O.C. Water Chief Quits After Trips Disclosed : Travel: Santa Margarita chairman cites ‘continued adverse news,’ including reports of his free Mexico visits.

The chairman of the Santa Margarita Water District resigned Sunday, the same day it was disclosed that he had taken free trips to Cabo San Lucas, 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.”

The Times reported Sunday that Schone was treated to stays in Cabo San Lucas for four days in April, 1990, and again for five days in May, 1991, with travel, lodging, food and drinks paid by Robert Bein, William Frost & Associates, an Irvine engineering firm. Schone didn’t 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 embarking on a “follow-up” trip in 1991 for the same purpose.

His travels, he said in an earlier statement, were beneficial to 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 statements 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, an official who accepts gifts valued at more than $250 in any 12-month period must abstain from voting on any official decisions that could affect the donor in the following year.

As a result, Schone should have abstained from voting on matters affecting Bein, Frost in 1991 and 1992 because the trips were estimated to be worth between $600 and $700.

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

Schone was chairman during a scandal that has consumed the district for much of last year and led to the resignations of the district’s 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 area, 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 1992.

In fact, the district spent $5,000 on a legal seminar last summer 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 adopted in May prohibit board members and employees from accepting all but the smallest gifts.

The only gift an employee can receive is a meal or beverage related to a business meeting and, even then, it cannot exceed $25 per meeting. No more than $50 can come from any one source over a calendar year.

Every district employee is required to submit a quarterly listing of all gifts, which can include as little as a cup of coffee.

Those doing business with the district must submit an annual inventory of gifts provided to district employees.

Ironically, both Knitz and Lord made some disclosure on trips provided by Bein, Frost in 1990 and 1991. Lord listed the 1990 Mexico trip as being worth $2,000 but did not list the 1991 trip. Knitz listed trips worth $3,000 by Bein, Frost in 1990 and the 1991 trip as worth $1,400.

The president of Bein, Frost said last week that the company would have no comment.

With Schone’s resignation, all five members of the board that were in office when the scandal erupted last March are gone. One board member retired last May. Three others were voted out of office in November. The four new board members will select Schone’s replacement.

In what he said would be his last communication with the news media, Schone’s written statement criticized the press for stories over the past 10 months that he said “warrant correction, clarification and balance” although he was not specific and concluded, “it is time to move on and end the distractions.”

New board member Bob Lay praised Schone’s help to his colleagues in the months after the election and said he came to like the chairman.

“We frankly needed help and he was of real good assistance to give us some perspective,” Lay said Sunday. “I got to know the guy over the last couple of months, and I think a lot of him. I don’t know the circumstances of what happened (with the trips), but he was dedicated and a real straight-up person.” State Assemblyman Mickey Conroy (R-Orange), who authored a bill that became law earlier this month that allows district board members to be selected by popular vote, said Schone’s resignation was proper.

“The bottom line is that maybe after 17 or 18 years with no oversight to speak of, you kind of lose touch with reality,” Conroy said. “I don’t mind that he made those trips, but when you come back, if you have to report it, then report it. Be proud of why you went and what you did.”

Schone’s resignation was in the best interest of the district, Conroy said, “after all the problems they went through last year. He was responsible. He was chairman of the board. Now that he’s out, they are basically cleaned up down there, and I hope they can now go about their business.”

Although he had contemplated resigning for some time, Schone said he stayed on “to provide historical continuity during the recent restructuring period” and to interview candidates for the general manager’s job. The new manager, John J. Schatz, 39, begins work at the Santa Margarita Water District today.

However, Schone stated that a news account of the trips made his prompt resignation more “timely.”

Schone, an engineer with Southern California Edison, called his tenure with the board “a labor of love” and said he used vacation time to attend board meetings.