O.C. Water Chief Failed to Disclose Paid Trips : Santa Margarita district: Board chairman says one Cabo San Lucas visit was to review firm’s work.

The chairman of the Santa Margarita Water District, who was slow to criticize the district’s top two managers for taking $60,000 in gifts from companies they recommended for lucrative contracts, was treated to stays in Cabo San Lucas in 1990 and 1991 by one of those same companies.

Don B. Schone, a member of the district’s board of directors since 1977, traveled to the Baja California resort area for four days in April, 1990, and again for five days in May, 1991, with former General Manager Walter W. (Bill) Knitz and former Assistant General Manager Michael P. Lord, according to a source familiar with the trips.

Schone never reported the trips--estimated to have cost the engineering firm of Robert Bein, William Frost & Associates in Irvine between $600 and $700 each--on statements of economic interest, as he is required to do under the state’s Political Reform Act.

And Schone voted those same years to give no-bid contracts to the company, which has been awarded nearly $14 million for engineering services over the past five years alone.

Under state law, an official who accepts gifts valued at more than $250 in any 12-month period must abstain not only from voting on, but also influencing, any official decisions that could affect the donor in the following year.

Several top officials of the engineering firm accompanied Schone, Knitz and Lord on the trips, and paid for all travel, lodging, food and drinks.

In a written statement, Schone acknowledged making a “field review trip” in 1990 to look at Bein, Frost’s work on a sewage reclamation system installed for Koll Co. developments, such as the Hotel Palmilla in Cabo San Lucas.

Because “this on-site early feasibility review was at no cost to the (water) district/customers, the proposal (to make the trip) appeared at the time to have merit,” Schone wrote. He said he made the trip on his own time and was accompanied by Knitz and Lord, who were suspended after the scandal broke, and later retired.

Schone said that during the trip he learned a great deal about how the Santa Margarita Water District might reclaim water during a drought, and that the district is “now placed in an optimum position to expand lessons-learned applications, when necessary.”

But he declined to discuss the second free trip to Cabo San Lucas in 1991, nor would he explain his failure to list the gifts on his disclosure forms.

Bob Kallenbaugh, the president of Bein, Frost, said the company would have no comment on the trips.

Although Schone did not record the gifts, Knitz and Lord, who are under a joint federal-state criminal investigation for conflicts of interest stemming from their acceptance of gifts, appeared to have made some disclosure on their reporting forms.

Lord, for instance, listed the 1990 Mexico trip as being worth $2,000 but did not list the 1991 trip. Knitz valued the trips he got from Bein, Frost in 1990 to be worth $3,000 and the 1991 trip to be worth $1,400.

For his part, Schone has reported receiving gifts only during calendar years 1990 and 1992--the only two times he has submitted economic interest statements in his 17 years on the board.

In 1992, the chairman reported he accepted about $80 in free meals from Bein, Frost, and the same amount from another contractor--MacDonald-Stephens Engineers in Mission Viejo.

In 1990, he reported accepting gifts of between $50 and $100 from Bein, Frost, and the same amount from MacDonald-Stephens Engineers for “quarterly business events.” He also listed $50 to $100 in gifts from the district’s law firm of Stradling, Yocca, Carlson & Rauth in Newport Beach for “biannual business events,” including entertainment at a national conference on water issues.

After questions were raised last year on whether Schone had actually received $200 to $400 per donor for 1990 because he listed his $50-to-$100 contributions as quarterly, Schone explained his filing. He said that he had received $200 to $400 from all three donors combined, but no more than $250 from any one donor--a situation that would have required him to abstain from voting on their contracts.

For much of last year, Schone refused to criticize the spending and gift-taking habits of Knitz and Lord, saying that he probably should have examined their expenses more carefully.

When the district adopted a draft code of conduct in May, Schone spoke about ending “the perception that anyone is being influenced (by gift-givers). The impression is that there is influence being applied.”

When the district’s new ethics code--one of the most stringent of any public agency in California--was finally adopted, he spoke of “restoring trust in the district.” But Schone has never openly criticized Knitz and Lord, nor has he expressed any regrets over his own lavish spending of district funds.

Both Knitz and Lord were in the habit of submitting expense accounts that would have made some Fortune 500 executives blush, and Schone’s name regularly appeared along with theirs on dinner and bar tabs at some of the region’s most expensive hotels and restaurants.

In a moment of introspection last April, Schone said he should have been more diligent in inspecting Knitz’s expense forms. But, he reasoned, Knitz was an outstanding manager and the district was too preoccupied with more weighty matters to dwell on expense accounts.

“When you have confidence in someone and you are signing things in a hurry after a board meeting, you don’t really look that closely,” he said. “I should have said, ‘Let’s call a meeting and look at this and that,’ but we were too busy building water and sewage treatment plants.”

The two managers retired in May after The Times revealed their spending habits and the enormity of the gifts they had accepted from contractors doing business with the district. Knitz, to kill some time during a trip to New York, once hired a stretch limousine for $245 to take him sightseeing around Central Park and wait while he had a $121.70 lunch at the Tavern on the Green.

The new revelations about Schone startled longtime board member John F. Van Dam, who resigned in May shortly before Knitz and Lord retired. Van Dam, who was elected to the board in 1981, said he never knew about the trips to Cabo.

“I sure wasn’t invited and wouldn’t have gone even if I was invited,” Van Dam said. “That’s just a case of bad judgment. I’m surprised at Don. I would have thought he would have known better.”

Van Dam said he was so disgusted by the actions of Knitz and Lord that he was ready to resign last March 28, the day the first story about Knitz and Lord appeared in The Times. But other board members urged him to reconsider.

“I see no difference between what Don did and what (Knitz and Lord) did,” Van Dam said, referring to the gift-taking.

Schone is the lone holdover from the board that was in office when the scandal erupted. Van Dam resigned first. And in November, the other incumbents were swept out of office by angry voters in a biennial election.

Schone, who is in his 18th year of service, has served on the board longer than any other director in the district’s 30-year history. The 52-year-old engineer works for Southern California Edison and is up for reelection in November.

The Times reported last April that Schone charged the district $275 to take part in the El Viaje de Portola, a horseback ride that traces the route of Don Gaspar de Portola. He said the expense was justified but never explained why.

He also billed the district for $1,302.62 in room service at the 1992 conference of the Assn. of California Water Agencies. At the time, Schone rented two rooms to entertain consultants, an expense that Van Dam said last week was ridiculous.

“I never would have approved of that,” he said. “What were we selling? We have nothing to sell.”

Last June, William R. Mitchell of the Orange County chapter of Common Cause and Mark P. Petracca, an associate professor of political science at UC Irvine, wrote a commentary that appeared in The Times in which they held Schone accountable for the activities of Knitz and Lord.

“Though there has been abundant evidence that the actions of Knitz and Lord were well known to the board, Schone continues to plead ignorance,” they wrote. “If true, then Schone failed to perform his responsibilities as chairman. If Schone knew of their activities, he should acknowledge this and not allow Knitz and Lord to be the fall guys.”

Either way, they said, Schone should step down.

Petracca said last week that he is not surprised to learn that Schone took trips at a contractor’s expense.

“I think it’s time for Mr. Schone to fall on his sword,” Petracca said.