The former CEO of a San Joaquin Valley water district, accused by federal prosecutors of carrying out one of the most audacious and protracted water thefts in California history, pleaded guilty Tuesday to a version of the much-anticipated crime. quieter than prosecutors had said. set forth in his original indictment.
As part of a plea deal negotiated with prosecutors, Dennis Falaschi, 78, former head of the Panoche Water District, appeared in federal court in Fresno and pleaded guilty to one count of conspiracy to steal government water and one count of filing a lawsuit. false tax return.
The plea deal is a jarring twist in a case that has captivated San Joaquin Valley farmers. In 2022, prosecutors accused Falaschi of plotting to steal more than $25 million worth of water from a federal irrigation canal over two decades and selling it to farmers and other water districts. The water taking, as stated in the indictment, occurred burglar-style, diverted through a secret pipe, often after hours to avoid detection.
According to the indictment, profits that should have gone to the federal government were instead used to benefit Falaschi, his water district and a small group of co-conspirators, with much of it funneled into exorbitant salaries and generous fringe benefits.
But the plea deal tells a more complicated story: one that minimizes Falaschi's culpability and raises a host of questions about who, exactly, engineered the water theft, who benefited and how many others were involved.
From 1986 to 2017, Falaschi was general manager of the Panoche Water District, a public agency that provides irrigation to 38,000 acres of farmland in Fresno and Merced counties on the arid western side of the San Joaquin Valley. The water district gets much of its supplies from the Delta-Mendota Canal, a major artery in the federal government's Central Valley Project, a system of dams and canals that moves water from Northern California to enable industrial-scale agriculture. in the arid interior of the state.
The federal government charges local irrigation districts for the use of their water, although at reduced rates compared to those available on the open market. Each year, the government announces how much water local districts will get at those reduced rates. In drought years, the government typically reduces its allocations, forcing farmers to extract groundwater, buy what they need on the open market, or leave fields fallow.
According to a description of the crime laid out in the plea agreement, Falaschi learned “before the year 2000” that an abandoned former public fountain on the Delta-Mendota Canal was leaking into a parallel local ditch, meaning the water that came out was not subject to federal measurement. The factual basis presented along with the plea agreement establishes that a farmer whose land was affected by the leak (who at the time was also president of Panoche's board of directors and therefore Falaschi's de facto boss) told Falaschi not to report it to the water authorities.
Panoche employees modified the leaking water fountain so that it could be turned on and off, according to plea agreement documents, allowing water to be drawn from the Delta-Mendota Canal on demand and undetected.
In subsequent years, settlement documents state: “Evidence obtained during the government's investigation further demonstrated that Mr. Falaschi was only one of several individuals who were involved in the misconduct and that he was unaware of the full extent of the misconduct.” ”.
Panoche “board members, supervisors and lower-level employees likely acted of their own volition and at times took federal water for their own use and benefit,” the documents state. “For example, Farmer #1 likely took the water, or ordered his ranch hands to take the water, either at his expense or by contacting PWD employees directly and without alerting Mr. Falaschi.”
The plea deal drops another bombshell, alleging that Panoche employees “likely also continued to take federal water from locations other than the former public fountain well after Mr. Falaschi left the district in 2017.”
The government did not offer details about this allegation, nor whether officials believe the alleged theft has stopped.
Falaschi, the government now maintains, was responsible for stealing less than $3.5 million worth of water, a small portion of the $25 million that prosecutors alleged was stolen over the years in the original indictment. Furthermore, despite what prosecutors alleged in the indictment, the plea agreement stipulates that there is no evidence that Falaschi directly benefited from the misconduct, but instead used the stolen water to dilute salty and toxic agricultural runoff, “which that helped protect farmland and improve water.” quality in the San Joaquín River.”
The plea agreement does not name Farmer #1 who allegedly conspired with Falaschi. And he is vague about the date the leaking water source was discovered, making it difficult to pinpoint which years are in question as to who ran Panoche's board of directors.
It was unclear Tuesday whether the federal government intends to file charges against the anonymous alleged conspirators, or simply call it a day. As part of the plea deal, Falaschi agreed to cooperate with federal prosecutors in any further investigation. According to court documents, that includes attending grand jury sessions and trials requested by the government, truthfully answering all questions and turning over all records requested by the government.
During Tuesday's hearing, Falaschi, dressed in a charcoal suit and tennis shoes, said little except to tell U.S. District Judge Jennifer Thurston that he suffered from hypertension and diabetes. In response to a question from Thurston, he testified that he has a high school education. He declined to speak to The Times after the hearing concluded.
His attorney, Marc Days, also declined to comment, as did the U.S. Attorney, Assistant U.S. Attorney. José D. Barton.
Falaschi faces a maximum sentence of eight years in prison on the two counts included in the plea agreement, which also states that the government “may recommend” that he be sentenced to the lower end of that sentence. A sentencing hearing was set for September. The agreement does not require financial restitution, and notes that the Panoche district agreed in 2021 to reimburse the Bureau of Reclamation almost 7.5 million dollars for unauthorized diversions of water from the Delta-Mendota Canal from 2009 to 2015.
Kevin Little, a Fresno attorney who has followed the case closely, said the settlement “probably marks an unfortunate end to what began as an important case.”
Little represents a St. Louis and Delta-Mendota Water Authority employee who discovered the illicitly modified standpipe in 2015. Little said the plea agreement “reflects the recognition that someone who was never charged with a crime penalty was perhaps the driving force behind the water.” fraud scheme.”
In the end, he said, prosecutors “demanded from Mr. Falaschi the necessary pound of flesh. Or at least an ounce.”
