2 Scandal-Plagued Managers of Water District Retire Posts

The top two managers of the Santa Margarita Water District retired Monday in the midst of multiple criminal investigations, officially ending district careers that began in the late-1970s and spanned almost two decades of booming South County development.

The district’s board of directors officially accepted the retirements of General Manager Walter W. (Bill) Knitz and his assistant, Michael P. Lord, but stressed that the district had undertaken its own internal investigation of both men and might still hold them legally liable if wrongdoing is uncovered.

Although neither man’s retirement required the board’s approval, Lord had asked that his be made effective June 24, the day he turns 50. The board unanimously voted to deny Lord’s request, and made the retirement effective Monday, thus denying him an extra month’s pay. Knitz’s retirement also was effective Monday.

“We feel this action is in the best interest of the district and its ratepayers,” said Board Chairman Don B. Schone after emerging from a one-hour closed hearing with other board members to consider Lord’s request.

Lord’s attorney, Gary M. Pohlson, did not return a call for comment.

Knitz and Lord announced their retirement plans last week while on paid leave, less than two months after revelations about their spending and gift-taking were first raised in The Times.

In their letters of resignation, both denied doing anything improper but acknowledged it was impossible for them to continue to oversee the district.

Both blamed the press for their troubles but did not mention a criminal investigation of their activities by the Orange County District Attorney’s office and the FBI that began shortly after the first articles appeared.

Investigators are trying to determine whether the two men traded their influence with the board in recommending that contracts be awarded in return for tens of thousands of dollars worth of gifts from companies that benefited from the work.

Short of proving that connection, authorities will focus on a more minor and technical issue: whether Knitz and Lord violated the state’s Political Reform Act by not abstaining from recommending contracts for companies that gave them in excess of $250 in gifts the year before. Such actions can be misdemeanor violations of state law.

The U.S. Securities and Exchange Commission is conducting its own investigation, which focuses on Lord’s management of the district’s $150-million investment portfolio. The Times disclosed that an outside auditor had raised the possibility of “theft or fraud” and “possible broker kickbacks” in his notes assessing the investment accounts.

The auditor was not specific, however, and did not make mention of any potential problems in a final audit he conducted last year.

Whatever the outcome of the criminal investigations, Lord and Knitz will still receive full retirement benefits.

Knitz, 61, joined the district in 1975 as general manager after more than two decades as a consulting civil engineer specializing in water and sewer systems. He was making $113,292 until Monday and will receive $42,918 a year in retirement benefits.

He will also receive seven weeks’ vacation pay and $1,428-a-month annuity the board purchased for him in 1987.

Lord was hired as the district’s financial director in 1977 and was quickly promoted to assistant general manager. He had previously worked for the city of Garden Grove. He was making $109,062 and because he retired at age 49, will be eligible to receive about $19,062 a year when he turns 50 next month.

He will collect five weeks’ vacation pay.

During Monday’s board meeting, directors made no mention of any accomplishments by the two men during their tenure and did not even thank them for their years of service.

Board Chairman Schone said it made little sense to fire either man because they had announced their retirements. He also said they had not been asked to retire.

“There were no deals, absolutely none,” Schone said.

Schone said he continued to believe that of the $75,000 to $85,000 each of the men had spent on travel, lodging, restaurant meals, room service and car improvements over the past decade, 75% of the total was valid.

“It was the other 25% that I think looked too much like a perk,” he said.