Central Basin Water District drowning in legal fees
The Central Basin Municipal Water District in Southeast Los Angeles, which has been trying to account for a $2.7-million chunk of public funds, has spent an additional $300,000 on lawyer fees to track down the missing money, according to invoices reviewed by KPCC.
The district also is spending millions of dollars on attorney's fees to manage an ongoing federal investigation and several other legal problems, records show.
Thirteen 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.
RELATED: Federal investigation of state Sen. Ron Calderon
That surprised Doug Johnson, a government affairs expert and Fellow at Claremont McKenna College's Rose Institute. "Thirteen percent is ridiculous, much less 26 percent," he said. "Every fourth dollar is going to a lawyer?"
KPCC has learned that a portion of that 13 percent is going to Arent Fox, a Los Angeles law firm. Central Basin has paid Arent Fox more than $300,000 since last March, when it hired the firm to track down $2.7 million in unaccounted-for public funds.
As KPCC reported in December, the money in question is tied to a trust fund that was supposed to pay for a groundwater storage plan. The plan was completed, but the district has no record of how the money was spent. Arent Fox, which has not delivered a final report to the board, did not respond to requests for comment.
Legal invoices obtained by KPCC show Arent Fox has also been paid to manage an ongoing criminal investigation. The FBI has served three subpoenas on Central Basin, the last delivered in late October. The subpoenas have asked for a number of things, including records regarding vendors involved in the groundwater storage plan and trust fund.
The attorney invoices provide a glimpse into what’s happening behind the scenes of the federal investigation, Johnson said.
"They are spending hours on these calls. 'Coordinate witness interviews. Prepared documents in questioning interview prep sessions,'" he read from one document. "They are even coaching the board members and employees on how to interview when meeting with the US Attorney’s office."
Central Basin serves more than 2 million customers in 24 southeast L.A. cities and is governed by a five-member board. It's one of about 2,300 California special districts, independent agencies with elected boards that operate with little oversight and almost no public scrutiny.
The FBI’s interest in Central Basin surfaced publicly last June when it served the district with its first subpoena, a demand for documents in connection with an investigation into state senator Ron Calderon and his brother, Tom, a former consultant at the district.
Records show Arent Fox has spent significant time researching the Brown Act and that it billed to "research remedies of contract formed in violation of Brown Act."
The Brown Act is California’s open meetings law, which forbids government agencies to do the public’s work in secret. KPCC could not determine which contract the Arent Fox invoice was referring to, or if a Brown Act violation has in fact occurred.
Central Basin is also paying tens of thousands of dollars to other law firms to manage legal problems, including a sexual harassment suit, a contract dispute and, most recently, a wrongful termination lawsuit filed last week by former interim general manager Chuck Fuentes.
Last week the Central Basin board of directors agreed to cap spending on some legal fees. But that was too little, too late for Mark Grajeda, general manager at Pico Rivera's Pico Water District.
"I think it is legal fees gone wild over at Central Basin," said Grajeda, who buys water from Central Basin for his district and was in the chamber for the board meeting.
Grajeda is unhappy with Central Basin because he’s already seen his water bills jump, and he fears ratepayers will pay part of the price for all of the lawyers.
"I think it goes to the character of the board and management," he added.
Central basin board members Art Chacon, Jim Roybal and Bob Apodaca declined to comment on this story, with Roybal citing ongoing litigation as the reason he could not answer any questions.