SCOTT S. SLATER - PMK - September 6, 2013 1 SUPERIOR COURT OF THE STATE OF CALIFORNIA 2 FOR THE COUNTY OF SAN FRANCISCO 3 4 5 6 7 8 9 10 SAN DIEGO COUNTY WATER AUTHORITY, ) ) ) Petitioner and plaintiff, ) ) VS. ) ) METROPOLITAN WATER DISTRICT ) OF SOUTHERN CALIFORNIA, ET ) AL., ) ) Respondent and defendants. ) ______________________________) NO. CPF-10-510830 NO. CPF-12-512466 Volume I Pages 1 - 190 11 12 VIDEOTAPED DEPOSITION OF 13 PERSON MOST KNOWLEDGEABLE OF 14 SAN DIEGO COUNTY WATER AUTHORITY 15 (SCOTT S. SLATER) 16 SEPTEMBER 6, 2013 17 18 19 Reported by: 20 SERENA WONG, CSR# 10250 21 -------------------------------------------------------22 23 JAN BROWN & ASSOCIATES WORLDWIDE DEPOSITION & VIDEOGRAPHY SERVICES 24 701 Battery Street, 3rd Floor, San Francisco, CA 94111 25 (415) 981-3498 or (800) 522-7096 1 JAN BROWN & ASSOCIATES (415) 981-3498 (800) 522-7096 SCOTT S. SLATER - PMK - September 6, 2013 10:51:17 1 mouth at all. 10:51:20 2 at this point in time, in 2003, you had not identified 10:51:26 3 any particular law or reg- -- law or regulation that 10:51:31 4 Met's then-existing rate structure might be in violation 10:51:31 5 of? 10:51:33 6 10:51:46 7 that could be pertinent, but we did not see a violation. 10:51:52 8 10:51:55 9 not to sue for the next five years. A I don't want to do that at all today. So We did -- we knew that there were laws Q And part of the agreement was you agreed 10:52:00 10 10:52:01 11 that, recommended that, uh-huh. 10:52:07 12 Q Why? 10:52:09 13 A We had spent many years in litigation with 10:52:12 14 Met. 10:52:17 15 consummated one of the most complicated, hard-to-do 10:52:18 16 transactions in the history of water. 10:52:22 17 10:52:24 18 the history of the United States, $20 billion 10:52:27 19 arrangement. 10:52:30 20 was to have intra-entity fighting while we were trying to 10:52:32 21 implement the transaction. 10:52:32 22 Q Uh-huh. 10:52:37 23 A So I was strongly supportive of having a 10:52:39 24 peace treaty with Metropolitan, and I expected we were 10:52:43 25 going to be sued by the world to try to stop its A Absolutely. It was also in support of We went through the negotiations with Met. We had It's the largest urban water transfer in And the last thing we needed to be doing 73 JAN BROWN & ASSOCIATES (415) 981-3498 (800) 522-7096 SCOTT S. SLATER - PMK - September 6, 2013 10:52:45 1 implementation. 10:52:52 2 actually happened. 10:52:54 3 that's all gone well. 10:52:56 4 Q What suit are you referring to? 10:52:58 5 A There were suits to challenge the validity 10:53:05 6 of the quantification settlement agreements, multiple 10:53:05 7 suits. 10:53:06 8 Q QSA? 10:53:08 9 A Correct. 10:53:23 10 Q And -- strike that. 10:53:26 11 10:53:29 12 your understanding, did anybody at San Diego convey to 10:53:33 13 MWD that the rate structure then in effect violated the 10:53:37 14 law? 10:53:38 15 10:53:45 16 knowledge, no. 10:53:45 17 Q All right. 10:53:48 18 A Sorry. 10:53:51 19 question? 10:53:53 20 10:53:56 21 your understanding, did anybody at San Diego -- I'm 10:53:59 22 talking about San Diego County Water Authority -- convey 10:54:02 23 to MWD that the rate structure then in effect violated 10:54:03 24 the law? 10:54:07 25 And at least insofar as that, that We were sued. And fortunately, Prior to execution of the agreement, to A Q A I don't know. Okay. To the best of my Can you repeat that I'm not sure I understood it. Prior to execution of the agreement, to Oh. The answer to that is yes. There had 74 JAN BROWN & ASSOCIATES (415) 981-3498 (800) 522-7096 SCOTT S. SLATER - PMK - September 6, 2013 10:54:13 1 been -- look, the conversations between -- and the 10:54:17 2 rhetoric between the San Diego board members and the San 10:54:25 3 Diego -- and the Metropolitan board is legendary. 