O.C. Scandal Prompts Bill to Limit Gifts

SACRAMENTO — Spurred by revelations of excessive spending and gift-taking at an Orange County water district, the state Senate on Monday approved a bill that would impose stringent limits on gifts and other perks that could be accepted by local government officials.

The Senate sent the measure by Assemblyman Tom Umberg (D-Garden Grove) to the governor’s desk on a 35-0 vote.

Gov. Pete Wilson must decide the measure’s fate within two weeks, and Umberg said he is confident Wilson will sign it. Jan Dana, a Wilson spokeswoman, said the governor would have no comment on the legislation until it reaches his desk.

Umberg said he decided to push the measure after reading accounts in The Times about gifts, trips and extravagant business expenses rung up by top officials and several employees at the Santa Margarita Water District.

“It’s a shame we didn’t have this legislation in place two years ago,” Umberg said after the Senate vote. Had that been the case, “perhaps we could have avoided the scandal that occurred at the Santa Margarita Water District,” he said.

Walter W. (Bill) Knitz, the district’s general manager, and Michael P. Lord, his assistant, elected to take early retirement after The Times disclosed numerous examples of the two managers spending lavishly from district funds and accepting gifts totaling more than $60,000 from consultants and contractors to which the men steered lucrative contracts without any competitive bidding.

Board chairman Don B. Schone, a director for 16 years, resigned after The Times reported that he took two trips to Cabo San Lucas paid by the district’s chief engineering contractor. Schone did not disclose the gifts until the news accounts surfaced.

The bill passed Monday would ban gifts or honorariums in excess of $250 each year from any single donor to an elected official or employee at a special district or local government such as a city, county or school district. Currently, there is a $1,000 restriction.

Some governmental agencies, such as the Orange County Board of Supervisors and the Santa Margarita Water District board, enacted a virtual ban on all gifts to their officials and employees last year.

Umberg’s measure also would add tough disclosure requirements for special districts, which would be required to disclose if an employee or elected director were reimbursed with taxpayer dollars totaling more than $100 for meals, lodging, travel expenses or other costs.

The districts also would be required to publish a tally of all reimbursements to employees exceeding $100 in a document published at least annually. Umberg said the disclosure statements, which could be inspected by the public and press, will “curtail the abuses as much as anything else.”

Special districts typically handle water, sewer or waste disposal duties, often in unincorporated areas. The bill would also apply to air pollution control districts, maintenance districts and redevelopment agencies.

The measure is the second legislative proposal offered by an Orange County lawmaker to contend with problems at the Santa Margarita Water District.

Last year, Assemblyman Mickey Conroy (R-Orange) pushed through a new law that changed the way the district’s directors were elected, making them more accountable to the general public instead of to large landowners.

Under the old voting system that Conroy’s bill overturned, votes for board members were awarded exclusively to the district’s landowners on the basis of one vote for each dollar their land was worth on county property tax rolls. Under the new law that takes effect this year, however, voting in the district will for the first time be open to all voters registered in the district on a “one person, one vote” basis.

A criminal investigation into activities at the Santa Margarita Water District is continuing and “preliminary determinations” are expected by the end of the month, according to Wallace J. Wade, assistant district attorney in charge of special operations.

The district attorney’s office and the FBI are looking at possible conflict-of-interest violations stemming from contracts that Knitz and Lord helped steer to companies that provided them with thousands of dollars in gifts and meals.

Meanwhile, members of the Orange County Grand Jury are scheduled to meet today with Santa Margarita Water District officials as part of a grand jury study into whether the district should be merged with four other South County districts.

The grand jury’s administrative agencies committee is studying the possible consolidation of the Santa Margarita, Irvine Ranch, El Toro, Los Alisos and Moulton Niguel water districts.

Like the Santa Margarita district, the four others were originally established as “landowner districts,” although the Irvine Ranch, El Toro and Moulton Niguel districts were converted to one-person, one-vote voting systems years ago, leaving only the Santa Margarita and Los Alisos districts under the old system that Conroy’s bill eliminated.

Jurors are visiting all five districts and have asked administrators there to compile information on each district’s finances, board members, consultants, ethics statements and other records.

The Grand Jury is also studying the possible merger of five other agencies that are intermediaries or wholesalers in the county water distribution system. The jury has hired the accounting firm of Ernst & Young to help with the study.

Consolidation of special districts is a subject that has been on the negotiating table for the past 12 months at the county’s Local Agency Formation Commission, a five-member panel charged with ruling on government annexations and boundary changes.

In Dana Point, LAFCO is studying the possibility of merging six water-related government agencies into a single district. In Garden Grove, the city has begun a move to take over the sewer services from the Midway City Sanitary District.

The city of Los Alamitos is also considering taking over sewer services from the Los Alamitos County Water District, but no paperwork has been filed yet.

Times staff writer Len Hall contributed to this story.