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Fraud Possible in Calexico Unified School District Bond Expenditures

Sweetwater Union High School District and Southwestern College continue to be subjects of district attorney investigations related to school bond expenditures. Calexico Unified School District had concerns about bond-related activity, so superintendent Richard Fragale and Calexico trustees ordered a forensic audit. The audit was released this week.

In a July 23 interview, Fragale said that all the funds from Measure J had been expended; however, questions raised first by the grand jury and more recently by a district audit indicated the need for a forensic audit. Fragale mentioned that, among the problems, there was a scarcity of minutes from the Measure J bond oversight committee.

Measure J was a 2004 general obligation bond for $30 million to build and modernize Calexico Unified school facilities. Fragale was brought into the district in February 2011, as he describes it, “to save the district from state takeover.” Last year the district was teetering on the brink of insolvency.

The investigation was done by VLS Fraud Solutions, a service of Vicenti, Lloyd & Stutzman, LLP. Jenny Dominguez, the manager who worked on the audit, said that her company typically divides the audits into phases for districts so they can determine the depth and the cost. So far, VLS has done phase one of the forensic audit.

The report from VLS had a number of notable findings: in some instances the district was unable to provide proof of bidding; in other instances the district was unable to provide copies of contracts for vendors. In the case of the architect Garcia & Associates, some invoices had no other details than “fee earned to date.”

One of the report’s recommendations is to “obtain a background check of David Alvarez, the superintendent at the time Measure J was passed, to determine if there is any known association with Garcia & Associates.”

VLS conclusions include this statement: “Although VLS did not identify evidence of fraud, there are indicators of possible fraud: missing support, missing contracts, change orders that exceed code limits, excessive change orders, payments that exceed contract amounts, and work that was not properly bid. These weaknesses are indicators of possible kickback schemes, vendor favoritism, and bid-rigging. In order to make a final conclusion on the existence of fraud, additional work would be required….”

Fragale says the board will soon consider whether or not to contract for additional investigation. Fragale said, however, that the report only “implied the possibility of wrongdoing and that the bottom line is it would cost the district a lot of money to do a thorough job — and then, where would we go with it?” He said the district has not ruled out taking the information to the district attorney.

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Sweetwater Union High School District and Southwestern College continue to be subjects of district attorney investigations related to school bond expenditures. Calexico Unified School District had concerns about bond-related activity, so superintendent Richard Fragale and Calexico trustees ordered a forensic audit. The audit was released this week.

In a July 23 interview, Fragale said that all the funds from Measure J had been expended; however, questions raised first by the grand jury and more recently by a district audit indicated the need for a forensic audit. Fragale mentioned that, among the problems, there was a scarcity of minutes from the Measure J bond oversight committee.

Measure J was a 2004 general obligation bond for $30 million to build and modernize Calexico Unified school facilities. Fragale was brought into the district in February 2011, as he describes it, “to save the district from state takeover.” Last year the district was teetering on the brink of insolvency.

The investigation was done by VLS Fraud Solutions, a service of Vicenti, Lloyd & Stutzman, LLP. Jenny Dominguez, the manager who worked on the audit, said that her company typically divides the audits into phases for districts so they can determine the depth and the cost. So far, VLS has done phase one of the forensic audit.

The report from VLS had a number of notable findings: in some instances the district was unable to provide proof of bidding; in other instances the district was unable to provide copies of contracts for vendors. In the case of the architect Garcia & Associates, some invoices had no other details than “fee earned to date.”

One of the report’s recommendations is to “obtain a background check of David Alvarez, the superintendent at the time Measure J was passed, to determine if there is any known association with Garcia & Associates.”

VLS conclusions include this statement: “Although VLS did not identify evidence of fraud, there are indicators of possible fraud: missing support, missing contracts, change orders that exceed code limits, excessive change orders, payments that exceed contract amounts, and work that was not properly bid. These weaknesses are indicators of possible kickback schemes, vendor favoritism, and bid-rigging. In order to make a final conclusion on the existence of fraud, additional work would be required….”

Fragale says the board will soon consider whether or not to contract for additional investigation. Fragale said, however, that the report only “implied the possibility of wrongdoing and that the bottom line is it would cost the district a lot of money to do a thorough job — and then, where would we go with it?” He said the district has not ruled out taking the information to the district attorney.

