LCCN Exposé Leads to State Tax Fraud Allegation in Central Basin Contract Scandal

August 1, 2025

By Brian Hews

LCCN investigation revealed an unregistered Texas LLC tied to a no-bid contract; now the state could investigate fraud and illegal public contracting.

In early July, Los Cerritos Community News reported—backed by documentation—on a $500,000 no-bid contract awarded to MV Cheng and Associates by Central Basin Municipal Water District. The contract had been pushed through by Board President Nem Ochoa and Directors Joanna Moreno, Juan Garza, and Gary Mendez, in apparent violation of recommendations made in the State Auditor’s 2015 report.

MV Cheng and Associates, owned by Misty Cheng, claimed to provide staffing and consulting services in finance, purchasing, human resources, risk management, and IT. However, a visit to the company’s website painted a much different picture. The site appeared amateurish, using blurry stock images, offering no client list or testimonials, and featuring a “News” section whose most recent item linked to a seven-year-old cached article.

Despite Cheng’s claim that her company was headquartered in Southern California—with offices in Pasadena and Upland—property records told a different story. The Pasadena location was a single-family home owned by Cheng. The Upland property was owned by MV Cheng Properties LLC, a company unknown to anyone at Central Basin.

Further investigation by LCCN revealed a Facebook page stating that MV Cheng Properties LLC “was owned and managed by Misty Cheng for properties in California and Texas.” A search of the Texas Secretary of State’s business records confirmed that MV Cheng Properties LLC was registered in Texas and controlled by Cheng.

That revelation raised a serious issue: the Texas-based company had been operating out of Cheng’s California residence without registering as a foreign LLC in California, a clear violation of state law. Under California Corporations Code Section 2105, any out-of-state business conducting business in the state must register with the Secretary of State, file the proper paperwork (Form LLC-5), and pay state taxes.

A search of the Secretary of State’s records found that Cheng had failed to register the Texas LLC in California. As a result, her company had been operating illegally for nearly eight years, potentially avoiding at least $6,400 in taxes—including California’s mandatory $800 annual registration fee for out-of-state entities.

Following LCCN’s reporting, a reader filed a formal complaint (below) with the California Franchise Tax Board alleging tax fraud. The complaint stated, “Tax fraud by Misty Cheng of MV Cheng Properties LLC in Texas and MV Cheng and Associates in Pasadena. No Texas business whatsoever exists. All the business is from California. The LLC registered in Texas has been and is utilized for the purpose of evading taxes due to the Franchise Tax Board for revenue and income earned in California.”

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COMPLAINT: Signature and name on file with LCCN.

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When contacted about the complaint, Cheng responded, “I am a bit shocked as well as offended that a total stranger would file a complaint with the Franchise Tax Board and include all the news articles that have been listed on my company’s website. Those articles have nothing to do with any alleged tax fraud.”

However, in a subsequent email to LCCN, Cheng admitted she had been operating under the radar. “Hi Brian, first of all, I would like to thank you for bringing to my attention that MV Cheng Properties LLC needs to be registered as a foreign entity doing business with the CA Secretary of State. Upon further research, you are indeed correct, and I have since registered it with the CA Secretary of State. I am awaiting the final paperwork/certificate.”

Despite the admission and apparent tax evasion, Cheng’s no-bid contract with Central Basin remains in place.

Cheng originally secured the deal just under the $25,000 threshold requiring board approval—shortly after General Manager Elaine Jeng took over in 2024. Neither Cheng nor Jeng responded to questions about any prior professional relationship.

Five months later, without a competitive bidding process, the same board members—Ochoa, Moreno, Garza, and Mendez—approved Amendment No. 1, expanding the scope and raising the contract amount to just over $250,000. Directors Art Chacon, Jim Crawford, and Leticia Vasquez voted no.

Then on June 12, 2025, Ochoa, Moreno, Garza, and Mendez approved another $250,000 amendment, bringing the total contract to an eye-popping $501,125.

Notably, the June amendment left the agenda item number and board approval date blank, raising questions about whether it was signed before formal board action—a potential violation of the Ralph M. Brown Act, which governs public meetings.

Legal experts said the deal was on shaky ground. “This is a textbook example of contract splitting to avoid competitive bidding,” said one municipal attorney familiar with California procurement law. “Once you amend a professional services agreement multiple times—especially past the $250,000 threshold—you’re in dangerous legal territory unless you can show emergency need or issue a valid exemption. The Public Contract Code exists to protect public funds from cronyism, and this contract raised major red flags.”

Emails to President Ochoa, VP Mendez, and Directors Moreno and Garza went unreturned.