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By Dave Toplikar (contact) 
Tuesday, May 10, 2011 | 6:06 p.m.
Related Document (.pdf)
Authorities made a second arrest Tuesday afternoon in connection with an alleged extortion, bribery and money laundering scheme involving some $8.4 million worth of Nevada water rights.
Michael E. Johnson, 51, former chief hydrologist of the Virgin Valley Water District, was booked into the Clark County Detention Center on charges he conspired in the alleged scheme with Robert Alan Coache, 52, former deputy state engineer for Southern Nevada in the Nevada Division of Water Resources.
Coache was arrested Monday. Both men are each being held on $500,000 bail and are expected to have court hearings later this week in Las Vegas Justice Court.
The Clark County District Attorney's office has filed a 25-count complaint against Coache and Johnson, saying they were paid more than $1.3 million in bribes to help Bunkerville landowner John Lonetti Jr. sell two Virgin River water permits to the Southern Nevada Water Authority for about $8.4 million.
The complaint alleges the activity took place between Jan. 1, 2006, and Sept. 1, 2010. It says the two men set up a company, Rio Virgin LLC, to accept the $1.3 million from Lonetti and then paid themselves from that company.
The complaint lists 18 counts of money laundering and says the money paid by Lonetti to acquire the water rights was withdrawn from Rio Virgin LLC by Coache and Johnson.
A report filed by Metro Police Detective N. Chio says Chio and another officer first met about the case on Oct. 11 with several members of the Virgin Valley Water District and members of the district attorney's office, including District Attorney David Roger.
Water district board members had asked for the meeting to report "possible criminal misconduct" by Johnson.
Chio's report said the water board had earlier met in a closed session with Johnson because of several allegations of wrongdoing on his part.
During that closed meeting, Johnson admitted to the board that he had been a "consultant" for a wealthy landowner, John Lonetti Jr., without notifying the board — a violation of his position.
Johnson told the board at that meeting he had received fees in the "thousands of dollars" from Lonetti in exchange for unknown services involving a water rights transaction involving Lonetti, the Southern Nevada Water Authority and the Virgin Valley Water District, Chio's report said. After that closed hearing, Johnson resigned as chief hydrologist, the report said.
Chio said the water board's attorney also brought up allegations about a business connection that Johnson had with Coache and there were rumors that their relationship was used to facilitate several transactions in the past.
At that meeting, Metro was asked to investigate the allegations, Chio said.
Chio said in his report that the transaction involved Johnson serving as an intermediary to sell two permits Lonetti had to the Southern Nevada Water District.
Chio's report said Johnson met with John Entsminger, general counsel for the SNWA, who told him Lonetti wanted to sell two Virgin River permits, one of which was more valuable because it was from 1914 and had a higher priority than the other one, which was from 1990.
Enstminger told Johnson he wasn't interested in the 1990 permit. But then Johnson proposed a water swap.
He allegedly told Enstminger he could arrange for the Virgin Valley Water District to trade 890 acre-feet of water from the Bunkerville Irrigation Company with an earlier priority date in exchange for the 1,200 acre-feet in the 1990 permit — if the SNWA would first buy the two permits from Lonetti.
Enstminger agreed, Johnson got the Virgin Valley Water District to make the trade and the entire transaction was done in May 2008, with the $8.4 million transferred to Lonetti's trust on May 20, 2008, the report said.
Chio also said he was able to find that Coache and Johnson owned the Rio Virgin LLC and had set it up July 30, 2007.
And investigators also found that a deposit was made into the Rio Virgin LLC account of $1,327,500 from the Lonetti Trust on May 2, 2008, Chio wrote
"These funds were then subsequently used to purchase several homes and transferred into other individuals accounts belonging to either Johnson or Coache," Chio wrote in his report.
He also wrote that a wire transfer of $15,000 was discovered from Rio Virgin LLC to Johnson's personal bank account with a memo that said "Winters."
Chio reported he learned that money was paid to Michael Winters, the general manager of the Valley View Water District at that time, who would have had to approve the VVWD's trade of water acreage to make the water swap between Lonetti and the SNWA go forward.
Chio reported that after the $1.3 million was disbursed, the Rio Virgin LCC was dissolved, making it appear the sole purpose of Rio Virgin was to receive the money from the Lonetti Trust.
