County, Fired Officer Question Practices of Water District

A south Los Angeles County water district that was sharply criticized by state auditors last year now faces attacks on two new fronts: from a former top-ranking insider who alleges financial improprieties and from county officials who want to dismantle the agency.

The latest troubles for the Water Replenishment District of Southern California, which serves 3.5 million people, come as a group of its 43 member cities seeks to secede.

Ronald Flores, the district’s former chief finance officer, says he was fired recently for objecting to several questionable contracts, including payments to relatives of a board member. The contracts, worth a total of nearly $24 million, were approved without competitive bidding, in violation of the agency’s own policies, he charges.

Flores made the allegations in an employment discrimination complaint filed last week with the state Department of Fair Employment and Housing.

District officials deny the charges. “The district is very confident that they are all false,” said the agency’s general counsel, Edward Casey.

Flores’ charges echo similar allegations made in a 1999 state audit that accused the district of paying 22 vendors more than $2.6 million over two years without contracts and without bidding.

As a result of that audit and other complaints, the district is also under siege from county officials who are considering dismantling it.

Supervisor Don Knabe submitted a motion to the Board of Supervisors this week, urging the county to consider having its Public Works Department take over the duties of the water district, which is known as the WRD.

“Member agencies still feel dissatisfaction with WRD and its board of directors and feel WRD continues to ignore the concerns of its member agencies,” Knabe said in his motion.

According to the Little Hoover Commission, a state watchdog group, there are 2,200 special districts in the state, including 458 water districts. The water districts have reserves totaling about $11.8 billion and there is little outside oversight of those funds, the commission said in a separate report released in May.

The WRD does not directly serve homes and businesses. Instead, it charges municipal and private water companies to pump water from underground aquifers, which the district refills.

The state’s 1999 audit harshly criticized the district for raising water rates by as much as 200% since 1990 and stockpiling a $67-million reserve over the last 10 years.

The fee hikes and other problems have prompted eight cities to begin the process of seceding from the district. State lawmakers adopted two bills this year that impose tough financial reforms on the district.

In his complaint to the state, Flores said he drew the ire of board members for objecting to a contract with Amervest Co., a Los Angeles-based financial management firm. Board member M. Susan Carrillo’s brother, Albert Robles, is a consultant for Amervest. He is also treasurer for the city of South Gate.

Concerns About Lack of Documents

Flores also charged that the board became hostile toward him when he questioned repeated payments made without a contract to Pyramid Press, a Los Angeles printing company owned by another Carrillo relative, Angel Gonzalez.

State auditors who investigated the agency last year said they found no proof that either Amervest or Pyramid Press had been hired in a competitive bidding process. Chief deputy auditor Steve Hendrickson said auditors focused on the Amervest and Pyramid Press contracts “because we had concerns that they were paying a lot of money with few documents.”

Since 1995, the district has paid Amervest nearly $700,000 and Pyramid Press about $184,000, according to state and water district records. The water district’s administrative code requires that the district take competitive bids for all services exceeding $10,000.

Board member Carrillo did not return repeated calls seeking comment.

However, her brother, Robles, rejected allegations of a conflict-of-interest violation, saying his sister had never benefited financially from the contract with Amervest.

Printing company owner Gonzalez, whose nephew is married to Carrillo, also rejected Flores’ allegations and accused Flores of manufacturing the charges to win a large discrimination settlement. “It’s an outright lie,” he said.

Flores said he was hired in January 1999 to put the district’s finances in order. He said he was fired Oct. 4, 2000, for objecting to several contracts.

In addition to the contracts with Amervest and Pyramid Press, Flores said, he complained about a $22-million contract awarded without bidding to Montgomery Watson Americas, a Pasadena engineering company, to build two plants to desalinate and recycle seawater that has seeped into the aquifer.

Water district officials have defended that contract, saying they did not put the contract out to bid because Montgomery Watson had prepared a previous feasibility study on the project and is an expert on saltwater contamination.

State officials confirmed that Flores had filed an employment discrimination complaint Nov. 16 but declined to discuss the matter, pending an investigation and resolution.

Flores concedes that he wants the district to pay him a settlement for firing him, but he said he has collected internal documents and has witnesses to support his charges.

According to district documents, the five-member water district board--including Carrillo--voted unanimously on April 18, 1995, to hire Amervest to manage the district’s investments.

The contract paid Amervest 0.004% of the principal of the district’s account. In November 1998, that amounted to about $14,000 per month, according to state auditors.

Flores said he repeatedly warned board members that such a fee was exorbitant. He said he urged board members to instead invest in the Local Agency Investment Fund, a state program that charges much smaller fees.

“After I made these complaints and disclosures, Carrillo stopped talking to me, stopped providing me with assignments and took measures to eliminate my position,” Flores said in his complaint.

The water district eventually ended its contract with Amervest in March 2000 and moved its account to the state investment fund, Flores said.

Attorneys for the state Fair Political Practices Commission said they could not comment on the matter because they have not been asked to investigate it. But they noted that the conflict of interest laws in the Political Reform Act of 1974 extend only to “immediate family members,” which are defined as spouses and dependent children.

Gonzalez, the printing company owner, insisted that neither he nor Carrillo had violated any conflict-of-interest laws.

Both state auditors and water district officials said they had been unable to find a contract between Gonzalez and the water district. Yet the printer said he had submitted competitive bids.

“These allegations are bogus,” he said. “I’ve done work with the WRD and I have used the bidding process.”

He conceded, however, that on occasion, water district officials have asked him to print documents on short notice without going out to bid.

“I’m in business to print,” he said. “That is what I do.”