No criminal charges in school construction scandal
District, remaining board members are ‘disappointed’ in the decision not to prosecute Del Terra company
SAN JOSl >> A corruption scandal over construction contracts that embarrassed the Alum Rock Union School District after two scathing state audits will not result in criminal charges following a three-year probe by county prosecutors.
Though the Santa Clara County District Attorney’s Office confirmed many of the criticisms previously leveled against the district, including meager oversight over millions of dollars spent on school construction projects, it found that most of the malfeasance was not criminal but rather a product of poor institutional controls and favoritism toward Del Terra Real Estate Services by district administrators and board members.
Current board member Andres Quintero, who long opposed the Del Terra contracts, disagreed.
“I’m disappointed that taxpayers of Alum Rock aren’t going to get the justice that they deserve,” Quintero said.
The investigation by the DA’s public integrity unit did find that there was a conflict-of-interest crime committed in 2014 when Southern California-based Del Terra, while serving as a financial consultant for bond-funded construction projects, secured $2 million in construction work with the district. About three years ago, district counsel Rogelio Ruiz warned district board members that the arrangement violated state law.
But prosecutors said that conflict of interest couldn’t led to charges because the four-year statute of limitations had passed, and Del Terra, in lacking a government title, would have been subject to civil but not criminal penalties under case law at the time.
“Although no charges were filed, this office’s deep diligence in investigating this case speaks to its great import,” District Attorney Jeff Rosen said in a statement. “Our school districts deserve rigorous, competent, and ethical oversight over their finances.”
The Alum Rock district, which endured more heavy criticism in a DA memo made public Tuesday, denounced the decision, noting Del Terra CEO Luis Rojas faces criminal charges in Los Angeles County for alleged influence peddling amid scandal-plagued project management for a school district east of Los Angeles.
“With Del Terra’s chief executive officer having recently been charged for criminal activity by the Los Angeles County District Attorney’s Office, it is baffling to believe that charges could not have been raised in Santa Clara County for similar activities,” reads an Alum Rock statement. “The Santa Clara County District Attorney’s Office missed a clear opportunity to send a message to anyone seeking to exploit public
agencies in an effort to access tax dollars.”
Rojas lauded the investigation’s findings.
“We are pleased with that the investigation has come to a conclusion and that the exhaustive investigation turned up no evidence to support any legal actions,” Rojas said in a statement Wednesday. “As such, Del Terra has moved on from this matter, and we wish Alum Rock School District success in moving forward.”
The controversy led to voters in 2018 ousting Alum Rock board members Esau Herrera and Khanh Tran, who a county civil grand jury recommended step down for failing “to meet its governance standards and fiduciary responsibility.”
Quintero says he is now part of a three-member majority on the school board with a more careful eye on district business and hopes an ongoing lawsuit the district filed against Del Terra in 2019 will bring some relief.
Most of the staff and board members linked closely to the Del Terra conflict are no longer with the district, which severed ties with the company in 2018.
“As long as we don’t go back, we’ll be OK,” he said.
Still, the DA probe did unveil new information that had not been public.
Through warrant powers that could not be exercised in audits by the California State Auditor and the state’s Fiscal Crisis and Management Assistance Team, prosecutors found the district paid Del Terra more than $200,000 in preconstruction management fees for multipurpose rooms at Fischer Middle School and George Middle School that never went up.
“We can go back to the same spot where we did the groundbreaking and nothing ever got built,” Quintero said.
Alum Rock has 28 elementary and middle schools, with an enrollment of more than 10,500 students. More than 80% of them receive free or reduced-price lunches, according to the state Department of Education.
The dealings between the district and Del Terra have been plagued by scandal, including an alleged side deal that was quashed in 2017. The state audit report found practices that violated state law, including a lack of transparency in disclosing financial information. The district also was found, under the apparent guidance of Del Terra, to have awarded no-bid contracts and put key decisions in the board’s consent calendar away from public discussion.
Prosecutors used the FCMAT audit as a springboard for its investigation and said Rojas “took advantage of inexperienced board members and overworked or incompetent district staff to cause these problems.”
On an allegation Del Terra defrauded the district to secure $600,000 over an agreed-upon contract fee, prosecutors “determined that Del Terra’s questionable justifications when seeking that amendment were really matters of opinion that could not be proved false or that they were made with fraudulent intent.”
Rojas objected to the FCMAT audit’s characterization of his company, saying the agency did not talk to him. He added that the civil suit with Alum Rock will show “Del Terra fulfilled its contractual duties and obligations under the contracts, which were both prepared and reviewed by the district’s own legal counsel. We look forward to our day in court to resolve these matters.”
Deputy District Attorney Daniel Kassabian said that although no one faces criminal penalties, other public boards should pay heed to the Alum Rock case.
“While we use consultants a lot in government these days, you don’t just hand the keys to the car; you need to follow up and do due diligence,” he said. “Here there was a trusted program manager, responsible for a lot of money and oversight of construction, and school officials not well versed, and should have asked more questions along the way.”