Water District Officials Enjoy a Flow of Perks : Utilities: O.C. agency's two top managers have been reimbursed tens of thousands of dollars in luxuries.


An Orange County water official was in New York City on public business but he had some time to kill. So he hired a stretch limousine, cruised around Manhattan for five hours and lunched at Tavern on the Green restaurant in Central Park.

Upon returning to California, he billed the Santa Margarita Water District for the $245 limo ride and $121.70 lunch as part of the $4,021.81 in expenses he claimed for the three-day New York trip. He was fully reimbursed with public funds.

It was "a perk . . . part of the business," said Walter W. (Bill) Knitz, general manager for the district, a little known government agency that provides water to 26,500 customers in Rancho Santa Margarita, Coto de Caza and parts of Mission Viejo.

For Knitz and his deputy--Michael P. Lord--such perks have been business as usual. Documents obtained by The Times show the two officials have been reimbursed for tens of thousands of dollars in questionable expenses over the past decade, including cross-country trips for their wives, rooms at posh hotels like the Ritz-Carlton and Helmsley Palace, sheepskin seat covers and $125 wax jobs for their automobiles, four-figure room service tabs and regular repasts at pricey local restaurants.

In one instance, the two men successfully submitted the same hotel bill for reimbursement three times. They refunded two of the improper overpayments last week after being questioned by The Times.

In an interview, Knitz and Lord defended the expenses they had claimed, and issued a typewritten statement saying their expense account spending had "been measured against the results achieved in accomplishing the goals and objectives of the district . . . (and) found to be cost effective."

No guidelines were violated, Knitz said, because none exist, and furthermore, none are needed. There is no daily limit on food, no ceiling on dinner bills, no restriction on staying in luxury hotels.

Within 24 hours of the interview, however, the chairman of the water district's board formally issued a statement saying guidelines for travel, hotel selection and business meals, as well as per diem limits on meals while traveling, were perhaps justified, and a new proposed policy should require "pre-approval of major and/or non-routine business activities."

"Maybe we need to do some soul-searching," Chairman Don B. Schone told The Times.

The Santa Margarita Water District is one of thousands of special districts that have been created in California in the 116 years they have been authorized to operate everything from water and sewage systems to parks and libraries. More than 20 such districts exist in Orange County. For the most part, they are largely unregulated and perhaps the least scrutinized layer of government in the state.

Knitz and Lord agreed to be interviewed about their expenses and other matters this past week--but only on the condition that they be interviewed together, and for no more than one hour.

When asked if there are limits to what he considered acceptable spending, Knitz replied: "Probably are, but don't ask me what they are. I have no idea."

As for his 1990 limo ride in Manhattan, Knitz said he was "just killing some time before my plane left and doing a little sightseeing."

Since 1984, Knitz has received $86,120 in expense reimbursements. Lord has received $75,949. These figures do not include some expenses, such as car rentals and airline tickets paid directly by the district, which are not included as prepaid expenses on their individual expense reports.

In addition, they have also arranged to throw lavish parties, costing as much as $18,000, to celebrate the completion of a district construction project or employee anniversaries, and these costs are likewise not included on their expense accounts.

Often, the expense reports show that Knitz and Lord purchased expensive lunches and dinners for engineering consultants and contractors who have provided them with free meals and gifts.

Staff meetings and other vaguely described business functions are routinely held at local bars and restaurants, and occasionally in local hotel rooms.

On one such occasion, a hotel bill shows that Lord checked into a Costa Mesa hotel with an unidentified companion. He charged to his room a $6.35 pay-per-view movie, a $38.20 gift shop purchase, $22.99 in room service and $8 in "overnight valet" services before checking out the following day. The entire $186.16 hotel bill was charged off on his expense account as an "OCWA function"--something having to do with the Orange County Water Assn. Lord did not respond to questions about those expenses.

Knitz's disdain for expense account controls is perhaps a product of the almost unique status of the Santa Margarita Water District, a so-called "landowner district" whose board members are elected--not on the basis of the U.S. Supreme Court's "one man, one vote" rule--but under a voting procedure that awards votes exclusively to landowners, and on the basis of one vote for each dollar of assessed land value.

Among Orange County's 17 water districts, which distribute water to those residents not served by municipal water departments, only one other--the Los Alisos Water District--is a "landowner district" like Santa Margarita.

