VVWD allegedly loses another $3,885,000 on bad water deals made by Winters and Johnson.
Web link to the civil court documents included in this article.
Parts I and II of this series examined alleged corruptive actions by two former Virgin Valley Water District employees, Michael Winters, General Manager, and Michael Johnson, Chief Hydrologist. Winters was fired from the Water District on Feb 2, 2010. Johnson resigned from his job in August, 2010.
Robert Coache, former Deputy State Engineer, State of Nevada Division of Water Resources, was allegedly a key player in the scheme as allegedly was John Lonetti, Jr, a wealthy land owner in Bunkerville. Lonetti also owns The Ranch Market which is closing its doors in the next few weeks.
There is no evidence that other current or former Virgin Valley Water District employees or past or present Board of Director members were involved in the alleged schemes.
See MCJ stories: Former VVWD Officials and Business Owner Face Mounting Legal Woes and Former VVWD Officials Corruption Scandal Widens - Part II
Part II ended with Lonetti owning two sets of water rights; one had 1200 acre feet of water but with a permit date of 1990. The other more valuable permit only had 600 acre feet of water. What made it so much more valuable was its priority date of 1914.
SNWA was not interested in purchasing the 1990 permitted water even though there was twice as much in it. Instead, the Agency wanted Permit 3085 with the older associated date of 1914, mainly because it gave them a higher priority for the water usage and there were fewer restrictions on its usage.
On the other hand, VVWD had 890 acre feet of water “with a valuable pre-1929 priority date.” SNWA much preferred that water to the 1,200 afy with a 1990 priority date.
According to the civil complaint filed by the Water District, Johnson told SNWA that if it would purchase the 1990 water from Lonetti, then Johnson would convince the Virgin Valley Water District Board to make a trade.
According to other court documents, John Entsminger, General Counsel for the Southern Nevada Water District, told Johnson that if he could convince the VVWD to make the trade, then SNWA would go ahead and buy the 1990 water with the idea it would soon trade it away.
Remember, Lonetti was originally granted Permit 54383 supposedly for irrigation purposes on his 400 acre ranch south of Bunkerville. At first, the State Engineer told Lonetti that the water wasn’t being allocated anymore. Then, allegedly through Coache’s actions, Lonetti was given the water to use, not to sell.
Less than a year later, Johnson was allegedly making a deal with SNWA to purchase Lonetti’s water but only if Johnson could convince the VVWD Board to later swap it out for 890 acre feet of water than was much more valuable to SNWA.
It also bears reminding that SNWA is one of the largest water agencies in the West. Pat Mulroy, the Agency’s head official, was recently elected as President of the Association of Metropolitan Water Agencies, a group based in Washington D.C. that represents publicly owned drinking water systems around the nation.
During the time of these alleged violations, SNWA was buying as much water as it could from all over the region. Its specialty is knowing the value of every drop of water that flows anywhere in the West.
At this point in time, the Virgin Valley Water District Board of Directors consisted of Cecil Leavitt and his son Kenyon Leavitt, both representatives from Bunkerville. Cecil Leavitt had been a Board member since 1993 when the District was first formed. He also served as the Board’s Treasurer.
Mesquite's elected representatives on the Board were John Paul and Ted Miller, both elected in 2006, taking office Jan. 1, 2007. Robert "Bubba" Smith was appointed the Mesquite City Council representative to the VVWD Board in July 2007.
The civil complaint says that, “On or about March 18, 2008, Johnson and Winters misled and convinced the VVWD Board to trade its 890 afy of pre-1929 water worth $7,125,000 for the 1,200 afy of 1990 water worth $3,240,000, which SNWA purchased from Lonetti.”
The court documents go on to say that Winters and Johnson did not discuss the real value of the water based on its permit dates but rather led the Board to believe that it was getting the better deal with SNWA based strictly on the amount of water being traded.
The complaint says that VVWD’s water it was trading away was actually worth $3,885,000 more than the water it was getting in return from SNWA.
“In direct reliance on Johnson’s and Winter’s misleading information and statements, the VVWD Board agreed to the trade with SNWA,” states the civil complaint.
Soon thereafter, SNWA wrote Lonetti a check for $8,416,506. That included $2,700 per acre foot for the 1,200 acre feet for the 1990 water and $8,600 per acre foot for the 1914 water.
In two water right sales, three years apart, Lonetti received a total of $17,283,006.
Of the $8.4 million SNWA paid Lonetti in 2008, $3.24 million was for the 1990 water the agency would quickly trade off to the VVWD in order to receive 890 acre feet with a pre-1929 permit date.
“In exchange for Coache, Johnson, and Winter’s respective actions in obtaining the approval of Lonetti’s water applications and in convincing the VVWD Board to do the trade with SNWA, Lonetti paid Johnson and Coache $1,327,000. Lonetti wired these funds to Johnson and Coache’s Wells Fargo bank account held in the name of their company, Rio Virgin, LLC, on or about May 21, 2008,” is how the civil complaint court documents summarize the ‘2008 deal.’
From those ill-gotten gains, Winters allegedly received a check for $15,000.
Between the 2005 deal outlined in Part I of this series in which the Virgin Valley Water District paid $8,866,500 for water it later lost the rights to, and the 2008 deal outlined in this Part III in which the District swapped water that was worth $3,885,000 less, the District lost a combined $12,751,500 worth of water over three years.
Click here to see the complete civil complaint as filed in Clark County District Court, Nevada.
Next up: how Johnson and Coache allegedly spent $1.3 million dollars and how Coache got his children and other family members caught up in the scheme.