Two Admit Stealing From Water District

Two of four men charged with stealing more than $2.2 million from the Irvine Ranch Water District by submitting improper bills for rebates on water conservation equipment pleaded guilty Wednesday and agreed to pay restitution.

Wayne Melvin Smith of Tustin, a district employee who ran the water conservation program, admitted to orchestrating the elaborate, two-year scheme. Under the plea agreement, he will spend five years in prison and reimburse the district $2.2 million, said Mark Sevigny, a senior Orange County deputy district attorney in the economic crimes unit.

J. Randall Ismay, an independent management consultant from Laguna Niguel, also pleaded guilty and agreed to reimburse $340,000 he pocketed, Sevigny said. His prison sentence will be determined later and will depend on whether he makes restitution, Sevigny said.

“Mr. Smith is going to prison no matter what,” Sevigny said. “Mr. Ismay will be given an opportunity to make restitution. This is a fair agreement. Mr. Smith was a contract manager for the district. Everybody trusted him.”

The two men, who were charged in 1998 with criminal conspiracy and several counts of grand theft, are scheduled to be sentenced May 12. The two were set to go to trial Wednesday when they entered last-minute pleas.

Smith and Ismay could not be reached for comment.

Water district officials said they welcomed the turn of events.

“We are pleased that the trial has come to a swift conclusion that will prevent further delays in justice being served. Wayne Smith will at last begin serving the sentence he deserves,” Darryl Miller, president of the Irvine Ranch Water District Board of Directors, said in a statement. “The district long ago implemented far stricter financial controls to ensure that such a situation will not happen again in the future. . . . It is important to note that the losses were covered by insurance and did not affect customer rates at all.”

Two other outside management consultants--Robert William Casey of San Dimas and Robert Edward Baier of Seal Beach--accused in the scheme have pleaded not guilty and are scheduled to go to trial June 12.

According to prosecutors:

The fraud began in late 1994 and ended in early 1997, when a district employee became suspicious about the flow of money from the district’s Operation Outreach program, which encouraged large customers, such as homeowners associations and school districts, to save water during periods of drought.

Under the program, customers who installed water-saving equipment would receive a rebate of as much as half the cost of the devices. The three consultants were accused of turning in rebate requests saying they had done the work for about 35 groups, including the Turtle Rock Crest Homeowners Assn. Other customers included the cities of Irvine, Tustin and Newport Beach, UC Irvine and the Irvine and Saddleback Valley Unified school districts.

Smith, prosecutors said, approved most of the payments.

The plan began to unravel when another district employee wondered why large rebate payments were being made to consultants instead of directly to the homeowners associations and school districts. Normally, the customers--such as a homeowners association--would apply for and receive the rebates.

An investigation revealed that in some cases, customers had never requested the upgrades.