Reacting to disclosures that its top managers took thousands of dollars in gifts from contractors in excess of state limits, the Santa Margarita Water District's board of directors held its first hearing Friday on a draft code of conduct that prohibits district employees from accepting gifts of any value.
The draft code would also impose several restrictions never before in place, such as forbidding dependent relatives of district employees from working for vendors who do business with the district.
District employees, including the board of directors, will no longer be able to buy lunches or dinners for contractors and, similarly, will not be permitted to accept meals or other entertainment that contractors offer to employees.
"It's going to be the 'Dutch treat' test, from now on," said Scott Hart, who helped draft the proposed code with his partner, Dave Ellis. Hart and Ellis are political consultants working under a $20,000 contract to provide public relations help for the troubled district.
The new conduct guidelines, which are expected to be approved Monday, would be the toughest imposed so far on any water district in Orange County, and are similar to proposed guidelines under consideration by the Orange County Board of Supervisors.
While the county's proposal calls for criminal prosecution of those who violate its gift-taking provisions, the water district's code is less strict. Alleged violations will be considered by a review board that would be created to consider cases and impose discipline.
The Santa Margarita board's consideration of the code follows disclosures in The Times that its two top managers, Walter W. (Bill) Knitz and Michael P. Lord, accepted nearly $60,000 in gifts from contractors, developers, bankers and others who did business with the district. In many instances, Knitz and Lord made recommendations to the board that some of the vendors receive millions of dollars' worth of no-bid contracts.
Knitz, the general manager, and Lord, his assistant, were suspended with pay last month and the board has promised to decide their fates by May 24.
If the measures discussed Friday are adopted, they would be more restrictive than the state's Political Reform Act of 1974, which allows donors seeking business to provide gifts to officials within limits. Officeholders are required to abstain from voting on any matter involving a donor who gives more than $250 during the previous 12 months.
"We want to end the perception that anyone is being influenced," said Don B. Schone, the board's chairman. "The impression is that there is influence being applied."
The draft guidelines also prohibit officials from consuming alcohol during business meetings or during work hours. Knitz and Lord often charged the district for alcoholic beverages while on business, records show.
The board is also seeking to end the practice of allowing contractors to pay for water district officials' meals. Knitz has listed $8,725 in meals from vendors between 1989 and 1992. Over the past six years, Lord has reported accepting $13,140 worth of meals.
Knitz and Lord in turn paid for thousands of dollars' worth of meals for executives of development and contracting companies that have business with the district.
"Lunches paid for by vendors are considered gifts," Hart said. "We will try to educate the employees about that and all employees in advisory capacities will have to read and sign the final policy."
The district is expected to adopt a policy setting reimbursable limits on meals of $9 for breakfast, $18 for lunch and $28 for dinner, a slightly lower amount than the county allows. Knitz and Lord often exceeded those limits when dining on business.
The new guidelines will also ban the employment of employees' dependents by contractors doing business with the district. Earlier this month, The Times disclosed that the children of at least four district officials had been hired by three different firms that had been awarded contracts worth tens of millions of dollars.
Under the district policy, dependent relatives will be those listed as dependents by district employees on their income tax forms.
Meanwhile Friday, the district announced that longtime director John F. Van Dam had resigned from the board. The 80-year-old retiree had been planning to resign for some time, he said, and stayed on in the past months only to help sort through the troubles at the district.
Van Dam had served on the board since 1981.
If the board doesn't replace Van Dam within 60 days, County Supervisor Thomas F. Riley is permitted to fill the vacancy. The water board is within Riley's district.