Scandal-Ridden Water District’s Chief to Retire

The suspended general manager of the scandal-plagued Santa Margarita Water District announced his sudden retirement Wednesday, less than two months after disclosures of excessive spending surfaced.

In a letter addressed to the district’s chairman, Walter W. (Bill) Knitz said that he would continue to “vigorously refute the accusations against me by the press,” but that it would be impossible for him to continue to provide “the leadership the district must have to serve the public.”

Knitz, 61, said he had hoped to remain in the top administrative post he has held for more than 17 years and continue overseeing water and sewer service for the sprawling district’s 26,500 customers, but decided it best “that I clear the way for new leadership” and retire effective Monday.

The district’s board of directors had been poised to make a decision on the employment status of Knitz and his top assistant, Michael P. Lord, during a special meeting Monday.

Both men were suspended with pay last month and the district announced May 6 that it planned to resolve their status by May 24.

“This is a total surprise to us,” spokesman Scott Hart said. “There have been absolutely no agreements and no deals” arranged beforehand for Knitz to retire, he added.

The board is still scheduled to decide Lord’s fate Monday afternoon, and Lord’s attorney, Thomas Goethals, said his client is not quitting.

Knitz, who earns $113,292, and Lord, who earns $109,116, were suspended after The Times disclosed that the two officials engaged in lavish spending at district expense, treating themselves to stays in luxury hotels across the country, and running up room service tabs as high as $1,500. Knitz once took a $245 sightseeing tour of Manhattan in a stretch limousine “to kill a little time” before catching a flight back to Orange County.

Both men had also accepted tens of thousands of dollars worth of gifts from contractors, bankers and engineering firms, which they acknowledge recommending for millions of dollars in no-bid contracts.

Their acceptance of gifts and actions on behalf of the donors are under investigation by a joint task force formed by the FBI and the Orange County District Attorney’s office. Under state law, an official who accepts gifts worth more than $250 within a 12-month period is forbidden to influence any official decision that would benefit the gift-giver.

The U.S. Securities and Exchange Commission has also opened its own investigation into Lord’s management of the $150-million investment account where the district has deposited the proceeds of public bond sales.

Knitz was hired in November, 1975, after being recommended by board Chairman Thomas C. Blum, who is now the executive vice president of the Santa Margarita Co., the water district’s largest client.