Water District Enters a Cautious New Era : * Code of Ethics Will Help Prevent Repetition of Abuses

The disclosures of the way things were at the Santa Margarita Water District keep dribbling out in a form reminiscent of water torture. And with each new name of someone who received gifts but did not report them comes a deeper understanding of the problems facing the district and the work the new directors must do to restore public confidence.

Last year the general manager of the district, Walter W. (Bill) Knitz, and his assistant, Michael P. Lord, resigned after The Times disclosed their spendthrift ways with district funds. Both men are under investigation by the county district attorney and the FBI to determine if conflict-of-interest laws were violated.

Last month, the district’s longtime board chairman, Don B. Schone, resigned hours after it was reported that he stayed in Cabo San Lucas, Mexico, as the guest of Robert Bein, William Frost & Associates, an Irvine engineering firm. Schone did not file the conflict-of-interest forms required by the state. Nor did he abstain from voting on matters involving the engineering company, as required by state law.

Then The Times Orange County disclosed that the district’s two top engineers were treated to hundreds of meals and gifts valued at nearly $12,000 by the Robert Bein firm. Bill Dye, the district’s top engineer since 1979, did not report meals and gifts from anyone on the forms he was required to file every year under state conflict-of-interest laws. Dye’s chief assistant, Dan Ferons, was not required to file the forms. The district’s new general manager, John J. Schatz, said Dye and Ferons were complying with the rules as they understood them.

The Robert Bein company was awarded nearly $14 million in district contracts over the past five years and also gave more than $20,000 in gifts to Knitz and Lord. There have been no charges that the firm did anything wrong.

The disclosures of the gifts to Dye and Ferons did prompt Schatz wisely to order top district employees to amend their statements of economic interest, dating back a decade or more, to include any unreported free meals and gifts from those doing business with the district.

Schatz said he would also require more district employees to list all sources of income, which is good. Too many district officials took gifts from companies and then recommended that they receive contracts.

Although Schatz defended Dye and Ferons, he acknowledged that even after the scandal broke, Dye “did not receive clear direction” that he should amend his financial statements for previous years, despite a seminar for all district workers on reporting requirements.

Let there be no confusion in the future. The district should be sure that all employees understand the law and comply with it.

The district board has instituted one of the toughest codes of ethics of any public agency in California, a good start in preventing repetition of abuses.

Another troubling practice was removed last year. Previously, staff members could recommend to committees which companies should receive contracts and then could vote on those committees. New procedures to avoid potential conflicts of interest allow staff members to recommend who should receive a contract, but not to vote.

Despite the reforms, the continuing disclosures show that the problems were systemic, and board members cannot assume their job is done after they promulgate ethics codes and new procedures.

They must stay on guard to be sure the codes and state laws are obeyed.