Chairman of Scandal-Plagued Water District Resigns : Agencies: Don B. Schone steps down from Santa Margarita board after word of trips he took at expense of firm that has received millions of dollars in contracts.

The chairman of the beleaguered Santa Margarita Water District resigned Sunday, the same day it was disclosed that he had taken free trips to a Mexican resort, courtesy of an Orange County engineering firm that has received millions of dollars in district contracts.

Don B. Schone, 52, who has served on the board for 17 years, submitted his resignation effective today and, in a written statement, said it was “due to continued adverse news which distracts from the effectiveness of (the district’s) important objectives. . . .”

Schone’s is the third resignation in the scandal-plagued district. The district’s general manager and assistant general manager have already resigned. Sunday’s resignation means all five members of the board who were in office when the scandal erupted last March are gone. One board member retired in May. Three others were voted out of office in November. The four new board members will select Schone’s replacement.

The Times reported Sunday that Schone was treated to two stays in Cabo San Lucas: for four days in April, 1990, and for five days in May, 1991, with travel, lodging, food and drinks paid by Robert Bein, William Frost & Associates, an Irvine engineering firm. Schone did not report the trips, as required by state conflict-of-interest regulations.

Schone initially said he had been on only one trip, in 1990, to inspect a Bein-Frost sewage reclamation treatment plant installed for Koll Co. developments. On Sunday, he acknowledged a “follow-up” trip in 1991 for the same purpose.

His travels, he said in an earlier written press statement, were beneficial in understanding how the Santa Margarita Water District might reclaim water during a drought.

In his written statement Sunday, Schone said he did not list the cost of the trips on his reports of economic interest--required by state law--because he had not fully understood the requirement at the time of his travels. He called his failure to report the trips a misunderstanding.

“It is worth mentioning that business expense reporting guidelines were not consistently disseminated or understood uniformly within (the district)” Schone wrote. “Specifically, the practice of receiving and extending courtesy reciprocation for business meeting and function expenses was not well defined” in district regulations.

Under state law, Schone should have abstained from voting on matters affecting Bein-Frost in 1991 and 1992 because each trip was estimated to be worth between $600 and $700--far more than the $250-a-year limit that public officials are permitted to accept each year and still vote.

However, Schone continued, along with other directors, to approve Bein-Frost contracts. During 1991 and 1992, the board approved nearly $9 million in Bein-Frost engineering work.

Schone has been chairman during a scandal that has consumed the district for much of last year and led to the resignations of its general manager, Walter W. (Bill) Knitz, and assistant general manager, Michael P. Lord.

Both Knitz and Lord are under a joint state-federal criminal investigation for conflicts of interest stemming from their acceptance of gifts, first disclosed last year in The Times. The two managers also spent tens of thousands of dollars on personal “perks,” which outraged many district ratepayers.

Throughout the scandal, Schone was reluctant to criticize Knitz and Lord. The two managers accompanied the chairman on both trips to the Baja California resort, but reported the travel on their state disclosure forms.

On Sunday, Schone declined to explain why he did not file amended statements of economic interest reflecting the Mexico trips when the issue of gift-giving had been aired so thoroughly in the press in 1993.

In fact, the district spent $5,000 on a legal seminar to teach all board members and top district employees how to comply with state gift-reporting requirements administered by the state Fair Political Practices Commission.

New district guidelines prohibit board members and employees from accepting all but the smallest gifts.