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ORANGE COUNTY PERSPECTIVE : Definitely One for the Books

May 07, 1993

Is there no end to the leaky pipes in the scandal-ridden Santa Margarita Water District?

The latest revelation has the children of district officials being hired by companies that at the same time were being recommended for and awarded lucrative, no-bid contracts by the district.

That followed closely the discovery by a joint task force investigating the district that an outside auditor had suggested that the water agency's $150-million investment portfolio was susceptible to theft or fraud.

The reason for the auditor's statement: Some of the water district's books were found to contain "difficult-to-audit" transactions.

That in turn followed disclosures that the district in 1991 purchased a $2-million certificate of deposit from a bank that was on the verge of insolvency. And with this came the news that the district kept an average daily bank balance of $1 million in accounts that paid no interest.

And that followed revelations that two top officials--William W. (Bill) Knitz, the district's general manager, and Michael P. Lord, his top deputy--treated themselves to lavish perks over a period of years and that they had accepted nearly $60,000 in gifts. Most of these gifts, it was found, came from contractors and other vendors they recommended for lucrative district contracts.

So large are the ethical problems of this small water district that it stands as a kind of "how-not-to-do-it" case study for the 1990s. It's a multifaceted mess.

Consider, for example, that the state's Political Reform Act of 1974 forbids government officials to use their influence on behalf of any gift-giver who has given them more than $250 in the previous year and flatly prohibits gifts worth more than $1,000. The allegations in this scandal have officials staying at luxury hotels, running up room service tabs as high as $1,500.

Consider also that the same law also says that no public official at any level of state or local government can attempt to influence a government decision if the decision will have a material financial effect on a member of his or her immediate family. In the recent revelations, members of Lord's family were hired by two of the water district's largest contractors when he was recommending contract awards to those firms, according to records.

In fact, the Santa Margarita scandal has sufficient dimensions that it could easily serve as a model for drafting normative ethics-in-government legislation, were there not state laws already in place. One simply could look at what happened in this small Orange County water district and see easily, without looking further, many reasons we need to codify guidelines for the conduct of public officials.

Given such legislation, it almost certainly will stand as a handy reference point for future students of ethics in government.

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