Water District Board Members Spar, Order Audit of RMC Work

A testy two-hour discussion Tuesday between the Santa Clara Valley Water District board and staff resulted in an audit referral to delve deeper into allegations of improper payments to one of the district’s largest consultants.

More than a month has passed since San Jose Inside published a report identifying conflicts of interests and internal allegations of improper billing by RMC Water and Environment. This summer the company signed a single-source agreement with district CEO Beau Goldie to begin work on a $800 million groundwater recycling plant. Shortly after San Jose Inside’s report, the District Attorney’s office launched its own investigation.

In a presentation to the board Tuesday, district staff said that a review of financial documents found “no irregularities” in RMC’s invoices, despite admitting that work was rushed, poorly designed and managed, and might not have complied with laws on public oversight.

As previously reported, a public records request found that a civil engineer for the district, Roger Narsim, repeatedly expressed concerns to superiors about RMC’s billing practices over the course of 18 months. Najon Chu, the district’s chief financial officer (CFO), said his team conducted a detailed analysis of RMC invoices and found no evidence of wrongdoing, although it appears the review did little more than match invoices to payments rather than confirm payment for services provided.

Board chair Gary Kremen repeatedly challenged Chu and other staff on the transparency of past decisions, including the fact that a top district deputy is married to one of RMC’s owners and has managed people who handle RMC business. Kremen also picked apart the more recent financial review, which had no independent auditors or outside experts examine RMC’s work.

“So, basically,” Kremen said, “you audited yourself.”

“Yes,” Chu said.

Quality control issues occurred on the Lower Silver Creek watershed project in East San Jose, which RMC managed as a consultant starting in 2009. Out of a total of five tasks, the final two were scrapped and left for district staff to complete. The third task was originally scheduled for $375,000 in work, but additional amendments—none of which went to the board for approval—ballooned the cost to $1.7 million.

Chris Elias, a deputy operating officer who took over the project in the fall of 2013, told the board that money was often shifted through “inter-task fund transfers” that were authorized by the previous project manager, Dennis Cheong, who is now retired. Interestingly, Cheong’s name was never mentioned in the staff presentation, yet it appears he signed off on all of RMC’s requests to shift money away from previously contracted tasks, which have since fallen on district staff to pick up the slack.

“It sounds like a rather informal process,” said board director Barbara Keegan.

“That’s one of the lessons we’ve learned,” Elias said.

Another lesson that was learned only recently is the need to further prevent Melanie Richardson, a deputy administrative officer, from conducting performance evaluations of district employees who work with RMC, the company owned in part by her husband. Richardson’s review of two unit managers’ work on RMC business was stopped in July, following inquires by San Jose Inside. Norma Camacho, the district's chief operating officer, said that “additional precautions and steps to reinforce this separation” will be completed next month.

The district has refused to release a copy of a firewall agreement created several years ago, which did not require Richardson to leave meetings in which RMC work was discussed.

CEO Beau Goldie has similarly rebuffed interview requests for nearly two months, but on Tuesday he called the district and RMC’s work on Lower Silver Creek a “success,” despite the fact that the project remains a year away from completion and well over budget. (Federal funds were used, which could prove to be problematic when the U.S. government reviews deliverables on the project.) Goldie could not answer whether or not he and staff followed rules on public oversight.

“There are processes in place,” Goldie said. “The level of following those processes I don’t have the detail on.”

It appears the CEO had the authority to negotiate RMC contracts, but a key question is whether or not he was given the power to amend contracts and award millions more in taxpayer dollars. For now, that question remains unanswered.

Board chair Kremen and director Keegan, the only two board members to oppose $10 million in single-source agreements Goldie proposed in the spring, pressed staff with questions to get answers on where breakdowns occurred. Despite a unanimous vote Tuesday to refer to the matter to the district’s audit committee (director Dennis Kennedy was absent), board members Tony Estremera and Linda Lezotte bristled at the length and tone of the discussion.

Estremera compared the line of questioning to a “Benghazi hearing,” while Lezotte directly accused her board colleagues of sour grapes after losing a vote in May.