Chio also reported that on March 29, he and another officer interviewed Lonetti at his ranch in Bunkerville. Lonetti told Metro officers that in early 2006 he had tried to get a water permit to irrigate 400 acres on his property.
Lonetti said the permit was denied, so he went to Johnson to get his help in getting the permit and hired Johnson for an amount he wouldn't disclose, Chio reported. Lonetti said that was the only time he had hired Johnson, Chio said in his report.
Lonetti said he didn't know Coache, but he had heard about him from Johnson, and knew Johnson had connections in the state engineer's office, Chio's report said.
"Lonetti admitted to writing a check from Johnson's consulting fee to Rio Virgin LLC," Chio's report said.
CORRECTION: Clarification: In an earlier version of this story, John Lonetti's first name was incorrectly written as Michael Lonetti. "Michael Lonetti" is how Lonetti's name is listed in the criminal complaint. | (May 12, 2011)
Is there ANYBODY tat is NOT on the take in this county.. It seems that this is just status quo. No morals no accountability.. It it ios not even looked at it wrong anymore.. we are NOW reaping what we sow in this town
Typical greedy government employees.
^^^^^^^
Typical Teabagger comment.
i am not reaping anything but lousy government/state employees. maybe these two guys can go to jail with the dept. of motor vehicle employee who issued illegal licenses to illegal immigrants. america.... what happened to you? it is so close to being over for us.
I LOVE seeing the DA go after white collar criminals.
Apparently gmag39 thinks only capitalists can be greedy.
One of the earlier above comments was a gas :)
Actually, this past week has been good for those of us on the side of decency, transparency, and public accountability. Now if we can just sweep the Goodmans from office... :) :) :)
So Lonetti was the harmed party?
What exactly was the crime?
Water flows uphill toward money. Is that illegal now?
The real criminal here is rich greedy person who owns the water right and who was willing to bribe these two guys.
Why isn't this rich guy being charged with bribery?
Another case of rich people getting off and the little guy being screwed!
Lonetti is claiming that Johnson and Coache made him give them the money, thus the extortion charge.
This is probably in exchange for his cooperation. Without his cooperation, the case is much harder to prove.
Noindex - you can't lay the actions of these two public employees off on the entire public sector. If one accountant commits fraud, would you say all accountants are crooks. If one doctor uses poor judgement, would you say all all doctors are killers?
If your answer to either of these questions is yes, you're small minded and not able to comprehend individual actions versus those of the whole. Everything is not black or white.
Chill on the govt employee bashing. When Enron did what they did (which was catastrophic by comparison,) did we trash talk all private sector businesses and their employees all the way down the line to the burger king drive thru boy and the walgreens cash register girl?
There are actually some govt employees (and I know this for a fact,) that simply show up for work everyday, do their jobs to the best of their ability and without looking to rip anyone off.
WaterBank handles such transactions everyday. We are licensed brokers and we are all bonded. We also own 100,000 acre feet from the Carson River. Why would someone think they need to hire someone within the system and bribe them. That would certainly be a conflict of interest. We have always found the Carson City State Engineer Office folks extremely honest and helpful.
There are bad apples in every bunch. Here in New Mexico we have a few State Engineer employees I would like to send to Outer Mongolia. Because of them I have the lamentable honor to have been before our Supreme Court on cases against the State Engineer more than anyone in the history of the State. As a matter of interest our first Territorial State Engineer was indicted by the United States on October 24, 1906 for Land Fraud. He, in fact, approved an application for water rights from his business partner J.H. Sloan on the same day it was filed. JH Sloan, himself was indicted for land fraud by the United States in 1911. He was defended by the leader of the Santa Fe Ring, Thomas B. Catron. One of the most illustrious members of the Santa Fe Ring was A.B. Falls of the memorable Teapot Dome Scandal. New Mexico water law has been haunted by those early actions ever since.
Senatorbill:
Thanks for the history lesson! As one who used to live in Las Vegas, New Mexico, I am not surprised at the level of corruption associated with water rights in New Mexico (more than 100 years ago or today) nor here in Nevada (kind of a "sister" state if you will in the wild West). Water will be the new "oil" of the 21st century as fresh water becomes evermore scarce.
It is ONE government employee NOT ALL government employees. You cannot hold the thousands of "Typical Government Employees" accountable for the actions a few people. I am a government employee and I am as aghast at this as you are.