2 on Water Board Accused of Extortion

Building on a Carson corruption probe that has drawn guilty pleas from four public officials, federal agents arrested the son of U.S. Rep. Juanita Millender-McDonald (D-Carson) Thursday on charges of extorting kickbacks from contractors doing business with the government water agency he heads.

R. Keith McDonald, president of the obscure but powerful West Basin Municipal Water District, was also charged in a separate alleged scheme with extorting tens of thousands of dollars from a bus company seeking a contract extension from Carson.

In that case, McDonald is accused by a federal grand jury of ferrying bribe payments to three Carson City Council members who have since acknowledged receiving them.

A second West Basin board member, Tyrone Smith, was also indicted by the grand jury for allegedly extorting $25,000 two years ago from an investment banker who stood to earn 10 times that much if a firm he was representing handled the refinancing of $140 million in West Basin debt.

Both men face a nine- or 10-year prison term if convicted, said Assistant U.S. Atty. John Hueston, the government’s lead prosecutor.

McDonald, 39, was arrested at his Long Beach home and taken to U.S. District Court in Santa Ana, where he was freed on $200,000 bail.

The sum was guaranteed by his mother, who agreed to put a $100,000 lien on her house.

Millender-McDonald declined to comment on the charges facing her son, as did his lawyer, John Potter.

Smith, 46, of Ladera Heights, remains at large, authorities said Thursday.

West Basin is one of the largest water districts in California, serving close to 1 million residents in Malibu, Culver City, Inglewood, the South Bay beach cities, Carson and Gardena and on the Palos Verdes Peninsula. Its five elected board members work part time, representing 17 cities and some unincorporated areas, principally in southwest Los Angeles County.

West Basin buys water from the giant Metropolitan Water District -- which imports supplies from the Colorado River and Northern California -- and sells it to local water companies. It also recycles sewage for industrial uses and landscape watering.

Although boards such as West Basin’s attract little attention from voters or the media, they are considered plum positions by many budding politicians.

McDonald, who has served the water district since 1994, has lost two bids to succeed his mother in the state Assembly since she was elected to Congress in 1996.

West Basin board members control a $100-million annual budget and hand out multimillion-dollar construction contracts to build pipelines, as well as water recycling and desalination plants. One of the largest, the Juanita Millender-McDonald Regional Recycling Plant, was named two years ago for the congresswoman.

Keith McDonald was first elected to a four-year term on the board as part of a slate of water board candidates affiliated with former U.S. Rep. and current Assemblyman Mervyn Dymally (D-Compton). Dymally said he wanted to see more minority representation on boards traditionally dominated by whites. Dymally and McDonald are African American.

West Basin board members enjoy such benefits as meeting attendance fees that averaged $15,000 last year, plus travel expenses that ranged from $5,000 to $38,000 per member last year, a board spokesman said. McDonald received a total of $20,000 last year, the lowest among board members. In addition, the members get monthly car allowances and medical and dental insurance that extends to family members. In the past, the West Basin district also provided reimbursement for tuition and the costs of foreign travel.

McDonald lists his occupation as a venture capitalist with his own firm. Prosecutor Hueston described him as “a veteran and skilled extortionist who very carefully tried to cover the trail of his extortionate acts by putting intermediaries between himself and his victims.”

McDonald would pressure firms into writing checks to intermediaries who would then write checks to him, Hueston said. McDonald would then allegedly claim that the payments were for consulting work he had done for the intermediaries.

McDonald came to Hueston’s attention in late 2000 when Carson Councilman Manuel Ontal walked unbidden into the U.S. attorney’s office in Santa Ana and confessed to having taken a bribe from McDonald. Ontal later agreed to work undercover for the government, providing the crucial break in what has become a widening probe of public corruption centered in Carson, a South Bay city of 90,000.

Ontal told prosecutors that McDonald paid him $5,000 in cash after the councilman voted to turn aside a staff recommendation and award a $6.5-million, five-year extension of a public bus service contract to Transportation Concepts Inc., whose work had been criticized in an audit.

