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Tuesday, Dec 13 2011 08:19 PM

Report alleges longtime fraud in BCSD departments

BY JORGE BARRIENTOS Californian staff writer jbarrientos@bakersfield.com

For more than 20 years there's been a history of public property being put to personal use and illegal recycling habits within divisions of the Bakersfield City School District, which could amount to criminal fraud, according to a state report released Tuesday.

The Fiscal Crisis & Management Assistance Team investigation was requested by BCSD after it learned of potential misappropriation of funds in the maintenance and operations, and transportation departments.

It's the third report to emerge in recent months alleging misuse of public funds and property, the others centering on personal use of Kern County fire equipment and the Kern County library director driving a county car on non-work trips.

The BCSD report singles out but never names Maintenance and Operations Department Director James “Mike” Taylor for failing to implement proper controls in recent years.

Employees drove district cars to the Central Coast, used district equipment to change their personal car’s oil and used surplus materials for home projects, according to the report. They’d recycle district scraps and buy department supplies with the cash, bypassing property laws.

In an interview with The Californian Tuesday, Taylor denied wrongdoing and claimed he’s being blamed as political backlash and to force him into retirement. He and his lawyer slammed the report as inaccurate.

Investigators, however, say Taylor ignored rules and allowed himself and his employees to benefit from district property. They allege Taylor allowed a department handbook to say employees can “borrow” equipment for their personal use.

“This contributed to a department culture in which it was permissible to ignore district rules, regulations and policies, setting a tone that internal controls were unimportant,” the report says.

Investigators wrote they could not determine if a specific employee committed fraud but that at least $34,000 has gone unaccounted for — so fraud is possible.

Investigators recommended BCSD educate its maintenance, operations and transportation employees and managers on rules and procedures; update policies and handbooks; and carefully monitor the departments.

They also suggested that Kern County Superintendent of Schools Christine Lizardi Frazier notify the state controller, state superintendent of public instruction and the Kern County District Attorney’s office that fraud may have occurred. She told the BCSD school board she would.

REQUEST, REPORT

BCSD officials learned of the alleged misappropriations in July and investigated. They sent findings to the Bakersfield Police Department on Aug. 15, police confirmed, and to the Kern County Superintendent of Schools office, which oversees the Bakersfield-based Fiscal Crisis & Management Assistance Team.
Police investigators “determined no crime had been committed,” BPD Sgt. Mary DeGeare said.

In September, the fiscal team started interviewing more than a dozen people, digging through years of accounting records from BCSD and recycling companies, and reviewing policies and laws.

On Sept. 27, district Chief Business Official Steve McClain sent a memo to all maintenance, operations, facilities and transportation employees reminding them of board policy that states, “No employee shall make personal use of any school equipment or supplies.”

District officials wouldn’t say why they sent the memo, saying it was a personnel matter. But they confirmed Taylor was put on paid administrative leave Aug. 12, and he continues to be on leave, Taylor confirmed.

Frazier praised BCSD interim Superintendent D. Kent Ashworth and the board for taking the allegations seriously and asking an outside source to investigate deeper. The fiscal crisis team is an arm of KCSOS, but acts independently, she said.

“You are a very ethical board, to ask for a report on this and know it will be reported publicly,” Frazier said.

DEPARTMENT RECYCLING

Taylor told investigators that for at least 20 years, the maintenance and operations and transportation departments have recycled district property and spent the proceeds on small items for the department, and an annual barbecue. The transportation department used proceeds for an annual bus driving competition.

The funds were kept in cash boxes, bypassing record-keeping policies.

Employees would load district vehicles, sometimes on Saturdays and on overtime, and take scrap material to recyclers. Recyclables included tractors, copper and a forklift. School property must be auctioned to the public.

Investigators gathered three years of recycling receipts totaling nearly $85,000, some showing $62,000 being paid to employees in cash. Much of the recycling proceeds were accumulated during the 2010-11 school year when numerous school modernization projects took place through a $100 million bond. District scraps piled up.

Of the $85,000 documented, $34,156 couldn’t be accounted for. More than the $85,000 could have been misappropriated in those three years and years prior because the investigators did not have the subpoena powers needed to secure other types of documentation, one told the board Tuesday night.

