O.C. Water Officials Voted to Pay $815,181 to Donors : Inquiry: Two district managers OKd payments to the firms while serving on four other boards and commissions.

Two Santa Margarita Water District managers, under investigation for recommending contracts to companies that gave them gifts in excess of legal limits, voted to pay $815,181 to some of the same firms while serving on four other boards and commissions.

Walter W. (Bill) Knitz, the district’s general manager, and Michael P. Lord, his assistant, voted the payments to four engineering companies, the district’s law firm and a bond underwriter between 1989 and 1993 while accepting nearly $12,000 in gifts from those companies.

In every case, records show that Knitz or Lord voted to award the money to companies that had given them more than $250 in gifts the previous year. State law requires that board members serving on such commissions abstain from voting on contracts involving those companies.

Knitz and Lord are already under scrutiny by a joint state-federal law enforcement task force for recommending to the Santa Margarita Water District board that payments be made to contractors and consultants that provided both men with nearly $60,000 worth of gifts over a six-year period.

Marshall M. Schulman, Knitz’s attorney, said that both men filled out economic disclosure forms and voted with the advice of their legal staff. If errors were made, he said, Knitz and Lord are not to blame.

“These guys are engineers, not lawyers,” Schulman said. “They are relying on the services and efforts of others whose responsibility it is to make sure that all the documentation is correct and all voting is done correctly. They needed someone to give them advice at an early stage, not at a later stage.”

Knitz and Lord have been suspended with pay. Both have strongly denied any impropriety.

Schulman said it would be ridiculous for investigators to believe that either Knitz or Lord traded their votes for free lunches or trips.

“You’re not talking about someone making a donation to an elected official who has then approved a development, a building or an airport,” he said. “There was no extortion here.”

In serving on several other special-purpose boards and commissions, Knitz and Lord act as directors themselves, rather than administrators, formally approving millions of dollars in payments to many of the same companies that they helped recommend for Santa Margarita Water District contracts.

Assistant Dist. Atty. Wallace J. Wade said Friday that he would direct investigators to look into the votes of Knitz and Lord on the special boards to determine if violations of law occurred.

“This is something we’ll definitely look at,” he said.

Details of the payments are contained in hundreds of pages of minutes and billing records reviewed by The Times this week.

The special boards that the managers serve on are called Joint Powers Authorities, or JPAs, which are formed among various agencies for public works purposes, such as selling bonds or building sewage treatment plants. Members of these boards are selected by officials of the public agencies that create the JPAs.

Karoline Koester, a member of the San Clemente City Council between 1979 and 1986 who has long been opposed to JPAs, believes they should be abolished.

“They are very much a shadow layer of government,” Koester said. “The accountability is lax and I think they should be dissolved.”

During the 1960s, the federal Clean Water Act encouraged the creation of JPAs by offering federal funds to agencies willing to build treatment plants so long as they combined their resources.

In the case of the Santa Margarita Water District, it is part of five such joint agencies: the San Juan Basin Authority, the Santiago Aqueduct Commission, the South East Regional Reclamation Authority, the South Orange County Reclamation Authority and the Santa Margarita/Dana Point Authority.

Knitz, water district general manager since 1975, has sat on all five boards although records show that the Santa Margarita/Dana Point Authority met only once and Knitz was not present. Knitz also sits on the South Orange County Reclamation Authority but approved no contracts to vendors who gave him gifts.

While serving on the three other boards, however, Knitz consistently voted for payment on projects involving contractors that had given him large amounts of gifts, records show. For instance, while a member of the San Juan Basin Authority, Knitz voted for $470,974 in payments to NBS/Lowry, an Irvine engineering company. At the time the payments were being authorized, NBS/Lowry provided Knitz with $1,100 in meals and $225 in gifts between 1990 and 1992.

The San Juan Basin Authority was formed in 1971 to oversee the underground water supply system beneath the Capistrano Valley. It is made up of four water districts.

As a member of the San Juan agency and the Santiago Aqueduct Commission, which operates the V.P. Baker Aqueduct, Knitz voted to pay legal fees to the Newport Beach law firm of Stradling, Yocca, Carlson & Rauth at the same time he received gifts in excess of $250 each year from the firm between 1989 and 1992.

For legal work at both JPAs over that time, Knitz has voted to pay the firm nearly $60,000, records show. At the same time, the firm provided Knitz with $2,000 in meals and $900 in theater tickets.

The Santa Margarita Water District has paid the Stradling law firm $1.85 million over the past four years for legal work.

While attorney Fritz R. Stradling--who sits on the board of the water district, the basin authority and the aqueduct commission--has provided Knitz and Lord with gifts in excess of state limits, neither of the men have ever abstained from voting.

Knitz, while a member of the aqueduct commission over the past two years, has helped approve $9,600 for the Irvine engineering firm of Robert Bein, William Frost & Associates. That amount was to pay for the repair of bonded pipe joints along the Baker Pipeline in South County. In addition, $21,000 was approved to study whether to convert the pipeline from an untreated to a treated water line. Dan Boyle Engineering helped the engineering firm with the study and Knitz voted to pay $13,445 of Boyle’s contract.

