The document outlines a settlement proposal between the State DEQ and Lucas, Lehman Development & Lehman Hot Springs regarding various civil and criminal cases. The key points of the proposal are: 1) The State will dismiss all criminal charges and agree no violations occurred. 2) Both sides will refrain from public comments about the case. 3) The State will issue a press release admitting its previous pollution claims were false. 4) Defendants will pay $1 in civil penalties. 5) All claims will be released and pending cases dismissed. The rationale provided is that the State's case lacks scientific evidence and witnesses, the previous pollution claims were disproven, and the State's aggressive litigation tactics caused undue harm,

1. State DEQ
v
Lucas, Lehman Development & Lehman Hot Springs
Settlement Proposal1 for
Settlement Conference of May 27, 2011
The State has completely botched these cases. The State could have simply
proved that the Defendants had no valid permit to operate the sewer treatment system
and obtained an injunction in May of 2009. Had it done so, the rest of the civil litigation
which began in 2009 would have been unnecessary. Instead, the DOJ, on a political
crusade, litigated bogus allegations of pollution, structural integrity and leaks and issued
false press releases. The State’s politically motivated error did not simply waste time
and resources. It confused the issues and confounded the evidence so that the State’s
case is now untenable. The State failed to prove its allegations of pollution, leaks and
structural failure. The injunction issued in the civil proceedings was based solely on
findings by Judge Reynolds that Defendants had failed to properly maintain certain
parts of the facility (liners and the collector line) and failed to comply with regulations
(Transcript of 10-16-2009). The Court refused to order any cleanup (Id.). Defendants
were not held in contempt despite State’s determined effort. There was no finding of
pollution.
Proposal
1. State will dismiss all criminal charges against all Defendants with
prejudice, and will stipulate that no criminal violations occurred. State will
obtain a stipulation from EPA that no Federal criminal violations occurred.
2. No party will publish in any fashion, make public statements, or provide
any information to the media or internet outlets concerning these cases,
this settlement, or the underlying facts, except as expressly provided in
the agreement.
3. State will admit in a press release, containing only agreed language, that
its published statement that the sewer lagoons were leaking 21,600
1
This is Defendants’ proposal to resolve all matters relating to the Lehman Hot Springs resort
and its sewer collection and treatment system. These include all criminal allegations, all civil
allegations, the contempt case, all defenses and all administrative and regulatory issues
including civil penalties.

2. gallons of untreated sewage a day was false; that its allegations that raw
sewage had leaked into the creek were false; and that its claim that the
lagoon dykes were in immediate danger of catastrophic failure was false.
State will admit that it was unable to prove its criminal allegations.
4. Defendants will pay to State the sum of $1.00 as a token civil penalty.
5. Both sides will fully release all claims and counterclaims, including but not
limited to criminal, civil and administrative claims of any nature. All
pending cases will be dismissed and the permanent injunction vacated as
moot as Defendants no longer own or have an interest in the facility.
Rationale
1. The state must dismiss its criminal case because it cannot prove it and will
lose at trial. State cannot prove any sewage reached the creek or leaked beyond the
lagoon dykes. At the 2009 trial in the civil case, State’s environmental engineer, Heidi
Williams, admitted under oath that all of her testing of water running from the lagoons to
the creek was negative. No e-coli were found, no coliform bacteria were found.
(Williams Cross Examination and DEQ test results) State’s water expert, Butcher, was
so confusing as to be worthless, especially in a criminal trial. No test found pollution at
the creek.
State cannot prove that the dykes lack structural integrity. State’s know-it-all
expert, Norris, has been discredited. The 21,600 gallon per day “leak” he “discovered”
proved to be nothing but runoff and ground water when it continued after the lagoon had
been pumped to a level below the leak and there was no hole in the liner at that
location. His eyeball opinion that the dykes had settled proved wrong when actual
measurements and a comparison of topographical maps proved that the dykes had not
settled. State’s claim that he lagoons were leaking was refuted with a negative dye test
and an evaporation test. Norris’ structural surmises were disproved with a structural
analysis by a geotechnical engineer (LaVielle testimony, Exh. 307).
In short, all the science proved Defendant’s contentions. State offered no
scientific evidence proving anything. Instead it relied on opinions based on
“observations and experience” alone. Judge Reynold’s site visit revealed that the water
visible around the lagoons was runoff, snow melt and ground water, which continued
even though the lagoon levels had been drastically reduced and could not have been
producing that water. It is also significant that EPA has not elected to use its
enforcement and remediation powers.
State cannot prove its allegation that Lucas ordered an employee to dump waste
water into the creek because the witnesses are no longer available or do not support

3. the allegation, and the employee is a convicted felon. State is clearly not well informed
about its own case because its witness list contains the names of two people who have
been dead for three years.
2. No more press crusade. DOJ published a number of false press releases in
conjunction with the civil litigation and has made false statements about Defendants in
public speeches. There will be no settlement unless this is stopped.
3. Remedy for the false press. DOJ’s false statements must be corrected by an
agreed press release.
4. Token Civil Penalty. Defendants recognize that there were multiple violations of
regulations, including the failure to have a certified operator at all times, failure to
maintain the system allowing the collector line and manholes to leak, and the failure to
keep a log at all times. These violations were due mostly to Defendant’s inability to fund
compliance. However, Defendant’s violations were caused in major part by the
enormous cost of State’s oppressive litigation and enforcement tactics and refusal to
allow Defendant to use more cost effective solutions. This is made obvious by State’s
much more favorable treatment of the new owner of the facility, allowing him to drain the
lagoons using spray irrigation during the winter months and in inclement weather, and
not requiring a certified operator or daily reports, when State had prohibited Defendants
from doing the same things. State’s selective enforcement tactics and vilification of
Lucas have resulted in punishment enough. He has lost the property and has incurred
more than $300,000 in compliance and legal costs since April of 2009. State allowed
Defendants to operate without a permit because an application was on file, DEQ’s Heidi
Williams had stated the application was “complete,” and Defendants had paid the
application fee and all other fees. DOJ’s abusive litigation tactics also justify elimination
of the civil penalties. DOJ’s tactics include using subpoenas and contact with Lucas’
business contacts and associates to interfere with business deals with Lucas’
businesses in Sherwood and the Portland area, without any legitimate litigation or
enforcement purpose. DOJ also insisted on discovery of Lucas personal financial
information, which was finally denied by Judge Reynolds.