10:54:28 4 would guess there's countless pieces of correspondence 10:54:29 5 going back and forth over that. 10:54:31 6 10:54:37 7 discussions about doing spot transfers, and the -- and 10:54:44 8 why the rate structure was protective of lost sales. 10:54:47 9 so from San Diego's perspective a rate structure that 10:54:51 10 tried to compensate for lost sales was inappropriate. 10:54:54 11 10:54:59 12 that 2002 -- 2000 San Luis Obispo case regarding you 10:55:01 13 can't recover lost sales out of the wheeling 10:55:07 14 arrangements. 10:55:12 15 that's going on, it's as close to political warfare over 10:55:15 16 that subject as you could possibly be. 10:55:17 17 10:55:22 18 objection that the rate -- the rate structure was 10:55:28 19 designed to protect against lost sales. 10:55:31 20 and that's in the San Diego nomenclature. 10:55:35 21 Metropolitan nomenclature, it was protecting against 10:55:37 22 fixed -- the coverage of fixed costs. 10:55:40 23 10:55:45 24 minds on that subject in -- I don't think there's ever 10:55:53 25 been a meeting of the minds since before '98. And I And my recollection is there were And And the people in San Diego would look to So, yeah, in the background of everything So, yeah, I think there was ongoing And San Diego -And in the So there was never a -- a meeting of the But in 75 JAN BROWN & ASSOCIATES (415) 981-3498 (800) 522-7096 SCOTT S. SLATER - PMK - September 6, 2013 10:55:56 1 terms of sitting down and saying, "Is that the number 10:56:00 2 that the administrative code kicks out," and whether or 10:56:00 3 not that is appropriate under the administrative code, 10:56:03 4 no, I don't think anybody objected to that or said that 10:56:04 5 was illegal. 10:56:06 6 10:56:10 7 in the political context of flying out of San Diego's 10:56:11 8 Board and back and forth. 10:56:12 9 A Yeah. 10:56:14 10 Q I want to get you to focus on the 10:56:16 11 negotiating team as you defined it, yourself -- 10:56:19 12 A Right. 10:56:21 13 Q -- to Mr. Cunningham, all the people you 10:56:22 14 mentioned earlier. 10:56:22 15 A Right. 10:56:25 16 Q Did anybody in San Diego's side, in that 10:56:30 17 negotiating team, convey during these negotiations of 10:56:34 18 this exchange agreement that the rate structure then in 10:56:36 19 effect was illegal? 10:56:38 20 10:56:44 21 that the rate structure was not legal; right? 10:56:48 22 mean, you could -- you could call it -- it was 10:56:55 23 completely, I think, unexpected. 10:57:00 24 had written a book on it, and I think even Russ Behrens, 10:57:02 25 who was the Met lawyer -- sorry. Q A Now, you talked a bit about some charges Well, okay. The entire backdrop to '98 is In fact, I Certainly to me, and I Who was working for 76 JAN BROWN & ASSOCIATES (415) 981-3498 (800) 522-7096 SCOTT S. SLATER - PMK - September 6, 2013 1 STATE OF CALIFORNIA ) 2 ) 3 COUNTY OF LOS ANGELES) 4 5 6 REPORTER'S CERTIFICATION 7 8 I, Serena Wong, Certified Shorthand Reporter in 9 and for the State of California, do hereby certify: 10 That the foregoing witness was by me duly sworn; 11 That the proceedings were then taken before me 12 at the time and place herein set forth; 13 That the testimony and proceedings were reported 14 stenographically by me and later transcribed into 15 typewriting under my direction; 16 That the foregoing is a true record of the 17 testimony and proceedings taken at that time. 18 19 IN WITNESS WHEREOF, I have subscribed my name on 20 this date: 9/17/13 21 22 ____________________________________ 23 Serena Wong, CSR No. 10250 24 25 190 JAN BROWN & ASSOCIATES (415) 981-3498 (800) 522-7096