Dennis Falaschi — indicted two years ago in an alleged $25 million federal water theft — pleaded guilty to a single count of conspiring to steal federally owned water in Fresno federal court on Tuesday.

Falaschi, who lives in Aptos, also pleaded guilty to one count of filing a false tax return.

The plea deal was perhaps a legal victory for the 78-year-old Falaschi, a former Panoche Water District general manager and one of California’s best-known water managers.

The original five-count indictment alleged that Falaschi exploited a leak in the Delta-Mendota Canal and engineered a way to steal large amounts of water from the federal Central Valley Project.

The Panoche Water District is headquartered in Firebaugh and serves farmers in Fresno and Merced counties, who grow a variety of crops on 38,000 acres.

Scheme Allegedly Began in 1992

The scheme allegedly began in 1992 when Falaschi learned that an abandoned drain turnout near milepost markers 94.57 and 94.58 on the Delta-Mendota Canal was leaking water into a parallel canal under the Panoche Water District’s control.

Falaschi told an employee to install a new gate inside a standpipe at the spot of the leak so that the site could be opened and closed on demand, according to court documents accompanying the original indictment. In addition, the employee was told to install a lid and lock to conceal and secure the apparatus. The original gate in the standpoint had been cemented shut years earlier.

A news release Tuesday from the office of U.S. Attorney Phillip A. Talbert stated that “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.”

That amount is a far cry from the $25 million water theft originally alleged by federal prosecutors.

“Evidence obtained during the government’s investigation further showed that Mr. Falaschi was just one of several individuals who were involved in the misconduct and the full extent of the misconduct was unknown to him,” a plea agreement document states.

Falaschi Faces Prison Time, Fines

Falaschi is scheduled to be sentenced on Sept. 16, 2024, before U.S. District Judge Jennifer L. Thurston. Falaschi faces a maximum of five years in prison and a $250,000 fine for the conspiracy to commit water theft and three years in prison and $100,000 fine for the tax charge.

However, his sentence will be determined at the discretion of the court after consideration of statutory factors and federal sentencing guidelines.

This case stemmed from an investigation by the U.S. Department of the Interior’s Office of Inspector General, the IRS Criminal Investigation, and the FBI. Assistant U.S. Attorneys Joseph Barton and Henry Carbajal III are prosecuting the case.

Panoche Agreed to Repay $7.5 Million to Bureau of Reclamation

In 2021, Panoche agreed to pay the U.S. Bureau of Reclamation nearly $7.5 million to compensate for the “unauthorized diversion of water” from two federal canals, according to published reports.

The district also agreed to pay $798,000 plus $172,000 in interest to the San Luis & Delta-Mendota Water Authority, which delivers water from the Bureau of Reclamation to Panoche and 28 other member districts.