Billing error or embezzlement?

Gilroy Unified School District trustee Francisco Dominguez is in

Gilroy Unified School Board trustee Francisco Dominguez, who
owns his own consulting firm, says he has resolved a billing
dispute with a leading social service organization in South County,
but the agency’s former treasurer, longtime Gilroy accountant John
Blaettler, says it’s a case of


embezzlement. Full article
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Gilroy Unified School Board trustee Francisco Dominguez, who owns his own consulting firm, says he has resolved a billing dispute with a leading social service organization in South County, but the agency’s former treasurer, longtime Gilroy accountant John Blaettler, says it’s a case of “systematic” embezzlement.

Blaettler says he resigned as treasurer after the South County Collaborative, led by chairwoman Lynn Magruder, declined to bring the matter to the attention of law enforcement agencies and, alternately, reached a civil agreement with Dominguez to pay back more than $52,000 to the agency.

“I’ve lived here all my life and I love this community,” Blaettler said, adding he agonized over the decision to come forward publicly for months. “I just can’t live with it … to allow someone to come in who’s in a position of leadership to rob our community – it’s outrageous. He needs to be prosecuted.”

Dominguez, who said he is the sole proprietor of DZ Consulting, repeatedly refused to confirm the monetary nature of the agreement.

“I’m not going to go into detail,” he said. “We had some dispute in terms of the billing and so that was an issue.”

Dominguez said he performed duties above and beyond what was called for in his contract with the South County Collaborative. One of those duties outside the contract’s purview, he said, was acting as the agency’s “bookkeeper.”

“They were giving me other things to do, and I was billing them for those other activities,” Dominguez said.

Dominguez came to Gilroy from Oxnard, where he served on the school board from 1996 to July 2006. He was elected to the GUSD school board in 2006 and served as its board president for one year beginning Dec. 10, 2009. In 2010, Dominguez ran for the 28th District State Assembly seat and lost in the primary to Luis Alejo.

He was hired by the South County Collaborative in September 2008 to manage a five-year, $125,000-per-year, federal Drug Free Communities grant that was renewable annually. During two years of managing the grant, Blaettler said Dominguez systematically overbilled the agency by $52,269. Moreover, Blaettler said Dominguez controlled the South County Collaborative’s only checkbook and wrote checks to himself paying invoices he generated from his DZ Consulting firm without any other representative of the agency co-signing.

Dominguez, however, said it was his practice to have someone from the South County Collaborative co-sign the checks or initial the invoices.

In an hourlong interview at The Dispatch office, South County Collaborative Chairwoman Magruder, who is employed as a grants administrator for the human services agency Community Solutions, declined to name Francisco Dominguez or DZ Consulting as the contractor. However, in minutes obtained by The Dispatch from a Nov. 4 South County Collaborative Board of Directors meeting held at the Gilroy Library, under Board Action it states, “The Board voted not to renew the contract with DZ Consulting for year three of the Drug Free Communities project.” Magruder is listed as present and the action to not renew with DZ Consulting passed 9-0 with three board members absent.

Vernice Dominguez, Francisco’s wife, was also listed among absent board members. Months later, in a March 25 special session of the South County Collaborative Board of Directors held at the Gilroy Foundation offices, Vernice Dominguez was removed from the board. According to the meeting minutes, Magruder cited the main reason for her removal as “1. Conflict of interest, given that her spouse is involved in a legal matter with SCC.”

Dominguez said he had a good relationship with the South County Collaborative and did not receive an official explanation as to why his contract was not renewed.

“I don’t think there was a reason,” he said. “They never notified me.”

The South County Collaborative is “a tax-exempt association comprised of 70 community-based organizations, schools, hospitals, clinics and public agencies that serve Southern Santa Clara County’s disadvantaged populations,” according to a recent job posting by the organization. Representatives on the 12-member board include David Cox, the executive director of St. Joseph’s Family Center; Marilyn Roaf, the city of Gilroy’s Housing and Community Development coordinator; Martha Bell, the city of San Jose’s disability navigator; Sr. Rachela Silvestri of Saint Louise Regional Hopsital; and Erin O’Brien, president and CEO of Community Solutions, one of the leading human services agencies serving South County. O’Brien accompanied Magruder to the interview at The Dispatch, but offered few comments.

Blaettler said that the South County Collaborative board debated whether to notify law enforcement after he briefed members in depth on the situation before deciding to resign.

