The former general manager of the Box Springs Mutual Water Co. in Moreno Valley said he thinks the alleged embezzlement of $280,000 could have been prevented had authorities paid attention then. Between 2004 and 2009 he reported theft of money from the company.
Bruce Gottschalk worked at the company between 2004 and January 2009. He twice contacted the Moreno Valley Police Department in 2009 to report the theft of $31,000 by a former employee after bookkeepers auditing the company’s accounts alerted him. Nothing came of Gottschalk’s reports because of lack of information and cooperation from the water company, police said.
He said he also tried to warn the company’s board of directors, of which he was a member. In January 2009, Gottschalk quit his job and was forced off the board when he said colleagues became hostile toward him rather than investigate the theft.
“It’s been very frustrating,” he said.
William Batey, the Moreno Valley councilman who represents the area, said he’s heard allegations about water company corruption for years. He said he told people to report their suspicions to law enforcement officials, but he could do nothing more because the city doesn’t oversee the company.
The company’s troubles have led to the community’s decay and impoverishment, making it unattractive to potential developers and homeowners.
Box Springs, a private nonprofit organization, provides water to about 3,300 people in the Edgemont community on Moreno Valley’s west side. As Moreno Valley’s east side thrives with development, Edgemont looks as if time forgot it. Side streets between Alessandro and Eucalyptus avenues are filled with potholes. Many houses appear uninhabitable and have yards covered with dirt, not grass. Most residents are renters.
The area needs developers, whose fees would pay for improvements to sidewalks, hydrants and the water-system. But builders and property owners can’t get building permits because of safety issues.
Box Springs’ water lines don’t provide enough water needed to fight a fire. Water company officials have said there's no money for upgrades, estimated to cost at least $15 million. So, new construction and property upgrades are out of the question. The water company can’t benefit from any new customers.
“I’ve got 3 acres behind my house that I can’t build anything on,” Gottschalk said.
He said he was on vacation in Mexico when he found out that his successor, Debra Sutton, resigned last month from the company. Investigators served search warrants at her home and office Jan. 23 seeking evidence that $280,000 in company funds were used to pay for cruises and casino gambling.
Sutton, who lives around the corner from the water company, has not been arrested or charged with any crimes. Her salary was $42,000 annually.
She declined to comment when reached at her house following the warrants.
Search warrants claim that a water company ATM card issued to Sutton was used for cruises to Alaska, the Bahamas, Mexico, the Caribbean and other places. Additionally, the ATM card was used for purchases and withdrawals at the Morongo and Edgewater casinos. Charges also were made to Alaska, Continental and United Airlines; Cheaptickets.com; Macy's; and Disneyland. The warrant also listed Carnival Cruise Lines of Florida; San Diego Cruise ship terminal; and Sam's Club in Bullhead City, Ariz.
According to court documents, Sutton told a Riverside County district attorney’s investigator that she thought she was using her personal money for the trips and casinos. Sutton also said she would make restitution if she had used the water company card, according to court documents.
The search warrant affidavits also showed her company ATM card was frequently used at Soboba Casino near Hemet. Casino records showed that Sutton gambled $5.6 million from February 2003 to December 2011.
“It’s a waiting game now,” Gottschalk said. “We’re waiting for indictments to come down.”
Sutton began working at the water company in January 2009 when Gottschalk said he hired her as a secretary. She replaced the employee who Gottschalk said he suspected of theft late in 2008. That employee was fired but was never charged.
Sutton later was promoted to general manager after Gottschalk left the company.
During Gottschalk’s tenure, Western Municipal Water District provided contract services for Box Springs, including bookkeeping. Box Springs is one of several of Western’s wholesale agencies. Western’s bookkeepers told Gottschalk about the missing $31,000 in 2008, he said.
Western spokeswoman Michele McKinney Underwood said she couldn’t comment because of the investigation. Western stopped providing Box Springs with contract services in February 2009, she said.
Moreno Valley Police Department records show that Gottschalk reported the embezzlement of $31,000 on Jan. 14, 2009, and April 6, 2009. Records indicate that Moreno Valley police tried to investigate both times.
The first time, officers didn’t have enough information to start a case, according to reports. Following the second report, officers contacted board president Joseph Heeter, who told them he didn’t want a criminal investigation, a police report states. He told police that he wanted to conduct an audit, records state.
When reached at the Box Springs office on Wednesday, Heeter, who has been board president since January 2009, declined to answer questions about the water company.
Records show an investigator met with Heeter and Sutton on Dec. 19, 2011, about the missing money. Heeter has not been accused of any wrongdoing.
For years, the Box Springs board has been mired in dysfunction stemming from longstanding feuds and mistrust among members and shareholders, said several members and shareholders who were interviewed. They accuse each other of stealing, lying, being disrespectful of one another, conspiracy and using the company for personal gain. No charges have been filed, they said.
Board member Irene Kendall, who has been active in the company for decades, said she believes the board should have kept a closer eye over company recordkeeping. She doesn’t think it was negligent.
Kendall, who turns 92 Monday, said she worries Box Springs and its board could be sued as a result of the alleged embezzlement. The board is to meet with the company attorney, Joe Aklufi, she said.
Aklufi couldn’t be reached for comment.
The water company on Wednesday is to have its regular monthly board meeting. Gottschalk wants most water company customers and property owners to attend and demand that new leadership be appointed.
Batey said he has repeatedly heard about possible mismanagement and embezzlement at Box Springs over the past 10 years. He said he always has urged people to report suspected wrongdoing to law enforcement officials.
“I’ve helped to the extent that I could,” Batey said. “We’ve got no say-so over there whatsoever.”
The City Council has no authority over Box Springs. The water company’s customers rely on the board of directors for company oversight.
Batey said Box Springs’ problems have negatively impacted the city and have reached a breaking point. Living conditions in many homes in the area have become some so poor that Batey said he thinks residents’ health and safety might be in jeopardy.
“Something has to be done,” he said. “Now it’s time to cooperate.”
Batey said he thinks the embezzlement investigation surrounding Box Springs will bring change. He wants Box Springs and Western to work with him to develop solutions to correct Box Springs’ problems and revitalize the Edgemont area.
“We can’t continue on the way it is,” Batey said.
Box Springs meeting
What: The regular monthly meeting of the Box Springs Mutual Water Co.
When: Wednesday, 12:30 p.m.
Where: At the company’s office, 21740 Dracaea Ave., Moreno Valley.
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