Since big landowners, such as the Santa Margarita Co., and developers own most of the acreage in the Santa Margarita district, the board members, and managers like Knitz and Lord, serve at their pleasure. That Knitz has survived as the top manager for 17 years suggests that he has not displeased the big landowners, who are likely to remain in firm control of the district for decades to come.

Directors of other Orange County water districts and several local government observers expressed surprise at the spending in Santa Margarita, and said such extravagances would never have been allowed by their governing boards.

Orange County Auditor-Controller Steve E. Lewis said some of the expenditures were clearly "outrageous and improper." Stan Sprague, the general manager of the Municipal Water District of Orange County, said the expenses were "amazing" and that he has never spent so much himself.

Nearly 100% of the Santa Margarita district's day-to-day operating budget of $28 million comes from water usage charges, according to district finance director James W. Clark, meaning that Lord's and Knitz's expenses are generally reimbursed from water ratepayer funds.

"They are spending other people's money," said William R. Mitchell, head of the Orange County chapter of Common Cause, a citizens' watchdog group. "These have got to be the best jobs in the county. This isn't even a close call. It's off the map."

To make his life on the road more convenient, he says, Knitz has ordered more than $6,200 in room service over the past five years. During the same period, Lord has frequently taken his wife or an unidentified companion along for the ride at district expense.

Usually, the highest room service tabs are incurred at the twice-a-year Assn. of California Water Agencies convention.

For instance, Knitz, Schone and another Santa Margarita board member spent $3,478 at a three-day ACWA conference in Indian Wells last May. The cost of the men's three hotel rooms--$1,467--was actually less than their $1,498 room service tab. More drinks and snacks--most of them served poolside--cost an additional $290, records show.

Schone's room was charged for three movies on one day at a cost of $24, according to expense account receipts. Knitz's bill included $57 in valet parking charges.

The total charge to the district for the men's three-day trip was $3,478.

Knitz, who recently called upon district employees to prepare for sacrifices because of tough economic times, said that he did not incur the $1,498 in room service charges by himself. In fact, $1,300 worth originated in Schone's quarters.

In San Diego in 1991, Knitz and three board members incurred $1,289 in room service charges, including a single charge of $568 to Knitz's room at the Hotel del Coronado. By contrast, the total hotel bill of the Irvine Ranch Water District's general manager for the same conference was $269.86.

Lord, for his part, has stayed at some of the most exclusive hotels in the country on water district business. One stay at the Helmsley Palace in New York City in November, 1990, cost the district $605.52, and Lord's monthly credit card statement shows that the district was charged for two separate American Airlines tickets--totaling $942--in association with the trip.

Repeatedly, the Santa Margarita district has paid the air fare for either Lord's wife, Ingrid, or an unidentified companion so they could accompany him on district business trips to New York, Oakland, San Francisco and Lake Tahoe.

Knitz said all board members and top staff are required to reimburse the district for the air fare of an accompanying spouse, but that he has made an exception in Lord's case.

"Mike does a lot of traveling for the district and a lot of that is away from home and it's on his own personal time," Knitz said.

Ingrid Lord's free ride is "just a perk," Knitz said.

The Lords' trips--billed as business-related--occasionally have yielded other perks as well. During an October, 1989, trip to New York, where the bill from the Hotel Inter-Continental ended up totaling $1,026 and their round trip air fares came to $796, the couple also charged $200 theater tickets to the district.

Lord said he doesn't remember exactly what show they saw. "It was a perk," Lord said.

The Lords also charged a $100 cash advance to their hotel bill to cover what Lord described as "out-of-pocket expenses." Lord never gave an accounting of how he spent the $100, for which he also produced no receipts.

"You can't get a receipt for everything in New York," he said. "There are bellhops, there are cabs, there is a variety of things."

Carol Megara, the district's controller, questioned on at least one occasion a $736 airline charge that Lord had submitted for reimbursement, according to a note contained in Lord's expense account file. "Please verify airline charges. Looks like they double billed," she wrote.

Lord responded that "the travel agent apparently booked two separate charges against the credit card for each segment of the trip."

The ticket numbers that relate to the credit card charges are different, however, and a spokesman for American Airlines, which issued the tickets, said differently numbered tickets are seldom issued for two legs of the same round trip.

Knitz, on occasion, has flown first-class on district business trips.

