California water district pays millions over ‘unauthorized diversion’ from federal canals
An obscure farm-irrigation agency in the San Joaquin Valley, the Panoche Water District has been struggling with a monumental scandal the past three years, with top officials under criminal indictment for embezzling public funds and illegally dumping toxic waste.
It turns out the district has also been allegedly taking water from the federal government.
Earlier this year Panoche agreed to pay the U.S. Bureau of Reclamation nearly $7.5 million to compensate for “unauthorized diversion of water” from two federal canals, according to a settlement agreement obtained by The Bee. The settlement was approved by the U.S. attorney’s office.
The Bureau of Reclamation operates the Central Valley Project, the massive network of dams and canals that deliver water to Panoche and other contracting agencies up and down the state.
Last month, Panoche made a separate deal with the San Luis & Delta-Mendota Water Authority, an umbrella agency that delivers water from the Bureau of Reclamation to Panoche and 28 other member districts on the west side of the Valley. Panoche agreed to pay the authority $798,000, plus $172,000 in interest, for damages it sustained from the diversions. Panoche didn’t admit to any wrongdoing.
“For the past several years, we have been committed to working cooperatively with the United States to develop a fair and equitable resolution to this matter,” said the district’s general manager Ara Azhderian in an email.
“We are deeply appreciative of the attention and effort our partners at the U.S. Bureau of Reclamation and the San Luis & Delta-Mendota Water Authority dedicated to develop the respective agreements that allow all of us to move forward.”
The alleged diversions took place from 2009 and 2015, when the Panoche district was run by then-general manager Dennis Falaschi — one of the men charged three years ago in the embezzlement case. Falaschi’s lawyer said Monday that no water was taken inappropriately.
“There is no water theft,” said the lawyer, Marc Days. “The district doesn’t know what they’re doing.”
He added that “if there was any taking,” it was caused by the government’s failure to provide drainage service to the Panoche district. The lack of adequate infrastructure in the San Joaquin Valley to drain water has allowed salt and other minerals to build up in the soil over the years — a sore point and a source of litigation among farmers on the west side of the Valley.
The amount of water allegedly taken was 53,388 acre-feet. That’s nearly 17.4 million gallons, enough water for as many as 106,000 urban households for a year. The water was improperly diverted at three separate points along the water authority’s two main canals.
The alleged incident stunned veterans of California’s contentious water world.
“I personally have never heard of anything like that,” said Stuart Somach, a Sacramento water lawyer who used to work for the U.S Interior Department, which oversees the Central Valley Project.
Pachoche delivers water to western Fresno and Merced
Mary Lee Knecht, a spokeswoman for the Bureau of Reclamation, said the incident came to light when state and federal officials investigated the embezzlement and waste-disposal criminal case that was filed in 2018.
Officials with the San Luis & Delta-Mendota authority didn’t respond to requests for comment.
The Panoche district, based in Firebaugh, delivers water in a rural area covering 38,000 acres in western Fresno and Merced counties. Until three years ago, it was little known outside its immediate service territory.
That all changed on Feb. 22, 2018. Then-Attorney General Xavier Becerra announced that Dennis Falaschi, Panoche’s former general manager, and four of his subordinates were being charged with embezzling $100,000 from the district.
The group was accused of using the money to pay for kitchen remodeling projects, purchase slot machines and other purposes. Prosecutors said Falaschi allowed $22,000 worth of district-owned pistachio trees to be transferred to land owned by his son, Atomic Falaschi, who also worked for Panoche and was among those charged. All charges against Atomic Falaschi were dismissed last year.
In addition, Dennis Falaschi and three of his co-defendants were charged with illegally burying 86 drums of hazardous waste — containing chlorine, used antifreeze and other chemicals — on the district’s property. They have pleaded innocent.
This story was originally published August 10, 2021 at 5:00 AM with the headline "California water district pays millions over ‘unauthorized diversion’ from federal canals."