The board of directors of the troubled Central Basin Municipal Water District in Southeast Los Angeles County is up to its neck in debt, lawsuits, criminal investigations, political rivalries, and unanswered questions about the district's present -- and past -- odd behavior.
Already linked to the FBI investigation digging into state Senator Ron Calderon's finances, the CBMWD is scrambling to account for almost $3 million in district funds. The effort to untangle the mess around a controversial groundwater storage plan has cost the district at least $300,000 in legal fees so far.
The district's other legal troubles have cost millions of dollars. Reporters from KPCC found that "(t)hirteen percent of Central Basin's $11.1 million budget last fiscal year went toward legal bills, according to the district's finance department. The previous year saw 26 percent of the budget gobbled up by legal fees." When news of the district's huge legal bills surfaced, the CBMWD board hurried to cap spending on some future legal costs.
Much of the recent spending turns out to be forensic accounting to unwind service agreements that were approved in violation of the district's own policies and possibly in violation of the state's public meeting laws. Board members and district employees also have apparently been coached how to face questioning by the U.S. Attorney's office.
The legal chaos at the CBMWD includes a lawsuit by former Chief Operating Officer Chuck Fuentes for wrongful termination, contract disputes, and a sexual harassment investigation, all of which is contributing to the district's fiscal instability. The district is now at least $9 million in debt.
A plan to refinance that amount over 26 years would eventually sock municipal water agencies with $3 million to nearly $4 million in higher water costs -- costs that water suppliers will pass on to consumers. "There is a train wreck coming," Mark Grajeda, general manager for Pico Water District, warned the Whittier Daily News in late January.
The wreck has already arrived.
An independent audit of the district's financial records found seven "significant deficiencies" in the district's accounting practices. According to a report in the Whittier Daily News, among the anomalies "The auditor ... found the district wasn't following its policy in obtaining enough bids for contracts in some cases, employees (were) using district credit cards for personal purchases," and financial records were being reviewed only once a year rather than quarterly.
The auditor also questioned why the district prepaid $22,245 in college tuition and fees for Gil Cedillo, Jr., a district employee who was subsequently laid off. Instead of reimbursing Cedillo as required by district's policy, his school bills were paid before he completed his classes.
(Cedillo is the son of former state legislator and current Los Angeles Councilman Gil Cedillo. Before was hired by the CBMWD, Cedillo was the chief of staff for then-Assemblyman Ron Calderon and senior field representative for former state assemblyman Tom Calderon.)
It's hard to know if the district's fiscal chaos is more debilitating than its organizational meltdown or if the district's ties to the Calderon family and its entourage will put the district even more hot water.
But it's very likely.