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Moreno Valley Water Company   Embezzlement Was Reported Repeatedly But The Board Refused To Act. Three Years and $280,000.00 Later ...

First Published: 17 March 2012 06:25 PM

BY LORA HINES 

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.

State Schools Chief Tom Torlakson Issues Statement on Teacher Layoff Notices

SACRAMENTO—State Superintendent of Public Instruction Tom Torlakson issued the following statement regarding the issuance of thousands of preliminary layoff notices to California teachers: "Teachers across the state have rightly come to dread March 15. Though the very future of our state depends on California’s teachers, today many will receive a layoff notice that suggests just the opposite—and will now spend months in limbo, worrying about their futures and the future of their students. "Every pink slip being issued today is an unwelcome and undeserved blow to the morale of the teacher who receives it. They should also remind all of us of the urgency of finding the will and the resources to end the financial emergency facing our public schools."


The California Education Code Section 44955(b) requires school boards to issue preliminary pink slips by March 15, and then make the final decision on layoffs by May 15.

Collateral Damage Redux

Editor's note: Gayle Tzemach Lemmon is a fellow and deputy director of the Women and Foreign Policy Program at the Council of Foreign Relations. She writes extensively about women entrepreneurs in conflict and post-conflict zones, including Afghanistan, Bosnia and Rwanda. She wrote "The Dressmaker of Khair Khana," a book that tells the story of an Afghan girl whose business created jobs and hope during the Taliban years.

The following is a reprint of sorts from CNN Online. I seldom have time to write or reprint pieces on  any of George W' Bush's multiple fuck-ups. But this article breaks my heart. in 2002 when Colin Powell made the obviously prophetic statement "you break it you buy it!" Well "W" came home drunk and screwed the pooch but good. 10 years later we are still paying the veterinarian bills on borrowed time.

(CNN) -- The killing of 16 unarmed Afghan civilians is, as President Barack Obama has said, heartbreaking. Families have lost children, mothers and fathers in a rampage that has left Afghanistan reeling.

For Afghans it is the latest in a pattern of disrespect and dishonor: the burnings of the Quran that ignited protests, video of U.S. soldiers urinating on Taliban corpses, kill teams in Kandahar.

The horror of the killings offers a public relations victory for the Taliban and leaves Afghans wondering whose side they should be on. Is this the kind of "peace" they should believe in and rely on? Both hearts and minds have been shattered and lost. And, devastatingly, another casualty of this rampage is the quiet voices of men and women who risk their lives each day to fight for the progress of their country. Human rights activists, midwives, high school principals, doctors, entrepreneurs and young students crowding on to Facebook like kids everywhere else in the world. Their voices pleading for patience and calm are lost in the violence, mistrust and misunderstanding of the last few months.

These warriors for progress are rarely heard in the media, but the jeopardy in which they place themselves is very real: Since 2011, Kandahar's mayor was assassinated in his home, the city's police chief was assassinated and an educator in Logar province was shot and killed for the crime of educating girls. The killings in Kandahar by insurgents are another strike against people who simply want to live in a secure country where they can support their families and send their children to school safely.

The bloodshed thus far in 2012 bolsters those in the United States and Afghanistan who say that a swift international exit from Afghanistan is the only answer. On the other side are those who argue the United States must stay the course militarily.

Stuck in between are the country's women, who have fought since the Taliban's departure to strengthen their own rights to go to work and to school and to lead their communities. More than 2 million girls are now in school. Women make up a quarter of the Parliament. And nearly 3,000 midwives go out each day to save women's lives in a country that Save the Children rated the deadliest for expectant mothers.

Women I speak with feel caught in a political ambush. They enjoy little protection from their own government, they are under fire and constant threat from anti-government insurgents and now troops sent to protect them are contributing to the violence. Women who fear deeply for the erosion of their own rights if the Taliban return are told by some in their community: "Would you rather have this? Is this alternative any better? Is this peace?" And their push for progress this past decade is tied by their opponents to an international effort increasingly seen as drenched in disrespect.

Afghan President Hamid Karzai has been balancing for political survival on a tightrope between the international community on one side and his country's most conservative elements on the other. The more peace talks with the Taliban in Qatar become a reality, the further the Karzai administration seems to tilt in favor of the conservatives: Recently, Karzai signed off on a code of conduct for women released by clerics on the Ulema Council that said women should not travel without a male guardian or mix with men in offices or schools.

Women activists say they do not want troops in their country forever. But they worry what the international community will leave behind as it hurries for the exits. Timelines seem to determine events on the ground rather than the other way around.

As parliamentarian Fawzia Koofi told me in the wake of the Quran protests, "If the international community decides to leave tomorrow, women will be the first victim of the Talibanization of the government."

