The Mexican American Community Services Agency, whose San Jose
headquarters once facilitated the El Portal Leadership Academy on
IOOF Avenue in Gilroy before it became defunct in 2009, is seeking
damages in the aftermath of payroll embezzlement that surfaced four
years ago, according to a court affidavit.
The Mexican American Community Services Agency, whose San Jose headquarters once facilitated the El Portal Leadership Academy on IOOF Avenue in Gilroy before it became defunct in 2009, is seeking damages in the aftermath of payroll embezzlement that surfaced four years ago, according to a court affidavit.
The lawsuit, a complaint filed against several of MACSA’s former leaders and a slew of suggested but unnamed additional 100 “Doe Defendants,” contends negligence and breach of fiduciary duty surrounding hundreds of thousands of skimmed funds from employee retirement pensions.
Its text however, accuses the defendants of subjecting MACSA staff to a slew of damages including injury to reputation, lengthy and probing investigations by the Santa Clara County District Attorney’s Office, lost ability to raise funds by means of charitable donations and severe damage to employee morale.
The suit is spearheaded by San Jose lawyer John Marshall Collins – MACSA’s attorney in the case who was unavailable for comment as of press time. A hearing is slated for 10 a.m. Jan. 25 at the Santa Clara County Superior Court in San Jose at 115 Terraine Street.
The defendants include Joe Chaidez, a Certified Public Accountant in Clovis, former CEO Olivia Soza-Mendiola and Former Chief Financial Officer Benjamin Tan, according to court documents obtained by the Dispatch.
The motion to file charges against school administrators is another development in the MACSA story line since a bulky 33-page affidavit presented Oct. 13 to the Santa Clara County Superior Court detailing the ongoing saga of the troubled agency.
It chronicled events occurring between 2002 and 2009, building an inside case based on personal accounts of former MACSA staff, business records and various audits, and was riddled with accusations of monetary delinquency, blame shifting and “illegal fiscal practice.”
The nonprofit – which ran Gilroy’s only charter school and another charter school in San Jose – became the subject of heated controversy after investigations revealed its top administrators had embezzled about $400,000 in payments from its charter school employees’ retirement accounts over the course of several years, using those funds to pay for operational costs, according to an August 2010 audit.
MACSA’s financial finagle, largely shrouded in confusion until in-depth reviews were eventually conducted and made public via the affidavit, detracted attention from the 46-year-old nonprofit’s proactive intentions and services designed to create long term, systematic changes/improvements in family literacy, education, health, prevention and housing.
The lawsuit is an extension of the original complaint filed by MACSA against Chaidez in June 2010, which was amended last month to include Soza-Mendiola and Tan.
Chaidez, who had prepared MACSA’s financial statements, is being sued for his failure to “become aware” of financial discrepancies, including diverted funds withheld from employee paychecks, the mismanagement of general operating funds and the failure to make payments to the federal and state government for MACSA employees’ share of FICA and Medicare payments.
“The accountant had a duty to set up controls which would have prevented such practices, to discover these facts, to place them in his written audit reports, and to report them directly to the Board of Directors,” Collins argued in the lawsuit.
“The accountant failed to perform his duty.”
As for Soza-Mendiola, Tan and the bevy of unidentified “Doe Defendants,” – individuals suspected by MACSA, or plaintiff, to be involved but not officially identified in the lawsuit – Collins said their roles as president and chief financial officer called for diligence, care and the use of good judgment.
Rather, the lawsuit said MACSA leaders tampered with pension funds, income tax withholdings, and retirement plan deposits.
The Dispatch was unable to reach Soza-Mendiola, who has strong family ties to Gilroy.
MACSA’s Former Chief Operating Officer, newly elected San Jose City Councilman Xavier Campos, was also a figure associated with the nonprofit’s past leadership discrepancies.
When confronted with surmounting employee grievances, the affidavit states Campos blamed the issues on administrative errors.
“Xavier encourages MACSA to provide the district attorney’s office with every document in their possession requested by the district attorney’s office.” Rolando Bonilla, a spokesman for Campos told the Dispatch in November. “Mr. Campos also encourages the district attorney’s office to pursue all leaps in this investigation in order to help a fine institution like MACSA continue providing the vital services to those who are most in need.”
Campos’ name is absent from the lawsuit.
Accusations within the lawsuit, for that matter, correlate with questionable scenarios documented in the affidavit.
“Why was it decided that withholding our retirement fund was a sound solution, and how could you morally allow that?” asked one teacher in a Feb. 27, 2009 meeting between MACSA’s charter school teachers and Soza-Mendiola.
The teacher was referring to the news MACSA owed approximately $300,000 to employee pension funds. At that time, the teachers were still unaware that MACSA owed an additional $700,000 to its employees’ 403(b) retirement accounts.
Soza-Mendiola replied she had no choice: it was either doing business that way, or firing people.
“Such acts,” states the lawsuit, “placed the Plaintiff (MACSA) in violation of its duties to its employees … Soza-Mendiola and Tan should have known the activities of the accountant, and failed to call these activities to the attention of the Board of Directors of the Plaintiff, or participated in concealing these activities because they did not want the Board to know about these matters.”