For instance, on the same New York trip on which he took the five-hour limousine ride, Knitz got there sitting in seat 3B of an American Airlines flight--first class. Total cost of the ticket for Knitz: $2,195.

Knitz almost never stays in a room that costs less than $150 a night when traveling on district business.

Three years ago, Knitz stayed in a $567-a-night suite at an ACWA conference in Palm Desert. Three members of the board who also attended the two-day conference stayed in rooms costing about half that much.

Knitz and Lord have both stayed in Orange County hotels as well, and had the district reimburse them even though they live not far from where they stayed.

Lord and an unidentified companion checked into the Four Seasons Hotel in Newport Beach, about 60 miles away from Lord's home in Vista, on Aug. 14, 1986.

He expensed the $302 stay as a "meeting, closing of bonds." The room rate was $167 and food and drinks charges totaled $118.

In 1987, Lord evidently had a tire blowout in Anaheim, and said that was the reason for an overnight stay at Anaheim's Travelodge at the Park.

"Accommodations charges due to tire blowout" came to $139.21, with food and movies making up $55 of the tab. The next day, he paid a $213 tire repair bill that was also expensed to the district.

The Red Lion Inn in Costa Mesa has also hosted Knitz and Lord.

Knitz attended the Orange County Water Assn.'s "dinner-dance" on Nov. 2, 1988. He incurred $93 in room service charges and an additional $20 in "in-room services." Coupling that with movie charges of $13 and the room rate of $62, the total charge to the Santa Margarita Water District came to $192.

The Red Lion Inn is about 25 miles from Knitz's home in Mission Viejo.

Lord and an unidentified companion registered at the Red Lion Inn on Dec. 1, 1989, and charged $186 to the district, including $23 in room service and $38 in purchases from the gift shop.

If the two water district officials had been subject to restrictions imposed on Orange County officials, many of the expenses they have routinely claimed never would have been paid. Lewis, the county government's auditor-controller, said the county generally allows staffers traveling outside the county only $8 to $10 for breakfast, $15 to $20 for lunch and up to $30 for dinner. The totals cannot not include alcohol or gratuities.

For expenses incurred within the county, the rules are more strict: department managers cannot charge taxpayers for in-county meals, whether they are with other staff members or someone seeking the county's business, Lewis said.

Knitz said he runs his operation differently.

On many of Knitz's luncheon or dinner receipts, there is no mention of the persons entertained or what was discussed. The backs of credit card receipts are often marked with nothing more than an acronym for a district project. In some cases, the date on the credit card has been altered, if the date imprinted by the restaurant or bar would make it appear that the entertainment occurred on a weekend.

Knitz, two board members and the water district's attorney, Fritz Stradling, regularly dine before their monthly meetings at La Ferme, a pricey French restaurant in Mission Viejo. The bills for five recent luncheons there exceeded $500.

Then there was the time in March, 1986, when Knitz, Lord and finance director Clark met to discuss "district issues" at La Ferme for $161. Lord, meantime, has charged the district for a meeting with board member William F. Krasho at La Ferme that cost $230.

Knitz rejected the notion that a cheaper restaurant might be more appropriate.

"La Ferme is a good restaurant, it's local and it's a place that's conducive to doing business," said Knitz, an obviously valued customer whose portrait was featured in one of the restaurant's magazine advertisements for a "Bastille Day Extravaganza."

Knitz belongs to two board subcommittees, which also do business at bars and restaurants.

Last July, the reorganization committee met at Cannons in Dana Point at 5:40 p.m. The district paid the $170 tab. The "groundbreaking committee" met on a Friday in March, 1985, at Tortilla Flats in Mission Viejo and incurred $291 in charges. In many instances, the meal tabs include alcohol.

During a one-night stay in San Francisco, Knitz charged $169 in drinks to the district. Those drinks accounted for almost half of his $397 hotel bill.

Lord and a companion last December charged $271 in drinks to their New York hotel room over the span of four days.

Knitz said he sees nothing wrong with the district picking up a bar tab.

"Why shouldn't they? What's wrong with having wine with your meal? Or what's wrong with cocktails?" he asked.

Santa Margarita's parties often include alcohol expenses, like a La Ferme bash that included $342 worth of Chardonnay, $255 of Merlot and $645 in other liquor.

For a separate $2,200 party to salute outgoing board member Robert Moore, he was picked up at his home by Stardust Limousine. The $326 limo bill was paid for by the district.

