Interior Department Mogul
High-Powered California Couple
Accused of Looting Family Trust

A high Interior Department official, active in federal efforts to impose harsh water rules on Fallon farmers, is being accused of looting a California family trust to illegally fund political campaigns for himself and his wife.
In a copyrighted story by former Sacramento Union editor Joseph Farah, the new Internet paper World Net Daily names both Deputy Secretary of the U.S. Department of Interior John Garamendi and his wife, Associate Peace Corps director Patricia Wilkinson Garamendi, as subjects of the charges.
After Bill and Hillary, the political-appointee Garamendis are the highest-ranking husband-and-wife team in the Clinton administration.
John Garamendi, nominated to his current post by Clinton in 1995, is a former California insurance commissioner and was an unsuccessful candidate for the 1994 Democratic nomination for governor.
Patricia, or "Patti," Garamendi, an unsuccessful candidate for both the California legislature and the U.S. Congress, was appointed by Clinton in 1993 to be Administrative Director of Volunteer Recruitment for the Peace Corps.
The accusations against the Garamendis, according to Farah's report, come from William Freitas, current president and executive director of Bankers Community Performance Concerns, Inc.



Formerly Freitas was president and chief executive officer of the Bank of Lodi, in Lodi, California.
According to Freitas, he was fired from the Bank of Lodi post in July 1994, and part of the reason was his refusal to allow the Garamendis to loot a family trust account for loans to their political campaign funds.
"My sudden departure from the bank was due to my consistent refusal to support imprudent self-dealing loan requests from certain directors," he said.
According to Freitas, one of those requests especially stands out in his mind because of its "serious political ramifications."
In the World Net Daily account attributed to Freitas, in the loan portfolio of the Lodi bank at the time he left were two borrowings, totaling $400,000, from the J.E. Wilkinson Trust. Co-trustees were Patti Wilkinson Garamendi, her two sisters and her mother, Merle Wilkinson. Patti Garamendi alone, however, had power of attorney. With her husband, John, she directed the financial activities of the trust.
Freitas says that one of the bank's directors, Ray Coldani, helped the Garamendis


 
manage the assets of the trust, and in February 1994, advised Freitas that the trust was "going broke." Patti's mother Merle Wilkinson was attempting to revoke her daughter's power of attorney, and Coldani urged that "financial accommodations" be made to keep the trust afloat, says the World Net Daily story.
Freitas then met with Merle Wilkinson and her husband, Peter, to discuss the loan request to the trust.
"It was alleged that the Garamendis had misappropriated in excess of $1 million from the trust to cover election campaign expenses," said Freitas. "That's what Patti's mother was charging."
As Deputy Secretary of the Interior, John Garamendi is responsible for much-criticized new rules proposed to govern the Fallon, Nevada Newlands Water Project. The rules, published in the Federal Register by the Bureau of Reclamation last December, were signed by Garamendi, as was a February, 1997 document announcing details of computer-modeling used in developing the water-use rules to which the Fallon farmers are being asked to conform.
According to a recent Congressionally funded study of Department of Interior water activities in Western states, the putative water-conservation




rules -- "operating criteria and procedures," or OCAPS -- strike most non-federal observers as not only counter-productive, but also needlessly punitive.
The DOI policy "seems to be designed more to punish than to serve a proactive solution. Again, it seems advisable to overcome the urge to punish in the long-term interest of a larger solution," says a report prepared for the Western Water Policy Review Advisory Commission [WWPRAC].
"[T]he continued pursuit of the 'forced march to efficiency' represented by OCAPs may have been one of the most negative tactics in which the federal government has engaged," wrote the consulting firm asked to appraise DOI actions. "The lesson of OCAPs and [water] recoupment appears to be that processes so 'heavy on the stick and light on the carrot' are likely only to increase levels of conflict and exacerbate the difficulty of reaching overall acceptable solutions in western water policy."
According to Clearwater Consulting Corporation, the contractor who prepared the 250-page Truckee-Carson River Basin Study, "the new OCAPs in particular raise many ... appearance of fairness issues," as they "represent a further 'turning of the screw'"


 
on Fallon farmers without any justification.
"The appearance," said the report, "is that OCAPs [are] being used to force sales of water rights." One reason for that appearance is that, according to Nevada State Engineer Mike Turnipseed, the OCAP demands Garamendi published in the Federal Register can't be met by the Fallon farmers.
"I don't believe that there is an irrigation district in the West using flood irrigation that can achieve the new OCAPs mandate (75% efficiency)." Said Turnipseed. "It is an unrealistic goal."
The WWPRAC study notes widespread opinion, outside the federal government agencies, that the feds have been inflexible and unrealistic.
"There appears to be a feeling on both the local and state levels that these requirements are rammed through by the federal government with little consultation or consideration of their impacts."

One example of this, said the WWPRAC report, was Garamendi's publishing of the proposed new OCAPs December 9.

"[T]he new OCAPs were circulated with only 30 days allowed for comment over a period that included the Christmas and New Years holidays (as well as the recent floods)," notes the study.

According to Joseph




Farah's World Net Daily story, the diversion of trust funds to campaign expenses "came at a time when Patti Garamendi was being defeated by Rep. Richard Pombo, R-Tracy, in a bid for a congressional seat, and John Garamendi was conducting an unsuccessful race to be governor of California."
And, according to former bank president Freitas, the campaign bucks didn't just not stop at the Bank of Lodi.
"My review of the Garamendi-Wilkinson borrowing relationship revealed that Garamendi also has extensive financial dealings at the Union Safe Deposit Bank in Stockton," he says. "It appears that the deposits of FDIC-insured banks have been used illegally to assist in the political pursuits of the Garamendis."
The World Net Daily story says a review of four Garamendi campaign committee disclosure forms from 1990 through 1995 shows that more than $3 million was received, including $500,000 borrowed from the Union Safe Deposit Bank.
"The last of those disclosure forms, in December 1995, indicates that much of the loan money used to finance the campaigns was listed as bad debt, forgiven or otherwise unpaid."
"It was apparent that additional extensions of credit to the trust would


 
be considered imprudent and expose the bank to serious criticism from bank regulators," said Freitas. "Furthermore, it appeared that the provisions of Title 2 U.S.C. 441b regulating political contributions would apply along with certain sections of the criminal code. Therefore the loan request was withdrawn and a proposal for the bank to accept a deed in lieu of foreclosure was refused."
Section 441b prohibits corporate contributions to federal campaigns and strictly limits the amount of individual donations or loans to $1,000.
Garamendi was also prominent in the Clinton Administration's early push for government-run medical care. According to a March, 1993 Washington Post story, Walter Zelman,




a key operator in Hillary Clinton's Health Care Task Force and head of several committees, was a former Garamendi aide. Garamendi, said the Post, "is credited with convincing Bill Clinton early in the campaign to support" the particular model of health care that eventually emerged. That model called for "the formation of giant agencies -- called health insurance purchasing cooperatives (HIPCs) - that would oversee approved health plans." Garamendi himself had already made a very similar proposal. According to an analysis prepared for the conservative Heritage Foundation, the plan would have put at risk about 6.6 million small business jobs, or about 10 percent of all small business employment.


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