O.C. District Official Delayed Disclosing Gifts

The top manager of the Santa Margarita Water District, under investigation for possible conflict-of-interest law violations, initially failed to report $22,840 in gifts from firms doing business with the district and only reported them late last year--nearly three years after some disclosures were due.

District documents reveal that in November of last year, Walter W. (Bill) Knitz, the district’s general manager, altered the financial disclosure statements he had filed for 1989, ’90 and ’91 to show that he had in fact accepted gifts. During those years, he had originally reported receiving none at all.

The filing discrepancy comes amid an investigation by the Orange County district attorney’s office, which is examining whether Knitz and his assistant, Michael P. Lord, have violated state conflict-of-interest laws by accepting large gifts from firms awarded district contracts.

Knitz and Lord, sitting on committees of the Santa Margarita Water District, acknowledge recommending millions of dollars worth of contracts for approval by the district’s five-member board of directors, while accepting more than $40,000 in gifts from some of the companies concerned.

According to documents in the water district’s files, Lord was the first to recognize that he might have a problem with the gifts that had been showered on him by consultants and contractors--gifts that he, unlike Knitz, had dutifully reported.

Last March, following news reports that the general manager of the Contra Costa Water District was removed for accepting gifts that exceeded state limits, Lord sought an opinion from the district’s legal counsel as to whether there were restrictions on any gifts he might accept.

It is a violation of state law for an official to influence a government decision that can have a financial impact on someone who has given that official more than $250 during the previous 12 months.

In an April 21, 1992, letter to Fritz R. Stradling, the district’s general counsel and secretary, Lord said he had come to a new understanding of the requirements of state law and, as a result, had decided to reimburse donors for all gifts exceeding the prescribed $250 limit--a total of $11,100.

“Additionally, I have advised the district’s general manager (Knitz) of this clarification, of the compliance and filing requirements and of the reimbursements made,” Lord’s letter to Stradling said.

Lord, however, has declined to provide copies of any canceled checks or receipts for the refunds.

Knitz said he never sought a legal opinion and never in 17 years with the district reported receiving a gift until last November.

But eight months after Lord said he made reimbursements, Knitz had a change of heart and reported receiving $22,840 in gifts, including a fishing trip, golf games, meals and theater tickets.

In his second batch of filings, Knitz used a photocopy of his originals, scratched out where he had marked “no reportable . . . gifts,” checked the box showing otherwise and inserted pages listing the gifts he had in fact received.

Phyllis A. Henderson, clerk of the Orange County Board of Supervisors, which reminds officials of the filing requirements each year, said the county would have insisted that the amended forms be signed and dated at the time Knitz changed them, instead of reflecting the dates the first filings were made.

State law provides that an official who “intentionally or negligently” violates reporting requirements can be held liable in a civil lawsuit for the amount that should have been reported. Any official who gets a financial benefit for failing to disqualify himself from influencing a governmental decision can be held liable for up to three times the amount of the benefit.

Knitz did not return a call for comment. The original economic disclosure statements were provided Tuesday by the law firm where the general counsel is a named partner, and a paralegal from the firm said they were just recently found in a file separate from the amended forms.

In a newly filed report, due Thursday, Knitz reported accepting $2,420 worth of gifts last year. In cases involving four engineering firms, Knitz made recommendations about financial payments to each company even though they had provided him with more than $250 in gifts during 1992.

The firms are: Robert Bein, William Frost & Associates, which gave $560 in air show tickets, golf and meals; MacDonald-Stephens Engineers, which provided $735 in America’s Cup yacht race tickets, golf and meals; NBS Lowry, a San Diego engineering firm which gave $425 in meals and golf; and Dan Boyle Engineering, which gave $350 in meals and golf games.

The district attorney’s office launched its investigation after civic activist Shirley L. Grindle wrote a letter of complaint. Grindle urged the probe after reading in The Times that Knitz and Lord accepted more than $40,000 worth of gifts over the last several years from firms they recommended for millions of dollars in contracts, particularly for Robert Bein and MacDonald-Stephens.

Stradling, the district’s general counsel, said he constantly reminds board members and administrators that they should fully disclose gifts in accordance with state law but does not check to see what amounts have been filed.

“They know the rules,” he said. “I’m not my brother’s keeper.”

Stradling said he did not know why Knitz had decided in November to file three years’ worth of gifts all at once but did remember that he admonished board employees to disclose everything to be on the safe side.

The Times reported Sunday that Knitz and Lord were reimbursed for tens of thousands of dollars in personal or questionable expenses they claimed over the past decade, including luxurious hotel suites, limousine rides and countless meals and bar bills.

During a specially called meeting of the district board Monday night, the directors suspended all spending authority by the two men, except in emergency situations.

Board Chairman Don B. Schone, who also charged costly expenses to the district during out-of-town conferences, said the board may also conduct an outside audit but would wait until the district attorney’s investigation is completed.

Public reaction to the stories has been so heated, Schone said, that he said he feared for the “health and safety of our employees” at the next board meeting on April 16.