"The board thought it would be a nice touch to pick him up," Knitz said.

The expense accounts submitted by Knitz and Lord have also included many other questionable charges--golf games, cut flowers and myriad car parts, like a bumper or a headlight or truck tire chains. Both men sit on sheepskin seat covers paid for by the district. Knitz's set cost $276, Lord's $371.

"I do a lot of driving and it's the district's vehicle," Lord said. "It made it more comfortable to drive."

County auditor-controller Lewis, for one, says it is up to the board of directors of any public agency to set limits.

"All this stuff--it doesn't matter whether it's a city, county or the state--it reinforces the thought that we're all a bunch of crooks," he said.

Times librarian Sheila A. Kern contributed to the research for this article.

New Water Order

Top officials of the Santa Margarita Water District originally said business expense guidelines and per diem limits on food and drinks weren't needed and had never even been considered. But one day after administrators made that statement, the district's chairman, whose name appeared on some questionable expenses, urged the district board to:

Establish guidelines for travel, hotel selection and per diem limits on food and drinks and "business meals."

Provide for various levels of disciplinary action for failure to comply with the guidelines.

Require "pre-approval of major and/or non-routine business activities."

Reaffirm the district's adherence to the requirements of the state's "Public Agencies Code of Ethics."

Source: Santa Margarita Water District statement

Costly Perks

Walter W. (Bill) Knitz and Michael P. Lord justified thousands of dollars in charges to the Santa Margarita Water District as perks, or acceptable business-related expenses. Here are some examples: Knitz's charges

Five-hour limousine ride to sightsee around Manhattan: $245.

Room service during five years, including charges by other board members: more than $6,200.

Palm Desert suite: $567 a night.

Photos taken in Las Vegas: $126.

One-night stay in Costa Mesa: $191.84

First-class air fare to New York: $2,195

Drinks for one night: $169.20

Sheepskin seat covers: $276.25

Car wax job, with an interior shampoo and engine steam cleaning: $125.

Separate charges for meals: $73.94 and $70 in the same day.

Hats purchased at a water conference in Monterey: $18.92.

Lunch with local attorney James Erickson: $120.16.

Lunch with Erickson and staff two weeks later: $238.18.

Friday staff budget meeting at Avanti Trattoria: $105.64; $67.17 the next day, a Saturday.

Saturday meeting at Picasso's in Dana Point to discuss San Juan Basin Authority agreement with unidentified companions: $92.25.

Lord's charges

Airline tickets for trips that included a companion: more than $1,200.

Out-of-pocket expenses for which there are no receipts: more than $3,000

Theater tickets: $200.

One-night stay in Costa Mesa: $186.16.

Two nights at the Helmsley Palace in New York: $606.

One-night stay in Newport Beach: $302.

Drinks on a four-day trip: $271.

Sheepskin seat covers for his district-provided car: $371.

Two charity tickets for the Mardi Gras Casino Night in 1989: $120.

Two rounds of golf at the Tijeras Creek Golf Club in Rancho Santa Margarita and listed as a business meeting: $80.

Luncheon meeting with board member William F. Krasho: $230.27.

10 Business lunches with James G. Gilleran, chief executive officer and president of the Mission Viejo Co.: $815.85

Lunch in Coto de Caza with two staff members: $72.39.

Source: Santa Margarita Water District documents

Water Managers

Walter W. (Bill) Knitz and Michael P. Lord have guided the Santa Margarita Water District since the mid-1970s. Together, they oversee a water and sewer operation that serves 26,500 customers. Walter W. (Bill) Knitz

Title: General manager, Santa Margarita Water District

Salary: $113,292 a year

Hired: Nov. 15, 1975

Age: 61

Education: Bachelor of civil engineering degree, Marquette University

Professional background: Spent more than 20 years as a consulting civil engineer in the fields of sewer and water, land development and municipal engineering. Served in Marine Corps.

Personal: Married, four children. Lives in Mission Viejo.

Michael P. Lord

Title: Assistant general manager, Santa Margarita Water District

Salary: $109,116 a year

Hired: Aug. 15, 1977

Age: 49

Education: Graduated from Cal State Long Beach with a bachelor of science degree in civil engineering

Professional background: Spent eight years working for utility, engineering and construction firms, including the city of Garden Grove.

Personal: Married five times, four children. Lives in Vista.

Source: Various public records

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World