Civil Suit Against Clark County Officials Raises Concerns about Water Board Activity

“All sources of water within the boundaries of the state, above and below ground, belong to the public.”[i]

Reno, NV, On July 14, Robert Coache, a defendant in a criminal case initiated by attorney Jedediah (Bo) Bingham, on behalf of the Virgin Valley Water Board (VVWB), Mesquite, NV, filed a wrongful conviction complaint (case # 2:21-cv-01334-BNW) against various Clark County law enforcement and prosecutors in the United States District Court of Nevada

On May 25, 2011, Coache and Virgin Valley Water District (VVWD) hydrologist Michael Johnson faced various felony charges relating to a 2007-2008 water deal between Mesquite area water rights holder John Lonetti, the Southern Nevada Water Authority (SNWA), and the VVWB.

Coache was the chief water engineer for the southern Nevada branch of the State Water Engineer’s office, responsible for water right investigations and reviews during the Lonetti transaction.

Attorney’s eventually dropped a civil suit over the issue against Lonetti, Johnson, Coache, and former water district manager Mike Winters.

Following their felony conviction, Coache served sixteen months in prison and was on Parole when on July 19, 2019, the Nevada Supreme Court reversed his conviction and partially reversed Johnson’s convictions. Johnson was also released.

Background

The Coache-Johnson felony case and a current civil action filed by the owners of Mesquite Wolf Creek Golf course against the VVWD had their origins in Virgin River rate and price-setting activities by the VVWB beginning in 1993.

Historically, Mesquite and Bunkerville, NV shareholders of publicly owned [ii] highly polluted Virgin River water, used that resource for irrigation and livestock watering. As the community of Mesquite shifted from a river water-based economy to one requiring cleaner underground water, the productive and economic value of the former source dropped to virtually zero.

In 1993, the Bunkerville Water User’s Association and the Mesquite Farmstead Water Association were merged into the Virgin Valley Water District (VVWD, as a Nevada state political subdivision.

John Lee, Cresent Hardy, J.L. Bowler, Tod Leavitt, and Sam Reber, with family ties to Virgin River water stock shares held in the Mesquite Irrigation Company (MIC) and the Bunkerville Irrigation Company (BIC) dating back to 1927,[iii] became the first water district board members. Their primary duty was to deliver clean underground water for domestic use.

Lee, Hardy, Bowler, Leavitt, and Reber and other stock shareholders with distant familial ties to water stock shares who followed used their statutory power to set Virgin river water rates and purchase water stock shares. Thus they created a self-serving “market rate” and virtually unlimited profits for n MIC and BIC shareholders. To justify the purchases, board members claim they would clean the water and deliver it for domestic use sometime in the future.[iv]

Between 1993 several shareholders, gifted [v][vi] $12,159,670.86 of public dollars for 4,992 AFA (551 shares) of MIC and BIC publicly owned water, establishing a so-called market rate on public water equal to an average price of $18,427.76 per share (median $8,287.29 per share).[vii]

In a legal deposition of Wesley Smith, VVWD Chief Financial Officer (CFO) revealed that the acquisition of highly polluted Virgin River water stock shares by the VVWB contributed to an increase of the public’s debt to 35 % in 2010 and a 94 % increase in 2015 for the water customers served by the water board.

Once shareholders on the water board established a “market” price for Virgin River water, they and other shareholders began selling and leasing shares to the SNWA. As of August 2019, they earned  $50,922,733.74.  On paper, at least, the SNWA “converts” that water to much more valuable domestic water.[viii]

As of August 2019, shareholders earned a total of $63,082.60 for publically owned river water no longer needed for its intended purposes.

It is essential to understand that not all river water has equal value. Highly polluted river water used for irrigation is much less valuable than water converted to domestic use.

Legal jeopardy

Michael Johnson was in legal jeopardy the moment he began working for the VVWD. In April 1999, VVWD manager Mike Winters and the VVWB attorney George Benesch (from 1993-2009) approached Johnson, then employed by the SNWA, with a deal. The Board needed Johnson’s expertise in hydrology and geology to build a sustainable infrastructure to serve the growing communities of Mesquite and Bunkerville.

