D.A. Requests Reams of Water District Records : Investigation: Documents sought in the conflict-of-interest probe of the Santa Margarita agency’s two top managers cover the past six years. Authorities focus on invoices submitted by three contractors.

District attorney’s investigators on Wednesday requested a mountain of contracts, invoices, expense reports and other material from the Santa Margarita Water District as they began in earnest their probe of the agency’s two top managers.

“There are a lot of areas we’re looking into down there,” said Jerry Hodges, a senior investigator who supervises the organized crime and grand jury units. “Obviously, we’re just getting started.”

The documents sought by the district attorney’s office cover the past six years.

Investigators are trying to determine whether Walter W. (Bill) Knitz, the general manager of the district, and Michael P. Lord, his assistant, have violated conflict-of-interest laws by recommending projects for contractors that have given them gifts in excess of state limits.

Hodges likened the probe to the 11-month examination of former County Supervisor Don R. Roth. Roth pleaded guilty last month to seven criminal misdemeanor counts of conflict of interest and failure to report gifts from people who had business with the board.

The FBI has launched its own inquiry into the water district. Federal agents are focusing on whether the gifts received by Knitz and Lord were given with the understanding that the contractors would receive district work, a more serious allegation.

On Wednesday, district attorney’s investigators left a laundry list of documents they want from the water agency, including all documents associated with every project the district has submitted for bid during the past six years.

Authorities are focusing on invoices submitted for payment by three contractors: Robert Bein, William Frost & Associates; MacDonald-Stephens Engineering, and Hood Construction Corp.

Bein, Frost, based in Irvine, has done $13 million in engineering work for the district over the past four years; at the same time, it has provided Knitz and Lord with thousands of dollars in meals, trips and other gifts. MacDonald-Stephens, based in Mission Viejo, has received about $4 million worth of district work during that time and has also provided both men with a substantial amount of gifts.

Hood Construction, based in Whittier, was terminated from a $12.9-million contract to lay pipe for the district’s South County Pipeline project in February, 1990, after the district concluded that the company was not performing up to standards.

The district hired two companies to finish the job and sued Hood for more than $5 million in damages. Hood, which claimed that problems beyond the company’s control caused delays, countersued for breach of contract and won $1.8 million in damages after a jury trial in Orange County Superior Court. The district is appealing the case.

Earlier this week, authorities collected the past four years’ expense reports for Knitz and Lord. On Wednesday, they also gathered the expense reports for chief engineer Bill Dye, finance director James W. Clark, controller Carol Megara and former operations director C.J. DiPietro.

They have requested all information related to the salaries, benefits and other compensation for Knitz, Lord, Clark, Megara, DiPietro and operations director Bob Regan.

Investigators also ordered the district’s most recent audited financial statement, investment portfolio summaries for three years and six years’ worth of board minutes. Authorities also want employee rosters dating back a decade, which are to include home addresses and telephone numbers.

“We are looking for things that show a paper trail to what’s going on with the money in the district,” Hodges said. “Obviously, if someone goes to a conference for three days and bills the district $5,000, that’s a lot of taxpayer money.”

Hodges said there is a one-year statute of limitations on most misdemeanor violations. More serious felony violations can date back three to six years.

Meanwhile, two board members, Don B. Schone and Richard F. Boultinghouse, called a gathering of all water district employees Wednesday to reassure them that the agency will improve the way it does business. The turnout was so great that the meeting had to be held in the parking lot outside the operations center.