Central Basin GM inflated salary, benefits by more than $75,000 without approval, report alleges

Lax oversight over Central Basin Municipal Water District’s finances during the tenure of General Manager Alex Rojas led to the misspending of at least $123,000, including more than $75,000 in extra pay and benefits that went to Rojas specifically, according to a newly released forensic examination.

A report written by certified public accountants from the firm Carr, Riggs & Ingram alleges Rojas, who served as general manager and treasurer for much of the review period, influenced the selection of vendors, bypassed competitive bidding processes and pushed for alterations to his own pay and benefits that resulted in an unauthorized $25,287 raise and tens of thousands of dollars in extra leave payments, retirement contributions and tuition.

Rojas has been on paid leave since February, pending the outcome of this investigation and another equally critical report completed by CRI in June.

The latest findings have prompted two board members to call for criminal investigations. Central Basin boardmember Martha Camacho Rodriguez sent a copy to the Los Angeles County District Attorney’s office and referred to the report as “evidence of a crime.”

“At the end of the day, I just hope the D.A. will do their job and kick down doors if necessary and lay down the hammer of the law,” she said in an interview.

Boardmember Juan Garza echoed her sentiments in a separate interview.

“We don’t have subpoenas, we don’t have the power to look into bank records,” Garza said. “We’re doing what we can with the tools we have. These findings demonstrate that the authorities that do have those powers are going to need to look into these findings further.”

Denies wrongdoing

In an email, Rojas responded to a series of questions through his attorney, Craig Missakian, and broadly denied any wrongdoing. The response, however, describes Rojas in the third person and includes language that suggests it was meant to be attributed to Missakian. Asked about the confusing language, Missakian confirmed the words came from Rojas. Neither answered other follow-up questions.

Rojas wrote that the “so-called forensic audit” did not find evidence of “fraud, missing funds, unknown accounts, or any financial mismanagement.” He questioned its accuracy and stated he was never interviewed about the findings.

“The report misuses the word ‘override’ suggesting that Dr. Rojas somehow overturned or changed staff decisions when this is absolutely not the case,” Rojas wrote. “There was never any situation wherein Dr. Rojas overrode or changed staff member’s decision to reject or deny any of the items listed in this so-called forensic audit.”

Rojas threatened to sue in the written response, which refers to himself as “my client.”

“I will strongly recommend that my client undertake any and all remedies available to him given the defamatory and libelous manner in which this report was written,” Rojas wrote.

Central Basin’s board president, Arturo Chacon, defended Rojas — as he has frequently done in the past — in an email structured similarly to Rojas’ response.

“The important thing is that the report states that there is no finding of fraud, unknown accounts or other financial mismanagement regarding the district finances and that all district banking records and funds are accounted for,” Chacon wrote.

Chacon brought up the potential for a lawsuit, too, saying inaccuracies and accusations create a “potential defamation or libelous situation for the district.”

Past issues

Central Basin Municipal Water District is a public water wholesaler with few employees of its own and primarily contracts out to others to cover day-to-day operations. It serves nearly 2 million people from 24 cities and unincorporated areas in southeast Los Angeles County, with its boundaries stretching from La Habra Heights in the east to Carson in the west and from Signal Hill in the south to Montebello in north. The board is made up of seven members, four of whom are elected and three of whom are appointed by the agency’s customers.

CRI’s first report, released in June, accused Rojas of sidestepping internal controls while overseeing a construction management contract later found to be secretly tied to a company whose owner allegedly paid $400,000 in bribes to Rojas while he was the superintendent of the nearby Bassett Unified School District.

The Los Angeles County District Attorney’s Office previously charged Rojas, along with the owner of a company called Del Terra, Luis Rojas, who is not related, with 18 counts of money laundering, bribery, perjury and embezzlement in August 2022 in the Bassett case. Both men have repeatedly denied any wrongdoing and the case has not progressed past the initial arraignment.

The Central Basin board initially allowed Rojas to stay on for more than a year despite his arrest. However, that changed after a shift in the board’s majority and the discovery that one of the companies hired by Central Basin was secretly run by employees of Del Terra, raising concerns that water district funds had flowed to Rojas’ co-defendant in the bribery case.

Bypassed internal controls

The second CRI investigation, the forensic examination finished on Sept. 30, looked at a broader selection of financial records and “determined that Dr. Rojas overrode Central Basin’s internal controls and/or limited Central Basin’s internal controls in multiple respects on numerous occasions.”

As a result of those overrides, the report states, in multiple instances Rojas received compensation and/or benefits “that he may not have otherwise received.”

For example, in July 2022, Central Basin’s Board of Directors amended Rojas’ contract to provide for a commensurate adjustment to his wages if the district’s other employees received cost-of-living adjustments. That same day, Rojas adjusted six of the district’s eight employees’ salaries 2.6% to 28.2%, allegedly without disclosing it to the board, and boosted his own salary by 10.4%, the report states.