Winters and Benesch, on behalf of a board, asked Johnson to leave his $90,000 per year job with the SNWA. They offered him $65,000 per year and the ability to contract on water issues “off-the-clock” to make up the salary difference. The Board also paid into his state retirement account. As Johnson would eventually learn, that arrangement violated Nevada state law because, among other things, it creates an unequal power relationship between those with government authority and those requiring such control to consummate a deal. Accusations of bribery and extortion can result from such relationships.

The VVWD is a subdivision of the State; thus, Johnson and, for that matter, water board members were state employees with government authority.  And the water board allowed Johnson to perform “off-the-clock” consulting, including those with Kraig Hafen, the Mesquite Irrigation Company (MIC) Water Master. There is no difference between working on or off the clock. The issue is working within areas of public employment.

In late 2003, while serving on the VVWB from 2000-2006, Hafen learned that the owners of Paradise Canyon (dba Wolf Creek Golf Course) had put 61 shares of MIC water they use for irrigation up for sale. He moved to acquire those shares.

Disregarding his approval for hydrology consulting for Johnson, Benesch, supported by Winters, correctly advised Hafen that dealing on that water presented a potential legal problem. Hafen, in anger, abandoned his effort, and the water board paid owners of Wolf Creek $402,600 for the river water shares.

In 2003 or 2004, David Biasi sought to sell his water shares in BIC to the water district. [ix] The Board met and discussed Biasi’s offer. Days later, Hafen’s brother bought the shares from Biasi. Hafen claims he was unaware of his brother’s purchase. However, he did confirm that he and his brother share ownership in LLCs which possess water rights. [x]

In 2005 the VVWB Board, including Hafen, asked Johnson to approach Lonetti about acquiring 591.11acre-feet per year (AFY or 65 shares) of groundwater [xi] with a February 1965 priority date. The Board offered Lonetti $8,866,650 ($15,000 per Acre Foot) for that water. Lonetti agreed, and Board members approved the deal.[xii]

Hafen left the water board in 2006. That year the VVWD issued a 7.5 million dollar bond to cover Virgin River water right purchases. And that year, Hafen approached area resident Ted Miller and asked him to run for Hafen’s seat. [xiii] In a deposition, Miller stated that Hafen “tasked him” to address “some problems with some of the board’s management.”[xiv]

Hafen admitted that although he had left the Board, he had “lots of conversations with lots of board members about lots of transactions. ” [xv] Specifically, he admitted to conversations with Miller “all the time about various things, whether it’s water district-questions and things like that about water or the city, just questions in general.” [xvi]

In February 2007, The Southern Nevada Water Authority (SNWA) expressed an interest in Virgin River water permitted to Lonetti, a deal requiring a transfer of 89 BIC shares held by the VVWD to SNWA. [xvii] And on March 20, 2008, SNWA paid Lonetti $8,416,506 for 602 AFY ($13,900 per acre-foot) for those shares. [xviii] For brokering these transactions between all the parties, Johnson received $1.3 million from Lonetti.

On February 5, 2008, Hafen sought to lease BIC shares from the water district at $250.00 per share under the premise that they would  “remain” in the valley. [xix] Arguably Hafen intended to lease the BIC or other shares to SNWA for a  profit. Johnson and Winters frequently objected to such leases.

That year, Hafen told the VVWB that the Lonetti-VVWB-SNWA March 2008 agreement was “probably a good deal.” Miller voted for the deal, saying that the actual monetary value of the water exchanged was unimportant to the Board. He noted that the VVWD “was getting more water from SNWA that it could lease to its customers.” John Paul, Board President at the time, stated that “his primary purpose was to own the water and not a return on money from leasing. [xx] “After the deal, Miller argued that given the amount of money Johnson earned in the transaction, the Board should consider cutting his contract.

Hafen changed his mind about the deal. According to Miller, two weeks after the March deal, Hafen called him and said it was a “very bad” deal. [xxi]

After Hafen’s ‘bad-deal” claim, Miller demanded that the VVWB place an item on the agenda to discuss the water leases to Wolf Creek. The discussion concerned river water that in 2003 Hafen attempted to acquire from the Wolf Creek Golf Course owners that Benesch and Winters forced him to recuse himself. Miller testified that Hafen was displeased that the water board acquired the water instead of him.