Dispute over billed amount

Monetary issues came to light in September 2010 when Blaettler – a veteran board member of the local philanthropic nonprofit Gilroy Foundation – left the Gilroy Foundation board and became the volunteer treasurer for the South County Collaborative.

This move took place after the Gilroy Foundation applied for and received a $70,000 grant from the Silicon Valley Community Foundation, a philanthropic organization in San Mateo and Santa Clara counties.

“They (the Collaborative) are a good organization that has done wonderful things for the community in the past. Because of that, we secured a one-year grant to help them with office space and a paid staff member,” said Donna Pray, executive director of the Gilroy Foundation.

The one-year grant began Jan. 1, 2011, and is administered to the South County Collaborative through the Gilroy Foundation.

Blaettler said the Gilroy Foundation and South County Collaborative had a great relationship, and he wanted to act as a liaison between the two by sitting on the Collaborative’s board.

“Because John is a respected CPA (certified public accountant) in our community … the SCC Board asked him to step in and take over the treasurer position,” Pray wrote in response to questions about the Gilroy Foundation’s involvement.

After repeatedly requesting and eventually obtaining the South County Collaborative’s financial data from Dominguez and analyzing it, however, Blaettler said he noticed “inaccuracies” as billings submitted by Dominguez exceeded what was allocated to his contract.

“He was doing it. It was systematic,” said Blaettler. “There’s no question looking at it from a ‘financial guy’ standpoint.”

Blaettler presented these findings to the South County Collaborative Board of Directors in November 2010. Blaettler said that subsequently he and Magruder, the chair of the Collaborative board, met with Dominguez at least twice, but “never really got answers” as to why the financials did not align. Dominguez confirmed there were multiple meetings.

Lloyd Lowrey, the Gilroy lawyer hired by the South County Collaborative, attended at least one of the meetings with Blaettler, Magruder and Dominguez, according to Pray.

Lowrey was reached Thursday in his Gilroy office but said he could not comment on client engagement.

In her email, Pray said when Blaettler “pressed the SCC Board to press charges over at least four months and they refused, he resigned from their board.”

Speaking on behalf of the Gilroy Foundation, John Perales, the foundation’s board president and principal of Christopher High School, said he “absolutely” would support an investigation by the Santa Clara County District Attorney’s office.

“That’s what I would do if I wanted to clear my name,” Perales said.

Since the Gilroy Foundation is just affiliated with the South County Collaborative, however, and is not the organization that has suffered direct harm, Perales says they’re caught in the middle of an “odd situation.”

Still, Perales reiterated Blaettler “made it very clear this was not a situation where overpayment occurred, and somebody added the numbers together in the wrong way. This is what was presented to the Foundation board, and this is what the Foundation board supports.”

Pray echoed this stance, recognizing Blaettler as an individual “who holds himself and helps to hold others to the highest of standards.”

She delineated events through which the Gilroy Foundation became aware of the South County Collaborative’s missing funds in early April 2011, writing “it was at that time we were told that an independent contractor had had control of the Collaborative’s checkbook from 2009 through late 2010 and had taken, through various means, over $52,000 that was not due him.”

Dominguez explained the billing dispute was a misunderstanding that arose after he went above and beyond responsibilities outlined in his contract.

“I was submitting invoices for work I had completed, and at the time I wasn’t aware it was over the contract amount,” he said.

Administratively there were things the South County Collaborative should have been doing, he said, “but they didn’t have anybody to do it, and it fell on me … I don’t think I was overpaying myself. I was billing for work that I was doing.”

When asked if he had ever signed a check from himself made out to DZ Consulting, Dominguez initially said he “didn’t think so.” Later he said that it might have occurred in reimbursements on “one or two occasions” when covering his consulting expenses out of pocket. He acknowledged that he was an authorized signer on the South County Collaborative’s checkbook and could sign checks without co-signators, though he said it was not his practice to singularly sign a check made payable to himself.

Blaettler disputes this, saying Dominguez “was submitting invoices from his own company and writing checks to pay himself.” According to Blaettler, numerous checks made out to DZ Consulting were signed by Dominguez.

When she moved from the board into the chairman position in September 2010, Magruder reviewed “hundreds of invoices” sent to the South County Collaborative during the two-year period.

“I inherited all this,” she said. “It was very hard to figure out what was going on.”

