San Jose—The Santa Clara County District Attorney’s office has launched an investigation into conflicts of interest and allegations of fraudulent billing at the Santa Clara Valley Water District.
Last week, John Chase, head of the DA’s public integrity unit, began requesting documents related to district contracts with consultant RMC Water and Environment, which were the subject of a Metro Silicon Valley investigative report. In August, water district CEO Beau Goldie, who lives in Morgan Hill, signed a single-source contract with RMC to begin preliminary work on a recycled groundwater project that could cost as much as $800 million.
Board chair Gary Kremen called on the DA to look into the matter after Metro identified conflicts of interest and uncovered internal emails that showed a civil engineer for the district had identified as much as $512,000 in improper payments to RMC. The employee had been raising the issue to superiors to no avail for approximately 18 months.
“The District Attorney’s Office is in the process of reviewing Santa Clara Valley Water District records to determine whether there is any evidence of a crime,” Chase said in a statement.
Metro’s report also focused on a flimsy “firewall” agreement that failed to prevent a high-ranking district deputy administrator, Melanie Richardson, who is married to one of RMC’s co-owners, from coming into contact with RMC business. In 2009, she had a role in approving two RMC contracts with the district worth a total of $10.7 million. Forms declaring outside economic interests show Richardson owns RMC stock valued between $100,000 and $1 million.
In an interview this summer, Richardson admitted that her firewall agreement, which the district refuses to release, does not even require her to leave meetings where RMC business is discussed. The District Attorney began looking into the situation in 2013 but called off the investigation due to statute of limitations.
None of these issues were disclosed by Goldie in March or April, when he went to the board for permission to sign $10 million in single-source contracts to begin work on a new indirect potable reuse plant. Goldie insisted that due to the worsening drought, now in its fourth year, there was no time for standard contract qualification and review processes. RMC’s deal, originally slated for roughly $4 million, was the largest of the single-source agreements Goldie proposed.
“I’m more convinced now than ever that there are real internal control issues at the top,” board chair Kremen said last month.
Metro’s report also concentrated on a bribery scandal involving RMC in Monterey County, where a board member pleaded no contest in March to conflict of interest charges after accepting $160,000 from the company. RMC president Alyson Watson defended the company as an innocent bystander in the bribery scandal, but former RMC employees told Metro that one of the company’s partners, Lyndel Melton, attempted to cover up the crime.
“We were asked to destroy documents, and we refused,” said a former member of RMC’s financial team.
Because of media scrutiny surrounding RMC’s dealings with the local water district, the largest of Goldie’s proposed single-source contracts—a $4 million deal with RMC—has now been scaled back to $1.3 million. The contract wasn’t signed until August, more than three months after Goldie told the board it needed to take emergency action, which has raised additional questions.
Along with a DA investigation, Metro has also learned that an internal district investigation has been underway for more than a month, based on staff complaints related to RMC. It is not clear who is overseeing the inquiry, as Leeann Pelham, the district’s director of ethics and corporate governance, resigned shortly after Goldie announced his plan to sign a single-source contract with RMC.
District communications manager Teresa Alvarado told Metro that the board of directors and CEO met in a special closed session meeting Oct. 1, and a full discussion of the district’s dealings with RMC will be discussed in open session Oct. 27.
The next regularly scheduled board meeting is Oct. 13, but the item had to be pushed, as CEO Goldie will apparently be out of the area on that date to attend a conference.
“The board has decided they want to get to the bottom of this in open session, so they want to hold a public meeting and investigate this further,” Alvarado said. “They want to hear about any investigations that have taken place and ask the CEO questions about these allegations, or items, that you raised in the paper.”
Goldie has refused multiple requests for an interview over the last month.
Josh Koehn is the news editor for Metro Silicon Valley, a sister paper of the Dispatch.