UPDATE, Tuesday, May 3, 2:30 p.m.:
Some sharp-eyed readers took note of the “May 01” stamp in the photo below, which prompted some speculation that the County Administrative Office may have had a copy of the lawsuit in hand a full day before one was delivered to Auditor-Controller Karen Paz Dominguez.
But Clerk of the Board Kathy Hayes tells the Outpost that she accidentally used the wrong stamp when the suit was served on Monday.
“It should have been stamped Received on May 2, 2022,” Hayes explained in an email. “I have since re-stamped the lawsuit with the correct date of May 2nd, 2022.”
The courthouse isn’t even open on Sundays, so delivery on May 1 would not have been possible. Hayes said that only she, as clerk of the board, or deputy clerks in the office can accept service for a lawsuit being served on the county as a whole.
“We cannot accept service for individual employees, department heads or elected individuals when they are named separately/individually in a lawsuit,” she added. “Those must be served personally on the individual.”
Jennifer Hanson, press secretary to California State Controller Betty T. Yee, told the Outpost via email late Monday afternoon that both the county and Paz Dominguez were “in the process of being served.”
Hayes said her office’s process with lawsuits against the county is to accept service, log the date and time received and then send a copy to county counsel, the CAO’s Office and members of the Humboldt County Board of Supervisors, after which county counsel takes over.
“I want to be clear because there is misinformation out there stating that the CAO accepted service and that is incorrect,” Hayes said. “[T]he CAO is not authorized to accept service of lawsuits on behalf of the county.”
The State of California is suing Humboldt County and Auditor-Controller Karen Paz Dominguez, in both her personal and professional capacities, for failure to comply with government-mandated financial reporting requirements.
A nine-page complaint filed Monday by Supervising Deputy Attorney General Julianne Mossler says Paz Dominguez failed to file the county’s adopted budgets on time for two consecutive fiscal years — 2020/2021 and 2021/2022 — and also failed to file the county’s Financial Transaction Reports for fiscal years 2019/2020 and 2020/2021 “in the time, form, and manner prescribed by the State Controller.”
The state is asking the court to order Paz Dominguez to pay $10,000 — two fines of $5,000 apiece — and order the county to pay $2,000 for these delayed and/or improperly submitted reports. The suit also asks the court to issue a writ of mandate requiring Paz Dominguez “to perform her mandatory statutory duties” and submit the overdue reports correctly.
News of the lawsuit came as a surprise to Paz Dominguez, who told the Outpost via email Monday afternoon that she was not aware of it and had not received a copy.
“I don’t have a comment about a lawsuit as I have no documentation to reference,” she wrote. “I will need to check in with the CAO [County Administrative Office] regarding the submission of budgets as that is an item the CAO has historically submitted to the SCO [State Controller’s Office] on behalf of the County,” she added.
The state’s lawsuit, however, says that it’s Paz Dominguez’s responsibility as the county’s auditor-controller to file both the county’s adopted budgets and its Financial Transaction Reports.
“Defendant Paz Dominguez is sued in her personal and in her official capacity as the Auditor-Controller for [the] County,” the suit says. “She is an elected county official, has charge of the County’s financial records, and is responsible under Government Code sections 29093 and 53891, et seq., to ensure that the County’s adopted budgets and her FTRs are filed in the time, form, and manner required by the State Controller.”
The suit goes on to recount a succession of missed deadlines, incomplete or improperly submitted reports and long lapses in communication from the Auditor-Controller’s Office.
For example, the State Controller’s Office sent Paz Dominguez letters on Feb. 28 advising that the county’s 2020/2021 adopted budget had not been received by the Dec. 1, 2020, due date, nor had the subsequent year’s budget been received by the Dec. 1, 2021, due date, according to the suit. The letters warned that the county would be subject to a $1,000 forfeiture for each of those two “missing” budgets if Paz Dominguez failed to file them by March 21.
The state received the budget schedules on that due date, but they were incomplete, according to the suit. “Both sets of schedules were missing information required by Government Code … ,” the suit says. The budgets had no beginning fund balances, and funding sources did not equal financing uses, and so the State Controller’s “rejected the incomplete schedules” and has yet to receive adequate versions, according to the complaint.
