Former water officials charged with taking $1.3 million bribe

A former state regulator and a former local utility official have been charged in a $1.3 million bribery scheme designed to take advantage of Southern Nevada's insatiable thirst for water.

Robert A. Coache, 52, and Michael E. Johnson, 51 are accused of unlawfully taking the money to help a wealthy Bunkerville landowner sell $8.4 million in water rights to the Southern Nevada Water Authority.

Both Coache, who retired last year as a deputy state engineer with the Nevada Division of Water Resources, and Johnson, who resigned as the chief hydrologist for the Virgin Valley Water District in August, are in custody on $500,000 bail, according to jail records.

The Clark County district attorney's office filed a 25-count criminal complaint Monday against the two Las Vegas men, accusing them of misusing their offices to help John Lonetti Jr. of Bunkerville sell his water rights on the Virgin River.

In return for their help, Lonetti gave them a $1.3 million kickback that was funneled through Rio Virgin LLC, a company the two officials set up to receive the money, the complaint said.

"It never ceases to amaze me how many different ways public officials can cheat the taxpayers," District Attorney David Roger said Tuesday. "This is the first corruption case involving water rights that we have prosecuted."

THE CHARGES

Coache and Johnson are facing a variety of felony and gross misdemeanor charges, including bribery, extortion and money laundering. The bribery scheme took place from Jan. 1, 2006, until May 21, 2008, the complaint alleged. The scheme to launder the money continued until Sept. 13.

The case could trigger a review of other work Coache performed during his more than 28 years in the Las Vegas office of the Division of Water Resources.

Coache started there as a hydraulic engineer in November 1981 and rose through the ranks to become deputy state engineer in charge of water issues for Southern Nevada. He retired on May 1, 2010.

In a statement issued Tuesday afternoon, the Division of Water Resources and the state engineer's office said they have cooperated fully with police investigators and would continue to do so.

Officials from the agencies declined further comment.

Police allege Coache and Johnson, through the Rio Virgin partnership and other companies, bought several homes with cash they got from Lonetti. The partnership dissolved after Lonetti paid them in May 2008.

Detectives with the Metropolitan Police Department's Criminal Intelligence Section raided the Las Vegas homes of both men on Monday.

Coache is to make an initial appearance before Justice of the Peace Bill Jansen this morning, and Johnson is to appear before Jansen on Thursday .

The Virgin Valley Water District supplies about 23,000 residents, ranchers and farmers at the northeastern corner of Clark County. Its service area includes the communities of Mesquite and Bunkerville, 85 miles northeast of Las Vegas.

The water district's former general manager, Michael Winters, also has been implicated in the scheme. Police allege Winters received $15,000 from Johnson to use his influence to get the district's board to approve Lonetti's $8.4 million deal.

Winters, 56, and Lonetti, 77, have not been charged in the investigation, which is continuing. Detectives interviewed Lonetti during the investigation.

In June, a Clark County grand jury indicted Winters, who was accused of misconduct in an unrelated case. He was charged with orchestrating a separate land deal in which the water district paid an inflated price to buy land for an arsenic treatment plant.

Water district board members fired Winters, a 16-year employee of the agency, in February 2010 after they learned police were investigating the land deal. His trial on the misconduct charge is set for May 23 before District Judge Michael Villani.

DETAILS OF THE CASE

In a 12-page arrest report, Intelligence Detective Nate Chio said Johnson, Coache and Lonetti "entered into a criminal conspiracy to subvert the process" that allowed Lonetti's deal with the water authority to go through.

Chio said Lonetti needed the help of the public officials to persuade the water authority to "consummate" the $8.4 million purchase agreement.

The deal was struck at a time when the Southern Nevada Water Authority was busy snapping up water rights throughout the eastern part of the state.

Virgin River water became especially valuable to the authority in December 2007 when a new agreement among Colorado River users gave water managers in Las Vegas permission to take water from the Virgin after it flows into Lake Mead, eliminating the need to build an expensive pipeline to reach it.

When the deal with Lonetti was finalized in March 2008, John Entsminger, deputy counsel for the water authority, described the newly acquired rights as "the best water in our portfolio."

Spokesman Scott Huntley said authority officials had no knowledge of any misconduct until Las Vegas police contacted them about the investigation. They have been cooperating ever since.

"From our standpoint, it was a normal transaction," Huntley said. "We were looking to buy water rights on the Virgin, and we got what we thought was a fair price."

Since buying the rights, the authority has used them to bank about 3,200 acre-feet of the water in Lake Mead for future use. That's enough water to supply 6,400 average valley homes for one year.

Virgin Valley Water District board members first learned of the bribery scheme in August, when Johnson admitted during a closed personnel session that he had received "thousands of dollars" from Lonetti as a consultant, the arrest report said.

Johnson resigned after the meeting, and board members later asked police to investigate.

In his arrest report, Chio said state personnel records show that Coache was "disciplined and subsequently suspended" in 1989 for doing private consulting work on matters dealing with water rights while employed for the state.

Coache was warned again in July 2005 not to engage in consulting related to his official state duties, Chio wrote.

Chio said Lonetti detailed his dealings with Johnson and Coache during a March 29 interview at his Bunkerville ranch.

Lonetti told detectives that state water officials informed him in 2006 that he would not be able to obtain the 2,000 acre-feet of Virgin River water he had sought under his claim to irrigate his property.

He said he entered into a confidential "financial agreement" with Johnson to help him respond to the state. Eventually, the state engineer's office reversed its opinion and granted Lonetti a water permit for 1,200 acre-feet of water.

"As the deputy state engineer for Southern Nevada, who was the regional expert for the state, it stands to reason that his (Coache's) opinion would be heavily relied upon to make such a ruling," Chio said in his report.

He noted that state officials have not granted any other new permits for Virgin River water in the past seven years.

Tracy Taylor, the state engineer at the time, told detectives he didn't recall talking to Coache about Lonetti's water permit and had no knowledge that Coache was working as a consultant for Lonetti.

Chio said Lonetti never planned to used the Virgin River water to irrigate his property, but rather looked to make a quick profit with the rights by selling them to the Southern Nevada Water Authority.

Contact reporter Jeff German at jgerman@reviewjournal. com or 702-380-8135. Contact reporter Henry Brean at hbrean@reviewjournal.com or 702-383-0350.