Widening Corruption Scandal Dates Back to 2002
[Editor's note: This is Part 1 of a multi-part series on the Mesquite Citizen Journal that examines the alleged corruption on the part of former Water District officials that took place at the Virgin Valley Water District between 2002 and 2010.]
Click here for Part II Former VVWD Officials Corruption Scandal Widens - Part II
Click here for Part III Civil Court Documents Reveal Corruption in VVWD - Part III
Click here for Part IV VVWD Corruption Case: How They Allegedly Spent the Money-Part IV
Legal woes continue to mount for former Virgin Valley Water District (VVWD) General Manager Michael Winters and others. No one still associated with the District has been involved or currently involved in any of the legal cases.
Winters was initially charged by the Clark County District Attorney in June 2010 with one count of Misconduct of Public Officer, a Category E felony. His original trial date was set for Jan. 24, 2011. It was later postponed to May 23 and again changed to Oct 17. According to the Clark County Court trial schedule it has once again been postponed to Apr. 2, 2012.
The Mesquite Citizen Journal recently obtained court documents from the Clark County District Court in Las Vegas on another pending case involving Winters.
Winters has been included in a civil complaint originally filed by the Water District in March against Michael Johnson, former VVWD Hydrologist, and Robert Coache, former Deputy State Engineer, State of Nevada Division of Water Resources.
Also named in the civil complaint is John Lonetti, Jr., who owns and is now closing The Ranch Market in Mesquite.
Winters and Lonetti were included in a “Second Amended Complaint” filed by the Water District on July 20, along with Coache’s son and daughter-in-law, and five limited liability companies allegedly set up and managed by Johnson and Coache. Two other companies alleged to be “contractually and or tortiously responsible” are also named in the civil suit.
Officials and representatives from the VVWD, including Bo Bingham, the District’s legal counsel, are prevented from speaking to the press regarding Johnson’s involvement in the alleged corruption actions, bound by an agreement they made with him in 2010.
Apparently, this agreement was made so that VVWD could proceed on its claims against Johnson without any concern of any threatened counterclaim by Johnson such as for wrongful termination.
However, VVWD reserved the right to bring claims against Johnson and to speak with any other parties including authorities regarding the matters. Thereafter, Bo Bingham, VVWD’s legal counsel, and VVWD officials provided the evidence they had uncovered in their own internal investigation to the Clark County District Attorney.
George Benesch had previously served as VVWD’s legal counsel from its inception in 1993 until late 2009.
However, court documents outlining the alleged actions by Winters, Johnson, Lonetti, and the elder Coache, are enough to piece together apparent corruption on their parts dating all the way back to 2002.
According to the civil complaint, “In 2002, Johnson initiated contact with Lonetti, a very wealthy landowner in Bunkerville, to devise an arrangement whereby Johnson could personally benefit by engaging Lonetti in the sale of Lonetti’s water rights.”
In August 2005, VVWD purchased just over 590 acre feet of ground water per year (afy) from Lonetti for $8,866,500, according to the court documents. Unbeknownst to the District’s Board members at the time who voted to approve the purchase, they could have saved $2,955,500.
Allegedly, Lonetti told Johnson he was willing to sell his water right shares for $10,000. However, when Johnson presented the offer to the Board of Directors, he told them Lonetti wanted $15,000 per share.
According to the VVWD’s complaint, “Johnson has admitted that he also informed Winters of Lonetti’s willingness to accept
$10,000 afy; however, Winters also intentionally concealed and/or withheld this information from VVWD’s Board.”
The complaint continues with, “Upon information and belief, Johnson and/or Winters were compensated directly or indirectly from the excess $2,955,500 VVWD paid Lonetti for the water.” The court documents do not specify the amount of money the District believes the two officials received from Lonetti.
Much of the value of water rights shares is based on the date those shares were originally issued by the State. The issue date sets the priority for using the shares; the more senior shares have priority over shares with a later issue date. Therefore, the older the shares are dated, the more valuable they become. That’s extremely important throughout the civil complaint allegations.
The 590-plus shares that Lonetti sold to the District in 2005 had a priority date of February 1, 1965.
According to the VVWD Board of Directors meeting minutes from Sept. 6, 2005, there was no discussion among the Board members regarding the price of the water. The agenda item simply said, "Discussion & Action – Consideration to Approve for the Water District Chairman to Sign a Purchase Agreement of 591 Acre Feet of Ground Water."
The minutes go on to include the action taken on the agenda item. "The District has an agreement to purchase 591 acre feet of ground water from John Lonetti. The contract was changed to allow 60 days in lieu of 30 days for the District to obtain bonding for this purchase. John is keeping 5 AF and the board requested that Michael Johnson ask for first right of refusal if, and when, he decides to sell that remaining 5 acre feet."
The result of the action item, according to the minutes, was, "Cecil Leavitt made a motion to approve for the Water District Chairman to sign a purchase agreement of 591 acre feet of ground water between the District and John Lonetti. David Bennett seconded this motion and it was unanimously carried."
The VVWD Board of Directors at the time were Theron Jensen, Kraig Hafen, David Bennett, Cecil Leavitt, and his son Kenyon Leavitt, who was not present at the meeting. There is no evidence that any of them were aware that Lonetti was willing to accept a lower price for his water shares.
In 2006 the VVWD issued a $7.5 million dollar bond to pay for water right purchases the District had made.
In October, 2005, according to court documents, “VVWD filed a change application” with the State Engineer, for the water rights they had just purchased to categorize them for “municipal use and its place of use to the VVWD service area.”
Johnson and Winters were responsible for making sure all the documents associated with the change application were submitted to the State Engineer no later than March 4, 2009, in order for the District to hang on to them and to keep the senior priority date.
On Feb. 4, 2009, the State Engineer notified the two District officials that they had 30 days in which to file the documents or lose the water rights.
However, both of them failed to submit the proper documentation by the deadline. In a review of the VVWD Board of Directors meeting minutes from the Feb. 17, 2009 and March 3, 2009, neither Winters or Johnson mentioned the notification the State had sent them, nor that they had or had not submitted the proper paperwork by the deadline.
The State Engineer revoked the District’s water permit for the shares.
“VVWD’s valuable February 1, 1965 priority date was lost,” and “the 591.1 afy of water purchased by VVWD from Lonetti for $8,866,500 was now essentially worthless,” alleges the civil complaint.
It gets worse.
[Part II of this series looks at the corruption that allegedly took place by Winters, Johnson, Coache, and Lonetti in 2008 outlined in a recent civil complaint filed by the VVWD. Future installments will examine the criminal complaints against the men.]