Former S. County Water Official to Pay $10,000 Fine

The former board chairman of the Santa Margarita Water District agreed Wednesday to pay a $10,000 civil fine for his failure to disclose gifts from an Irvine engineering firm that secured expensive contracts with his help.

The agreement worked out between the Orange County district attorney’s office and Don B. Schone, who served on the board for 17 years until his resignation in January, is the first case to be settled among four that were filed after scandal rocked the district last year.

Prosecutors prepared a civil lawsuit against Schone and cited five instances in 1990 and 1991 when he either failed to disclose the full amount of gifts given him by Robert Bein, William Frost & Associates, or--having accepted gifts exceeding state-mandated limits--voted to award the company a series of lucrative contracts, which amounted to conflicts of interest.

By agreeing Wednesday to pay the fine, Schone settled the lawsuit the same day it was filed. A Superior Court judge still must approve the stipulated agreement, and this action is expected in the next few days.

“Hopefully, this will send a strong message to government officials and politicians that they’d better comply with the provisions of the (state’s) Political Reform Act, or they are subject to criminal and civil penalties,” said Marc Kelly, the deputy district attorney handling the case.

The Orange County district attorney’s office is still weighing civil charges against William B. Dye, the district’s engineer for the past 15 years, for his failure to disclose gifts from contractors he recommended for engineering work.

The cases against Schone and Dye are less serious than those against Walter W. (Bill) Knitz and Michael P. Lord, previously the water district’s top two managers, who face criminal misdemeanor charges of illegally taking thousands of dollars in gifts from Bein Frost and another engineering company, MacDonald-Stephens Engineers in Mission Viejo.

Together, the two men face 38 misdemeanor counts of conflict of interest and failure to disclose gifts. Prosecutors are working on plea-bargain agreements with both former managers, and court hearings are scheduled for next week.

In its case against Schone, the district attorney’s office said it found no evidence the former board chairman “knowingly” or “willfully” violated the state’s Political Reform Act of 1974.

The law requires that officials who accept gifts valued at more than $250 in any 12-month period abstain from voting on, or influencing, any official decisions that could affect the donor in the following year. Any gift of more than $50 must be reported.

“In evaluating the evidence, it was clear to us that Schone was on a different level than Knitz and Lord,” Kelly said. “However, Schone was not able to get off the hook because we have the power to file civil charges for negligent or inadvertent conduct of someone who was required to follow” the Political Reform Act.

Schone’s attorney, Paul S. Meyer, released a statement Wednesday labeling his client’s improper votes and failure to disclose gifts as “inadvertent” and said Schone still maintains that instructions provided by the state on how to fill out statements of economic interest are confusing.

“Mr. Schone is of the strong opinion that current and new officials need to clearly understand the rules themselves to avoid the problems that resulted in this inadvertent violation and penalty,” Meyer said. “When we examined the history of advice to (the district) by other experts, the inadvertent violations were bound to occur.”

Meyer said he is “satisfied that any rumors of intentional wrongdoing by Mr. Schone have been completely dispelled,” adding that “any violation was indeed inadvertent and did not represent any evidence of intentional misconduct by Donald Schone.”

Schone, a 52-year-old engineer who works for Southern California Edison, resigned the same day The Times disclosed that he had taken two free trips to Cabo San Lucas, courtesy of Bein Frost. The trips, taken in 1990 and 1991 and estimated to cost between $600 and $700 each, were not reported on Schone’s statements of economic interest for 1991 and 1992, but Schone acknowledged taking the trips on an amended statement he filed after The Times’ disclosures.

When The Times asked him about the trips, Schone said he took the 1990 excursion to inspect a Bein Frost sewage reclamation treatment plant and followed up in 1991 to take another look. At the time of the trips, Schone had helped approve millions of dollars worth of Bein Frost contracts.

With Schone’s resignation, the district’s five-member board of directors was completely overhauled. One member resigned shortly after the scandal broke, and three other incumbents were voted out of office last November.

Schone’s $10,000 fine is four times the amount of gifts that the former board chairman did not report, Meyer said. Prosecutor Kelly said Schone had failed to report between $2,000 and $2,500 in gifts between 1990 and 1992.

The total value of Schone’s unreported gifts is relatively small compared to the value of gifts accepted by Knitz and Lord, which totaled about $60,000 over a five-year period. The two men were also reimbursed with more than $160,000 in public funds between 1984 and 1992 for such questionable expenses such as limousine rides, transcontinental trips with a girlfriend, sheepskin seat covers for their district-provided cars and four-figure room service tabs.

Kelly said Schone’s $10,000 fine was arbitrarily set and that the former official could have been liable for up to three times the amount of the gifts he failed to disclose for each of three conflict-of-interest counts--or almost double the amount of the actual fine. In addition, he could have been fined for the amount of money that was not properly reported for each of the two counts of failing to report gifts.

The money goes to the county’s general fund, but a portion will be used to pay for the district attorney’s investigation.

Schone, who served on the district’s board of directors longer than any other member, expressed his regret over the matter, his lawyer said in a statement.

“Donald Schone is saddened that the hard work of the past and current members of the Santa Margarita Water District has been lost in the countless rumors and speculative publicity,” Meyer said. “He is grateful the matter is finally closed.”

A Bein Frost spokesman did not return a call for comment. Company executives maintain they have done nothing wrong in paying for meals, gifts and entertainment for Santa Margarita Water District officials over the years but have curtailed the practice.