Insuring Against Corruption in the Central Basin Water District

The Central Basin Municipal Water District is in even more trouble with its insurance carrier, the California Water Agencies Joint Powers Insurance Authority. The ongoing threat of further liability presents too great a risk to its insurance pool, the authority wrote the district last week. The authority's board of directors already has a staff recommendation to terminate the district's insurance, according to a report in the Los Angeles Times.

The insurance authority thinks the Central Basin is a liability magnet. It is. According to the Whittier Daily News, the authority in the past five years has paid out $384,114 in workers compensation claims and $331,699 in general liability claims against the district.

And that's not all. Past employees have threatened to sue the district over wrongful termination. District Board Member Robert Apodaca faces a $1-million sexual harassment lawsuit by a former district employee. And the district is paying $79,000 to settle claims from a 2010 car accident involving Board Member Art Chacon, although Chacon was not working at the time of the accident and was at fault, according the district's insurance carrier.

The district also is suing a politically connected contractor for nearly $900,000 in what the district says is fraudulent billings. A countersuit says the district owes the contractor another $265,000.

Scared stiff by a client in this much hot water, the insurance authority is close to ending Central Basin's liability coverage. The result is hard to calculate, but it would add to the district's overhead costs and could stall the district's construction plans.

The district's bitter internal conflicts may have already decided the issue. Apart from the recall threats and claims of personal misconduct that occupy Central Basin board meetings, one member of the board is alleged to have falsely identified himself as his brother in a DUI arrest and another board member spends his days at a facility where LAUSD teachers under suspicion wait out the district's investigation.

If the insurance authority ends the district's coverage, finding a new carrier will be the least of the district's problems.

A recent audit advised the district's board of directors that they had violated state law by creating a secret $2.7-million fund to keep going a water storage project that the courts and the state legislature denied the district had any right to build. The district is still waiting for the outcome of an FBI probe into the relationship between Central Basin board members and indicted state Senator Ron Calderon and his brother Tom, who was a district consultant. And the district and individual board members must deal with long standing allegations of influence peddling, unlawful campaign contributions, conflict of interest in letting contracts, and mismanagement of district funds.

You can't buy insurance against that kind of chaos. The only solution, apart from a state-appointed receiver to take over the district on behalf of ratepayers, is a complete and impartial audit of the district's business going back as far as the paper trail can take you.

A forensic audit will be expensive. It will be ugly. It will probably expose a pipeline of corrupt influence that flows downstream from state legislators like Senator Calderon and upstream from the boards of "phantom governments" like the Central Basin.

And then the Legislature should issue subpoenas, offer immunity to get testimony, and get rid of the Central Basin and its clownish board of directors.

The Legislature already has all the tools it needs to reform the Central Basin. But it doesn't have the will.