TO THE EDITOR:
As counsel for John Lonetti throughout the civil case brought against him by Virgin Valley Water District (“VVWD”), I have first-hand knowledge of many items that have been unreported and/or misreported about this civil case and the settlement thereof in various news resources, including the Mesquite Local News and Mesquite Citizen Journal. We have remained patient in the hopes that the Mesquite Local News would correct its errors and have the decency to restore Mr. Lonetti’s reputation based upon facts and truth rather than the vindictive and false information provided by others, including MLN’s current editor, Ms. Ellestad. Our hopes have remained unfulfilled which has prompted this letter.
Under a byline dated May 16, 2014, the Mesquite Local News (“MLN”) published an article titled Water District Settles Suit And Adopts Budget. In that article, MLN wrote as follows: “Winters and Lonetti reached a settlement agreement with the district earlier this year when Winters paid the district $15,000 and Lonetti paid the district $4.74 million.” The MLN May 16, 2014 report of the settlement between Mr. Lonetti and VVWD misinforms as to the terms and conditions of settlement. The common sense and natural interpretation of the MLN report by the lay person is that Mr. Lonetti paid VVWD $4.74 million in exchange for his release from liability and settlement of the case. Such an interpretation of the Settlement Agreement is flat out wrong.
From our perspective, VVWD’s lawsuit against Mr. Lonetti was nothing more than a case of buyer’s remorse on the part of VVWD. The documentary record in this case clearly shows that between 2005 and 2008, while Mesquite was recognized as one of the fastest growing small cities in the United States, the VVWD Board was frantic to acquire more water resources to service the anticipated future consumer demand for water fueled by expansive growth. In 2005, John Lonetti owned 591 acre feet per year of groundwater in the Virgin River basin. He was the only private person to own a considerable block of groundwater that could be purchased by VVWD. Since groundwater is the only source of potable drinking water for Mesquite and the surrounding area, Mr. Lonetti’s groundwater, which could service more than 1,200 newly developed homes, was viewed by VVWD as a strategic asset worth acquiring. VVWD approached Mr. Lonetti about buying the groundwater, not vice versa. Mr. Lonetti agreed to sell the groundwater and the VVWD Board unanimously approved buying the groundwater for $15,000 per acre foot per year for a total of approximately $8.8 million.
In the heady days of hyper growth and construction, VVWD believed it had a greater need for water than it had for cash in its coffers. More recently, in the absence of growth, VVWD perceived a need for more cash and less of a need for water reserves.
We believe that VVWD had no valid civil case regarding this transaction. However, Mr. Lonetti still had a use for groundwater on his property and, as part of a settlement, offered to buy back 100 acre feet per year of the water he sold in 2005 for the same $15,000 per acre foot that he received from VVWD. Thus, VVWD kept 491 acre feet per year of the groundwater it bought from Lonetti and Lonetti kept the approximately $7.3 million VVWD paid him for it. Lonetti has bought back the 100 acre feet per year and paid VVWD $1.5 million that he had previously received from VVWD to reacquire 100 acre feet of the water he originally sold to VVWD.
Mr. Lonetti stood ready, willing and able to have a jury decide that VVWD had no legitimate claim to make against him. Mr. Lonetti would not have paid one dime to VVWD as blood money to buy himself out of the meritless lawsuit.
Despite all the misinformation circulated about criminal charges being filed in connection with Lonetti’s water transactions, no person has ever been charged criminally with any wrongdoing whatsoever in connection with this 2005 transaction. The criminal charges filed against Michael Johnson, Michael Winters and Robert Coache had nothing to do with this transaction.
The only transaction at issue in the civil case that also involved any criminal proceedings relates to a complicated three party transaction between John Lonetti, Southern Nevada Water Authority (“SNWA”) and VVWD which occurred in 2008. Lonetti sold Permit 3085 (i.e. surface water with a pre-1929 priority date) and Permit 54383 (i.e. 1,200 acre feet per year of surface water with a 1990 priority date) to SNWA. In MLN’s publication under Ms. Ellestad’s name on March 19, 2015, Ms. Ellestad falsely claimed that “Lonetti agreed to ‘buy back’ 1,200 acre feet of non-potable Virgin River water from VVWD for $3.240 million that he had sold to the District in the 2008 transaction.” Lonetti sold nothing to VVWD in that transaction and received nothing from VVWD in that transaction.
After Lonetti sold the 1,200 acre feet of surface water to SNWA, SNWA traded the 1,200 acre feet per year of 1990 priority water it had acquired from Lonetti along with other water rights to VVWD in exchange for approximately 890 acre feet per year of other pre-1929 priority date surface water. In other words, in conformity with VVWD’s development plan, VVWD increased its water supply by acquiring 1,200 acre feet of water from SNWA while giving up only 890 acre feet of water. The pre-1929 priority date of the 890 acre feet of water was more important to SNWA than the amount of water it was giving up because of complicated water right laws which allowed them to more easily transport that 890 acre feet of water to its service area than the 1,200 acre feet it gave up.
