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October 11, 2024
The accounting firm was paid $400,000 for an audit. At the end, the firm backtracked and called it an ‘examination.’
A few weeks ago, Los Cerritos Community News exclusively reported that Central Basin Municipal Water District’s (CB) cash on hand had dropped $3 million in only seven months after attorney Victor Ponto, who was appointed in February, took over for Dr. Alex Rojas after the ruling majority on the CB Board illegally placed Rojas on leave.
Two weeks later, LCCN exclusively reported that some CB Directors, after they appointed Ponto, immediately began taking thousands more in payments to attend dubious “meetings.”
One meeting claimed by the biggest recipient of additional meeting cash was (appointed) Director Juan Garza. In April and May, Garza got paid nearly $600 for having dinner with Metropolitan Water District Chair Adan Ortega and planning a MWD water trip.
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Garza reimbursement (highlight yellow) form showing Ortega dinner and trip planning meeting, Garza was paid nearly $300 for each meeting.
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The blatant misuse of public funds was (and is) costing CB rate-payers thousands every month.
Surprisingly, no other Los Angeles-based print media companies picked up the LCCN stories.
This past week, a report on CB was released by the firm Carr, Riggs & Ingram (CRI) alleging “lax oversight” of CB finances during the tenure of General Manager Dr. Alex Rojas, whom Ponto took over for in February.
Interestingly, after ignoring LCCN’s stories that found millions in potential fraud and waste, the Whittier Daily News was at-the-ready to publish an article about the CRI report, which claimed to find $200,000.
The report, which, according to sources, cost CB an eye-opening $400,000, concluded that $123,000 was misspent, including more than $75,000 in “inflated salary” extra pay and benefits that went to Rojas.
However, the report did not cover the period between February and July 2024 when Ponto was in charge, and the agency burned through $3 million in cash, including paying nearly $200,000 to Ponto’s firm Burke, Williams, Sorenson.
The report alleged Rojas:
(1) Influenced the selection of vendors and bypassed competitive bidding processes.
(2) Pushed for alterations to his pay and benefits that resulted in an unauthorized $25,000 raise.
(3) Ordered tens of thousands of dollars in extra leave payments, retirement contributions and paid tuition.
CRI blamed Central Basin for “lack of documentation maintained by Central Basin, deletion of Central Basin records and lack of cooperation by certain individuals/entities related to the district” then admitted the numbers could be incorrect; yet they leveled the allegations anyway.
Despite the disclaimer, the findings prompted board member Martha Camacho Rodriguez and appointed board member Juan Garza to call for criminal investigations.
It was Camacho Rodriguez and Garza who were among the CB board members who illegally placed Rojas on leave, replaced him with the inexperienced Ponto and then, as a ruling majority, presided over a $3 million drop in cash.
Accuse but do not interview or corroborate?
In an email, Rojas and his attorney responded to WDN questions, and strongly denied any wrongdoing. Rojas also went on the record claiming that CRI never interviewed him for the audit.
Shockingly, the CRI report claimed the auditors DID INTERVIEW Rojas.
Rojas and his attorney responded, “The report misleads the board into thinking that Dr. Rojas was interviewed, but he was never called, I repeat, never called in to discuss these matters, asked questions, or given a chance to produce evidence in his defense.”
CRI officials have not answered LCCN questions about the apparent lie.
LCCN has also learned that CRI did not interview a number of officials who were involved at CB during the examination time window.
President Art Chacon, Directors Jim Crawford, Leticia Vasquez-Wilson, Noe Negrete, Bob Apodaca, John Ouskui, and attorney Robert Baker were not interviewed.
CRI officials have not answered questions about why they excluded testimony from CB Board members.
Rojas and his attorney continued, “The important thing is that the report states that there is no finding of fraud, unknown accounts, or other financial mismanagement regarding the district finances and that all district banking records and funds are accounted for.”
Answering allegation (1) of influencing the selection of vendors, bypassing competitive bidding processes, approving sole-source contracts, and overriding staff members, Rojas and his attorney wrote, “regarding sole source contracts, during Dr. Rojas’s time with the District, he never issued any sole source contracts.”
CRI questioned several payments made under Rojas’ $25,000 spending authority, alleging he split contracts into smaller amounts to avoid taking the contracts to the board for approval. The firm reviewed 13 sole-source contracts approved under Rojas’ watch and found that only one was procured correctly.
However, in his emailed response, Rojas and his attorney denied that any of those contracts were actually “sole source” and criticized CRI for making accusations without evidence, a common theme throughout the report.
“The report does not provide any evidence that Dr. Rojas overturned, or overrode, any staff member’s denial, rejection, or approval of anything related to district business.”