“Two people who disagree took their beef to the press instead of taking it to us, or even asking us about it,” Lezotte said. “That’s the shame we’ve spent all of this, the last 20 minutes, nitpicking a contract, because somebody lost a vote. It’s just, I agree with Tony, if you have questions of us, make the questions of us, not at staff. We’re the ones who make the decisions. All staff does is bring it to us. We get to ask questions, and we make a decision. Enough said.”

Keegan took exception to Lezotte’s comments.

“I had people that were concerned about this,” Keegan said. “There were many staff members that contacted the media. When I responded to the media it was people asking me why I voted the way I did and I explained that. I was not out rabble rousing. I was not out disrespecting either staff or my fellow board members. I believe that I have a responsibility to answer questions from the public and to answer questions from the press. And I think we all have that responsibility.”

Estremera serves as board chair for the audit committee, and staff says he has yet to call for the next meeting to be scheduled.

In closing remarks Tuesday, the CEO said he welcomed an independent audit while championing the staff report.

“This may sound odd, but even the issues that the media has raised really test our system,” Goldie said, “and I think what you actually find out as we have looked into ourselves, you’ll find the systems we have in place are solid.”

Those systems, of course, will continue to be examined, as the DA investigation, an internal inquiry launched in response to an employee complaint and now the audit committee continue their work.

Josh Koehn is the managing editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected] or follow him on Twitter at @Josh_Koehn.

16 Comments

  1. Just slightly O/T: Last week we received an analysis of our household water use. It said that we were using double the average amount of water for similarly sized lots. It had a nice bar graph that made us feel guilty.

    But we have cut back water use to the point that our front, back, and side lawns are now dead (we have a corner lot). We never run our dishwasher until it’s full, we use lots of paper plates, etc., and we have areators and low flow nozzles on all our showers, sinks, etc. We sincerely try to limit our water use as much as possible.

    But the analysis then went on to state that we have reduced our water use by one-third below last year’s level! It gave the number of gallons used each month last year, and compared it with this year’s usage. Sure enough, we are using a lot less water now.

    So how can this be? If true, it means that everyone else has cut their water use by two-thirds since last year. That’s hardly believable, since lots of front yards on our street appear green and regularly watered.

    Something doesn’t compute here. Anyone got an answer?

  2. Smokey – given how much you’ve cut back, your use should’ve reduced by more than one-third. Outdoor use alone is typically half or more of water of residential water use, likely more in your case with a corner lot. If that use is near-zero and your indoor use is also cut back, then you should be using less than half of last year’s water.

    Sounds like you’ve got a leak, and you’re spending money for water you’re not using. You can check by turning off all water use, checking your meter, and checking again after a while to see if any water’s been used. You can also contact Santa Clara Valley Water District to arrange a free water audit of your home (google “water wise house call valleywater”.

    Hope that’s helpful!

    • Brian,

      Thanks for the suggestion, but we already had the city out to check for leaks. There are none.

      That still doesn’t explain why they would be telling us that we use double the amount of water as our neighbors with the green lawns. Something doesn’t compute.

      • Well, sorry it sounds hard to sort out. Did you ask the city when they came out if they could explain your bill?

        You could check your meter more often to look for a big jump, just depends on how much effort you want to put into this. You could ask them to come out again to try to figure it out, or check yourself for a leak.

        Not to create any dissension within your home, but I wonder if there’s anyone who’s not completely on-board with the saving water thing.

        Beyond this I get into far-fetched territory: a neighbor is sneaking a hose over to steal water, or that your meter is screwed up and measuring you as taking twice as much water as you actually are (haven’t heard of that happening but I guess it’s possible).

        • Hi Brian,

          No, we didn’t ask the city worker anything about our bill, we just made sure we didn’t have a leak. I don’t think city workers checking for leaks are the same ones who write the notices.

          Yesterday my wife was talking to some friends who said they received the same message: they were told they had cut their water use, but they were using about double what similar neighbors were using.

          There are only 2 of us in our house. We’re retired, so I think we’d know if someone was stealing water from our hose or whatever. And our water meter has been the same for the past 55 years, so I think we’d know if it went haywire.

          I think it’s just an attempt to try and show that everyone is using too much water. Because it still doesn’t compute, when we’re told that we’ve cut by a third — but that we’re still using double the water others are using. Our lawn sure doesn’t agree.

