FRESNO, Calif. — A federal grand jury returned a five-count indictment on Thursday, April 14, against Dennis Falaschi, 75, of Aptos, California, charging him with conspiracy, theft of government property, and filing false tax returns in a scheme to steal over $25 million in federal water from a leak in the Delta-Mendota Canal.
U.S. Attorney Phillip A. Talbert announced the indictment in a statement issued by the U.S. Department of Justice on Thursday. The link to the indictment is here: justice.gov/…
Falaschi is the embattled former general manager of the Panoche Water District, located on the west side of the San Joaquin Valley in both Merced and Fresno Counties, near the communities of Dos Palos, Firebaugh, and Los Banos.
Falaschi exploited the leak in the Delta-Mendota Canal and engineered a way to steal over $25 million in federally owned water, according to court documents.
Falaschi stole about 130,000 acre-feet of water from the Delta Mendota Canal. That's about enough water for 260,000 homes for 1 year.
Panoche Water District (PWD) receives Delta water from the Central Valley Project via the Delta Mendota Canal and the San Luis Canal. It is one of several west side San Joaquin Valley water districts that export Delta water at enormous cost to winter-run Chinook and spring-run Chinook salmon, Central Valley steelhead, Delta and long fin smelt and other fish populations – and would stand to benefit from the proposed Delta Tunnel project, Sites Reservoir and the voluntary water agreements.
The statement from the DOJ explains the details of the scheme that enabled Fallaschi and PWD stuff to divert the water:
“The drain was connected to a standpipe on the bank of the Delta-Mendota Canal that used a gate and valve to redirect water from the Delta-Mendota Canal into the water district’s canal. The gate had been cemented closed years earlier. The cement had since cracked and water was coming through it.
“Thereafter, Falaschi instructed an employee to install a new gate inside the standpipe so that the site could be opened and closed on demand. He later instructed the employee to install a lid with a lock on top of the standpipe and an approximate two-foot elbow pipe off the valve of the standpipe that angled down 90 degrees into the water district’s canal.
“The lid concealed the theft because it prevented people from seeing that the gate inside the standpipe was functional. The elbow pipe further concealed and expedited the theft because it enclosed the water flow from the Delta-Mendota Canal into the water district’s canal and was installed in such a way that it was generally submerged under the water.”
The court documents also reveal how Falaschi subsequently instructed employees to use the site to steal federal water from the Delta-Mendota Canal on multiple occasions until the site was discovered in April 2015.
“He used the proceeds of the theft to pay himself and others exorbitant salaries, fringe benefits, and personal expense reimbursements,” the documents allege.
In addition, Falaschi is charged with filing false tax returns in 2015 through 2017. According to court records, he failed to report over $900,000 in income to the Internal Revenue Service that he received from private water sales.
If convicted of theft of government property, Falaschi faces a maximum penalty of 10 years in prison and a fine up to $250,000.
If convicted of conspiracy, he faces a maximum penalty of five years in prison and a fine up to $250,000.
If convicted of the tax charges, he faces a maximum penalty of three years in prison and a fine up to $250,000, according to the DOJ.
If convicted of all federal charges, Falaschi faces a maximum sentence of 18 years in prison and up to $750,000 in fines, according to prosecutors.
“Any sentence, however, would be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables. The charges are only allegations; the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt,” the DOJ added.
The case is the result of an investigation by the U.S. Department of the Interior’s Office of Inspector General, the IRS-Criminal Investigation, and the Federal Bureau of Investigation. Assistant U.S. Attorney Joseph Barton is prosecuting the case.
In a statement by Falaschi’s attorney, Marc Days, told the LA Times that his client plans to plead not guilty to the federal charges.
“We just received the indictment and need more time to review it. The indictment appears to be based on lies and inaccuracies,” Days told The Times.
This federal case comes after state officials opened an ongoing criminal case against Falaschi and four other defendants, all employees of PWD. On
California Attorney General Xavier Becerra announced the arrest and filing of felony charges against Falaschi and the four other district employees for the misuse of public funds and illegal disposal of hazardous waste “amidst widespread corruption” at the water district.
In 2017, the California Department of Toxic Substances Control (DTSC) found 86 drums of hazardous waste, varying in size from 35 to 55 gallons, illegally buried on the water district’s property. The drums contained chlorine, caustic soda, iron chloride and a mixture of used antifreeze, used solvents, and used oil.
Following that discovery, DTSC’s Office of Criminal Investigations (OCI) also investigated the water district for possible financial crimes, first identified by the California State Auditor. “These activities included illegal employee loans and the use of district credit cards for sporting events, slot machine purchases, concerts, kitchen remodeling, residential landscaping and other purchases,” DTSC said.
DTSC referred the criminal case to the California Attorney General’s Office in September 2017.
The five defendants were charged in a felony complaint with a total of ten counts, including eight counts relating to the theft of public funds and two counts relating to crimes involving hazardous waste disposal. Two of the defendants are charged with misusing over $100,000 in public funds
The state’s criminal complaint alleged that Dennis Falaschi, the ex-General Manager of PWD, “ran the District as his own personal operation and bank account, spending excessive amounts of District money using credit cards issued by PWD.”
“Under the direction of Dennis Falaschi, Julie Cascia used PWD credit cards and money orders for personal expenses, while mischaracterizing the charges as business expenses,” the A.G.’s Office stated.
You can read my article about the state’s case, “Former Panoche Water District Staff Charged With Embezzlement, Illegal Disposal of Hazardous Waste,” here: www.dailykos.com/…
PWD is a public water agency that distributes water for irrigation, domestic, and industrial uses, serving an area of about 38,000 acres in western Merced and Fresno counties. The district is overseen by a five-member board of directors.