Stockton Unified School District trustees agreed this week to settle litigation with two firms involved with an ultraviolet light air purification units in a deal that state financial investigators described as flawed if not illegal.
The district’s Board of Trustees voted at its Tuesday meeting to receive $3.75 million from IAQ Distribution and Alliance Building Solutions to end litigation. The board made its decision behind closed doors, then announced it when public session began.
The settlement calls for the court to enter a judgment against IAQ for the settlement amount. It is be paid to the district over time, though the schedule was not disclosed. The company and Alliance will be responsible for removing about 1,369 of its Air Guardian filtration units that were never installed.
The district’s settlement only covers about half than what the district eventually paid for the defunct ultraviolet air purifiers.
The vote was five in favor with two trustees, including AngelAnn Flores, abstaining. Flores was acquitted of charges involving misuse of public funds during a high-profile trial this month in which her lawyers cited the IAQ deal as an example of how she believed she was the target of retaliation for serving as a whistleblower over questionable spending by the district. She was one of two board members who vote against the deal.
In the same trial, Flores was found guilty of committing insurance fraud.
The settlement marks a quiet end to alleged shenanigans that attracted widespread public and media attention which included a state audit of the district’s finances that found evidence of fraud, the results of which were first release in early 2023.
What happened with the IAQ contract
SUSD was the subject of a year-long investigation by the state’s Financial Crisis & Management Assistance Team (FCMAT). The state audit of the district’s financial practices revealed “sufficient evidence to demonstrate that fraud, misappropriation of funds and/or assets, or other illegal fiscal practices may have occurred.”
The audit was requested by San Joaquin County Superintendent of Schools Troy Brown after SUSD employees reported irregularities in the procurement process and award of a contract with IAQ Distributions using federal funds for the purification units.
The ordeal began in beginning of 2021 when the COVID-19 pandemic had agencies of all sorts looking for ways to clear the air of viruses.
Alliance was brought before the SUSD governing board by former Trustee Scot McBrian in January of that year to make a presentation about ultraviolet disinfection technology, though state auditors indicated that there had been no evidence of discussions from previous board meetings the district needed such technology.
The following month, Alliance sent a proposal to the district for a $7.3 million system using IAQ, a subsidiary of Alliance that the company described as its sole distributor.
McBrian later told FCMAT investigators that the same presentation had been given previously by the company at a private holiday party hosted by former Stockton Mayor Anthony Silva with multiple trustees who served on the school board at the time, as well as a future board member, in attendance. State investigators described the holiday party meeting as “out of the ordinary and inconsistent with the district’s normal practice.”
Ignoring staff concerns about the vendor, the proposal process and apparent conflicts of interest, the board approved a multimillion dollar contract with IAQ with support from former Superintendent John Ramirez Jr. by a 5-2 vote in August 2021. Trustees Flores and Maria Mendez were the dissenting votes.
Investigators said the board did not conduct a formal bid process, relying on “less formal” handling that seemed to work in IAQ’s favor, such as allowing the company to work with staff on its proposal, extending deadlines and changes in vendor scoring and proposal requirements. Out of five possible vendors brought before the district’s governing board, IAQ was chosen despite being ranked the least suitable.
“(The) district and board ignored their own policies, procedures and past practice in order to award the contract to their preferred vendor,” investigators said in the FCMAT report, as well as noting that the holiday party likely violated the Brown Act, California’s open meetings law.
IAQ had also been found to not initially have registered its company with the state before being awarded the district contract, investigators said, and was not a licensed contractor with the California Department of Industrial Relations.
Most of the IAQ air filters were also either never installed or not delivered to the district, according to a scathing 2022 San Joaquin County Civil Grand Jury report that gave SUSD “A Failing Grade in Public Trust.”
Stockton Unified ultimately paid just over $6.6 million to IAQ, funding the contract with federal COVID-19 relief funds. The contract was later “deemed an unallowable expenditure” and the money spent on it would need to be paid back to the federal government.
The district ultimately employed some financial maneuvering okayed by the California Department of Education that saw the problematic contract moved from pandemic funding to the district’s general fund.