Former Water District Managers Enter Not Guilty Pleas : Courts: Two longtime Santa Margarita agency officials deny illegally steering more than $17 million in contracts to companies that lavishly entertained them.

Two former managers of the Santa Margarita Water District entered pleas of not guilty Tuesday to charges they illegally steered lucrative contracts to companies that gave them thousands of dollars worth of gifts, meals and entertainment.

Walter W. (Bill) Knitz and Michael P. Lord, who ran the water district in Mission Viejo from the 1970s until they took early retirement last year, were arraigned Tuesday in Orange County Municipal Court in Laguna Niguel. Neither man attended the proceeding.

Gary M. Pohlson, Lord’s attorney, telephoned the court Tuesday morning to enter his client’s not guilty plea. Marshall M. Schulman, Knitz’s attorney, could not be present in court, but sent another lawyer from his firm, Lynne Patterson, who entered a plea on Knitz’s behalf.

Municipal Court Judge Arthur G. Koelle set the pretrial hearing for May 6, with a trial date of May 17.

“We feel confident in the charges we filed, and have the evidence to convict Mr. Knitz and Mr. Lord,” said Deputy Dist. Atty. Marc Kelly. “We have had no contact with their attorneys, but we assume that will be forthcoming.”

Pohlson was expected to visit prosecutors today to discuss a possible plea bargain for his client. He did not return a call for comment Tuesday.

Lord, 50, is charged with 15 misdemeanor counts of failing to disclose gifts from two engineering firms and then illegally recommending that those firms be awarded district contracts.

The companies, Robert Bein, William Frost & Associates of Irvine, and MacDonald-Stephens Engineers of Mission Viejo, have been awarded some $17 million in contracts that were not competitively bid since 1989. Together, they have provided Knitz and Lord with tens of thousands of dollars in trips, meals, gifts and other entertainment.

Knitz, 62, is charged with 23 similar misdemeanor counts, mainly for his votes to recommend contracts to the two companies. Knitz is accused of failing to disclose gifts from the two companies on his annual statements of economic interest from 1989 to 1992.

Knitz was hired as general manager of the district in 1975 and Lord was hired as his assistant two years later. The two men guided the district through a period of rapid growth and each was rewarded with a salary, a district-leased automobile and other benefits that totaled more than $140,000 per year.

But the managers also spent freely, receiving more than $160,000 in expense reimbursements between 1984 and 1992, not including the cost of some airline tickets and car rentals that were billed directly to the district.

Their expenses were frequently excessive. Knitz, for instance, once charged the district $245 for a five-hour ride in a stretch limo to kill time in New York City while waiting for his flight home. While in New York City on business, he ran up a $4,021 bill for his three-day stay.

Lord charged the district $1,026 for an October, 1989, trip to New York for himself and his wife, including $200 for Broadway theater tickets.

At the time the managers were spending public money freely, Knitz and Lord were also accepting lavish entertainment from district contractors, including fishing and pheasant hunting trips, golf games and expensive meals at fancy restaurants.

According to their statements of economic interest, Knitz and Lord accepted more than $40,000 worth of gifts from contractors, developers, bankers and consultants. After The Times published articles about the gifts they had accepted, the men amended their disclosure forms, eventually reporting more than $60,000 in gifts.

In dozens of instances, the managers accepted gifts in excess of state-mandated limits on gifts from contractors to which they continued to steer business. Under the state Political Reform Act of 1974, administrators are prohibited from using their “official positions to influence a governmental decision” that has a financial impact on a company that has given $250 or more in gifts during the previous year.

Prosecutors are still weighing whether or not to file criminal or civil charges against the district’s former board chairman, Don B. Schone, and its current top engineer, William B. Dye, over their acceptance of gifts.