By Marc Days
Publisher’s Note: Dear Reader, More than a month ago I received this letter from Attorney Marc Days and a request it be published in WaterWrights.net. It is not the usual type of story we run – to say the least. The incidents referred to took place almost a decade ago. We’ve never heard Mr. Falaschi’s version before now. Chances are you haven’t either. The publishing of this letter is not meant to exonerate or condemn anyone and as it says in our disclaimer, “The opinions expressed in this report are those of the author and do not represent any advertisers or third parties.” But it is very interesting and a part of our Valley’s water history. So here goes:
January 30, 2025
In Re Dennis Falaschi
In 2014, a private investigator was hired. As part of his services, the private investigator began conducting recorded surveillance of Dennis Falaschi’s family. A second private investigator was also utilized. As part of the investigation, in 2014 and 2015, several public records act requests were sent to a number of public entities and water districts. Panoche Water District (PWD), Panoche Drainage District (PDD), and the San Joaquin River Improvement Project (SJRIP) responded to public records act
requests and information responsive to the public records act requests was provided to the Federal Bureau of Investigation (FBI). Shortly thereafter, the federal government began a long and wide-ranging investigation and instigated a state audit.
On May 24, 2016, Mr. Falaschi was scheduled to testify on behalf of the Northerly San Luis Unit Districts before the United States Congress, House Natural Resources Subcommittee on Water, Power and Oceans. On the day he was scheduled to testify, the Congressional subcommittee advised that PWD was under federal investigation, and as a result, Mr. Falaschi did not testify.
Notably, the purpose of Mr. Falaschi’s testimony was to describe the success of the Northerly Districts in managing drainage on the west side of the San Joaquin Valley and promote passage of (HR 5217) the drainage settlement which would compel the Northerly Districts to assume from the United States the obligation to provide drainage services to the lands within the boundaries of the Northernly Districts in exchange for payment of $70,000,000, thereby making HR 5217 a great deal for the Northerly San Luis Unit Districts and taxpayers.
For over a quarter century, Mr. Falaschi worked closely with Reclamation to solve the drainage dilemma. In 1997, Mr. Falaschi implemented a bioremediation project, which involved experimenting with salt tolerant crops to reduce drainage. In 2000, Mr. Falaschi procured approximately $40,000,000 in grant funding from the state and federal government to purchase and develop land that would become known as the SJRIP, an expansion of the bioremediation project, that eventually grew to 6,000 acres displacing
toxic drainage from the Grassland Basin Drainers (an area comprised of over 90,000 acres of farmland), drainage which would have either ended up in the San Joaquin River or sterilized farmland. After an exhaustive federal and state investigation, not a single allegation or suggestion of misuse of the $40,000,000 in grant funding, spent to develop the SJRIP, was made by the federal government or state. The SJRIP is still operating today to manage drainage.
However, on February 20, 2018, the Attorney General of California filed a criminal complaint in Fresno County Superior Court unrelated to the grant funding. The complaint charged Mr. Falaschi with Conspiracy to Misappropriate Public Funds; Embezzlement and Misappropriation of Public Funds; and Unlawful Disposal of Hazardous Waste. Mr. Falaschi repeatedly requested that the state proceedings be continued until the conclusion of the federal investigation, however, the state insisted on moving forward in its prosecution.
As a result of the state’s insistence on moving forward with its prosecution, a preliminary hearing was held in January 2020, in Fresno County Superior Court. During the preliminary hearing it was revealed that the state was unaware of whether Mr. Falaschi had used, and repaid, credit cards consistent with PWD policy. At the conclusion of the preliminary hearing the court gutted the state’s case, dismissing Count 1 [conspiracy to misappropriate public funds], Counts 5 and 8 [misappropriation of public funds], and each of the two special allegations. Thereafter, the state joined Mr. Falaschi’s request to continue the state proceedings until the conclusion of the federal investigation.
On April 14, 2022, the federal government indicted Mr. Falaschi, charging him with theft of over 130,000 AF of federal water from the DMC over a 23 year period of time. The indictment alleged the value of the water exceeded $25,000,000 and that Mr. Falaschi used the proceeds from the theft to benefit himself. The indictment also charged Mr. Falaschi with three counts of filing false tax returns.
A federal jury trial was scheduled for March 12, 2024. Prior to trial the government proposed a resolution. Mr. Falaschi agreed to a resolution on the condition that the government agree, and the government did in fact agree in writing as part of the plea agreement, that: (1) significantly less water was taken than alleged in the indictment and that nearly all the water taken was used to protect farmland by allowing farmers to continue to drain by blending and recycling toxic drainage, rather than discharging the drainage to the San Joaquin River; (2) that Mr. Falaschi did not benefit financially, or otherwise, from the water taken; and (3) that Mr. Falaschi owed no taxes. Mr. Falaschi acknowledges that he authorized taking water from a rotted standpipe only to blend toxic drainage. Notably, according to an FBI report, a Senior Hydrology Technician for the Authority admitted having firsthand knowledge, since 2009, that PWD was blending drainage water with DMC water at the location of the rotted standpipe.
The federal plea agreement provided that the amount of water Mr. Falaschi was responsible for taking from the rotted standpipe was approximately 6% of what was alleged in the indictment. 6% of the 130,000 AF alleged in the indictment is 7,800 AF (over 23 years an average of 339 AF a year or 0.93 AF per day). The government cannot, and did not, dispute the evidence regarding the volume of water taken, which included: the pumps in the ditch that pumped water into PWD’s conveyance system; the electricity used in kilowatt-hours by the pumps as recorded by the district’s monthly PG&E records; the amount of kilowatt-hours of electricity needed, based on efficiency testing of the pumps, to pump 1 AF of water; and that the daily salt measurements in the ditch at issue, which conveyed water to the district’s conveyance system, reflected salt readings averaging over three times that of the DMC and often times over four times that of the DMC, indicating that on a daily basis very little DMC water was taken.
Because the facts were different than the allegations in the federal indictment, the federal court sentenced Mr. Falaschi to probation with no restitution owed. At no time did PWD’s governing body work with Mr. Falaschi, its General Manager for over 30 years, to learn these facts regarding the water diversion investigation.
After the federal case closed, Mr. Falaschi sent the California Attorney General PWD’s ledgers and minutes which showed a PWD practice, that predated Mr. Falaschi’s employment, of allowing PWD employees and Board members to use PWD credit cards for personal expenses and repay PWD. The ledgers record the
charges, employees and Board members being invoiced for the charges, and employees and Board members repayment of the charges. The records provided to the Attorney General showed that Mr. Falaschi acted in complete conformity with PWD policy. Mr. Falaschi also provided evidence to the California Attorney General that the hazardous waste charge was based on the statement of a single purported witness, a contractor that lacked credibility because the contractor provided multiple versions of what happened and contradicted a key witness, and only implicated Mr. Falaschi after the contractor was promised a dismissal of his pending criminal case.
In response, the state offered Mr. Falaschi a misdemeanor theft charge with no restitution owed and probation. Although Mr. Falaschi felt confident he would prevail at trial, at the age of 78, he opted to plead no contest to a misdemeanor rather than spend any further time and money on the matter.
Sincerely,
/s/
Marc Days
Counsel for Dennis Falaschi
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