CRI also looked at financial records and “found that Dr. Rojas overrode Central Basin’s internal controls and/or limited Central Basin’s internal controls on numerous occasions. As a result, Rojas (2) received compensation and/or benefits that he may not have otherwise received.”
Rojas and his attorney responded, once again citing the lack of evidence. “Dr. Rojas does not have the system access or any other authority over his personnel records or files. The report does not provide examples of how Dr. Rojas supposedly interfered with or overturned any staff data entry or processing.”
CRI also alleged Rojas received (3) extra leave payments, retirement contributions, and tuition.
Rojas and his attorney responded, “His compensation and employment contract are reviewed annually by independent outside auditors.
“Shockingly, the CRI report fails to mention that two independent CPA firms/auditors reviewed these same payments. The auditors found no issues or noncompliance, I repeat, found no issues or noncompliance, with district policy or Dr. Rojas’ employment agreement.”
Central Basin President Art Chacon offered the same criticism of CRI and their lack of research. “The report does not mention that his compensation and employment contract are reviewed annually by our independent outside auditors and there have been no findings in the last two audits submitted to the board; we discussed the contract and approved it at a regular meeting.”
In regards to his retirement, Rojas and his attorney wrote, “The items regarding his retirement were identified and corrected in consultation with general counsel, the business department, the human resources department, and outside agency compliance staff. Dr. Rojas cannot make those types of changes to his records.”
The CRI report also claimed that Rojas paid for tuition without authorization but with some basic research CRI would have found that language in Rojas’ contract states the District will pay for professional development, including university courses for its employees, “for the good of the agency.”
CRI concluded the examination stating that “significant errors” were found in the District’s internal accounting amounting to $2.4 million, which made investigators conclude that the District’s bank reconciliation records were “unreliable,” but once again offered no proof.
The WDN reported that, “auditors raised complaints about missing and incomplete records in the past. One auditor, Harshwal & Co., became ‘so fed up’ that the auditors quit before finishing the fiscal year 2021-22 audit.”
But the reporter ignored the February 7, 2024 CB Board meeting where Harshwal stated (on the record) that the audit for 2021-2022 was close to being complete and a draft would be ready “within two weeks.” Harshwal was then asked by the board when the 2022-2023 audit would be completed with Harshwal stating it would take “about four weeks.”
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February agenda item showing Harshwal presentation.
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It was at that meeting that Rojas was illegally placed on administrative leave. Sometime after that, Harshwal was suddenly “having trouble getting documentation” and quit, stopping all the audits from completion.
At the same meeting the board then approved the appointment of CB attorney Ponto as the “exclusive project manager” of the CRI investigation overseeing all aspects of the process.
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February agenda item showing appointment of Ponto as “project manager.”
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And in a move that reeks of covering their backsides, CRI told the WDN that the investigation “was not an audit.” However, a LCCN examination of the Request for Proposal CB sent out clearly stated that CB was asking for an audit – called the scope of work – and CRI answered the RFP as if they were going to audit the agency.
Finally, in a stunning lack of research, the WDN reporter failed to report on the highly questionable actions taken by CB attorney Victor Ponto and Interim CB GM Elaine Jeng, including one that involved the reporter, to make the CRI report public before a scheduled closed session meeting to discuss the report.
Ponto went to court – without board consent – and asked a judge to declare CRI’s report not privileged and, therefore, public record. The action stopped the CB Board from reviewing and discussing the report in closed session with CRI to hear their arguments and avoid possible litigation.
In an email to CB Board members, Ponto wrote, “I attached the tentative ruling issued by Judge Fujie related to the treatment of CRI’s work product. The Court’s ruling determined that CRI’s work-product is not privileged.”
Just a couple hours after that declaration, the WDN reporter received the report.
“Nobody authorized Ponto to do that,” said President Art Chacon.
Jeng, ironically using the $25,000 spending authority and a no-bid, sole-source contract that CRI blasted Rojas for using, hired the law firm of Seki, Nishimura & Watase, LLP to “support the board with its review of the CRI report.” That was extremely questionable as Jeng had not been involved in the examination.
“Nobody authorized Jeng to do that either,” said President Art Chacon. We paid $400,000 for CRI, why did we need a law firm to support the board, what kind of support?” Chacon continued, “Maybe that the report was lacking in evidence?”
Chacon finished, “Ponto’s unauthorized maneuver allowed the report to go public, without review in closed session, which is standard with a report like CRI’s. Then one of our board members recklessly gave it to the newspaper, you can guess who. Now the report, due to its inaccuracies and unfounded accusations, creates a potential defamation or libelous situation for the District.”