No one is championing endless war in Afghanistan. For Americans, too much national treasure has been spilled and the treasury has been depleted. Drawdown plans leading to 2014 are well under way and will continue to unfold in the coming days. But how the international community gets out matters. And so does what it leaves behind.

We have trapped ourselves in an all-or-nothing conversation. The military alone cannot end the war in Afghanistan -- and U.S. military officials are the first to say this. But after "drawdown," two other "Ds" are critical. Diplomacy -- talks about Afghanistan's future that involve all Afghan sides and regional players and include women. And development dollars -- funds that help local government and civil society keep schools open, clinics functioning and midwives working after 2014 has come and gone.

Already an orphanage I know is facing funding problems as it works to keep boys and girls off streets and out of trouble. A withdrawal of troops should not mean an abandonment of Afghanistan.

This is not simply about American altruism. This is about leaving behind a state stable and secure enough that American forces will never have to go back. Afghan women are not a pet project taken up by the international community. They are a stability indicator whose involvement in their own societies is in the best interest of lasting security. Any agreement that leaves them out will simply be a short-term deal, not a durable peace.

Women's involvement in their own country's future is a must-have for the U.S. president to get what he has said he wants: a "responsible" end game for America's longest war

Diana DeGette You Go ! In the Name of Shirley Chisolm!

Mitt Romney declared, "Planned Parenthood has got to go!" Afraid if it had been around when he was conceived he wouldn't be here today ...

Republicans have a clear agenda for women: Defund Planned Parenthood, deny women access to health care and birth control, and even prohibit women the right to participate in the debate about women’s health care.

Grassroots Democrats around the country have united against the Republican War on Women to launch a Women's Health Accountability Fund. Our goal is to expose the truth about Republicans' war on women with an aggressive rapid response operation including ads, on-the-ground organizing and more.

Tell USDA to STOP Using Pink Slime in School Food!

"Pink slime" is the term used for a mixture of beef scraps and connective tissue (formerly used only for pet food and rendering) that is treated with ammonia hydroxide to remove pathogens like salmonella and E coli. These so-called "Lean Beef Trimmings," are produced by Beef Products, Inc.

Two former government microbiologists claim that, for political reasons, pink slime was approved for human consumption by USDA over serious safety concerns.  (http://bit.ly/waMMni)

Government and industry records obtained by The New York Times in 2009 showed that "in testing for the school lunch program, E. coli and salmonella pathogens have been found dozens of times in Beef Products meat, challenging claims by the company and the U.S.D.A. about the effectiveness of the treatment. Since 2005, E. coli has been found 3 times and salmonella 48 times, including back-to-back incidents in August in which two 27,000-pound batches were found to be contaminated. The meat was caught before reaching lunch-rooms trays."

Even apart from safety concerns, it is simply wrong to feed our children connective tissues and beef scraps that were, in the past, destined for use in pet food and rendering and were not considered fit for human consumption.

Due to public outcry, fast food giants like McDonald's and Burger King have stopped using pink slime in their food.  But the federal government continues to allow its use in school food and has just authorized the purchase of ground beef which collectively contains an additional 7 million pounds of pink slime for consumption by our nation's children.  

Tell the USDA to STOP the use of ground beef containing pink slime in the National School Lunch Program!

[You can follow the progress of this petition, including the latest media coverage and more information on pink slime, on my daily blog -- The Lunch Tray (www.thelunchtray.com)]

The Emanant Insolvency of San Diego Unified School District: A Harbinger of Things to Come for Moreno Valley USD??

Original story by andrew.donohue
voice of sandiego

The public proclamations that the San Diego Unified School District faces a state takeover dropped like bombshells this month, but district leaders have had serious discussions about insolvency both publicly and privately for years.

At one point more than two years ago, former Superintendent Terry Grier was so concerned that school board members didn't grasp insolvency's consequences that he scheduled a private briefing from perhaps the state's foremost expert on it, San Diego County Office of Education Superintendent Randy Ward.

"We'd just had numerous discussions with them about the possibility of insolvency. They just didn't believe the state elected officials could or would allow it to happen," Grier said. "There was even early discussion about how becoming insolvent might be the right thing to do."

Ward knows state takeovers well. The state appointed him to take over Oakland Unified School District after it went broke in 2003. He unilaterally ran the district, cleaning up its finances after the superintendent was fired and the elected school board became an advisory council.

When he met with them, Ward didn't tell the board members they were headed for insolvency. Rather, he explained what would happen and how the district would need to take drastic measures to avoid it. "He also rang that warning bell loud and hard," Grier said.

At least twice since that meeting, while the state continually cut funding to local schools, the school board has made high-stakes gambles that state finances would improve or that school spending would significantly increase. In light of California's continued economic problems and those serious ongoing discussions about insolvency, those gambles have begun to look misguided at best and reckless at worst.