On June 3, 2008, the VVWD Board considered Miller’s Wolf Creek agenda item. Hafen spoke during that meeting. [xxii] Hafen said that from “a person who understands water, I’d tell you what it looks like it’s not a very good contract.” He stated that it was not the Board’s responsibility to assist Wolf Creek Golf Course. Hafen then expressed his desire to lease the Wolf Creek Water and indicated that he would “keep  it in the valley.”

A board member asked Hafen “whether he planned on using that water as replacement water for that leased outside the area.” Hafen said, “there is a big difference between selling water and leasing water” and then changed the question, asking if Benesch drafted the Wolf Creek lease. He contended that Wolf Creek water should go-to persons in the Virgin Valley and not SNWA. Hafen further said he takes responsibility for not telling the VVWD what they should have done with the Wolf Creek water. Hafen also stated that Winters was trying to blame him for wanting to lease the water. To that, Hafen said, “it was his right to lease the water from VVWD and lease his water to SNWA for a profit.

On July 21, 2008, Hafen requested that the VVWB hold a special meeting to consider the sale and leasing of MIC shares held by the VVWD.[xxiii]  Hafen stated that he would like to lease the MIC shares under his River View LLC. Jedediah (Bo) Bingham of Bingham, Snow and Caldwell represented Hafen during that meeting. Hafen requested that those shares remain in the Virgin Valley.

Cecil Leavitt said that the water district had received more water than needed in the Johnson swaps during the meeting. Johnson cautioned the Board not to get ahead by leasing or selling BIC or MIC shares to SNWA. If so, Johnson said they might have to use ground (culinary) water for the golf courses and potentially drill wells. [xxiv]

On February 17, 2009, the water board asked Johnson to explain why Hafen was not allowed to lease the BIC shares that the Board approved on February 5, 2008. Johnson referred to the March 2008 deal and reiterated the facts of that deal, saying that it was District personal who failed to notify Hafen personally about the agreement. He added that the district posted the agenda for the board meeting.

On June 16, 2009, Miller, during a board meeting, moved to hire Bingham.[xxv] At the next meeting, Bingham admitted that his firm had no experience with water law. [xxvi]

On February 2, 2010, Miller led an effort, supported by board member Karl Gustaveson to question Winters’s leadership. Miller made a motion to fire Winters, and it passed with Miller, Gustaveson, and Board President John Paul approving. Board members Kenyon Leavitt and Mark McEwen opposed.  At the same meeting, Miller questioned the use of Benesch when Bingham was the water district’s attorney. [xxvii]  The Board removed Benesch.

In April 2011, Bingham for the VVWB filed a civil lawsuit against Lonetti, Johnson, Coache, and Winters. They settled that action within weeks of going to trial. Lonetti agreed to purchase back 100 AFA of the 591.11 AFA of groundwater rights for the original price of $15,000 per AFA. Winters decided to pay the VVWD $15,000, which he had borrowed from Johnson to purchase a trailer.

Then Miller and Bingham went to the Las Vegas Metropolitan Police Department and initiated a move to have Johnson,[xxviii] Coache,[xxix] indicted. Metropolitan police detectives then met with Hafen despite his not being on the Board.

On October 11, 2010, under Bingham’s tutelage, members of the VVWB met with Detective Nathan Chio to discuss “rumors” that Johnson had real-estate dealings with Coache and had earned an illegal consulting fee for brokering the 2008 tripartite river water deal with Lonetti.

On August 17, 2010, [xxx] during a closed session, Bingham badgered Johnson and attempted to solicit incriminating statements concerning his brokering of the Lonetti water deal. Johnson knew the Board, under Bingham’s guidance, would terminate him. He resigned.

On May 25, 2011, the Clark County District Attorney filed a complaint against Coache and Johnson, charging them with conspiracy to commit extortion by a public officer or employee (NRS 199.480); extortion by a public officer or employee (NRA 197.170); conspiracy to ask for or receive a bribe (NRS 197.040; NRS 199.480); misconduct of a public officer (NRS 197.110); conspiracy to commit money laundering (NRS 199.480; NRS 207.195).

