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Central Basin moves forward with whistle-blower lawsuit

COMMERCE — The Central Basin Municipal Water District’s board of directors’ three new members weighed in on a whistle-blower lawsuit filed by director Leticia Vasquez for the first time on June 25.

The new members took office in February in accordance with state legislation authored by Assemblywoman Cristina Garcia, D-Downey, increasing the number of board members from five to eight. The decision has spawned two lawsuits against the district. One was filed in February by former Pico Rivera Councilman Ron Beilke. The other was filled in May by the city of Huntington Park.

Both claim the law is unconstitutional because the new members were chosen by water companies and water utilities in the district instead of residents of the cities the district serves.

The law was approved by the state Legislature after an audit released in 2015 criticized the board’s management of the district, which distributes water in Southeast Los Angeles County. The audit also criticized the district for engaging in questionable contract practices and accused the board of violating state law by creating a trust fund without public disclosure.

The lawsuit was filed in 2014 and has been a divisive matter among board members. The board approved waiving its attorney-client confidentiality privilege between the district and former legal representatives in the lawsuit filed by Vasquez by a 5-0 vote. Directors Arturo Chacon and Phillip Hawkins abstained when the board voted.

Vasquez said she filed the lawsuit to recover $2.75 million from the trust fund the audit uncovered. She said the funds were misappropriated by attorneys from the law firms Sedgwick LLP and Buchalter Nemer, which represented Central Basin. She also said the board members in office when the trust fund was created used the money for political favors.

Directors Chacon and Hawkins expressed concerns about potential costs of the lawsuit. Chacon also questioned Vasquez’s motivations for filing the lawsuit during the June 25 meeting. He said Vasquez has a conflict of interest because she could benefit financially by winning the lawsuit.

Hawkins said the district has already spent thousands of dollars from the audit that uncovered the trust fund. Sedgwick’s legal representative in the case, Bethany Kristovich said that even though Central Basin hasn’t taken over the case, it might still have to be heavily involved. She said that in addition to having to pay for legal representation, it might be required to submit requested documents to the court.

The district also paid $875,000 to Pacifica Services, an engineering consultant firm, in 2014 in a settlement after the district sued the engineering firm for allegedly over-billing the district.

The whistle-blower case has been appealed by the defendants twice, once by stating that Vasquez has a conflict of interest and a second time by stating that discussing their dealing with the board at the time would violate their attorney client confidentiality privilege.

With the attorney client privilege waived, the case will return to the Los Angeles Superior Court. Vasquez said she would not participate in the voting process to avoid having the case appealed for a third time.

Vasquez’s attorney Jimmy Johnson said the district can receive approximately $8 million if the lawsuit is won, even if it doesn’t take over the case.