While approving those payments during the same two years, Knitz received from Bein, Frost $850 in meals, a $1,400 trip, $150 worth of golf fees and $35 for tickets to an air show. At the same time, Dan Boyle Engineering provided Knitz with $300 in meals, $150 for theater tickets and $75 in golf fees.

According to state law, Knitz should have abstained from voting on contracts for the two engineering firms as well as Stradling.

As a member of the South East Regional Reclamation Authority, which collects, treats and disposes of sewage, Knitz approved payments of $28,500 to MacDonald Stephens Engineering, $117,143 to MacDonald Stephens Labs and $42,828 to NBS/Lowry over the past two years.

MacDonald Stephens Engineering in Mission Viejo has given Knitz $3,200 in trips, $925 in meals and $215 in golf fees in the time the company and lab was paid.

The state-federal task force served grand jury subpoenas Friday to Bein, Frost and McDonald Stephens and demanded business records related to the Santa Margarita Water District.

Lord’s membership on special boards is limited. He has served as a voting member of the Santa Margarita/Dana Point Authority, which was formed in 1987 with the Dana Point Sanitary District so that both agencies could develop greater sewage capacity.

In 1989, he and three other board members voted to float a $2.3-million bond issue, allowing Dana Point to buy waste water capacity from the Santa Margarita Water District. Smith Barney, Harris Upham & Co., the underwriter, received a $51,799 fee from the issue. In the 12 months preceding the votes, Lord had received $300 worth of business lunches from Smith Barney. Nevertheless, Lord joined a unanimous vote on the issue by that JPA board.

The state-required financial disclosure forms that Lord has filed with various agencies during the same years are different.

For 1987, for example, Lord declared receiving $1,900 in gifts in connection with his work for the Santa Margarita Water District. For the Santa Margarita/Dana Point Authority, however, he listed $1,000 in gifts. Although some of the gifts came from the same companies, such as the Bein, Frost firm, MacDonald Stephens Engineering and Municipal Services Consultant, a Newport Beach governmental consultant, the amounts and gifts are different.

On his 1987 water district form, Lord listed $500 in lunches from Bein, Frost. On the JPA’s form, he declared receiving from the firm $350 for two separate golf tournaments and $100 more for a December pheasant-hunting trip.

The difference in the amounts on the forms is more pronounced for 1990. Lord first declared that he had not accepted any gifts during that year until questioned last month by Times reporters, who asked why he had listed gifts on his disclosure forms in 1987, 1988, 1989 and 1991 but not in 1990.

Lord said he recalled getting consultants to pay for meals in similar amounts they had paid in other years. In amending his 1990 form, he listed $930 in gifts, with no single contribution exceeding $250.

However, Stradling’s law firm provided reporters with his 1990 disclosure form for the Santa Margarita/Dana Point Authority, on which Lord listed $10,950 in gifts, including $8,600 in trips and $500 in meals from Bein, Frost.

On his 1990 water district form, Lord listed just $250 in meals from Bein, Frost and no trips.

Scott Hart, a spokesman for the Santa Margarita Water District, said he is trying to have a representative of the state Fair Political Practices Commission conduct a workshop at the district to instruct employees how to fill out state economic disclosure forms.

Ties to Related Water Agencies

Santa Margarita Water District managers Walter W. (Bill) Knitz and Michael P. Lord, under investigation for allegedly recommending contracts to companies that gave them gifts, also voted to authorize more than $800,000 in payments to gift-giving companies while serving on several related “joint power authorities,” records show.

SOUTH EAST REGIONAL RECLAMATION AUTHORITY

Formed in 1970 to collect, treat and dispose of sewage.

Representatives come from two water districts, two sanitary districts and two cities.

Knitz is a director; Lord is an alternate.

Knitz has approved $188,471 in contracts to two engineering firms that gave him gifts in excess of state limits.

SANTIAGO AQUEDUCT COMMISSION

Formed in 1961 to build and operate the V.P. Baker Aqueduct; composed of seven water districts.

Knitz is a director and has approved $55,377 in payments to two engineering firms and a law firm that have given him gifts in excess of state limits.

SANTA MARGARITA-DANA POINT AUTHORITY

Formed in 1987 to “acquire, construct and operate” facilities to provide collection, treatment and disposal of waste water between the two agencies.

Knitz and Lord are directors.

Lord voted for a $2.3-million bond issue in 1989 in which a bond underwriter was paid $51,799. The underwriter gave Lord $300 in business lunches the year before.

SAN JUAN BASIN AUTHORITY

Formed in 1971; composed of four South County water districts whose mission is to develop a long-range plan for the underground water supply beneath the Capistrano Valley.

Knitz is a director and has approved $470,974 for an engineering firm and $48,560 for a law firm that had given him gifts in excess of state limits.

SOUTH ORANGE COUNTY RECLAMATION AUTHORITY

Formed in 1991 to produce, store, distribute and use recycled water.

Representatives come from nine water districts.

Knitz is a director but approved no contracts to vendors who gave him gifts.

Source: Individual agencies