District officials have cast the financial crisis as one wholly of the state's making, but talk of insolvency has always hung over the financial gambles the district's taken in order to keep class sizes small and teachers employed in the short-term. The long-term consequences of those decisions only compound the trouble handed down by the state.

Just a year after Ward's talk, the school board entered into a labor contract that, while providing short-term relief, saddled it with burdens it may well not be able to handle. The contract was, by the board president's own admission, a "gamble." Then, this summer, the board voted to rehire hundreds of teachers based on rosy state projections, despite advice to the contrary from their staff and consultant.

Now, with the state's projections looking unlikely to materialize, school board President Richard Barrera is calling for the state to levy taxes on the wealthy, oil extraction or alcoholic beverages to save school districts from insolvency.

Grier, who left the district in 2009 for Houston, said the district's dynamics changed when the teachers union's slate of school board members, John Lee Evans and Richard Barrera, were elected in 2008 and joined with Shelia Jackson to form a pro-labor voting block.

When Barrera and Evans joined the board, Jackson put together a plan to cancel teacher layoffs that had been issued before their election, a move the new board approved unanimously.

Grier said the move went against staff's advice and had little justification as the district's enrollment had been shrinking for the better part of a decade and the teachers simply weren't necessary.

At the time, then-board member Katherine Nakamura said schools were fully staffed and it would be hard to even find places to put the teachers. She warned of the bad timing, too, considering the state's plight. "You don't eat a jelly donut in the middle of a heart attack, no matter how sweet it might be."

Nakamura ended up voting for the plan, though, saying she wanted to move the board forward.

Barrera said his decisions have nothing to do with his relationship with, and support of, labor unions. He said his relationship with the teachers union has soured thanks largely to his vote in favor of layoffs earlier this year.

Make no doubt about it: The state Legislature has made severe changes to the way it funds K-12 education, offering districts 15 percent less money than it did just a few years ago. And it's not even giving the districts the smaller checks it promised, forcing them to borrow money every year and bank on IOUs. That's put districts around the state in serious trouble.

In response, San Diego Unified has made its own harsh changes. It's cut staffing by 15 percent since 2009 and this year it ultimately laid off more than 1,000 workers, including 500 teachers. The threat of insolvency, for example, popped up during the school board's public deliberations about whether to issue layoff warnings to teachers this March.

Today, district leaders say they've cut to the bone and are now evaluating closing some schools. Teachers agreed to shorten the school year by five days the last two years, taking five unpaid days off and saving the district about $20 million.

But, despite those major changes, the school board has been banking on the state Legislature upping education funding or a roaring economy to come to the rescue before the consequences of some of its long-term decisions come due. Every cut that wasn't made a year ago compounds now, and only deepens the budget pain when it eventually has to be made.

Barrera said every budget decision he's had to make has involved risk. "We either risk the education of kids or we risk the financial health of the district, that's the situation we've been in, over and over and over again," he said.

The issue to Barrera is one of drawing a line in the sand.

The board has already made cuts that have raised class sizes to an unacceptable level and impacted the welfare of children, he said, but there's a point the board simply can't cross. If refusing to make cuts entails gambling against the financial health of the district, then that's what he's got to do, he said.

Choose against the financial health of the district too often, though, and you eventually run out of money to even keep a school district functioning.

That's the situation the district faces today.

It's already staring at a $60 million deficit for next year after managing a roughly $80 million deficit this year. It has a rather vague list of solutions to fund that deficit, from closing schools, to selling off land, to asking the union to make concessions on teacher salaries and benefits. All that will have to be decided soon.

If the state's optimistic revenue forecast fails to materialize, next year's deficit could nearly double for and the district will have to find more ways to cut without laying off teachers. So far, the only solution that's been floated for that problem is shortening the school year by seven days, a proposal that, again, the district would have to negotiate with its unions.

If the state goes ahead with the threatened midyear cuts, Barrera and Superintendent Bill Kowba say the district will be on its way to insolvency. If the district goes insolvent, it will get taken over by the state and local control would be eviscerated.

Budget decisions would be made unilaterally by a state-appointed trustee. The superintendent would be fired. The school board would be advisory. The state would have some power over school finances for decades as the district paid back its bailout loan.

Kowba, a former rear admiral in the Navy, served as Grier's chief financial officer. Grier said Kowba had continually raised red flags for the school board.

However, he said, often staff's warnings to the board went unheeded.

"We knew the cuts were going to be painful. We also knew from everyone we talked to that this was not going to get better. We kept sharing that with the board. They were in a hard position, I don't envy them," Grier said. "But they kept going in the opposite direction that staff recommended."

You can reach us at andrew.donohue@voiceofsandiego.org orwill.carless@voiceofsandiego.org. Follow us on Twitter: