Stockton, Calif., School Officials Could Face Criminal Charges after Audit Finds ‘Sufficient Evidence’ of Relief Fund Fraud
The district might also have to to repay millions of dollars to the federal government for questionable COVID air filter contract
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Stockton Unified school officials could face criminal charges and be forced to repay millions of dollars in relief funds to the federal government after an investigation released Tuesday found “sufficient evidence” of fraud.
The audit by an independent California agency largely focused on a questionable $7.3 million contract paid for with pandemic relief funds. In 2021, former officials appeared to ram through the purchase of 2,200 ultraviolet air filters designed to kill COVID despite multiple warnings that they weren’t following laws and procedures, the report said.
In new details described by the auditors, two district employees — a purchasing manager and Stockton’s chief business officer — eventually quit rather than help the board approve a proposal from a company that seemed to be trying to “manipulate” the bidding process.
Auditors who conducted the review on behalf of the San Joaquin County Office of Education said the school board, former Interim Superintendent John Ramirez Jr. and former Chief Business Official Marcus Battle “failed to perform their fiduciary duty.”
Reached Wednesday afternoon, Battle strongly denied that he was at fault and said Ramirez faced “extreme pressure” from the board to move the contract forward.
“This district was a disaster before I walked through the door,” Battle said. “We wanted to right a ship that had been going in the wrong direction for a long time.”
The next step could be criminal charges.
“I look forward to thoroughly reviewing the independent auditor’s report,” San Joaquin County District Attorney Ron Freitas said in a statement. “Make no mistake, any attempt to commit fraud on the backs of our children will be prosecuted to the fullest extent of the law.”
The release of the long-awaited report — presented to the board Tuesday night — was the latest rebuke of a Central Valley district that has been mired in controversy throughout the pandemic and faces a $30 million deficit next year. A civil grand jury report released last summer and reporting this week by The 74 point to sloppy business practices, petty board disputes and expenditures that gave the appearance of a conflict of interest. Now, a new board majority is promising to root out corruption and offer transparency on how the district is spending $241 million in pandemic aid.
“We could not in good conscience sit by and do nothing,” Troy Brown, county superintendent of schools, told the board, as members of the audience gasped and applauded. The county office has oversight of districts’ finances.
Some attendees directed shouts of “Resign” at the three members still on the board who voted for the contract — Alicia Rico, Ray Zulueta Jr. and Cecilia Mendez. The county gave leaders of the 36,000-student district until March 1 to respond to a list of recommendations, including revising purchase policies, completing required paperwork and ensuring ethics training for board members.
Board President AngelAnn Flores told attendees that the findings didn’t surprise her.
“I promise you that everybody involved in this will be held accountable,” she said. “I am just really upset [and] disappointed that we got here.”
The 74 previously reported that a former board trustee, Scot McBrian, initially recommended that the company, Alliance Building Solutions, make a presentation on the filters to the board, which the grand jury said was “unusual” and could be “perceived as a conflict of interest.” McBrian said he heard about the filters from former Stockton mayor Anthony Silva, who has had a string of legal problems since 2012.
The audit added further details. Silva hosted a holiday party where Alliance representatives initially briefed McBrian and others about the filters. Zachary Avelar, a colleague of Silva’s who was later appointed to the school board in July 2021, was also at the gathering. At the time, Avelar was also on the board of the Stockton Kids Club, where Silva was CEO.
Avelar and Silva did not respond to requests for comment. In a previous interview, Avelar said, “I’m nobody’s puppet,” and that it’s “BS” to say he was “voting a certain way for someone else.”
Avelar joined the board 7 months after Silva’s party. Less than two weeks after he took office, the board voted 6-1 to approve the contract with IAQ Distribution, a subsidiary of Alliance, even though district staff rated the company’s proposal the lowest in quality out of five. Flores was the lone dissenter.
The board chose IAQ despite the fact that it was not a licensed contractor in California and had been the subject of complaints the district received about labor violations.
In January 2021, a representative from Alliance wrote interim Superintendent Brian Biedermann and referenced “working with your team” to develop the proposal. The wording, the auditors said, suggested the company was trying to evade the normal bidding process.
Susanne Montoya, then-chief business officer, expressed concerns about the bid to Ramirez. But in an email included in the report, which the auditors described as “intimidating,” Ramirez insisted there was no conflict of interest with the bid and suggested the only problem was that staff had “defied a directive” to include Alliance in the pool of potential vendors.
Montoya later resigned, as did Nick LaMattina, a purchasing manager who wrote a memo to Montoya and Ramirez about the “appearance of impropriety.” That’s when Battle became chief business officer.
Battle said he was only in the district for a month when the proposal first went before the board in July 2021 and that he opposed it.
Department directors, he said, reported receiving visits from Mendez and other board members “who often utilized threats, intimidation and their board power to get what they wanted.”
Mendez declined to comment and referred The 74 to a district spokesperson. During the Tuesday meeting she pledged to “move forward and get the training that we need.”
Battle added that the county also bears some responsibility for allowing the district to reach this point.
Ultimately, only 800 of the filters were installed in classrooms. The remainder sit unused in a district warehouse.
According to the audit, “The district and board ignored their own policies, procedures and past practice in order to award the contract to their preferred vendor.”
At Tuesday’s meeting, Zulueta turned criticism back on the county and argued that it had approved previous budgets, regardless of a deficit. He blamed the decline in revenue on the district’s past approval of charter schools.
He previously told The 74 in an email that he believes the board “took every measure to ensure that all decisions were vetted through appropriate legal counsel when recommendations were made by staff.”
But the audit team also found fault with the district’s hiring of the attorney who provided that advice. The board didn’t follow its proposal process when it hired attorney Jack Lipton in February 2020, the audit said. The report includes notes from Flores and a former board member, who said they didn’t get a chance to weigh in on the decision to hire him.
And Mendez, board president at the time, drove Lipton to the meeting, raising questions about the attorney advising board members even before he was hired, investigators found. The contract to hire him, they said, was also written by his law firm, not the district.
“It is of concern that the board set a policy and then ignored it,” the auditors said. “Even more irregular and of equal concern is that the board would contract for services from a legal firm that would not advise their prospective client to follow their own policies.”
In January, at the first board meeting to feature the new majority, members voted to fire Lipton.
In an interview, Ramirez said he was alarmed by the district’s fiscal condition when he became interim superintendent in early 2021. That’s why he called in the auditing team to look at the district’s finances. An initial audit report in 2022 warned that the district was paying for “essential” positions with COVID relief funds and failing to plan for the future when that money dries up.
The district provided The 74 with records showing that relief funds have paid the salaries of 21 current and former central office employees, including 14 making over $100,000. That includes Motecúzoma Sanchez, the district’s family resource center director, who also runs a tabloid-style website that targets political opponents in the district.
Ramirez, who signed a non-disparagement agreement when he resigned last June, said he couldn’t comment on the findings of the new audit, but added, “I have no concerns about what I’ve been involved in.”
He said he hoped the county superintendent would move quickly to bring closure to the community.
“I don’t feel that the challenges [in Stockton] are unique,” he said. “I think they’re a lot more extreme maybe, but I don’t think they’re unique.”
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