Following their conviction, Coache served sixteen months in prison and was on Parole when on July 19, 2019, the Nevada Supreme Court completely reversed his conviction and partially reversed Johnson’s convictions.

In Coache’s wrongful conviction suit, his attorneys argue that the Las Vegas Metropolitan Police Department (“LVMPD”), and Detectives Colin Haynes, Nathan Chio, along with Clark County District Attorneys Marc DiGiacomo, Sarah E. Overly, and up to 30 other Clark County personnel engaged in misconduct in prosecuting the case.

In overturning Coache’s conviction, Nevada Supreme Court Chief Justice Mark Gibbons, Justices Kristina Pickering, and James Hardesty ruled “that there was insufficient evidence that Coache had any involvement with granting Lonetti’s permit. Therefore, the Justices concluded that any connection Coache may have had to the underlying scheme with Johnson could not have amounted to bribery.

Further, the Justices concluded that “there was not enough evidence that Coache received the money in exchange for performing his job or acting under the color of his office with the State Engineer concerning the Lonetti permit application. Nor, they said, was sufficient evidence to show Coache knew the proceeds of a real estate transaction with Johnson derived from unlawful activity.

When questioned by the Justices, defendant DiGiacomo admitted that he did not have any evidence that Coache committed any of the crimes for which convicted. That admission and the failure to prosecute Lonetti contributed significantly to the reversal of Coache’s conviction.

Having found insufficient evidence for all Coache’s convictions, we decline to address the remaining arguments raised on appeal, and accordingly, the conviction is reversed,” the Justices said.

The Court agreed with Johnson’s contention that there was not enough evidence to convict him of conspiracy.  In the ruling, the Court said: “Having reviewed the record, we agree that the evidence is not sufficient for a rational juror to reasonably infer that Johnson and co-defendant Coache conspired to commit extortion by a public officer or employee, asking or receiving a bribe by a public officer, or money laundering.” The majority also reversed Johnson’s conviction for misconduct by a public office since he had no official control over VVWD’s water rights.

However, the Justices felt that receiving a fee from Lonetti did constitute extortion and bribery, and the convictions were not, as asserted by Johnson, double jeopardy.

It bears repeating that Johnson was in legal jeopardy when he began working for the VVWD. It was Winters, the VVWD manager Benesch, their attorney, who in April 1999, told him he could consult on hydrology deals. That was to make up salary differences between his SNWA pay and that offered by the water board. And it was the VVWB who allowed him to consult up and until he did so on a water deal involving water shares that Hafen wished to purchase and potentially lease to SNWA for a profit.

Further, Bingham, Hafen’s attorney, orchestrated and pushed assumptions that caused the State to launch conspiracy theories where none occurred and assumed bribery, extortion, and misconduct, none of which were supported by the facts or the evidence. The State further accepted, on Binghams, pleading that every financial transaction by Johnson and Coache in any way relating to the $1.3M constituted money laundering.

Epilogue:

To paraphrase Winston Churchill, Coache’s civil suit is not the end; it is not even the beginning of the end, but perhaps the end of the beginning when it comes to egregious legal actions by the water board and their attorney.

Still being heard in Clark County District Court is the three-year-old civil suit brought by Paradise Canyon against the Virgin Valley Water Board. Bingham is attempting to defend both the water board and his role in various contract transactons between the parties involved in the litigaton.

That civil case has eerie similarities to the Coache- Lonetti-Johnson, Winters case. It involves questionable policy actions by the VVWB, price and rate setting, potential profiteering, the SNWA, and dissatisfaction by Hafen with a water deals he has an interest including the one with Paradise Canyon (dba Wolf Creek Golf Club). As with Coache-Johnson et al., Bingham’s assertions, questionable acquisition, and conduct come into play.

And in both cases, Bingham relied upon former local journalist Barbara Ellestad to argue his assumptions while engaging in character assignations of those opposing him.        

Legal actions are not cheap. But with an unlimited source of public funds, the water board can sustain Bingham and his law firm indefinitely in their effort to set water rates that provide profits to the few at the expense of the many.

Nonetheless, the Coache civil action against Clark County Officials reminds us that inappropriate behavior by elected officials, attorneys, and law enforcement officials has consequences.

