4 Charged With Stealing Millions From Irvine Water District

Four men, including an employee of the Irvine Ranch Water District, were charged Thursday with allegedly stealing more than $2.2 million from the district by submitting phony bills for rebates on water conservation equipment over a two-year period, authorities said.

Charged with criminal conspiracy and several counts of grand theft were three water management consultants, J. Randall Ismay of Laguna Niguel, Robert William Casey of San Dimas and Robert Edward Baier of Seal Beach. The fourth suspect, Wayne Melvin Smith of Tustin, who ran the district’s water conservation program and allegedly approved the bills the others submitted, was charged with the same counts, as well as misappropriation of public funds.

Irvine police investigator Phil Cadenhead said Ismay and Casey received about $1 million each and Baier got about $270,000.

Cadenhead would not comment in detail about Smith’s alleged role or the amount of money he received. “We can show he had a business relationship with the three consultants,” he said.

Ismay, the only man charged who could be reached for comment, denied wrongdoing.

“There was never any intent to defraud anyone or steal funds, and I don’t believe I’ve done so,” he said.

The alleged scheme began in late 1994 and ended in early 1997 when a district employee became suspicious, Cadenhead said. The district notified police last year.

The money came from the district’s Operation Outreach program to encourage large users, such as homeowners associations and school districts, to save water during periods of drought. Under the program, customers who installed updated water-saving equipment would receive a rebate of as much as half the cost of the devices.

The three consultants turned in forms saying they had done the work for about 35 groups, Cadenhead said. Smith allegedly approved most of the payments, Cadenhead said. About 90% of the customers were homeowners associations, including the Turtle Rock Crest Homeowners Assn. Other customers included the cities of Irvine, Tustin and Newport Beach, UC Irvine and the Irvine and Saddleback Valley Unified school districts.

The plan began to unravel when another district employee wondered why large payments were being made to the consultants instead of directly to the homeowners associations and districts. Normally, the associations would apply for reimbursement and then pay the consultant.

The employee, who asked police not to be named, called property managers at the associations. “They had no idea why work was being performed, and in some cases they had never heard of the consultant or the company,” Cadenhead said.

Ismay’s company is Water Management Consultants and Baier’s two Costa Mesa companies were called AquAudit and the Earth Laboratory Inc.

The district’s annual operating budget is $38 million.

The Irvine Ranch Water District serves 150,000 people who live in Irvine and surrounding communities. It has received national attention for its pioneering use of treated waste water for irrigation.

Smith was arrested at his home, while the other three men surrendered at Harbor Municipal Court in Newport Beach.

Darryl Miller, president of the water district’s board of directors, expressed dismay at the crime.

“We are shocked and disappointed,” he said, “and we have taken what we think is appropriate action to try and avoid this in the future.”

Among other things, he said, the agency has implemented stricter administrative controls on the process by which checks are requested.

“We are aggressively pursuing the [return of the] funds and remedies through legal proceedings,” Miller said. “It will involve criminal and also civil actions.”

Times staff writer David Haldane contributed to this report.