said payments would have been quicker, if Train had done a better job keeping track of workers and their surviving families. Charts presented in court by Union City redevelopment attorney Charles Reese indicated that between 1996 and 1999, Train and his partners configured several different plans that all amounted to a $37 million profit for themselves.  And in April 2000, after being stripped of his court duties and ordered not to interfere, Train met secretly with at least three developers, in order to secure a claim in future building. Those deals carved out a profit margin of between $59 million and $101 million. Correspondence from developers indicates that Train continues wooing developers, to Patel’s dismay.

Reese says Train’s interference with the court’s orders constitute criminal wrongdoing. He is asking Patel to consider embezzlement charges and a referral to the U.S. Attorney. [S.J. Mercury News 3/8/01]