Murky waters on ethics of MWD’s museum deal

As chairman of a fledgling museum designed to promote an “appreciation of water,” Phillip J. Pace was keenly aware that the organization was drowning in debt. But as a director of the Metropolitan Water District of Southern California, he was also in a unique position to throw it a lifeline.

Last week, he did just that.

Pace cast a vote in favor of allocating $4.67 million in ratepayer money to bail out the troubled Center for Water Education in the Riverside County city of Hemet. In the process, he helped protect the center from bankruptcy and creditor lawsuits that could conceivably name him as a co-defendant.

The water district’s cash infusion Tuesday brings its total center contributions to $20 million. Pace, who bears a fiduciary responsibility to the MWD and the center, has been the driving force behind the nonprofit museum project since its inception in 2001.

MWD officials said that under current ethics guidelines, Pace did not violate any rules by voting to save the museum or personally lobbying fellow MWD board members to do the same. Before the vote, Pace had spoken at public meetings requesting the multimillion-dollar assistance and sent letters to the board on the museum’s letterhead seeking help.

However, in a memo to the board two months ago, MWD ethics officer Deni Elliott wrote that directors’ serving on the museum board presented a potential “conflict of loyalties” that could harm the institution’s credibility. She said the board could handle the matter in three ways: Do nothing; require that directors serving on the museum’s board recuse themselves from such votes; or pass a policy that prohibited directors from serving on the water museum’s board.

The MWD board chose to do nothing. But four directors who, like Pace, also served on the water museum board decided to resign those positions in December.

Bill Wright of Torrance was one of the directors who resigned. He said he and the others knew that the MWD might need “to bail the center out, and we felt that it would be a conflict of interest if we had to vote on it.”

Pace was the only MWD director to remain on the museum’s board.

His vote on the bailout raised concerns among outside ethicists.

“The question is, ‘Where was his allegiance?’ ” said Robert Stern, president of the nonpartisan Center for Governmental Studies in Los Angeles. “It just doesn’t look right.”

In response to inquiries from The Times, Pace said through a spokesman that he made “an honest mistake.”

He had intended to abstain but “got caught up in the moment” and failed to respond when the board’s secretary asked whether any directors were recusing themselves. In fact, two other board members did abstain. Pace, who has been an MWD director for 12 years, said he realized his error only after inquiries from the newspaper.

According to ethics experts, Pace did not violate any law if he didn’t financially gain from the vote -- and there is no evidence that he did. But, they said, such dual loyalties undermine the public’s faith that policymakers are acting in its best interests.

“There are many things that are allowed by law that clearly are not ethical,” said Judy Nadler, a senior fellow in government ethics at the Markkula Center for Applied Ethics at Santa Clara University. “If you are using just the legal standard, you are missing the boat.”

Nadler said Pace probably had more access to, and influence with, MWD directors than a truly independent representative of a nonprofit would have had. She also noted that policymakers have been known to extend “professional courtesies” to colleagues they serve with, creating distrust among the public.

“There are inherent issues of fairness, honesty and transparency,” Nadler said.

She said Pace could ask for a reconsideration of the matter to change his vote if he “wants to right a wrong. It’s not too late.”

Elliott, the MWD ethics officer, sat next to Pace during Tuesday’s vote and raised no public objection. Afterward, she said she did not see any conflict.

“I think it’s a nonstory,” she said.

As envisioned, the Center for Water Education is part museum and part educational facility. Its mission is to “tell the story of water” and educate the public on water management and conservation, according to its website, www.centerforwater.org.

In the end, the bailout passed 24 to 5, with two abstentions. The board has 37 members, and six were absent.

At least one MWD director was critical of Pace’s role in the vote.

“I wouldn’t do it,” said Director John W. Murray Jr. of Los Angeles. “I wouldn’t feel comfortable.”

Another director said he was concerned about the MWD’s growing financial commitment in the project, as well as Pace’s advocacy of it. But he declined to go into detail.

“I’m not eager to get into a conversation about that,” said Director James H. Bond of Encinitas, who voted against the bailout. “That’s certainly something that any news reporter would want to look at. I’m just trying to figure out how we got into this situation and how we can limit our losses.”

MWD officials said that directors are often members of other entities and that potential conflicts are not uncommon. For example, each director also represents a smaller, regional water district. But, officials added, the agency tries to manage such conflicts. Directors are supposed to withdraw from votes that award contracts to their individual water district.

“It’s a balancing act,” said MWD Chairman Timothy F. Brick of Pasadena. “I think this is the kind of situation that often occurs for public officials. Often there are cases where we have to balance our responsibilities.”

Brick said he did not agree with those who saw a conflict in Pace’s actions.

For Pace, it was not the first time his role for both entities has drawn scrutiny. The Los Angeles district attorney’s office previously investigated conflict of interest allegations involving Pace but closed the case two years ago after determining that he did not financially profit from the arrangement.

After Tuesday’s vote, Pace, president of Pace Land & Development and a former Montebello city treasurer, called the bailout a “win-win” situation for the public and MWD.

As part of the MWD’s action, the district pays all of the museum’s existing debt and takes control of the facility.

Officials said they will also look to be partners with another entity that could operate the museum at no further cost to MWD ratepayers.

Construction on the museum is nearly complete, although it is more than a year behind schedule. The grand opening is scheduled for fall.

matt.lait@latimes.com