The Irvine-based firm, the indictment says, had agreed to pay McDonald $120,000 if its contract was approved.

McDonald planned to pay three Carson councilmen -- Ontal, Daryl Sweeney and then-Mayor Pete Fajardo -- $10,000 apiece, in two installments, and keep $90,000 for himself, the indictment says.

Ontal has pleaded guilty to accepting that bribe and is awaiting sentencing. Fajardo has pleaded guilty to another charge: extorting $50,000 from the owner of a low-income senior citizen housing project in return for approval of a city grant that would have lowered the owner’s mortgage.

Sweeney, who succeeded Fajardo as mayor, pleaded guilty this week to conspiring to extort hundreds of thousands of dollars from waste haulers competing for another city contract. Former Carson Councilwoman Raunda Frank pleaded guilty earlier this year to extortion in the waste-hauling scheme. Their plea agreements call for them to cooperate with the government in ongoing investigations.

Most of the charges involving the water board concern a company building $30 million worth of pipelines for West Basin recycling facilities.

The indictment alleges that McDonald used a friend to approach the pipeline builder, Luster National Inc., with the message that the firm would have to pay to keep its job.

Luster then paid McDonald $94,000 in 11 installments, funneling the payments through the friend’s business, which paid McDonald, the indictment says. McDonald reported the money as consultant income on public disclosure statements.

He personally demanded $23,313 more from Luster, the indictment alleges, and then used a different intermediary to conceal $30,000 in additional payments.

He allegedly used a third intermediary to conceal the source of a $100,000 payment from Robert Dennis Pryce Jr., a lawyer who is awaiting trial in the corruption probe. Pryce is accused of serving as the middleman for former Mayor Sweeney in extorting payments from the waste haulers. It was not clear why the lawyer paid $100,000 to McDonald. Pryce, a U.S. Bankruptcy Court trustee, is also accused of abusing his position by demanding kickbacks from real estate firms handling the liquidation of debtor assets.

The intermediaries cooperated with McDonald in the hope that he would “create lucrative contracting opportunities over time [through] his political reach in Southern California,” Hueston said. None was charged.

McDonald is also accused of making “a corrupt solicitation” by demanding that United Water Inc. of New Jersey, which had been awarded a five-year, $25-million contract to operate a West Basin recycling plant, make a $25,000 contribution to his Assembly race.

When United Water refused to make the contribution, McDonald accused the firm of improperly doing its job and tried unsuccessfully to nullify its contract, Hueston said in federal court Thursday.

Finally, McDonald is accused of demanding a $50,000 contribution for his Assembly race from the Furman Group, a public affairs firm under contract to West Basin. In return, McDonald allegedly promised to boost Furman’s contract by at least $50,000, the indictment says. Furman also refused to pay, Hueston said, and retained its contract.

Smith, the second member of the water board indicted, allegedly received his payoff from the New York-based investment banking firm of M.R. Beal & Co.

The indictment says he also used an intermediary: Garland Hardeman, a former Inglewood city councilman who has pleaded guilty to attempting to arrange bribes from waste haulers for Carson city council members.

Smith’s indictment, unsealed Thursday, says Beal stood to make $250,000 if the West Basin board hired Rice Financial Products Co. of New York to handle the refinancing of the district’s debt. Rice offered high returns at relatively high risk, while a competing firm -- Salomon Smith Barney -- proposed a lower-risk strategy that would produce less in savings.

Smith extorted $25,000 from Beal in exchange for his vote to give the business to Rice, the indictment says. Before the deal was signed, the board decided to hire a financial advisor, which Smith selected, to negotiate with Rice.

Last month, the water board sued the financial advisor, claiming that its poor counsel cost the public millions.

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Times staff writer Hilda Munoz contributed to this report.

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See correction that ran July 8, 2004, concerning a June 10, 2004 story about Manuel Ontal and Daryl Sweeney. This correction clarifies the facts about this case.

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