Dominguez asserted “there was no hiding information” as either Magruder or Martha Bell – the Collaborative’s treasurer before Blaettler – would always sign invoices and reconciled bank statements.

Blaettler acknowledged Dominguez provided financial reports to the board, but said those were misleading and did not disclose everything.

“He didn’t tell lies; he didn’t tell the truth,” Blaettler said.

Blaetter said he spent 100 hours working on the South County Collaborative’s finances. He outlined one case as an example where Dominguez hired a speaker to address a youth outreach meeting, submitted an invoice from DZ Consulting for reimbursement but never paid the speaker. Blaettler, who owns and operates the John Blaettler Accountancy Corp. in Gilroy, said there were other similar examples.

South County Collaborative’s board chairwoman declined to give an example of what she meant by billing dispute.

Repeatedly referring to the circumstance as “a dispute over the amount billed,” Magruder’s responses were guarded as she echoed Dominguez, saying “we’ve resolved the matter and are in the process of recovering money that was owed to us.”

During a Dec. 2, 2010 Collaborative Board meeting, a motion to spend $1,000 to consult attorney Lloyd Lowrey was made by board member Sr. Rachela Silvestri according to the minutes. Magruder did say that she has spent $500 of her own money to cover attorney fees related to the billing dispute and that other Collaborative board members were covering the additional costs out of their own pockets.

No federal grant monies were used to cover the “overbillings,” according to Magruder, who said the South County Collaborative has received one repayment installment from the contractor so far.

Magruder did leave the door open on the question of whether the South County Collaborative will seek law enforcement’s involvement, saying Thursday over the phone, “We haven’t made that decision yet. This is a very complex situation … people may assume that things have happened that haven’t yet happened.”

When asked if the Collaborative will seek prosecution if all the money is paid back, Magruder replied “that’s not a question I’m able to answer.”

The Collaborative is following the advice of its attorney during this “very complex situation,” Magruder said.

Blaettler said the overall direction for the Collaborative Board is led by Magruder as the board’s chairman.

A call for transparency

In his resignation letter to the South County Collaborative dated March 25, Blaettler expressed frustration over what he called “a lack of accountability.” He wrote that he did not want to be party to a decision that allowed Dominguez to “get away with criminal behavior by simply allowing him to return the $52,269 he stole.”

Members of the Gilroy Foundation have since come forward to publicly support Blaettler’s call for accountability and transparency.

In addition to serving on the Gilroy Foundation board together, Perales said he’s consulted Blaettler on financial matters for 10 years, describing the CPA as an “upstanding guy” and “community man.”

Having never heard Blaettler “speak ill of anybody,” Perales said he has no reason to believe the accountant would bring accusations forward to “accuse people frivolously” or maliciously “smear somebody.” He also described Dominguez as “a good man” and “loyal (school) board member.”

While the Gilroy Foundation wasn’t defrauded and “doesn’t necessarily have the legal grounds” to launch an investigation, Perales said if something’s questionable, “then we make it right … open it up, put the cards on the table and let’s move forward.”

When The Dispatch asked Dominguez to provide copies of DZ Consulting invoices, South County Collaborative checks, checks he cashed himself for services related to the Collaborative and bank statements that were signed off on, Dominguez replied via email he did not have those documents.

South County Collaborative Board chairman Magruder said the agency would not provide “private business records” related to the issue, but would provide a copy of the Drug Free Communities Grant.

When asked directly if their consultant simply made a human error and overbilled, Magruder said, “that would be a question for the contractor. We’re trying to make our work whole so we can move forward with the community.”

On Tuesday Rhoda Bress, president of the Gilroy Unified School District Board, along with GUSD Superintendent Debbie Flores said they were informed of the matter by the Gilroy Foundation about a week previous.

Bress and Flores say they did not speak to other GUSD trustees, but asked Dominguez to communicate with fellow trustees about the issue himself.

“It’s an area of concern, of course,” said Bress, but pointed out “this involves the Collaborative and Foundation, not the school district.”

Flores said she was “definitely surprised” at the news, while Bress described her reaction as “very concerned.”

Had Dominguez agreed to pay back the funds immediately and resign from public office, “Boom – it would have been done,” Blaettler said. “It would be different if he wasn’t a public person. But this was a president of the Gilroy School Board stealing from the public community … directing the finances and well-being of our children. It just doesn’t seem right.”

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