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Comments
25

Unfortunately, the district attorney is GCR which racked up the big legal bills for Sweetwater School District. Oh that we could have the DA come in and handle the investigation.

July 24, 2012

Superintendent Fragale is at least making a sincere effort to solve Calexico Unified's problems by calling for the forensic audit. In the Sweetwater district, many have called for a forensic audit as well, but interim superintendent Brand and his board majority have consistently ignored public opinion. It will be very interesting to watch what unfolds in Calexico as they take this giant step forward. Hopefully the DA is paying attention.

July 24, 2012

me thinks me sees certain similarities between calexico and sweetwater based on last nights board meeting at the sweetwater district office.

forensic audit - hmmmm, the community and ms. lopez have been asking for a forensic audit for over a year, even before the erick hall audit.

scarity of minutes you say - well we have a very important meeting minutes that seems to have disappeared. it is the meeting in which questions were raised over the company that was picked, chosen, manipulated, skewed, WHATEVER YOU WANT TO CALL IT. that issue too was raised last night at the board meeting.

ms lopez eluded to some information she has received and had confirmed which allegedly proves the district is borrowing state matching funds. hmmmm, isn't that against the law? - oh but that is right this is sweetwater and they seem to have their own code of law.

what sweetwater needs is a forensic audit of the ENTIRE BOOKKEEPING SYSTEM OF SWEETWATER - to include prop o and the everyday business.

but brand promises great things with the new ipads, and according to mccann all of this technology is going to set us apart - the only problem is this - the majority of our students are now without bus transportation to even get to school. back in april when the west side folks showed up and spoke up they were basically ignored. a letter was suppose to go out - however for some strange reasons all of those thousands of pieces of mail seem to have also disappeared (like the prop bb minutes) as the parents never received notification until they went in to pay for the passes. now last night the east side folks showed up - let me tell you it was not a pretty picture, now these folks know how to get a message across. they were torked off when the got there, then there were told that public communication would be last on the agenda, then they were told that they only five of them could speak, then they were told they had only two minutes - well lets just say that drove them over the edge - THEY ALL SIGNED THE RECALL PAPERS against john mccann, jim caratmill and arlie ricasa right there. as one speaker noted it was going to take his child 1hr and 1/2 to get to school and the childs school began at 7:00 am. other speakers told of their working schedules. did it phase the board, well lopez AS ALWAYS was understanding, quinones made it a point to set the record straight she had voted against the issue (all of a sudden since is running she is on the side of the students, and parents - PLEASE!!!!!!!!!!!!!!)

last but not least there is the charter school K-2, DAY CARE AND IPAD INCLUDED (yes folks you read that right) - while i applaud charter schools do i really want my tax dollars being spent on a charter school when 150+ teachers are loosing their jobs? when students are having to walk tremendous amounts of distances?

July 24, 2012

Anniej,you think. We know. Same old business that Sweetwater is involved in.GCR is there for a reason, and,we know what that is. I want to know why the County is playing dumb? They have the power to get an audit. I, not certain about it being forensic though. Does anyone know?

July 24, 2012

It is my understanding that an Extraordinary Audit is performed at the request of a County Board of Education, or at the request of the State Superintendent of Instruction in cooperation with a CBOE. It is usually performed at the request of the CBOE "Fiscal Crisis and Management Assistance Team" (FCMAT). I believe (but this is a guess) that a forensic audit focuses on alleged fiscal irregularities, and/or possible criminal issues, while an 'extraordinary' audit is performed to overview what and how a school district manages its resources, its internal controls, and if it is in compliance with ed code. The ed code section 1240 deals with extraordinary audits. There is one such extraordinary audit report posted on the San Diego County BOE website at SDCOE.net/business2/ . It was performed on the Eagle Creek Charter School and prepared for one Ms. Laura Duzyek...so she should certainly know about such things.

July 24, 2012

the person of which you speak allegedly is friends of cfo and brand. those that spoke at the county board of ed's last meeting stated that when they requested info from said person that a call was placed to district alerting - 'the antagonists are asking for information' (paraphrasing of course).

July 24, 2012

The current school board in Calexico heavily relies on an attorney (Calderon) who does not provide timely bills to the board/public for review. Billing is often months behind. It seems like the board is setting themselves up for more "questionable" actions, as did previous boards.

When will the school board begin to perform its fiduciary responsibility rather than looking for scapegoats and outside consultants?

