Inflated Salary Forces Rainbow Water Chief Out

The general manager of the Rainbow Municipal Water District has resigned after the board of directors learned that he was overpaid $21,000 in salary in 1987 and 1988--and that he either didn’t realize it or didn’t do anything about it.

John Perry was told of the inflated paychecks in January, 1989, by a district accountant, but still he didn’t reimburse the district, directors say. Finally, two citizen watchdogs--acting on a tip--brought the matter before the board of directors last month. Perry then repaid the money and quit his $75,000-a-year job on Wednesday, when four of the five directors stood ready to fire him.

It is the second time in 12 years that Perry has run afoul with public money. In 1978, an Orange County grand jury indicted him and his brother for using a Moulton Niguel Water District vehicle and credit card for their personal benefit. The two men, employees of the district at the time, pleaded guilty to embezzlement of public funds and were ordered to pay $500 fines and serve one year’s probation.

In the wake of the more recent episode, one of the citizen whistle-blowers has asked the San Diego County district attorney’s office to investigate. The request is under consideration, said office spokeswoman Linda Miller.

At least two district directors say they would welcome an investigation to set aside any other suspicions of wrongdoing in the district.

Perry, who lives in southern Orange County, could not be reached for comment.

“We’ve got problems,” sighed Tom Pascoe, chairman of the rural water district that serves North County east of Fallbrook, along the Riverside County line.

“I couldn’t believe it when I learned,” Pascoe said. “But I know there wasn’t any fraud involved. He’s done a hell of a job for this district. But what bothers me is that he should have come clean in January, 1989.”

At issue is the amount of money Perry received in his biweekly paycheck during 1987 and 1988.

In early 1987, the district transferred its biweekly payroll to a computer system. But for reasons that remain unclear--and may be attributable to a clerical error--Perry’s biweekly paycheck was figured at one twenty-fourth of his annual salary, instead of one twenty-sixth.

For the next two years, then, he received $21,000 more than he should have, directors say.

The error was discovered in January, 1989, when he was given a pay raise. A district accountant discovered that Perry was already making more money every pay period than he was to get with the raise.

At the time, Perry disclosed the payroll confusion to two directors, Phil LaBarge and Herb Stickney.

LaBarge said Perry told him, “There seems to be a discrepancy on my payroll.”

“I said, ‘Have you corrected it?’ And he said yes. And that’s the last thought I gave to it,” LaBarge said. LeBarge said he didn’t pursue the matter because he was distracted at the time because his wife was dying of cancer.

Stickney could not be reached for comment.

But, LaBarge and other directors acknowledge now, even though Perry’s paycheck was then adjusted to the correct figure, Perry did not reconcile the overpayments by determining how much extra money he had been paid during the previous two years and reimbursing it.

“That’s the concern I have now,” said LaBarge, who said he was the only one of the five directors who didn’t want Perry to quit this week. “It was a poor management decision not to go back and figure out how much he owed back.”

Director Jim Jensen added: “That’s what’s most disappointing to me. When he was alerted to it back in January of ‘89, he didn’t do anything about it. He didn’t make any apparent effort for restitution.”

Director Alan Ferguson said he wondered: “What on earth was the man thinking about, to not do anything about it? It bothered me, and it still bothers me.”

Some directors and citizens say they find it hard to believe that Perry wouldn’t have noticed and questioned the larger paychecks over the two-year period.

LaBarge said it wasn’t improbable, though, that Perry simply didn’t notice.

“We’re talking $200 a paycheck variance, but his paycheck always varied anyway because of his expense account, his car allowance, his deductions, his vacation pay, all that. Everything was paid on one check, and it varied every time anyway,” LaBarge said.

Jensen said he wouldn’t argue whether Perry should have noticed the overly generous paychecks, but added with a laugh, “I’m sure I would have noticed if I was underpaid that much.”

Others complained that he should have noticed when he got his year-end payroll summary statement.

In any event, nothing came of the overpayments until two local residents--Tom Warner, an accountant, and Ron Thompson--said they were alerted to the overpayments by an anonymous tipster, presumably from within the district’s ranks.

The two men asked to inspect the district’s financial records--and their request prompted the board of directors to assign a recently hired consulting accountant to review the same figures.

The in-house review and the one conducted by Warner and Thompson showed virtually the same findings--that Perry had been overpaid $18,000 in salary and $3,000 in retirement benefits.

While they were successful in surfacing the issue, Warner said he was still upset that the matter could--and should--have been resolved in January, 1989.

“It bothers us that two directors took such a cavalier attitude toward the problem when it was initially discovered,” Warner said. “They were told about it, but they didn’t follow up on it. That’s the wrong way for them to approach their duties and responsibilities as directors.”

Board members said they were shocked to learn how much Perry had been overpaid, and some said Perry himself expressed surprise.

“John was just as surprised as everyone else when the accountant determined how much was overpaid,” LaBarge said. “He was absolutely amazed. I’m sure he didn’t realize the extent of it. I buy that. I may be naive, but I buy that.”

Perry repaid the money--with interest--a couple of weeks ago, but his apparent indifference to the whole situation still nagged at board members, some said.

On Wednesday, they gathered behind closed doors and told Perry to quit or be fired. He quit, ending more than five years’ service with the district.