The former chief executive of a Central Valley water district has been accused of stealing more than $25 million worth of water over 23 years, the latest development in a long saga of corruption and theft, reports said. federal authorities on Thursday.
A federal grand jury has returned a five-count indictment against 75-year-old Aptos resident Dennis Falaschi, according to the U.S. Attorney’s Office for the Eastern District of California.
He faces one count of conspiracy and theft of government property, and three counts of filing false tax returns, according to the indictment.
Falaschi was the general manager of the Panoche Water district, which serves parts of Frenso and Merced counties near Dos Patos, Firebaugh and Los Banos, according to court documents.
The indictment does not name the water district, but in 2018, then California Atty. General Xavier Becerra announced the arrest and filing of felony charges against five people for embezzlement of public funds amid widespread corruption in the district.
Falaschi is among the defendants in the ongoing case.
The water theft scheme began in 1992, according to the federal indictment.
That year, Falaschi was notified that an aging and abandoned drain turnout on the Delta-Mendota Canal, part of the Federal Central Valley Project, was leaking water into a parallel canal controlled by the District of waters, the document says.
A gate inside a pipe that connected the two channels had been cemented in years earlier when the drain was abandoned, but the cement cracked, according to the indictment.
After learning of the leak, Falaschi allegedly told a water district employee to install a new gate inside the standpipe, which could be opened and closed on demand, the document says. Later, he told the employee to put a cover with a lock on the top of the riser and an elbow pipe of about two feet inclined at 90 degrees in the water district channel.
“The cover concealed the theft because it prevented people from seeing that the door inside the fire hydrant was functional,” prosecutors said. “The bent pipe further concealed and accelerated the theft because it enclosed the water flow from the Delta-Mendota canal within the water district canal and was installed in such a way that it was generally submerged under water.”
Falaschi then told employees to use the new gate and pipe to steal federal water from the canal “repeatedly,” prosecutors said.
“He used the proceeds of the theft to pay himself and others exorbitant salaries, benefits and personal expense reimbursements,” prosecutors said.
The diverted water was unmetered and was routed to a water district pumping station, where it was transported through the district’s wider canal system, according to the indictment. It was combined with the district’s other water sources and either sold to customers or fed back into the federal canal so the district could collect water credits.
During the scheme, Falaschi allegedly told water district employees to misclassify stolen water as runoff reclaimed from farms in reports presented to the district’s board of directors, according to court documents.
In all, more than 130,000 acre-feet of water were stolen, according to the indictment.
An acre-foot is the amount of water needed to cover one acre of land in one foot of water and is the standard unit of measurement in the water industry.
In April 2015, drought lowered the water level of the canals enough that the drain pipe, cover and connection were discovered by authorities, according to the indictment.
Federal authorities also alleged that Falaschi falsified tax returns from 2015 to 2017 and failed to report to the Internal Revenue Service more than $900,000 in income he received from the sale of private water, according to court documents.
The federal case comes after state officials opened an ongoing criminal case against Falaschi and four other defendants.
In 2017, investigators discovered 86 drums containing thousands of gallons of hazardous waste illegally buried in a yard in the Panoche water district, according to The Times coverage of the case.
The state’s case expanded to include allegations of misconduct that were revealed by an audit.
In a statement, Falaschi’s attorney, Marc Days, said his client plans to plead not guilty to the federal charges.
“We just received the indictment and need more time to review it,” Days told The Times. “The indictment appears to be based on lies and inaccuracies.”
The lawyer said he planned to make further comments on the case “in the very near future”.
If convicted of all federal charges, Falaschi faces a maximum sentence of 18 years in prison and up to $750,000 in fines, prosecutors said.
Los Angeles Times