The board had recently approved a budget for fiscal year 2022-23 that “did not consider or include salary increases” and Rojas “lacked the authority to award compensation increases to employees,” according to CRI.

The report indicates Rojas sent an email to board members the following January urging them to provide a cost-of-living adjustment to his staff for the first time “since FY 2018-2019 (maybe even longer).” The email did not mention the prior year’s increase and the board gave everyone another 7% increase as a result.

Rojas’ salary increased by 40% to nearly $280,000 in less than three years.

Central Basin repeatedly failed to comply with its own policies in ways that often benefited Rojas, according to CRI.

A change to his CalPERS membership status led to an extra $15,000 in retirement contributions. An increase in his leave accruals to 10 hours per pay period exceeded the maximums outlined in the Administrative Code and resulted in 113 extra hours of leave, valued at $15,186. Rojas cashed out an excessive 100 hours of vacation and 20 hours of personal leave in late 2022 and early 2023, for a total of $15,925, though personal leave cashouts were not allowed and midyear vacation cashouts were limited to 20 hours per year.

Rojas also allegedly used his district credit card to cover $18,765 in tuition to the University of Colorado Boulder and, as a result, the payment was never reported as taxable income, according to the report. The district requires reimbursements and caps the total at $9,000 per calendar year.

CRI could not find documentation showing Rojas’ planned coursework, grades, or course completion in his employee file.

Blaming others

In his emailed response, Rojas blamed others for the mistakes with his compensation.

“Furthermore, it goes on to point out that alleged errors were made by district staff regarding Dr. Rojas’ compensation resulting in alleged overpayments; however, it fails to report that two independent annual auditors reviewed these exact same payments and found no issues or noncompliance with district policy or Dr. Rojas’ employment agreement,” he wrote.

Chacon offered the same criticism.

“The report does not mention that his compensation and employment contract are reviewed annually by our independent outside auditors and there have been no findings in the last two audits submitted to the board,” Chacon wrote.

Central Basin’s last completed fiscal audit covered fiscal year 2020-21 and many of the allegations about his compensation occurred in subsequent years. Rojas did not respond to a request for clarification on the dates of the audits.

Both Rojas and Chacon pointed the finger at the business department and/or the human resources department and said changes in compensation would have been made in consultation with the district’s general counsel.

CRI attributed the dysfunction at Central Basin to the constant infighting among the water district’s board members and a failure in “the tone at the top” within Rojas’ administration.

Rojas is alleged to have pressured employees to approve certain vendors, purchase orders and other payments, including to an IT company that used to employ him. One district employee interviewed allegedly told investigators: “We do what the General Manager says. It’s his decision.”

CRI questioned several payments made under Rojas’ $25,000 spending authority, alleging he split contracts into smaller amounts to avoid taking the contracts to the board for approval. Other contracts weren’t appropriately advertised or did not properly justify why they were not competitively bid, CRI alleged. In one instance, Rojas told a purchasing manager, who expressed confusion about a decision, to accept a proposal from a company charging a one-time fee of $24,465 to sanitize the district’s offices, over another company offering to do the cleanings every month for roughly the same price annually.

CRI reviewed 13 apparent sole-source contracts approved under Rojas’ watch and found that only one was properly procured. Rojas in his emailed response, however, denied that any of those contracts were actually “sole source.” He did not respond to a request to elaborate.

CRI’s findings came with a disclaimer. The examination — which CRI stressed is not an audit — was limited “due to lack of documentation maintained by Central Basin, deletion of Central Basin records and lack of cooperation by certain individuals/entities related to the district,” the report states. Making matters worse, CRI identified “significant errors” in the district’s internal accounting, to the tune of $2.4 million, that made investigators conclude that the district’s bank reconciliation records were “unreliable.”

Previous auditors quit

Complaints about missing and incomplete records were raised by annual auditors in the past, too. One firm, Harshwal & Co., became so fed up that the auditors quit before finishing an audit for fiscal year 2021-22 that remains unfinished to this day. Moody’s Investors Services withdrew its credit rating for Central Basin in June as a result.

It’s unclear what the next steps will be now that both investigations have concluded.

Terminating Rojas requires the support of six out of the seven of the board members, thanks to an amendment quietly added to his contract following his arrest in 2022. That’ll be a tough hurdle for a divided board. That may soon change, however. Three of the elected board members’ seats are up in November and two of its appointed seats, selected by the cities and companies that purchase its water, have recently changed hands.

“Now it is going to be up to the board to gather and deliberate and to consider these findings and determine the appropriate next steps in regards to Dr. Rojas,” said Garza, the boardmember. “For me, the question is this: is this highly troubling behavior from our management acceptable to the public and our customers? I don’t think so.”