July 24, 2012

if desertwaverat were to take the time to google bonnie garcia aka bonifacio garcia - a partner of calderon; desertwaverat would be able to see that untimely billings, large billings - nothing new when you are dealing with these two.

July 24, 2012

oskidoll, in the case of Calexico, the forensic audit was done on the superintendent's recommendation to the board--approved by the full board.

July 24, 2012

Maybe we need a grand jury to do some more looking into Calexico's questionable financial dealings and to see if any former board members and former administrators had any goodies given to them for contracts awarded. Garcia Calderon & Ruiz (GCR) doesn't need to make any more money off of Calexico. We need a law firm in Calexico that doesn't have a past with Sweetwater and doesn't charge outrageous amounts.

July 24, 2012

Debwhalen: i would recommend that you google GCR, specifically bonnie garcia aka bonifacio garcia. are you aware of the fact that ruiz (the r) is suing the g (garcia) and the c (calderon).

July 24, 2012

Google is a wonderful tool. Calexico School Board notes of 9/22/05 show Alvarez was having his number two guy, David Groesbeck (whose wife was just sentenced for misuse of federal funds), as being in charge of overseeing protocol and procedures for purchases. Groesbeck is rumored to have been working for Garcia & Associates (G & A) which is pointed to having potential problems regarding payment in the report by the grand jury. Groesbeck is still on the pr page for G & A recommending them and as being the superintendent of Calexico schools as of this afternoon. And as much as the law firm of GCR would love to ring up a bill on this, the fact that a former partner would sue GCR doesn't give one very much confidence in them. Calexico needs help, but not from GCR.

July 24, 2012

debwhalen, Calexico sounds as twisted as Sweetwater. Grosbeck is linked to the San Diego State professors and the phony grant program right?

July 24, 2012

cvres - from page 5 of the indictment:

"...payment of $395,000 in CaMSP grant money to G & A Associates, a partnership controlled by defendant OLGA AMARAL and her husband, in return for preparing an allegedly independent, external evaulation of the grant project."

The husband, David Groesbeck, is former Calexico Superintendent, Asst. Supt of Business, Asst. Supt. of H.R., and principal.

You may read the entire indictment here:

http://media.trb.com/media/acrobat/2010-12/301381960-01120137.PDF

July 24, 2012

Be sure to read the entire forensic audit, where questions arise on who supervised construction... it turns out that the architect was given the responsibility of being construction overseer, when the same architect may have billed without detail (detailed bills have yet to be found).

Read the entire forensic audit here (only 13 pages):

http://www.calexico.k12.ca.us/supportdocs/Dept/SuperIntendent/BackupInformation/2012-2013/2012_07_19_Special_G13.pdf

Here is David Groesbeck's glowing review Garcia and Associates from their website:

http://garciaaia.com/?page_id=64

The Architectural firm of Garcia & Associates has assisted with a number of school facilities projects. Simple remodels, comprehensive modernizations, portable building projects and new construction projects for the Calexico Unified School District. The projects have been schedule and project driven, delivered on-time and within budget without sacrifice to the project’s requirements or group’s needs. The level of professionalism, quality and detail provided by Mr. Jorge Garcia and his staff can best be characterized by “competent”. The design capabilities of Garcia & Associates are outstanding and always represent an ability to listen to our needs and translate these needs into a reality.

Mr. Garcia’s knowledge and experience with K-12 educational projects are broad based and proven. Garcia & Associates’ knowledge of the State School Building Program, applicable State Statues and Legislation, as well as knowledge of the OPSC funding process, assisted the District in facilitating the funding application process for our projects. Mr. Garcia and his staff have provided leadership that an architectural company with vision, constructive, creative thinking and problem solving should have. Garcia & Associates’ commitment has been noteworthy and appreciated by the Board of Trustees, administration and by our community.

Mr. David Groesbeck Superintendent Calexico Unified School District

(Note, he is no longer affiliated with the Calexico Unified School District)...

Of course, the forensic auditor was the same one Oxnard School District used - where Yuri Calderon is the former general counsel. (Just another connection - small world)...

