The troubled Central Basin Municipal Water District violated the state's open-meeting laws when it created a $2.7-million fund in virtual secrecy, an investigation by the agency's attorneys concluded.
The fund, created for a groundwater storage project, was managed without public hearings or notifications, and records related to it were among those subpoenaed by federal prosecutors.
The subpoenas came after an FBI raid on the Sacramento offices of state Sen. Ron Calderon (D-Montebello). Calderon, along with his brother Thomas Calderon, a former assemblyman and influential Central Basin consultant, were charged last month in an unrelated fraud case.
Thomas Calderon was one of several recipients of money from the fund.
The full investigative report by Arent Fox will not be released for another month, but the firm presented a letter to Central Basin's attorney Monday that outlined some of their main findings.
Former Central Basin General Manager Art Aguilar testified last year in a deposition that was part of a lawsuit against a vendor that the $2.7-million fund was created in secret because the board wanted to pursue the storage plan but "didn't want anybody to know what we're doing."
Aguilar testified that because groundwater storage is a "big controversy" in the region, the board wanted to go about the project in a way that would avoid attention and litigation. Aguilar said that the district's then-general counsel, Douglas Wance, was sure Central Basin would get sued so he recommended the fund be handled under "pending litigation" so that "everything would be paid and all the decisions and all the discussion would be done under closed session."
The board voted on the fund on June 28, 2010. Aguilar testified that the elected board members were involved in the creation of the fund and its management.
"The board made all the decisions on any of the expenditures, any of the contracts," he said. "And all the discussion was done during closed session."
Current board members who were there at the time of the fund's creation have said that they were kept in the dark about it by Wance and Aguilar.
The groundwater storage plan ended up being scuttled by state legislation that curbed Central Basin's ability to take on groundwater storage.
Aguilar testified that the fund was created under a veil of secrecy to avoid litigation. Around that time it was already engaged in a pitched battle with another water agency, the Water Replenishment District, that cost both districts almost $5 million in combined legal costs.
But the Arent Fox report states that "the discussion and vote were used to finance many non-litigation expenses, avoid criticism" and create an environmental impact report for a groundwater storage project.
Arent Fox concluded that a governmental authority would find that the elected board members should not have voted on and made decisions on the so-called "trust fund" in closed session. But the firm also concluded that a "reviewing agency would not take further action" because those officials relied on the general counsel's legal advice that "they were permitted to discuss and cast this vote in a closed session." Arent Fox also said that damages to the public were negligible, that a statute of limitations had elapsed and that the board members have agreed to cooperate to resolve the issue.
Central Basin, which serves a large swath of Southeast L.A. County, has been the center of controversies, allegations of corruption and political in-fighting for years.
The Arent Fox report reached no conclusions and made no recommendations about the vendors that were paid, their contracts or the quality of their work.
The firm said that because of "any possible ongoing criminal investigations," Arent Fox was not able to "discover all facts and or take all necessary testimony before the conclusion of this report."