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Judge reduces bail for ex-water officials in $1.3 million bribery case

Defendants must show source of bail at hearing before it can be posted, judge says

Coache and Johnson Arrignment

Sam Morris

Michael Johnson, left, and Robert Coache stand during their arraignment on bribery, conspiracy and money laundering charges Thursday, May 12, 2011.

Updated Thursday, May 12, 2011 | 5:07 p.m.

Coache and Johnson Arrignment

Michael Johnson, left, talks with his attorney Blaine Beckstead while Robert Coache speaks with his attorney Bret Whipple during their arraignment on bribery, conspiracy and money laundering charges Thursday, May 12, 2011. Launch slideshow »

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A Las Vegas judge decided today to cut the bail in half for two former water officials being charged in an alleged $1.3 million bribery case.

Bail was reduced from $500,000 to $250,000 for Robert Alan Coache, 52, former deputy state engineer for Southern Nevada in the Nevada Division of Water Resources, and Michael E. Johnson, 51, former chief hydrologist of the Virgin Valley Water District.

However, Justice of the Peace William Jansen put a stipulation on the bail — an evidentiary hearing must be held first to show the source of the money before they post bond.

Jansen set a tentative bail evidentiary hearing at 8:30 a.m. May 25 for the two former officials, which is the same date he set from their preliminary hearing in Las Vegas Justice Court.

Both men appeared with their attorneys today at their arraignment. The charges against each of them include bribery, misconduct by a public official, conspiracy and money laundering.

The criminal complaint says they were paid more than $1.3 million in bribes to help Bunkerville landowner John Lonetti Jr. sell two Virgin River water permits to the Southern Nevada Water Authority for about $8.4 million.

The complaint alleges the activity took place between Jan. 1, 2006, and Sept. 13, 2010. It says the two men set up a company, Rio Virgin LLC, to accept the $1.3 million from Lonetti and then paid themselves from that company.

The complaint lists 18 counts of money laundering and says the money paid by Lonetti to acquire the water rights was withdrawn from Rio Virgin LLC by Coache and Johnson.

According to a police investigator's report, the two men worked with another man, Michael Winter, the former general manager of Valley View Water District, to sell Lonetti's water permits. Neither Winter nor Lonetti have been charged in the case.

During this morning's hearing, defense attorneys and the state's prosecutor sparred about some of the aspects of the case.

Bret Whipple, who represents Coache, said "there's been a tremendous misunderstanding and that prosecutors have "missed the mark."

"What happened here is a farmer, who used to use water to grow alfalfa, sold it to the Southern Nevada Water Authority," Whipple said. "That's what happened. There's no theft.

"And I can promise you today, if you took that same water right to try to sell upon the open market, he'd get more. Because as the lake goes down, the price of the water shares goes up."

He said the water shares that were sold weren't for this year or for next year, but forever.

"So to suggest there was some impropriety or some theft is incorrect," Whipple said.

Whipple said prosecutors are wrongly saying Coache was involved with the Virgin Valley Water District because "they don't even understand water law."

Jansen interrupted him and asked if he was arguing the case, or arguing bail. The judge told him to make it relevant to bail.

Whipple argued that $500,000 in bail was "over the top" and asked that bail be reduced to own recognizance bail, or at most $50,000 to $100,000 in bail.

Blaine Beckstead, Johnson's attorney, who told the judge that Johnson has been in the community for more than 20 years, also said the $500,000 bail was too high.

Beckstead also asked for $100,000 bail or less. He also said that prior to Johnson being arrested, the state seized all of his assets, so he would have to rely on extended family to be able to raise the bail.

Chief Deputy District Attorney Marc DiGiacomo said he read newspaper reports quoting Whipple saying Coache didn't receive any of the $1.3 million.

"During the search warrant on Mr. Coache's house, there was a file in the name of Rio Virgin LLC and notes concerning all the fees going everywhere," DiGiacomo said.

Coache bought a house using $135,196.01, DiGiacomo said. Coache and Johnson used $139,000 from the Rio Virgin LLC account to buy another home, DiGiacomo said.

But "most disturbing" about Mr. Coache is that he gave $249,000 to his son and his son's wife for the home they now live in, DiGiacomo said.

"That's not all," he said.

Coache also allegedly gave $48,000 to his sister. And both Coache and Johnson put $438,500 into oil speculation in Texas in the Texas Allied Petroleum Corp., with dividends going into a bank account both men share.

Also, one of the homes they purchased together has renters, DiGiacomo said. The renters pay into an account controlled by both men, DiGiacomo said.

"They pay rent on property purchased by the taxpayers," DiGiacomo said. "When Mr. Whipple says no money was stolen, this $1.3 million was stolen from the taxpayers of the state of Nevada."

He also said that to suggest all of their assets have been seized isn't quite true — the state doesn't have access to the $438,000 in the Texas investment.

"They shouldn't be entitled to post their bail with the money that they stole from the taxpayers of the state of Nevada," DiGiacomo said.

Also, Johnson was aware of the search warrant on his home and took his computer and fled, DiGiacomo said. However, Johnson was eventually taken into custody after Metro Police and the district attorney had talked to his attorney, DiGiacomo said.

Also, there's evidence that Coache had been in contact with the accountant who set up the Rio Virgin LLC and the accountant has changed his story about the ownership of Rio Virgin, DiGiacomo said.

That's because the accountant's story changed over the weekend from saying he didn't know Johnson to saying that Johnson, not Coache, was in charge of Rio Virgin, he said.

Also, when police found Coache, he was in the accountant's home, DiGiacomo said.

DiGiacomo told the judge if the two were released and they were able to access the funds they have invested in Texas, "they have $438,000 to go on the lam with."

He said they also have three properties worth well over $500,000. One of the properties they bought for $139,000 has a purchase offer for $230,000, he said.

DiGiacomo said releasing them presents a danger they will flee and will also influence other witnesses.

CORRECTION: Clarification: In an earlier version of this story, John Lonetti's first name was incorrectly written as Michael Lonetti. "Michael Lonetti" is how Lonetti's name is listed in the criminal complaint. | (May 12, 2011)

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