In the cash box, district and police officials found $947 in receipts since 2004, plus $29,000 in cash. Receipts were for such things as a flat tire repair, air pump and label makers.

When Taylor took over the department 10 years ago, he inherited an empty cash box, the report states.

In the transportation department, employees recycled about four times a year, which garnered no more than $1,500. Staffers in both departments said the practice was longstanding.

Several employees told investigators they were concerned about the recycling procedures but continued them at the direction of the directors — Taylor and now-retired Robert Bradford.  

“It appears these recycling activities were conducted not only in violation of the department handbook and school district policy but also state law,” the report says.
State Sen. Jean Fuller, who led BCSD from 1999 to 2006, declined to comment on the report findings, or on whether the practices occurred during her tenure, because she hadn’t read the report.

“I really can’t say,” said Fuller, R-Bakersfield. “Those are the types of things I would terminate someone for.”

Michael Lingo, superintendent after Fuller until this summer, could not be reached. Current administrators including Interim Superintendent Ashworth told investigators they were unaware of the practice until it was brought to their attention.

PROPERTY USE

BCSD board policy forbids personal use of school equipment. But since 2003, the maintenance department handbook has read: 

“Employees will be allowed to borrow small power tools, i.e., saws, electric hammers, etc. for their personal use if they have approval from their supervisors.”

Several employees told investigators they knew of the board policy but still used such things as dump trucks, lawn mowers and trucks for personal use.

Taylor confirmed to investigators he used equipment to maintain his rental properties, according to the report. Other employees used district tools and the district shop for personal projects.

“Employees simply borrowed the items they wanted and returned them whenever they pleased,” employees told investigators, according to the report.

Sometimes, property was returned damaged and no effort was made to hold the borrower accountable, the report stated.

Vehicles assigned to employees were seen in parking lots of restaurants and home improvement shops. One was seen at a beach on the Central Coast.

Earlier this year, district board Trustee Andrae Gonzales asked that a BCSD logo be placed on each vehicle, but employees placed them where they could not be easily seen. District administrators required the logos be put in plain view.

The investigative team, however, did not find documented proof of the personal equipment use or out-of-town trips, only heard allegations in interviews, according to the report. Still, the team blamed managers.

“Managers are in a position of authority and therefore have a higher standard of care to establish the ethical tone and serve as examples to other employees,” the report states. “(Taylor) had the authority and responsibility to account for the money collected by his departmental staff and made no effort to accomplish this.” 

DIRECTOR DEFENDS

Taylor, 65, said he’s been singled out because he spoke out against a district plan to hand over a piece of property in east Bakersfield to another governing agency. Taylor wanted the land near Jane Street for a bus stop. After he spoke out, district administrators wanted Taylor out, he alleges.

Now, he’s being blamed in the report for things that have been in practice since well before he started in the maintenance and operations department 10 years ago, he said. Taylor has also taught and served as principal in the district since 1972.

“Had they come to me and said, ‘Make changes,’ I would have made changes,” Taylor said Tuesday at his attorney’s office.

“This is not an objective, fact-finding investigation. This is an effort to get him fired,” his attorney, H. Dennis Beaver, said. “It is biased, prejudiced and total crap.” 
Beaver also argued many details of the report are inaccurate and the document itself is a waste of taxpayer money. The report cost less than $25,000, investigating officials said.

Taylor argued the cash box was accessible to dozens of people, and therefore he should not be blamed for misappropriating the money. He did not steal any; he’s a millionaire who owns 20 rental properties, he said.

“My name is worth more than that,” Taylor said. “I have a family here.” 

Taylor said he didn’t know there was anything wrong with recycling procedures. And the policy on using property for personal use, he said, was written and put in place by another manager.

Beaver said they are “exploring all options” including suing the district for age discrimination and emotional distress.

The district has 15 days to respond to the report. Since before the investigation was finished, the district implemented procedures to better account for funds received from recycling operations, Ashworth said in a statement.

The board and administration, he said, are committed to closely reviewing the recommendations and taking steps to ensure best accounting practices and that district funds are properly handled.

“The board of trustees has been insistent that our district be transparent in all areas and focus our energy and resources on providing the best education possible for our students,” he said.

Click HERE to read the full report.

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