Published On: October 14th, 2019Categories: California News

State and local audits of the embattled West Valley Water District in Rialto have uncovered a slew of deficiencies, including questionable hiring and promotion practices, no-bid contracts, abuse of credit cards and work performed without contracts.

Allegations of mismanagement and corrupt practices over the past three years lodged by water district employees, board members and ratepayers triggered the audits by the state Controller’s Office and a private group commissioned by the district.

Preliminary findings from the controller’s audit show the district did not put out for bid multiple professional contracts and failed to provide documentation supporting the hiring of new employees for executive positions.

The district also failed to provide a fair and competitive hiring process for three nonexecutive positions, allowed multiple contracts to exceed the contracted amount, and allowed some services to be invoiced before a purchase order was completed for the work, state auditors found.

Additionally, certain credit card expenses lacked justification and supporting documentation and were used for nondistrict business-related expenses, while multiple credit card purchases did not adhere to the district’s purchasing policy, according to the state controller’s preliminary findings, included in a confidential memo obtained by the Southern California News Group.

Findings from audit commissioned by the water district — conducted by The Pun Group of Santa Ana for the period from July 1, 2018 through Jan. 31, 2019 — were fairly consistent with some of the controller’s preliminary findings.

For example, the audit found that the district entered into a $25,000 service agreement with Aerotek, a job recruitment and staffing agency, in December 2018 to provide state-certified water systems operators as temporary labor in the meter department. However, just a month later, Aerotek’s billing for services far exceeded $25,000. As a result, in March, the district increased the budget for the contract by $100,000.

The Pun Group also found that contracts with consultant Rob Katherman, dated June 2018 and March 2019, were not signed by the district. The June contract also did not place a cap on how much Katherman would be paid.

From May 2018 to January 2019, the district paid Katherman $55,394. Of that amount, $22,049 was paid without an authorized purchase order, according to the audit.

South Bay water official Rob Katherman, right, following his acquittal on corruption and embezzlement charges in March 2016. Katherman has been an elected official at the Water Replenishment District of Southern California since 2004. (Photo by Brad Graverson, The Daily Breeze/SCNG).

“Because of a lack of policies and procedures over purchasing, the district does not have sufficient monitoring and risk assessment control to prevent and detect unauthorized purchases,” the report states. “The district did not follow the district purchasing policy and also did not have adequate monitoring control over its contract management. A change order was not approved by the board of directors before the contract amount was exceeded.”

Katherman disputes that he was paid $55,394, saying he received $37,468 from the district.

In addition, Katherman said he submitted necessary paperwork to contract with the water district at $85 an hour, which is half his normal rate. “I can’t take responsibility for the lack of follow-through” by the district in signing the contract, he said, adding that water district General Manager Clarence Mansell eventually signed a one-year contract on July 1.

Katherman said he has been involved in several projects for the district, including its 2019 capital improvement and water well improvement efforts. He also drafted a request for quotes from suppliers to expand the district’s water treatment plant.

Auditors at The Pun Group also uncovered at least one example of an excessive pay raise for a district employee who was promoted internally. The employee was hired in August 2018 as a customer service representative at $31.92 an hour. Then, in November, the employee was promoted to water resources manager with a Step 8 classification and pay of $45.16 an hour, representing a spike of 41%.

According to water district policy, an employee promoted to a higher position should receive the minimum salary for the higher position, or at least a 5 percent pay increase above the worker’s former position, whichever is higher, the audit states.

Although the new pay rate for the internally promoted employee falls within the range prescribed by the district, management should have been more prudent in determining the proper salary step, auditors determined.

The only justification for the promotion and pay hike was a memo signed by Mansell and placed in the worker’s employment file, according to the audit. The audit does not name the employee, but Mansell, in a telephone interview, identified the water resources manager as Nadia Loukeh. She did not return a phone call seeking comment.

Mansell said he previously worked with Loukeh at the Department of Water and Power in Corona, where she was a supervisor in the customer service department. Mansell brought Loukeh aboard at West Valley in August 2018 as a customer service representative, but believed her expertise and experience qualified her more for the job of water resources manager, a position that at the time was in the process of being created.

Mansell said the district followed proper policy and procedure, despite the audit findings.

He said then-board President Clifford Young, who is now suing the district over alleged corrupt practices, approved and supported Loukeh’s hiring and subsequent promotion.

“We did things in accordance with the district’s policy,” Mansell said.

The Pun Group recommended the district adopt a new promotion policy that includes the posting of new jobs and vacancies, selection of potential candidates, and a panel interviewing qualified job candidates, among other things.

“We have no objection to doing that,” Mansell said of the recommendations. “And we told The Pun Group and the state (controller) that that’s what we’ll do in the future.”

Water district spokesman Naseem Farooqi said the state audit should be completed within two or three months.

“Once they have finalized their audit … a draft report will be provided to the District and the District staff will have a chance to respond,” Farooqi said in an email.

Mansell commissioned a board-sanctioned assessment of the district’s financial operations in November 2018 to find any deficiencies and identify areas of improvement, followed by the board of directors commissioning the Pun Group audit in March. The findings from the Pun Group audit are expected to be incorporated into the state controller’s audit, Farooqi said.

In response to the Pun Group audit, the district already has put together an action plan and been  working diligently to correct the problems and implement new policies, Farooqi said.

The new policies will brought to the board for approval at an upcoming meeting, Farooqi said.

Since 2017, the water district has been embroiled in controversy and litigation involving several former employees alleging improper hiring and spending of public monies, breach of contract, and workplace retaliation. In February, board member and former president Young, who was at the forefront of many of the allegations in 2017, filed a lawsuit in Los Angeles Superior Court, ordered unsealed by a judge in May, alleging bribery and kickbacks involving certain board members, attorneys and consultants hired by the district.

Naisha Davis, the water district’s former chief financial officer, and assistant board secretary Patricia Romero also are plaintiffs in the bribery lawsuit.

The alleged illegal kickbacks and bribes, according to the lawsuit, were to ensure contracts with the district and subsequent approvals of invoices. Katherman is a named defendant in the lawsuit, which alleges water district attorney Robert Tafoya helped secure Katherman’s “lucrative contract.”

Katherman, a former board member of the Water Replenishment District of Southern California who in 2016 was acquitted of corruption and embezzlement charges unrelated to his elected position, is alleged in the lawsuit to have paid for gifts and entertainment for water district board President Michael Taylor, such as bottles of wine valued at $500, boxes of cigars, and expensive meals, and contributed to Taylor’s and board member Kyle Crowther’s campaigns after receiving a contract from the water district.

Katherman believes he is being unfairly targeted in the lawsuit.

“I got sucked up in it because I am friends with the district’s new board president, Michael Taylor,” he said in a telephone interview. “I didn’t buy the board of directors expensive bottles of wine or take them to strip clubs. I did give political contributions (to some board members) but that was six months after I started working there and that’s legal.”

Katherman contends the lawsuit stems from “pure retaliation” because Young is angry that Taylor unseated him from the board in October 2018.

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