Gulf of California: Millions Stolen but No Jail Time for Decades Long Financial Fraud by City Water Bandit

The Department of Justice claim $25 Million Dollars of Water Theft. Despite this, it dried-out to only $3.5 Million at trial, despite civil compensation by the State to the Federal Gov. of $7.5M.  The numbers don’t add up.

A water manager of a public agency, who pleaded guilty to stealing as much as $3.5 million of taxpayers’ water, won’t serve time in prison.

At Fresno federal court on Monday, Judge Jennifer Thurston sentenced Dennis Falaschi to five years’ probation and six months of home detention. He also was fined $10,000.

Falaschi, 78, served as general manager for the Panoche Water District in western Fresno County, from 1986 through 2017.

The federal government accused him of diverting up to $3.5 million of water from the Delta-Mendota Canal and illegally selling it on the market.

Attorney Marc Days, representing Falaschi, successfully argued against prison time during a one-hour sentencing hearing. He said that Falaschi had survived a stroke and has diabetes.

Days also questioned whether Falaschi could survive a prison sentence.

“Who knows how much longer he has?” Days said.

In 2022, the government charged Falaschi with one count of conspiracy, one count of theft of government property, and three counts of filing a false tax return. He changed his plea to guilty in May.

Prosecutors Wanted One Year

Prosecutors sought a sentence of 12 months and a day. The federal probation department recommended six months.

Thurston at times seemed to waffle about her decision. She cut off Days at one point, when the attorney argued that federal sentencing guidelines did not reflect the actual amount of water stolen.

“I’m concerned about deterrence,” Thurston said from the bench. She also quoted the line that “whiskey is for drinking, water is for fighting.”

Assistant U.S. Attorney Joseph Barton argued the significance of the water loss.

“He should go to prison and serve a meaningful sentence,” Barton told the judge. “That needs to be punished … to send a message .. that this will not be tolerated.”

Initially accused of stealing $25 million worth of water for personal benefit, the plea agreement revised the amount of stolen water to between $1.5 and $3.5 million for the benefit of the district.

Scheme Began in 1992

As GV Wire’s Bill McEwen previously reported, the scheme allegedly began in 1992 when Falaschi learned that an abandoned drain turnout in the canal was leaking water into a parallel canal under the Panoche Water District’s control. Falaschi ordered employees to install equipment to be able to divert water.

Days said that Falaschi wanted to protect farmland and prevent toxic discharge into the San Joaquin River, by blending the stolen federal water with other sources and delivering it to farmers.

Falaschi briefly spoke to the court.

“I should have found a better way to deal with a toxic problem, to save things from being destroyed,” Falaschi said.

He apologized to the court, but said he had to do something because the federal government was not paying attention to water issues.

Thurston Justifies Decision

Thurston — a President Joseph Biden appointment confirmed in 2021 — told Falaschi what he did was wrong.

“I don’t think what you did is justified. What you don’t do is steal,” Thurston said.

But, she also said that it is unlikely Falaschi will re-offend.

“Does he have to risk his life over it?” Thurston said.

Days said that Falaschi cares for ailing family members, including his wife and children.

Neither Falaschi, nor his attorneys, Days and former federal judge Oliver Wanger, commented after the hearing.

Barton declined to comment on the sentence, as did U.S. Attorney Phillip A. Talbert.

Fresno, CA — Dennis Falaschi of Aptos, pleaded guilty today to one count of conspiring to take federally owned water and one count of filing a false tax return, U.S. Attorney Phillip A. Talbert announced.

According to court records, from 1992 through approximately April 2015, Falaschi was the general manager for a public water district in Fresno and Merced Counties (PWD) that sold water to farmers with over 38,000 acres of farmland.

PWD obtained water that it sold by purchasing water from the federal government and collecting drainage water from farms.

The federal water that PWD purchased came from the Delta-Mendota Canal (DMC), which is a federally owned canal operated by the United States Department of the Interior’s Bureau of Reclamation.

PWD purchased federal water from the DMC pursuant to a contract that it entered into with the Bureau of Reclamation.

The federal water that PWD purchased from the DMC was fresh water that could be used for farming immediately.

The drainage water that PWD collected from farms was high in salt content and toxins, and it needed to be blended down with fresh water before it could be reused.

Falaschi learned that water from the DMC was leaking from an old standpipe into a parallel canal in PWD.

The parallel canal was owned by the then-president of PWD’s board of directors.

PWD employees subsequently modified the old standpipe so that it would not leak and could be opened and closed.

This allowed for water to be taken from the DMC on demand.

The amount of federal water that was illegally taken for which Falaschi was responsible was valued at over $1.5 million but under $3.5 million.

Nearly all of that water was taken to blend down and reuse drainage water.

Moreover, according to court records, from 2011 through 2016, Falaschi entered into private water sales where he received payments.

The water sold was legitimately sourced from outside PWD and was not federally owned water.

Thereafter, in March 2016, Falaschi signed and filed an individual income tax return with the Internal Revenue Service where he did not report the income that he received from the private water sales.

This case is the product of an investigation by the IRS Criminal Investigation (CI), the U.S. Department of the Interior’s Office of Inspector General, and the Federal Bureau of Investigation. Assistant U.S. Attorneys Joseph Barton and Henry Carbajal III are prosecuting the case.

Falaschi is scheduled to be sentenced on Sept. 16, 2024, before U.S. District Judge Jennifer L. Thurston.

Falaschi faces a maximum statutory penalty of five years in prison and $250,000 fine for the conspiracy to commit water theft and three years in prison and $100,000 fine for the tax charge.

The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more.

CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate.

The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.