That’s the state’s first cause of action. The second concerns the county’s delinquent 2019/2020 Financial Transactions Report, which has been a topic of argument and speculation in recent Board of Supervisors meetings. Financial transactions reports lay out all of a county’s financial transactions during the previous fiscal year.
According to the complaint, the State Controller’s Office first reached out to Paz Dominguez about the delinquent report on Nov. 6, 2020, following up on Feb. 26, 2021 with a warning that she’d be subject to a $5,000 fine if she failed to submit the report by March 18, 2021.
She failed to submit it by the deadline, and on June 1 of last year the State Controller’s Office followed up again.
“Paz Dominguez responded on June 14, 2021, stating that the County’s audit for fiscal year 2019/2020 was underway, but not yet complete,” the suit says. “Paz Dominguez offered to complete the report using unaudited information and indicated it would take two weeks.” The State Controller’s Office agreed, but Paz Dominguez missed the deadline again.
Nearly nine months later, on Feb. 24 of this year, the Attorney General’s Office sent a Final Demand Letter to Paz Dominguez, giving her 20 days to file the report.
At a March 1 Board of Supervisors meeting, Paz Dominguez said she believed the final demand letter had been sent by mistake, or perhaps as the result of some automated process, because her office had been working directly with a team from the State Controller’s Office, who’d come to town to investigate the county’s financial practices and reporting, and they knew nothing about the final demand.
However, the Attorney General’s Office later confirmed that the notice was not sent by mistake.
According to the lawsuit, Paz Dominguez submitted the delinquent Financial Transactions Report on March 16, “and falsely stated it was prepared by the ‘AG,’ and ‘Under the Direction of the AG.’”
In response, the State Controller’s Office returned the report to Paz Dominguez with an email explaining that the report was deficient and instructing her to submit an accurate first and last name and title of the report preparer by no later than close of business March 23.
“Paz Dominguez did not respond to the SCO’s email and did not correct her FTR,” the complaint says. The report is now more than a year overdue, and the state’s lawsuit says submission of the “deficient” report “is inexcusable and does not satisfy Paz Dominguez’s statutory obligation.” Government Code dictates that she’s subject to forfeiture of $5,000, the suit says.
The county’s 2020/2021 Financial Transactions Report was also not submitted by the deadline of January 31, and on Feb. 25 the State Controller’s Office sent Paz Dominguez another letter, advising her that it was delinquent and giving her 20 days to comply. It also warned that failure to submit it by March 17 would result in a forfeiture of another fine of up to $5,000.
“Paz Dominguez did not file her 2020/2021 FTR by the March 17, 2022 deadline, nor has she filed it since then,” the suit says.
In a third cause of action, the state asks the court to issue a writ of mandate “compelling Paz Dominguez to perform her mandatory statutory duties.”
The Outpost sent Paz Dominguez a copy of the suit. She wrote back shortly thereafter, saying, “I will forward it to my attorney and communicate with the SCO. I will not be providing you any comment as this will best be handled in an official capacity.”
You can read the full suit via the link below.
- Attorney General’s Office Threatens Legal Action Against Auditor-Controller Karen Paz Dominguez Over Failure to Submit Financial Transactions Report
- Paz Dominguez on the Offensive: Auditor-Controller Riles Supervisors, Staff With Allegations of Fiscal Shenanigans
- Attorney General’s Office Confirms ‘Final Notice’ to Auditor-Controller Was Not Sent By Mistake
- TODAY in SUPES: Delinquent Financial Reports are Making County’s Budgeting Process a Challenge, Chief Financial Officer Says
- Fortuna City Council Directs Staff to Send Letter Expressing ‘No Confidence’ in Auditor-Controller Karen Paz Dominguez
- Auditor-Controller Karen Paz Dominguez Blasts Humboldt County Board of Supervisors During Reelection Announcement
- Auditor-Controller Submitted Overdue Report to the State After 10 Last Night; Special Meeting to Present Proof Behind Her Recent Allegations Canceled