Stockton is backsliding into its once-notorious corruption. That’s clear from the report state investigators released Tuesday on Stockton Unified School District.
The Financial Crisis & Management Assistance Team (FCMAT) found a dismaying level of “disregard for the law” in Stockton Unified, though they use the word “may” a lot.
As in, “…There is sufficient evidence to demonstrate that fraud, misappropriation of funds and/or assets, or other illegal practices may have occurred.”
Of numerous agencies investigating Stockton Unified, including the FBI, FCMAT is the second to conclude its work. The first was the county Grand Jury, whose 2022 report blasted the suspicious dealings and fiscal incompetence of district leaders.
FCMAT’s report looks at the district through the lens of school business experts. Its four-person team conducted “field work” at Stockton Unified in May 2022 but investigated both before and after.
After the Grand Jury report, I upgraded the district’s “possible” corruption to “likely.” With FCMAT’s report we can trade “likely” for “almost certain.”
The centerpiece of investigators’ findings involved a $7.3 million contract for ultraviolet air filters that the district awarded to an outfit called IAQ Distribution.
Everything about this deal stinks to high heaven.
The law says contracts over $50,000 must use a competitive bidding process — the school district, in this case, must accept bids from different companies and select the “lowest responsible bidder.” This process guards against favoritism and corruption.
Scot McBrian had other ideas. A trustee at the time, McBrian arranged for IAQ’s parent company to make a presentation about their wares to the Board of Education.
McBrian should not have given a leg up to IAQ. The board should not have allowed the presentation, which is irregular and outside the competitive bidding process.
But then, IAQ’s parent company, Alliance Building Solutions, already had made a “special presentation” to select board trustees at a “private holiday party” hosted by former Stockton Mayor Anthony Silva.
Silva is a member of the Former Felon Club, one of Stockton’s checkered characters to have their felony convictions reduced to a misdemeanor and expunged from their record.
Silva was convicted in 2019 of illegally funneling city money to a nonprofit he headed.
I would really like to hear from the judge that enabled Silva’s expungement why that was a good idea. Because here we are. Both Sawyer and Silva became behind-the-scenes power brokers. Silva recruits crappy school board candidates and gets himself lucrative contracts when he commands a board majority.
Regarding his party, “There may have been a violation of the Brown Act,” FCMAT’s report says, using “may” again.
Investigators also dug up a telling letter from Alliance to an interim district superintendent: “In working with your team we have been able to develop a customized sanitation strategy.”
No school district “team” should have been working with a vendor with a bid before the board. That’s preferential treatment outside the legal bid process and unfair to other bidders.
In fact, there never was a legal bid process. “The district board ignored (the law) and did not conduct a formal bid …” the report says, “and instead relied on a less formal RFP (request for proposals) process.”
Around this point, honest district employees were objecting to then-Interim Superintendent John Ramirez that the bid process looked more like bid rigging.
Chief Business Officer Susanne Montoya expressed concern over conflict of interest. Ramirez sent a “hostile and threatening,” email response, the report says.
Ramirez: “The conflict that exists now is that staff defied a directive from the interim Superintendent that asked for an RFP. … Let me know when you would like to sit with (attorney) Jack (Lipton) and I to discuss your concerns. I can share my concerns regarding the full scope of the CBO position as well.”
Translation: The problem is not that we’re breaking the law. The problem is that you’re defying me. Let me know if you want to take this matter to our General Counsel, so we can punish you.
Ramirez brought Lipton with him from Salinas. In my opinion, Lipton was part of the poor ethical culture that enabled all the highly suspicious dealings now under investigation.
So Ramirez and the board majority bent the rules to favor IAQ. Even by the metrics of the “less formal” selection process, however, IAQ failed to come first; so leaders rewrote the required qualifications; IAQ still failed; the board voted 6-1 to give IAQ the contract anyway!
Montoya and the district’s Purchasing Manager Nick LaMattina both resigned.
Ramirez then recruited Marcus Battle, another suspicious Salinas associate, to replace Montoya as CBO. Battle was brought on board without a search, screening process or interviews, in violation of board policy, the Grand Jury found.
Under this administration the wheels came off the internal controls.
Leaders justified their choice partly by saying IAQ’s filters included “mobile technology” other bidders lacked — then they did not buy the mobile technology that made IAQ the preferred bidder.
By the time state investigators waded in, Stockton Unified had paid IAQ $6.6 million.
It looks like a scofflaw board majority, headed by McBrian, and aided by Superintendent Ramirez, going behind closed doors with IAQ and Anthony Silva, conspired to flout state and federal law, as well as district policies, to award IAQ the contract come hell or high water.