In his deposition in the civil case, Board member Ted Miller, who voted to approve the VVWD/SNWA trade, confirmed that the actual monetary value of the water being exchanged was not important to the VVWD Board; rather, what was important was that VVWD was getting more water from SNWA that it could lease to its customers for irrigation purposes than it was giving up. (“QUESTION: And the reason you wouldn’t have asked [about the value of the water being traded] is because what was important was getting more water in exchange from Southern Nevada Water Authority than you were giving up, right? ANSWER: Right.” Deposition of Ted Miller 11/15/12, at page 71, lines 11-15). It was not until three years after the transaction that VVWD ever maintained that the trade with SNWA was unfair because VVWD gave up more value to SNWA than it received back.
As stated above, Mr. Lonetti received nothing from VVWD in the 2008 transaction. SNWA determined the fair market value of what it was willing to pay Lonetti for the water and Lonetti accepted it. SNWA and VVWD negotiated the terms of their trade. During his deposition in the civil case, Ted Miller maintained that SNWA cheated VVWD in the transaction because SNWA did not tell the VVWD Board that the water SNWA was getting from VVWD was more valuable than the water that VVWD was getting from SNWA.
After SNWA traded the 1,200 acre feet per year of water to VVWD in 2008, Mr. Lonetti leased that water from VVWD at market rates because he had an irrigation need for it. As part of the settlement of the civil lawsuit, Mr. Lonetti offered to buy that 1,200 acre feet of water from VVWD for the same price that SNWA paid him for it in 2008: i.e. $3.24 million or $2,700 per acre foot per year. Again, Mr. Lonetti would not have paid one dime in blood money to settle a frivolous lawsuit but was willing to purchase back water at the same price he sold it to SNWA years earlier.
I have read much innuendo and speculation in MLN and from Ms. Ellestad that because Johnson, Winters and Coache were criminally charged in connection with the 2008 tri-party transaction between and among SNWA, VVWD and Lonetti, Mr. Lonetti must have done something criminally wrong. Reprehensively, in MLN’s March 19, 2015 publication, Ms. Ellestad writes: “Lonetti agreed to a ‘proffer’ from the DA which kept him from being charged in criminal proceedings if he cooperated with the investigation and prosecution of the others.” Ms. Ellestad is totally ignorant of criminal procedure, has committed journalistic malpractice in not reading the Proffer Agreement and/or is deliberately trying to impugn the reputation and integrity of John Lonetti.
Every careful attorney seeks to obtain a Proffer Agreement from the government prior to allowing their client to speak to law enforcement authorities who are conducting a criminal investigation. In simplest terms, in a typical Proffer Agreement, the government agrees not to directly use any statement made by a client during his/her interview against the client in any possible future criminal prosecution. There is no general grant of immunity from and against criminal prosecution and there is no agreement to cooperate in the future. The only agreement is that the client will be truthful and honest during the interview and the government won’t use any statement made by the client in the interview as evidence against the client in a subsequent prosecution, if any. That was the only agreement between the District Attorney and John Lonetti.
The fact is that, after a thorough investigation, the government determined not to charge Mr. Lonetti with any wrongdoing. The Assistant District Attorney testified in a hearing in the VVWD case against Mr. Lonetti and confirmed that fact. Further, while Winters was initially charged criminally, the criminal case was dismissed in its totality as to him. Finally, the charges against Johnson and Coache relate to whether they, as public officers/employees, should have received any money that was in any way connected to the 2008 transactions rather than on anything unlawful that Lonetti or SNWA did. Among other things, Johnson and Coache were charged with committing extortion by a public officer or employee in violation of NRS 197.170. If they are guilty of that crime, the victim of the extortion was John Lonetti. To suggest that the victim of a crime is somehow culpable because others were charged with committing a crime against him is logic that comes right out of Alice in Wonderland. The fact is that John Lonetti does not view himself as a victim of extortion by Johnson or Coache and has never lodged a complaint against either of them for anything they have done. In fact, Lonetti never even met or spoke with Coache until after VVWD brought its lawsuit against Lonetti. If a criminal trial is held and Mr. Lonetti is called as a witness, he will testify truthfully and honestly as is every citizen’s obligation and his testimony will not be pursuant to any non-existent cooperation agreement with the government.
I suspect there are many unanswered questions for the good people of the Virgin River Basin to ponder that have come out of the civil litigation between VVWD and Mr. Lonetti. It is not my intent to try to answer those questions for you. I only hope to set the record straight as to the ultimate settlement of the case and to help restore the good name and reputation of John Lonetti.
Mark S. Dzarnoski, Esq.
Gordon & Silver, Ltd.