Once Odd Man Out, Koch Gains Allies, Heads Water Board

Presiding over his first meeting as president of the Three Valleys Municipal Water District board of directors, William Koch wasted no time establishing his personal style of parliamentary authority.

When Sandy Baldonado, Koch’s most persistent critic on the board over the past eight years, tried to ask a question of the water district’s legal counsel, Koch silenced her with a crack of the gavel.

“I’ve been waiting to do that for a long time,” Koch said.

On Tuesday night, Koch--who for years has been the odd man out in numerous 4-to-1 votes--was chosen as the board’s president with the help of two recently elected members.

An often cantankerous opponent of the board’s other members, Koch now appears to have two solid allies to enable him to form a majority voting bloc on many issues. After having repeatedly called for the firing of the district’s general manager, Richard W. Hansen, Koch may now be able to get his wish.

It has been a sudden turnabout for Koch, an aluminum products salesman who has represented Pomona on the board since 1978.

In October 1987, after he publicized the district’s loss of $1.5 million through investments with E. F. Hutton and Co., Koch was censured by his colleagues for leaking information that had been discussed in closed session. Other board members charged that Koch’s revelations hindered the district’s chances of settling with Hutton for the full amount lost.

In February last year, the district filed suit against Koch for “unjust enrichment from public funds,” alleging that he had collected $4,700 in undeserved fees and expense reimbursements while serving simultaneously on the Three Valleys board and the Metropolitan Water District.

No Evidence of Wrongdoing

The Three Valleys board also asked the district attorney’s office to investigate Koch, but Deputy Dist. Atty. Lawrence Mason informed the district in a letter dated Nov. 17 that there was insufficient evidence of wrongdoing to prosecute Koch. The letter was not made public until Tuesday’s board meeting, when Koch insisted on reading it.

Koch’s fortunes began to change in the November election, when Bruce Milne upset incumbent board President Douglas R. Miller, and Paul Stiglich defeated Richard Engdahl. Engdahl had been appointed by the board after the death of Carlton Peterson.

“In defense of Mr. Koch,” Baldonado said, “he was often the lone vote and he did what all good politicians do--he went out and secured allies. The rest of us didn’t and so he is able to call the shots.”

Stiglich, who took office immediately after the election, joined Koch in opposing the board’s offer of a 1-year, $69,000 contract to Hansen on Dec. 6. Hansen had said previously that he served “at the pleasure of the board” and could be terminated at any time.

During the board’s discussion of Hansen’s contract on Dec. 6, Koch read a letter from William Harris, a retired South Pasadena investment broker. It alleged that Hansen and Ray Wood, who represented the cities of San Marino and Maywood and other public agencies, had contacted him in 1985 about making speculative investments with public money.

Investment Proposal Described

In the hand-written letter, Harris said Hansen and the other official had expressed interest in investing their agencies’ money on margin, a practice by which investors borrow money from brokers to increase the amount of their investment and thus their potential profits.

In return for providing the money for high-volume margin trading, Harris wrote that Hansen and the other official expected “kickbacks,” a share of the commission the broker would earn. Harris said he refused the offer.

Harris, who could not be reached for comment this week, gave an identical account in an interview with The Times last year. However, he could not provide any corroborating evidence beyond his own recollection of a meeting and several phone calls he said he had with Hansen and Wood.

Harris’ allegations directly contradicted the contention by the water district and other public agencies that they were unwitting victims of an unscrupulous broker who worked for Hutton. In their lawsuit against the investment firm, (which became Shearson Lehman Hutton in a merger) the water district and other agencies state that they were unaware the money they had invested was being used for high-risk margin trading.

Hansen Threatens Lawsuit

The letter prompted a vehement denial from Hansen, who said he will file suit against Harris if he does not retract his accusations.

“The letter is totally and completely a fabrication,” Hansen said in an interview this week. “The fact is that Ray Wood and I have never met, we’ve never talked and neither of us has ever heard of a William Harris.”

Board members chastised Koch for making the letter public without first submitting it to the district’s legal counsel. William J. Brudnick, the district’s attorney, investigated the allegations and reported to the board on Dec. 20 that he had found no evidence to substantiate them. Brudnick forwarded Harris’ letter to the district attorney’s office and the U.S. Securities and Exchange Commission.