Why? The report doesn’t say. McBrian told investigators he had worked in the air filter industry, so maybe he thought he knew best. If so, the outcome shows his utter lack of aptitude. Eight hundred IAQ filters were installed in classrooms, but over 1,000 are gathering dust in a warehouse, possibly because they don’t work.
Kickbacks are widely suspected, of course, but state auditors found no evidence of them. Finding them, if they exist, is the job of law enforcement agencies.
Who is Alliance/IAQ, by the way? The report did not say.
“Our scope is very, very limited,” said Michael Fine, FCMAT’s CEO. “Our sole purpose is to determine…whether we believe there is sufficient evidence to warrant a further look … The starting place for law enforcement to pick up and go.”
There’s more. The district paid IAQ with federal Covid-19 relief funds. Federal grant money comes with strict requirements. School district leaders “may” have violated at least two of them, the report says.
If so, the district “may be required to repay the funds to the federal government.”
A spokesman for the San Joaquin County Office of Education had this to say about that dismal prospect: “The FCMAT report was forwarded to the State Controller’s Office and the State Superintendent of Public Instruction. (Officials) will need to evaluate the audit report and make a determination regarding any necessary repayment of funds.”
Board of Trustees Chair AngelAnn Flores — the sole trustee to vote against the IAQ deal — has said publicly she wants to sue IAQ to recoup the money.
What a mess.
The air filter saga is a classic example of what happens when leaders set a poor ethical tone, loosen internal controls, ignore conflicts of interest and the appearance of impropriety, and subordinate their responsibility as fiduciaries to other interests, including their own.
Excuse me — It may be a classic example. They look like a dirty bunch, but time will tell.
The report also found:
· When hiring law firms, the board blew off required RFPs and flouted other bylaws. They promiscuously hired nine law firms — none of which managed to keep leaders lawful.
· Numerous district leaders failed to file legally required statements of disclosures and conflicts of interest, and nobody called them on it.
· The state’s Financial Crisis & Management Assistance Team analyzed 64 of the school district’s business transactions from 2019-2022. Of 64 transactions analyzed, 96.43% had no documents demonstrating required competitive bidding or required request for proposal processes; 93.75% did not have a fully executed contract for services and/or board minutes showing formal approval; 51.56% had no purchase order or other form of formal approval prior to purchase; 10.94% had payments not supported by an original invoice; and 9.38% showed an invoice date that preceded the purchase order or approval date.
· Stockton Unified leaders should notify the state controller, superintendent of public education and the local district attorney of FCMAT’s findings that “fraud, misappropriation of funds and/or assets, or other illegal fiscal practices may have occurred.”
The involvement of new San Joaquin County District Attorney Ron Freitas takes place at an intersection of Stockton law and politics. Freitas was endorsed by the 209 Times, the same corrupt fake news site that defended or failed to report on the illegal actions of Stockton Unified officials now under investigation. The same site that cruelly and falsely attacked honest district employees.
Freitas declined to comment on his ties, if any, to the 209 Times and its founder/political consultant Motecuzoma Sanchez. He did issue a strong statement:
“I look forward to thoroughly reviewing the independent auditor’s report. Make no mistake, any attempt to commit fraud on the backs of our children will be prosecuted to the fullest extent of the law.”
Freitas deserves a chance to prove himself.
Interim Superintendent Traci E. Miller also issued a statement.
“We realize the importance of this (FCMAT’s report) and will keep our students at the forefront where student learning and achievement is our focus. We will address the shortcomings head on and without hesitation to move our district forward.”
Superintendent Ramirez resigned in 2022. Trustees botched his separation agreement, too, by doing it behind closed doors in violation of the Brown Act.
Months later Ramirez was arrested for alleged drunk driving, blowing a blood alcohol content of .225%. He returns to court on March 8 for further arraignment.
Three trustees who voted to award IAQ its contract remain on the school board: Cecilia Mendez, who was chair, Alicia Rico and Ray Zulueta. They are unfit for office and should be voted out.
Shady characters come and go from Stockton leadership, but a common denominator of certain people remain, working behind the scenes, intent on twisting government for power and profit.
They need to be identified, prosecuted and imprisoned. Any law enforcement or criminal justice people who don’t see it that way, including judges inclined to absolve career grifters, should be outed, ousted and ostracized. While other cities are moving forward in the 21st century, Stockton’s 20th -century demons are holding the city back. They’ll do much worse if not stopped.
Clarification: This article has been updated to clarify the criminal history of N. Allen Sawyer. A US District Court Judge in 2011 vacated his conviction for honest services mail fraud after the US Supreme Court in an unrelated case found unconstitutional a federal statute to which he had pled guilty; the vacation of his conviction came after he had spent six months in federal prison and six months in home confinement.
Michael Fitzgerald’s column usually runs on Wednesdays. Phone (209) 687-9585. On Twitter and Instagram as Stocktonopolis. Email: email@example.com.