COMMERCE >> Central Basin Municipal Water District’s insurance carrier might cancel the district’s policy because of numerous claims against the district, according to a letter from its carrier’s executive director.

In the letter obtained by this news organization Thursday, Walter Sells, executive director for the Joint Powers Insurance Authority of the Association California Water Agencies, expresses concern that Central Basin has had 22 claims filed against it since 1997, 11 of which are employment based.

He said he would recommend canceling the district’s insurance policy. The policy covers claims filed against the district.

The insurance company recently refused to pay $16,000 in damages following a car accident caused by Art Chacon, a board member who was driving without a driver’s license but collecting mileage reimbursement and car allowance from the district. Instead, General Manager Tony Perez paid the court judgment with district money.

“What has us most concerned is that many of these claims stem from actions of the district’s board of directors,” Sells wrote.

“Central Basin Municipal Water District has been in the news frequently, and generally, the district is not portrayed in a favorable light,” Sells continued. “It appears to an outsider that there is a sense of dysfunction on the district’s board. This dysfunction is resulting in an inordinate increase in litigation against the district.”

The authority’s Executive Committee will meet Wednesday to consider Sell’s threat and pass on a recommendation to the authority’s board of directors for a final decision on May 5.

The authority insures the district for liability, property and workers compensation.

The district serves more than 2 million people in 22 cities and unincorporated areas in the southeast area of Los Angeles County.

Tony Perez, general manager for Central Basin, called the letter “disturbing” and is reviewing the district’s options. He will report on the issue to the board at its 10 a.m. meeting Monday.

“We’re going to do our best to speak to JPIA to persuade them to change their minds,” Perez said.

If the district’s insurance is dropped, it would seek an alternative and might have to revise its operating budget of $8.6 million, he said. The district spends $105,000 on insurance.

Perez said he can’t argue with the authority’s concerns.

“We’re in the news quite a bit, and I think they’re characterizing it as not being favorable,” he said.

In addition to Chacon, who last week was censured by his board, there have been accusations in a lawsuit filed by director Leticia Vasquez that the district used a $2.75 million secret “slush fund” to funnel cash to political allies, relatives, board members and friends of district employees.

The district also is facing a sexual harassment lawsuit — against director Robert Apodaca — from a former contractor and a lawsuit from Chuck Fuentes, former interim executive officer, for allegedly leaking a confidential settlement. The latter also was filed against director James Roybal.

Fuentes in 2013 filed a claim for wrongful termination, later settling for $50,000.

Ron Beilke, whom Fuentes hired as assistant general manager, also has filed a wrongful termination claim for “well in excess of $10,000,” on which no action has been taken.

The district also has been under increased scrutiny since receiving a subpoena from the FBI as part of the investigation into former state Assemblyman Tom Calderon, D-Montebello, who had a $12,000 monthly consulting contract with the agency until February 2013.

Calderon and his brother, state Sen. Ron Calderon, D-Montebello, have been indicted by a U.S. Grand Jury on federal corruption charges, including bribery and money laundering, for their alleged roles involving a Long Beach hospital and a phony film studio.

In 2013 a separate insurance authority that covers cities placed Irwindale on probation, requiring it to impose a number of reforms or risk losing coverage.

In 2010, the Southern California Joint Powers Insurance Authority dropped Maywood from its coverage. The city failed to implement an improvement plan, which was imposed as a result of excessive claims filed against the Police Department. After its insurance was dropped, the city laid off nearly all of its employees and contracted with Bell to run city departments.

Staff Writer Sarah Favot contributed to the story