Watchdog Panel Urges Fines for Water Officials

Four top officials in the California Department of Water Resources, including Director Tom Hannigan, face fines totaling $100,000 for allegedly failing to have energy consultants submit personal conflict-of-interest statements in a timely manner, state officials said Friday.

The officials have been formally notified that investigators for the Fair Political Practices Commission are poised to propose fines against Hannigan, Deputy Director Ray Hart, former General Counsel Susan Weber and Personnel Director Greg Rowsey, sources said. Any fines would have to be approved by the five-member appointed commission.

The investigation stems from the water department’s emergency role as electricity purchaser for 27 million Californians served by three financially stressed utilities. The department was thrust into the role last January by Gov. Gray Davis after power sellers refused to supply the utilities and the state was threatened with blackouts.

The department rapidly hired dozens of consultants to buy electricity, advise the governor and negotiate long-term power contracts. Months later, it was revealed that several of those power traders owned stock in companies with which they did business on behalf of the state.

One consultant, Vikram Budhraja of the Electric Power Group, had worked for Williams Cos.--one of the energy marketers with which Budhraja helped negotiate a contract for the water department.

State law prohibits employees and contractors from participating in decisions involving their personal financial interests. It also requires many employees and consultants to submit forms annually in which they disclose stock ownership and sources of income.

The water department did not require the dozens of consultants it hired in January to submit such forms until July. Republican gubernatorial candidate Bill Jones charged that the forms showed potential conflicts of interest, and he asked for an investigation by the attorney general. That investigation continues.

In late July, Davis officials disclosed that they had fired five consultants for potential conflicts of interest.

On Friday, Jones said he was shocked to hear that blame was being placed on bureaucrats for the failure to file disclosure forms when the governor’s office was taking a direct role in the energy crisis.

“It just strikes me as an effort to try to eliminate any tie to the governor’s office and to hinder the investigation from going further to the governor’s office,” Jones said. He described Hannigan as “an honorable man who has always sought to do a good job.”

Water department officials could not be reached for comment.

Sources who spoke on condition of anonymity, citing the FPPC’s confidentiality rules, said investigators will ask for fines against the top water department executives on the grounds that their failure to require consultants to make immediate disclosures of any potential conflicts of interest violated state law.

There is legal uncertainty about which consultants must file such disclosure forms. For example, the Davis administration never required two of its top energy advisors--Joseph Fichera and Michael Hoffman--to submit the forms, arguing that they fall into a category of consultant beyond the reach of the state’s political reform laws.

“I want to know why no one in the governor’s office is included in this proposed action,” Jones said.