Lawsuit targets use of reservoir

FRESNO -- They grew their fortune in the California sun, turning pedestrian fruits and nuts into a vast and varied empire that secured their place in Hollywood.

Stewart and Lynda Resnick's bottles of Fiji Water and POM Wonderful are coveted across the globe. Their donations keep the lights on in art museums across the country. And Gov. Schwarzenegger and Arianna Huffington count them among their dearest friends.

But as their market share rises, one of the billionaires' competitors is fighting back, accusing the power couple of profiting at the public's expense, court records and interviews show.

As drought- stricken California weighs whether to give private companies more control in managing scarce water supplies, a lawsuit claiming the Resnicks violated utilities law by making money from a vast, taxpayer-funded underground reservoir is causing a stir in the state Capitol.

"Water is a public resource, owned by the people," said Democratic Assemblyman Jared Huffman of San Rafael. "We shouldn't be giving away public funds to private sector interests, let alone choosing winners and losers in the business world."

The Resnicks, who live in Beverly Hills, are among the nation's largest corporate farmers and are generous philanthropists and political donors, giving $536,000 to California's Democratic and Republican governors in the past decade.

The Los Angeles Business Journal estimates the couple's empire is worth $1.5 billion. It includes about 120,000 acres in the Central Valley -- where they say they own more fresh citrus, almond and pistachio trees than anyone else in the country -- and a facility akin to the Fort Knox of water.

That kind of success, Lynda Resnick said in a telephone interview, can inspire jealousy, and likely motivated this most recent "nuisance" lawsuit. Her husband declined to be interviewed.

After growing up working class in Highland Park, N.J., Stewart Resnick started a business waxing floors while in law school at UCLA. The couple bought farmland in the 1980s as a hedge against inflation, gaining access to water contracts attached to those parcels.

As drought has hammered the region, leading farmers to abandon dry fields, the Resnicks' 48 percent stake in the Kern Water Bank, an underground pool that stores billions of gallons of fresh water, has become increasingly valuable.

Court records show that in early 2007, the Resnicks' companies' combined water holdings reached 755,868 acre-feet -- more than twice the size of Hetch Hetchy Reservoir.

In 2007, that volume would have qualified as California's 11th largest reservoir, but the firms' water holdings have diminished significantly since, company officials said.

That cache provided enough to nourish the Resnicks' orchards, but it also offered another benefit. From 2000 to 2007, records show, the state paid the Resnicks $30.6 million for water previously stored there as part of a program to protect fish native to the ecologically fragile Sacramento-San Joaquin Delta.

Lynda Resnick's marketing savvy helped build cachet around her otherwise obscure brands, such as POM Wonderful pomegranate juice, Cuties mandarins and Teleflora floral bouquets.

"We've done more for the pistachio than anyone ever since it was planted in the Garden of Eden," she said in the interview. "My husband should be canonized for all the work he's done."

Others in agribusiness see it differently.

Ali Amin, a Persian immigrant who owns a competing processing plant, filed a lawsuit in late March in Fresno County Superior Court claiming the Resnicks violated California public utilities laws because they turned a profit by selling water to farmers who weren't members of their Bakersfield-based water company, Westside Mutual Water Co.

"You feel like David fighting Goliath," Amin said. "If they're allowed to keep doing this, the rest of the independents and small growers won't be able to compete."

Amin's lawsuit alleges he lost $22 million in revenue when growers lured by water supplies sold their nuts to the Resnicks' plant, which processes almost two-thirds of the nation's pistachios. Amin controls about 5 percent of the market.

Resnick and other water users in agricultural Kern County gained control of the Kern bank in the mid-1990s, after a round of negotiations with the state Department of Water Resources.

The deal was a pivotal moment in the rise of the Resnicks' business interests. Ownership of the bank ultimately was transferred to a joint powers authority including the local water agency, the Resnicks' Westside and four water districts.

Westside distributes water stored there to its members, the operations that grow the Resnicks' fruits and nuts, according to court records.

To prevent price gouging, the California Public Utilities Commission requires most mutual water companies to register as public utilities and subject their rates to state regulation if they sell water to nonmembers for profit.

PUC staff attorney Fred Harris said Westside had not registered with the PUC. If the company skirted the law by selling water to nonmembers at a profit -- as the Amin lawsuit claims -- Harris said Westside could be required to register and set up rates with the commission.

An $11.1 billion water bond signed last year by Schwarzenegger would allow private companies to partially own, operate and profit from dams, reservoirs and water banks built with billions in public funds. It won't become law unless voters approve it on the November ballot, and it's unclear how the bond proposal would interact with laws on public-private partnerships.

Bill Phillimore, who directs Resnick's water company, said the company has managed scarce water supplies responsibly, and he and his bosses have spent "a considerable amount of time to make sure we get value out of the last drop."

After Amin's lawsuit was filed, two of Resnick's companies filed a federal lawsuit in Los Angeles against Amin, his processing plant and his agricultural consultant, alleging Amin's plant engaged in false advertising.

"There are very jealous people out there," Lynda Resnick said. "But we usually win because we have such good in-house counsel."