Delta Mendota Canal cropped photo by flickr user Dave Park under CC license https://creativecommons.org/licenses/by/2.0/

A federal grand jury returned a five-count indictment Thursday against Dennis Falaschi, 75, charging him with conspiracy, theft of government property and filing false tax returns, U.S. Attorney Phillip A. Talbert announced.

According to court documents, Falaschi — currently a resident of Aptos, California — was the general manager for the Panoche Water District in Fresno and Merced Counties near the communities of Dos Palos, Firebaugh and Los Banos. He allegedly exploited a leak in the Delta-Mendota Canal and engineered a way to steal more than $25 million in federally owned water.

According to court documents, in 1992, Falaschi was informed that an old, abandoned drain turnout near milepost markers 94.57 and 94.58 on the Delta-Mendota Canal was leaking water from the Delta-Mendota Canal into a parallel canal that the water district controlled. The drain was connected to a standpipe on the bank of the Delta-Mendota Canal that used a gate and valve to redirect water from the Delta-Mendota Canal into the water district’s canal. The gate had been cemented closed years earlier, but had since cracked, allowing water to pass.

After that, authorities say Falaschi instructed an employee to install a new gate inside the standpipe so that the site could be opened and closed on demand. He later allegedly instructed the employee to install a lid with a lock on top of the standpipe and an approximate two-foot elbow pipe off the valve of the standpipe that angled down 90 degrees into the water district’s canal. The lid concealed the theft because it prevented people from seeing that the gate inside the standpipe was functional. The elbow pipe further concealed and expedited the theft because it enclosed the water flow from the Delta-Mendota Canal into the water district’s canal and was installed in such a way that it was generally submerged under the water.

Falaschi subsequently instructed employees to use the site to steal federal water from the Delta-Mendota Canal on multiple occasions until the site was discovered in April 2015. He used the proceeds of the theft to pay himself and others exorbitant salaries, fringe benefits, and personal expense reimbursements, according to court documents.

Additionally, Falaschi is charged with filing false tax returns in 2015 through 2017. According to court records, he failed to report over $900,000 in income to the Internal Revenue Service that he received from private water sales.

The case is the product of an investigation by the U.S. Department of the Interior’s Office of Inspector General, the IRS-Criminal Investigation, and the Federal Bureau of Investigation. Assistant U.S. Attorney Joseph Barton is prosecuting the case.

If convicted of theft of government property, Falaschi faces a maximum penalty of 10 years in prison and a fine up to $250,000. If convicted of conspiracy, he faces a maximum penalty of five years in prison and a fine up to $250,000. If convicted of the tax charges, he faces a maximum penalty of three years in prison and a fine up to $250,000. Any sentence, however, would be determined at the discretion of the court.