Santa Clara Valley Water District Paid $90K for Sham Audit

In late 2015, the Santa Clara Valley Water District’s board of directors unanimously approved an audit of RMC Water & Environment, a consultant that has received millions of dollars in contracts from the public agency in charge of Silicon Valley’s drinking water and flood protection.

It took nearly two years for that audit to come to fruition, but the findings from a report delivered in September—as well as subsequent records obtained by San Jose Inside—show that an investigation is only as good as its intentions. And it appears the top priority for water district executives has been, and continues to be, protecting their own.

In the years leading up to the 2015 audit request—which occurred at the same time RMC was awarded another $5 million contract—employees for the water district sounded internal alarms about RMC benefiting from conflicts of interest and billing for work that was never done, in particular an unfinished Lower Silver Creek watershed project between San Jose and South County that cost $512,000. Leslie Orta, a senior in-house counsel for the district, acknowledged in emails from 2014 that the former water district CEO, Beau Goldie, had broken agency bylaws by amending and increasing RMC’s contracts on the project without public disclosure and board approval.

Perhaps even more troubling, RMC received multimillion dollar contracts from the district while Melanie Richardson—currently the agency’s interim chief operating officer (COO) of watersheds—was overseeing district managers who handled RMC consulting work. Richardson is married to Tom Richardson, a principal of RMC, which merged with Woodard & Curran in 2016.

Board Director Gary Kremen spent much of 2015’s board meetings challenging the district’s cozy relationship with RMC, and he even called for the district attorney to launch a criminal investigation. His colleagues on the board, some more reluctant than others, eventually concurred that an external audit of RMC work was in order.

With all of this in mind, Kremen and board colleague Barbara Keegan were a bit bewildered in September, when the district’s Board Audit Committee received a report on RMC’s work on Lower Silver Creek that took no interest in claims of false billing and illegal activities by the contractor and district staff. PMA Consultants, a national construction and project management firm with offices in San Francisco, was paid $89,526 to compile the report, which scored the district’s compliance of basic accounting and management procedures for Lower Silver Creek at 72 percent, or a C- average.

Additional concerns were raised when director Kremen asked a PMA employee if the audit examined whether RMC or the district violated the law in their dealings, which in some cases had project completion mandates linked to federal grants.

“No,” the PMA employee said, “our initial proposal included that scope and financial and legal ramifications of the audit were removed, based on district direction.”

Director Keegan was also dismayed with the myopic approach of the audit, which noted six instances of noncompliance and 16 instances of only partial compliance.

“I’m not sure I agree with some of the exclusions in your report, particularly the financial ones,” she said.

Since that September meeting, interviews and public records requests have found that district staff did not request interviews for several key figures involved in RMC work with the district. The list of people not interviewed includes: Melanie and Tom Richardson; Chris Elias, a former district project manager who oversaw RMC work; former district CEO Goldie; and current district CEO Norma Camacho, who helped oversee an internal investigation into RMC billing in 2015 and was one of the first people at the district to receive allegations of false billing practices by RMC. She received these warnings as far back as April 2014.

“I don’t see how they could do the audit,” Kremen told San Jose Inside. “You would think anyone at the district would have to sit for an audit.”

In an email, district spokesman Marty Grimes said: “The District provided PMA with a list of possible interviewees, generated by determining those with the most direct involvement in the project, and PMA selected the people to interview.”

The Board Audit Committee told PMA to expand the scope of its audit on two fronts: first, to include a “financial review to ensure that there was no double billing and no billing for work that was not done,” as well as “additional analyses” on whether district staff gave an accurate presentation to the elected board at an Oct. 27, 2015, meeting in which staff reported “no irregularities” in RMC’s invoices.

Second, and far more unusual, the committee asked PMA to “review media allegations in newspaper reports and video and ensure that they have been addressed.”

Attempts to clarify what this means were unsuccessful, as all of San Jose Inside’s  reporting on RMC and the district have cited memos and emails alleging misconduct within the district. Requests to interview Camacho, who was installed as the permanent CEO of the district in July, Grimes and district communications director Rick Callender were denied, as all were said to be unavailable.

However, sources at the district have told San Jose Inside that the second expansion of PMA’s audit is designed to help make Melanie Richardson a more acceptable candidate to take over the district’s role of COO of watersheds on a permanent basis.

“It’s outrageous,” Kremen told San Jose Inside. “Using taxpayer money to discredit news reporters is upsetting and disconcerting. I’m for saving money. I’m against circumvention.”

The board director added that he is drafting a memo to bar RMC and its parent company from consulting with the district in the future, as Melanie Richardson’s position revolves around flood protection and RMC has done and continues to do such work for the district. District officials have claimed a “firewall” agreement was drafted to keep her from coming into contact with the work of her husband’s company, but the district has refused to ever produce that document.

“I don’t think we can have RMC do any more work,” Kremen said.

Josh Koehn is a former managing editor for San Jose Inside and Metro Silicon Valley.

15 Comments

  1. > Santa Clara Valley Water District Paid $90K for Sham Audit

    Those insensitive selfish clods.

    They could have used the $90K to by a sham Tiny Home for a hobo.

    Where are their priorities?

  2. Good Job JK!

    if you want to see more info on RMC, do a public record search on my memorandums on the issues: (Reclaimed Water-Advance Water Purification City of San Jose).

    David S. Wall

  3. I think this subterfuge by the SCVWD has risen to the level of criminal intent. I’d suggest that the County District Attorney look into this.

  4. Where’s the breaking news here?

    This looks like a witch hunt – same shit over and over….incredibly boring article with nothing interesting.

    If you follow the board meetings, Kremen is the problem – he is like a mini Trump – scruples and a bit mental. He is on the Audit Committee at the district with his “colleague” Barbara Keegan. They were the ones who asked to “look into media allegations.”

    Now he is saying it is a waste of taxpayer dollars to discredit media? He is criticizing his own proposal.

    He and Keegan are the only problems here. This is the reason why this story sucks – there is no story here.

  5. You mean they’re not doing the tax payers any favors, they’re only lining their own pockets. Anytime you have a husband/wife team you smell the fish. These people are incompetent, look at the flooding last year. They have no clue as to what they’re doing.

  6. Matthew
    You nailed it. Corruption. Malefessance. Follow the money and you will get why the water stinks and the people are getting flooded out of their homes. People need to pay attention and hold these people accountable.

  7. The gross mismanagement of this public agency over the years is unparalleled in government. FEMA may come close, but SCVWD tops the list.

  8. The drip drip continues at the water district as this type of corrupt arrangement is making its way through the public-private partnership project on recycled and purified water projects. Senior managers at the District have been leaning heavily on district line staff to find a way for HDR to form a joint venture with Poseidon for a $900 million recycled water project. Why? Because one of the principals of HDR is married to a senior executive at the water district and Poseidon is led by the former General Manager of Water District. Meanwhile HDR’s existing contract is limited, and under that agreement, they are not supposed to bid on the project management, design or construction. As an end run around that limitation, they form a joint venture with Poseidon and retain a serious competitive advantage against any other bidders on this P3 project. They have not learned their lesson.

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