Lawyers representing the district in its suit against Hutton subpoenaed Harris to give a deposition on Dec. 29, but Harris refused to do so, said attorney William W. Wynder.

The district may seek to have Harris found in contempt of court. Harris has also been subpoenaed to give a deposition to the Securities and Exchange Commission on Friday.

Hansen Blasts Koch

In a prepared response to the various accusations that he read at the board’s Dec. 20 meeting, Hansen blasted Koch for publicizing the letter as a power ploy.

“Mr. Koch’s hostility toward the board and the general manager is of long standing,” Hansen said. “He wants a board and staff he can personally control.”

Hansen charged that Koch’s motive in seeking to gain control of the board is that he wishes to be returned to his seat on the Metropolitan Water District Board. Hansen replaced Koch as the Three Valleys representative to the Metropolitan board in 1985.

“The (Metropolitan) directorship is a position Mr. Koch covets,” Hansen said. “In fact, Mr. Koch made the statement that his director fees (for both water districts) was the first steady paycheck he’d had since 1954.”

Hansen predicted at the Dec. 20 meeting that Koch would be elected president of the board this week and might immediately seek to oust him as general manager.

“He is confident that he will have the control of sufficient votes at that time, and he will secure my removal as general manager,” Hansen said. “He has already requested a dollar figure from staff on what it will cost to terminate my employment.”

Hansen’s predictions proved at least partly accurate Tuesday night, when Milne was sworn in, joining Koch and Stiglich in a coalition that elected Koch president and Stiglich vice president. Each was elected by 3-to-2 votes, with Baldonado and Muriel O’Brien in opposition.

The newly constituted board was given a stern admonition by Chris Francisco, who had served as Hansen’s assistant for more than two years before resigning last week.

“It is obvious that members of this board have personal agendas which they wish to accomplish at the expense of this district,” Francisco said. “The political games and bickering which are evident at every meeting of this board have prevented the district from maintaining a positive image and accomplishing tangible, productive goals.”

In another indication of the change in the board’s point of view, the new majority balked at a retreat planned later this month at Victorville. The retreat had been intended to foster better relations between the board and the district staff.

Milne criticized the retreat as being too late to help the board, saying, “I think we need to get this board together in a hurry.” Milne proposed that the date of the retreat be moved up, that its location be changed from Victorville to the water district offices, and suggested that it be led by the general manager rather than a professional “facilitator.”

Milne’s proposal passed with the support of Stiglich and Koch and against the opposition of O’Brien and Baldonado.

“I do not intend to attend the retreat at this time,” Baldonado said. “I think it would be a total waste of time.”

Executive Session Called

After an acrimonious 40 minutes in open session, the board adjourned to executive session to discuss the district’s lawsuit against Koch and Hansen’s future as general manager. Nearly four hours later, the board emerged from the conference room to announce that it was continuing its discussion of these matters to Monday evening.

“It was an excellent exchange,” O’Brien said after the meeting. However, O’Brien said she sensed that a voting bloc favoring Koch had been forged on the board and she refused to comment on Hansen. “By Monday next, we’ll be able to give . . . the press some indication.”

Koch said after the meeting that he still favors firing Hansen, but that he will not propose the firing himself. Either Stiglich or Milne will have to take the initiative, Koch said, stressing that the two new board members will act independently of him.

“I’m going to let them make up their own minds,” he said. “They’re new on the board and they have to make some determinations on their own without me lighting a fire under them.”

Sentiment to fire Hansen was running strong when the board began its closed-door meeting, Baldonado said, but views softened during the discussion and ended with the directors divided on whether to terminate him. “When we started the closed session, I would have thought it was a foregone conclusion,” she said.

Baldonado said she believes Hansen should be retained for the time being, but would not favor extending his contract when the board considers renewing his services in September.

“I’m not convinced that (Hansen) is the best person for the job, but I think at this point in the district’s history, it would be foolish to get rid of him,” Baldonado said. “If we terminate Mr. Hansen now, with the obvious dissension on the board, with two obviously inexperienced, uninformed directors . . . we would have a really serious administrative problem on our hands.”

In an interview Wednesday, Hansen acknowledged that his relationship with the new board has encountered some rough spots but expressed confidence that he will be able to work with the new members.