          *****

          (@Water Math: thanks for your input. I appreciate both of you trying to be helpful. While I agree that’s a possibility, it’s very unlikely because my wife and I are both senior citizens and pretty set in our ways, and we haven’t altered our water use for many years.)

  3. They don’t even touch on issues brought up in audit 2012, https://pgoeltz.files.wordpress.com/2014/06/diversityaudit2012.pdf or treatment of staff….. nor the many other issues raised by fired workers and people still working, they as always put on a good show…………
    look into the millions plus spent in the boardroom? the contracts paid for work to be programmed on the AMX control system, that was paid but work never done, or the 200k spent already on upgrades? don’t just audit the one project(rmc), audit everything. I can bring many witnesses to the abuse, waste, treatment etc. in IT and other departments if anyone cares to ask? Why do you think they are on the 4th it manager? why does the IT manager and unit manager, not seem to know what is in the boardroom or how much has been spent? its all there in the form of purchase requests, plus there is people who can tell you what should be there. why do they want to spend 50k for video conferencing, when we bought a Tandberg system, installed per board members, but never told them it was there? i can go on and on, but just like last night, all you will get is fluff.

    HERE IS MY STATEMENT FROM LAST NIGHT Honorable chair and fellow members. I would just like to remind you, myself and
    others in the IT dept, have tried to bring the district’s problems to light from about
    2010-2011. We went to ethics/H.R, union etc, all to no avail, and finally had to
    submit info at the Board of Directors meeting 12/11/2012 when I spoke on item 1.4.
    In addition, in 2014 documentation was submitted for public record from both A/V
    techs. So you hit the nail on the head when you mentioned “real internal control
    issues at the top,” What else explains a new I.T. Deputy Sudhanshu Tikekar,
    pushing for a Audio Visual Boardroom System upgrade when he has only been
    there less than a year on October 28, 2014 Item 2.1. ( what was his influence??)
    Frank Fung -Unit Manager and George Kamenjati ( A/V Engineers report) all
    backing the upgrade with no justification and outright lies. Many documents to
    support A/V techs claims were submitted to all the Directors and Leadership Team
    at the Board Of Directors meetings. What was staffs response?… keep trying to sell
    the Boardroom A/V upgrade in 10/28/2014 Board Meeting as well as below. Through
    public information act, I obtained the audio form the Information Technology Ad Hoc
    Committee June 22, 2015 and in front of 3 Directors Sudhanshu Tikekar as well as
    the CAO pushed once again for the upgrade! I guess they take everyone for a
    bunch of fools!! In early 2012 the Boardroom Upgrade was approved by the CEO as
    reported out by George Kamenjati. This did not go to the board approval at that
    time. Since we spoke up it was retracted and more retaliation followed. The parallels
    of the RMC Contract and Boardroom A/V system mirrors how staff conducts work.
    The only difference is the abuse to A/V staff -now up to 3 people including the last
    contractor from I.T. management. This is my tax dollars also that is being wasted.
    Question : why did the Unit Manager and Supervisor of I.T. ordered work and
    maintenance to stop on the A/V Board Room system (including many other items
    that are public record now) ? The CEO AND I.T. managers have gone around or
    above there authority to lie and try to discredit the workers so they can continue to
    cover up their actions. All I ask is you look at the RMC deal as the way 70% of the
    district works, including I.T.. Ever wonder why it is still an issue after I left? I was not
    even allowed to get my personal items. Per David Cahen i would receive 1300$ for
    the rest of my missing items, they then changed there minds and said we will give
    you whats due, if you “cease and desist” with other complaints, which I will not.
    David asked for names to interview, but never interviewed one I.T tech, only the 2
    leaders of the crimes. I’m a retired employee, but was never said thank you, I have
    not received my 1300$ per David. I can supply emails, and there is tons of purchase
    records to show over 200k has been spent in the boardroom along with the initial 3
    million. This does not even include equipment that just sits in the warehouse as
    George Kamenjati and Frank Fung have no idea how to run an AV dept or utilize its
    Handout 2.3-A
    10/27/15
    2
    resources. Please sir take a close look. If you require pdfs, email, documents, info,
    just ask. What did i do? EXCEPT BLOW THE WHISTLE AND THAT RESULTED
    WITH MY PICTURE AT THE FRONT DESK TO NOT LET IN? Why is I.T dept on its
    3rd manager??? All you have to do is ask. BTW the open house this weekend did
    we outsource and rent wasting another 2500$. We have all equipment needed for
    events, but somehow its never used.. Paul Goeltz Retired Senior Information
    System Tech. SCVWD IT DEPT [email protected]
    Handout 2.3-A
    10/27/

