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“In towns and cities... there is no more important institution than the local paper.”
Warren Buffett
Less than a year after insurance cancelled for “Board dysfunction”, former GM Perez multi-million dollar lawsuit prompts 2nd cancellation
By Brian Hews
For the second time in less than a year, the insurance carrier for the Central Basin Municipal Water District (CBMWD) has taken the rare action of canceling the District’s employee liability insurance.
The policy provided by the District’s insurance carrier, ACE Insurance, expired on June 15, 2015 and ACE Insurance has chosen not to renew. Although reasons for the cancellation were not given in open session, sources within the District who request anonymity claim that the cancellation was due to the liability caused by former General Manager Tony Perez’s multi-million dollar lawsuit alleging retaliation, defamation and breach of contract.
At the June 22, 2015 Board meeting, the District voted to award a replacement contract to Kingsale Insurance for an annual premium of $155,358, nearly doubling the cost of insurance. The increase comes despite the coverage being reduced from $2-million to $1-million. The new policy also requires the District to pay a $250,000 deductible, which is an additional cost from previous policies.
In March 2014, HMG-CN exclusively reported that CBMWD’s former insurance carrier, ACWA-JPIA had voted to cancel the District’s employee liability insurance for excessive claims stemming from “board dysfunction.”
As has been widely reported in HMG-CN, ACWA-JPIA had given the District the opportunity to retain its insurance contingent on a long list of conditions, including:
Directors Apodaca, Vasquez and Roybal failed to attend a Special Board meeting in March 2014 to discuss JPIA’s proposal, forcing cancellation of the meeting due to lack of quorum. The JPIA Board subsequently voted to cancel the District’s policy.
In October 2014, Directors Apodaca, Vasquez and Roybal voted to terminate General Manager Perez “for cause”, eliminating the need to pay Perez the severance required by his employment contract. This despite the Board first providing Perez a written settlement proposal of 12-months severance and informing Perez he had 21-days to review the offer. Perez was informed that the Board had reneged on its offer and was terminating him for cause several hours later that same day as he was driving home. Perez claims he was never given a reason for the termination.
HMG-CN first reported in January 2015 that Perez had filed an $8-million claim against the District and Directors Apodaca, Vasquez and Roybal alleging wrongful termination and defamation. In June 2015, attorneys for Perez filed a lawsuit against the District in Los Angeles Superior Court alleging retaliation, defamation and breach of contract.
HMG-CN first reported in September 2014 that the Los Angeles County Board of Supervisors passed an Urgency Motion requesting a State Audit of CBMWD, stemming from reports that the Board intended to fire Perez and remove Director Phil Hawkins as President. At the time, County Supervisor Don Knabe commented, “We cannot put more than 2 million people in 24 cities and unincorporated Southeastern Los Angeles at this kind of risk because of the outrageous and bungling behavior of this Board.”
In March 2015, HMG-CN reported that the California State Legislature’s Joint Audit Committee had ordered a financial audit of CBMWD. Assemblyman Anthony Rendon said in an emailed statement, “… audit ensures Central Basin is operating and spending public funds in a manner that fulfills its mission of serving Southeast Los Angeles County residents with quality drinking water.” Sources at the District say that the audit is anticipated to be complete before the end of the year.
When asked why ACE Insurance chose not to retain CBMWD as a client, an angry CB Director Art Chacon said, “Isn’t it obvious? You have three directors who refuse to listen to their lawyers, professional staff and insurance carriers. Every decision they make is based on how much money will be kicked back to them, and, as a result, the rate-payers will continue to pay millions for their actions. It’s a miracle that anyone will insure us based on our reputation.”