Endnotes:

[i] (Nevada Revised Statute (NRS) 533.025 and 534.020).

[ii] Shareholders do not hold ownership titles to public water.

[iii] On May 14, 1927, the Tenth (now Eighth) Judicial District Court, Clark County, Nevada,  affirmed the rights of Mesquite Irrigation Company (MIC) and the Bunkerville Irrigation Company (BIC)  stock-shareholders to Virgin River irrigation water acquired by valid appropriation before March 1, 1905, and were determined to be in good standing.

[iv] The 2020 Virgin Valley Water District Master Plan sets 2035 as the era to beging spending $60 million in capital costs to clean and repurpose Virgin River Water. The Master plan omits personnel and operating costs from their estimates.

[v] Article 8, Section 9 of the Nevada Constitution (the Gift Clause) prohibits “the donation, or loaning of money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.” A water share is, in fact, a stock.

[vi] “In principle, the State acts only as a fiduciary for the public when disposing of the public’s valuable property.” [T]he public trust doctrine, like the gift clause, requires the State to serve as trustee for public resources,” Nevada Supreme Court Justices, September 17, 2020.

[vii] Record request from Virgin Valley Water district for Virgin River Water share purchases between 1993-2010. Does not include Lonetti purchases.

[viii] The actual water is not converted. SNWA receives a credit as part of a Department og Interior-Burau of Reclamation drought plan. That credit allows SNWA, under certain conditions, to take and clean a percentage of the water credited from Lake Mead and use it for domestic purposes.

[ix] In 1997, Bruno Biasi sold 8 shares of MIC river water to the water board for $66,298.40 ($8,287.30 per share). And in 2002 he sold 32 shares of BIC river watrer to the board for $265,198.60 ($8,287.30 per share)

[x] Silver, Gordon; Gentile, Dominic; Dzarnoski, Mark S.; and Ciciliano, Dylan T. Lonetti’s Opposition to VVWD’s motion in limine Re the Golf Course Water, Biasi Water, and Mr. Hafen’s and his Family’s personal matters and private business, Dealings, Case No. A-11-636082-C, April 4, 2014, District Court, Clark County Nevada.

[xi]  Certificate 7917 application no. 22406 at: http://water.nv.gov/permitinformation.aspx?app=22406

[xii] Board members in 2005 included:  President Kraig Hafen, Vice-President Theron Jensen, Secretary-Treasurer Cecil Leavitt and members David Bennett and Kenyon Leavitt.

[xiii] Lonetti’s opposition to VVWD’s motion in limine Re: The Golf Course Water, Biasi Water, and Mr. Hafen’s and his family personal matters and private business dealings (April 14, 2004).

[xiv] Ibid at: p. 36:1-16)(emphasis added).

[xv] Ibid at: (Id. at p.62:8-10)(emphasis  added).

[xvi] Ibid at: (Id. at 143:3-9).

[xvii] Ibid.

[xviii] Southern Nevada Water Authority purchase records.

[xix] Hafen Deposition,  Ex. A  at  p. 38:16-20).

[xx] The pricing of River Water by the Virgin Valley Water Board is so the subject of a May 15th, 2018, civil case filed by the owners of Paradise Canyon Paradise Canyon LLC, (Wolf Creek golf course) against the VVWB seeking to halt the Districts restrictive pricing practices on water shares the board purchased from Virgin River water shareholders of the Mesquite Irrigation Company (MIC).

[xxi] Lonetti’s opposition

[xxii] See Virgin Valley Water District July  3,  2008 Video.

[xxiii] Minutes of Valley Water Board meeting for July 21, 2008.

[xxiv] Ibid.

[xxv] Minutes of Virgin Valley Water Board meeting for June 16, 2009.

[xxvi] Minutes of Virgin Valley Water Board meeting for July 7, 2009.

[xxvii] Virgin Valley Water Board minutes for February 2, 2010.

[xxviii] Michael E. Johnson Felony Case No. C-11-273560-1, Clark County Nevada District Court.

[xxix]  Robert Coache Criminal Case No. C-11-273560-2, Clark County Nevada District Court.

[xxx] Virgin Valley Water District August  17, 2010 Minutes,