State Agency Fined $69,500

A state political watchdog agency fined the Department of Water Resources $69,500 on Thursday for waiting too long to tell 52 energy consultants that they must publicly disclose any potential financial conflicts of interest.

The fine is the first of its kind against a state agency, and officials said it was intended to warn bureaucrats that they must make such revelations a top priority even amid a crisis.

The four appointees on the Fair Political Practices Commission--there is one vacancy--voted unanimously to force the water resources department to shift $69,500 back to the state general fund from its $576-million annual budget.

The fine stems from the department’s rapid expansion in January 2001, when it was ordered by the governor to begin purchasing electricity for 27 million Californians served by three practically bankrupt utilities.

With blackouts looming, the department quickly hired dozens of consultants to buy electricity by the hour and negotiate longer-term deals. Not until June did department officials tell the consultants that they must fill out paperwork describing their sources of income and ownership of stock and real estate.

State employees and some consultants, depending on the scope of their duties, are required to submit such information within 30 days of hire.

Once department consultants filled out the forms in July, it became clear that several owned stock in companies from which they were buying electricity. Five spot power traders were fired as a result.

Steven Russo, the political practices commission’s enforcement chief, told commissioners that the $69,500 fine against the water department was strictly for missed deadlines and would not preclude other penalties for alleged conflicts of interest by department consultants, some of whom participated in electricity deals involving millions of state dollars. The FPPC settled on the fine after negotiating with a private attorney hired by the water department to represent its top officials.

Russo refused to comment on whether related investigations are pending.

Secretary of State Bill Jones argued Thursday that taxpayers should not have to shoulder the penalty. As a Republican candidate for governor, he began calling on the administration of Gov. Gray Davis in June to release conflict of interest statements from department consultants.

The consultants should be forced to pay the fines, Jones said. He blamed Davis--not department officials--for poor oversight, and he urged the attorney general to investigate whether some multiple-year electricity contracts signed by the state should be invalidated by potential conflicts of interest.

“I don’t want this late filing fee buck-passing to be the end of the story,” said Jones, who was defeated in the March 5 primary election.

A team of six FPPC investigators had considered imposing fines on several top water department officials but decided to charge the agency as a whole because the failure to get statements of economic interest submitted on time “appeared to be the product of many people’s actions,” Russo said.

The fines would be paid by the department no matter what, he said, because the employees were acting in the scope of their state duties.

Though the $69,500 fine is relatively severe by FPPC standards, it is much less than the maximum $260,000 that could have been levied, Russo said.