    • Mr. Goeltz, I for one, would like to thank you for all your input and information. I know you have put yourself under stress and scrutiny most of us couldn’t fathom. I know what it’s like to take on these folks…as I have worked in different departments and seen things I wish I hadn’t. Bless you for naming names and being so specific. I know this has been going on for years, because these types of people only get and feel more powerful and above the law the longer it goes on without being caught. I’m sorry you’ve had to pay the price financially…but as only one citizen, I am grateful to you. Hopefully the District Attorney and possible the Feds (they used to call this racketeering) really get involved and hit them via fines/restitution AND PRISON!!! Thank you again.

      • THANK YOU i will not stop till i at least get my things back and a thank you for time served, maybe even a thank you for trying to save taxpayers money, its all on record i can prove every ounce of what i say with records and people that still work there, sure its not 200 million but every dept wastes a few million in taxes.

  4. Vote out Estremera and Lezotte, it is an awful shame to place people like this in public service.

    • All of this is criminal, and these two you mention are not the only ones. This is a HUGE misuse of power of public funds and only repayment and fines PLUS PRISON time for ALL involved (with the exception of whistle blowersts ) is the only answer. I pray the District Attorney’s Office doesnt back down and goes full steam ahead with their smartest and finest attorneys. These folks are criminals who still have the power to inflict more damage and exert their influence!! THANK YOU TO INSIDE SAN JOSE FOR BRINGING THIS TO LIGHT. PLEASE KEEP US ALL INFORMED.

  5. a full outside audit should be conducted on all RMC contracts, to ensure that billed invoices are actually for the work spelled out in the scope of services in the contract. Anything that was paid outside those scope of services should be investigated….. If District staff are now doing the work on tasks that were in the original contract, than process’s should have been put in place to ensure that money allocated for those particular tasks was not used for additional work that was outside the scope of services.
    Keep up the “dog and pony show” and maybe this will all go away ……..

    • And Mr.DA please check IT contracts, i can give you a couple to andersonintergration, 2 po were written for programming work, for camera control, equipment shut down, and various touch panel feed back commands, The contractor would have done the work as he was paid for it, but the av manager said no more work on equipment, and he did not want the contractor to come and do his work, or have a touch panel repaired. i wrote these po’s, but the manager did not make sure the work was done as he did not want it done. this is just a few examples, there is $60k in tandberg video conferencing gear both in the board room and up in sacramento, still state of the art, but he took it out of the rooms, only to tell directors we dont have VC, which was a board member request by larry wilson, so we put it in in 2004 and cameras zoomed to open mic. programmed by anderson, however it was never used or used once and they never told the board we had VC at the district, now they are requesting a new av system, saying there is no VC, and slew of other things the system can do, the manipulate and lie just to get more funds, check every unit. sure IT is only say 30-50 million a year, but how much is to favorite venders, how many laptops were really missing not just 2 as they told the board. so please dig deep, this is are money and yours. there is people willing to talk and about other problems also read the audit 2012 https://pgoeltz.files.wordpress.com/2014/06/diversityaudit2012.pdf
      a fine piece that explains how the top section runs.

  6. If you started off using twice as much water as the average household last year, and the average household also saved one-third this year, then you can still be using approximately twice as much water as the average household this year. Your logic assumes you were using the same as the average household last year. This is just one possibility.

  7. I have no idea what’s going on at SCVWD But I DO like audits of public agencies.

    And, while we’re in an auditing state of mind, audit the California High Speed dodo bird, audit ICE, audit the IRS, and audit the Federal Reserve.

    I’m sure I’ve missed a few audit worthy cesspools.