By ELLEN KNICKMEYER
Jun 9, 2016 11:21AM EDT
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SAN FRANCISCO (AP) — A California public water district that earned a rare federal penalty over what it described as “a little Enron accounting” loaned one of its executives $1.4 million to buy a riverfront home, and the loan remains unpaid nine years later although the official has left the agency, according to records and interviews.
Westlands Water District says its 2007 loan to deputy general manager Jason Peltier — now at $1.57 million with a 0.84 percent annual interest rate — is allowed under agency rules on salary.
But experts in governance say the deal raises red flags, not just over the unpaid loan and its generous terms but over whether Peltier and Westlands complied with laws mandating disclosure of the use of public funds.
“Show me the statute that allows this,” said Peter Detwiler, long the top consultant, now retired, to the California Senate on local government finance.
“Where else could you borrow $1.6 million dollars for 0.84 percent?” Detwiler asked. “Who wouldn’t want a real-estate deal like that? Sweet.”
Westlands, which sells water to big farmers and other landowners in the country’s largest public irrigation district, came under scrutiny in March, when federal regulators levied a $125,000 penalty against it over bookkeeping that a Westlands’ general manager had described as “a little Enron accounting.”
The Securities and Exchange Commission had concluded Westlands misled bond investors about its financial condition.
A heavyweight in California water politics, Westlands currently is negotiating two multi-billion-dollar deals with local, state and federal agencies that would reshape water distribution in California, the country’s agriculture leader.
Peltier described the loan from Westland’s reserve funds as a good deal for the water agency and for him.
“It was what was attractive to me, and I guess it worked for them relative to where their reserves were,” said Peltier, who has since bought an additional house in Pebble Beach while his loan to Westlands for his home on “Millionaires Row” along the Sacramento River has remained unpaid.
Governance experts say public agencies sometimes provide home loans to help recruit executives, but say Peltier’s appears unusual because it was extended for years at a fraction of the interest rates of commercial mortgages, the district’s various actions on the loan were not disclosed publicly although Peltier is a public official, and the loan will continue for years after he stopped working at Westlands.
“Each of the individual features is a bit unusual. Taken together these features are very unusual,” Fred Whittlesey, a consultant on employee compensation based in Washington state, said of the circumstances of the loan.
“Free money is usually a great deal,” Whittlesey said. “But it may not be appropriate in an employment arrangement.”
The story on the loan is this, according to Peltier and records from Westlands and the U.S. Interior Department, where he worked before Westlands:
In March 2007, Peltier, whose Interior job included overseeing California water issues, notified the department he was looking for a job elsewhere. Two months later, he signed a $1.4 million purchase agreement for his home with a new, “state of the art” $115,000 boat dock and a $100,000 swimming pool.
Peltier said he had already signed the paperwork before getting the Westlands job offer. Westlands hired Peltier June 25, 2007, as chief deputy general manager, and a short time later loaned him the full $1.4 million home price, agency records show.
Terms initially required Peltier to repay the money within a year, when he sold his old house in a Virginia suburb of Washington, D.C. But Peltier said the home didn’t move after the 2007 housing crash, and records show he signed repeated one-year loan extensions.
In 2012, he and Westlands revamped their agreement giving him until 2021 to pay off the loan, with a final payment of more than $1 million, according to district records. Peltier made monthly payments of about $5,000 from January 2013 to February 2015.
Peltier, whose salary ranged between $185,000 and $200,000 according to state records, finally sold the house back East in February 2014, and left Westlands for a job at an affiliated water agency in summer 2015, with the Westlands loan still unpaid.
Current Westlands Deputy General Manager Johnny Amaral defended the transaction.
“Unfortunately, Mr. Peltier, like millions of other Americans, was unable to sell his property in Virginia because of the collapse of the housing market and the bridge loan was converted to a long-term loan,” Amaral said in an email.
Westlands officials declined interviews.
The Associated Press had asked Westlands under open records laws to provide all documents on the loan, including any showing whether the district disclosed the deal publicly.
In response to written questions, Chief Operating Officer Dan Pope said the home loan was allowed under a district rule that gives officials the authority to set salaries. There was no public record of the district board’s loan decision, Pope wrote, because it was made in a closed session.
The AP could find public mention of the loan only on the website of a federal agency that oversees municipal bonds. Posted there were Westlands’ annual audits, which from 2010 on reported a $1.4 million loan to an unidentified management-level employee.
Peter Scheer, head of the California-based non-profit First Amendment Coalition, said Westlands as a public agency should have disclosed all of its actions on Peltier’s loan, noting that the public has a right to know those details. Scheer’s group has been supported by donations from some news organizations, including the AP.
California law requires public officials like Peltier to file annual financial disclosure forms, which includes reporting some loans.
Peltier said he had begun reporting the loan in his most recent annual disclosures. However, his reports through 2015, obtained from the state, make no mention of an outstanding loan from Westlands.
Asked about the apparent discrepancy, Peltier said he thought he had included the information.
Asked whether the loan from a public agency would require disclosure, Jay Wierenga, spokesman for the state Fair Political Practices Commission, said, “Someone probably has to have a pretty good reason to not report a loan that’s outside of the realm of what’s normal and available to the public at large.”