July 24, 2012

i believe it is about time that a collective front of citizens unite and contact the fbi. there are far toooooooooooo many similarities between calexico, sweetwater, southwestern, and NOW OXNARD??????????????

think about it, southern california could be used as the poster child for what happens when ordinary citizens get involved.

i am serious about contacting the fbi - something is amis regarding bond dollars and district financials.

rumors abound that sweetwater is borrowing from state matching funds, which is ILLEGAL. but it appears that all of the districts discussed have stories that are similar.

the students are the ones suffering - do these people have no shame? i will answer my own question - NO

July 24, 2012

http://204.147.18.75/education/sctemp/ff49bf8adbea0936f5da22cfabf5b8bd/1343197479/BOC_2010_Annual_Report.pdf

2010 ANNUAL REPORT BOND MEASURE M6 OXNARD SCHOOL DISTRICT RESPECTFULLY SUBMITTED BY MEASURE M6 BOND OVERSIGHT COMMITTEE

... Mr. Gutierrez responded that there was a dispute regarding a change order with the contractor; it was recommended that a third party be brought in to review the charges, and the District saved almost $8,000 as a result. Mr. Castillo asked: who approached Cambridge? Mr. Castillo stated that Cambridge was introduced to Mr. Gutierrez by Janis Duran, who was introduced to Cambridge by Yuri Calderon, General Counsel, who eventually brought Cambridge in. Mr. Castillo commented that Mr. Eloy with DMJM, another consultant, was proposed to be awarded a contract of $1.6M, but the Board shut it down. Mr. Gutierrez stated that Rincon Consultants are preparing a document for the Southwest School, and asked for clarification on whether the BOC’s proposed motion will halt or cease ongoing contracts. Mr. Thompson responded that the Southwest Project is not using M6 funds, but is paid out of Developer Fees (page 15).

... Action/Recommendations to the Board of Trustees The Committee took a vote on the 3 recommendations: 1) recommend an investigation to determine if a conflict of interest exists between General Counsel and Bond attorney for M6 Bond fund, 2) request a forensic performance audit of the M6 Bond fund; 3) recommend immediate removal of the 15 hiring ability of General Counsel/Bond attorney of all M6 Bond funds without Board approval. Motion by Mr. Castillo to accept the three recommendations, second by Mr. Gonzalez. All were in favor; the motion carried unanimously 6-0. (pgs 15-16)

July 24, 2012

The lack of accountability and checks and balances creates the opportunity to divert funds without proper authorization. We are discussing how it happens/happened with Bond money. The other two areas where there is possible "misspending" are Supplement Employee Retirement Plans and unreported pay raises granted within Administration. Calexico Unified raised class size and wrote a plan to provided an incentive for teachers to retire. How the then Superintendent and several Administrators became eligible for the same incentive also merits a close scrutiny.

July 25, 2012

It sounds like Calexico has a strong group of watchdogs. Your research and experience may blaze the trails for others...in fact, I believe it is already beginning to happen.

The issues raised in these comments merit closer attention.

July 25, 2012

Calexico residents: it is a long road, what you are doing is going to make a difference. all students deserve the best education possible, all taxpayers deserve fiduciary responsibility - never forget this is what you are fighting for.

I SALUTE YOU!!!!!!!!!!!!!!

July 25, 2012

As many financial irregularities seem to originate with Garcia, Calderon, Ruiz and now Groesbeck, shouldn't there be some discussion of disbarment?

Really, how long should this bunch be able to create turmoil while syphoning funds from school children?

They have established a pattern that is very evident. Why are they allowed to continue in this manner?

Can we stop the educated thieves before they latch onto another gullible school district?

July 26, 2012

Eastlaker: i agree with you. not sure if you are aware but ruiz, the r is suing garcia (the g) and calderon (the c).

but let me voice this opinion, haven't any of these school districts hiring legal firms ever heard of 'google'? there it is, all laid out for them in plain english. i just do not understand.

July 26, 2012

Yes, I had read that. Does that mean that Ruiz is not shady, but the others are? I haven't heard much that is positive about this law firm--or actually, I haven't heard ANYTHING positive about this law firm. Maybe it is time for some authorities to put the heat on these three and see who starts singing...so again I say, what about disbarment for those who steal from schools and school districts?

July 27, 2012

The Brown Act items for discussion needs to be revised and limited. The Public doesn't really know what is discussed in Closed Session. Too many times it seems that other than Closed Session allowed discussions do occur. Just another opportunity to avoid "checks and balances" and accountability.

July 27, 2012

The Calexico School Board voted to contact the District Attorney's office during last night's board meeting.

Aug. 1, 2012

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