DA: Felony grand theft charges for MACSA leaders

John Chase, Santa Clara County Deputy District Attorney with the Public Integrity Unit, speaks during a press conference Thursday in San Jose about their investigation into the Mexican American Community Services Agency, a San Jose-based organization know

Two former leaders of the Mexican American Community Services Agency who allegedly used employees’ retirement savings for school supplies, a salary raise, a YMCA membership, food from local supermarkets, computers, office supplies and other general operating costs are being charged with felony grand theft and could face up to three years in prison, Santa Clara County’s District Attorney Jeff Rosen announced Thursday morning.

As for the 50 to 100 “dedicated, hard-working” victims caught up in the financial debacle of the agency – a San Jose-based organization that once operated the now defunct El Portal Leadership Academy charter school in Gilroy before it shut down in 2009 – it’s anyone’s guess how much longer they’ll have to wait before they see a dime of $1 million skimmed from their pension and 403(b) retirement accounts.

“That is a question I can’t answer,” said Deputy DA John Chase during the press conference Thursday. “I’m sorry.”

At least some of those diverted retirement funds contributed to $20,000 in extra take-home pay for former MACSA CEO Olivia Soza-Mendiola, according to a “statement of probable cause” in support of an arrest warrant issued by the DA’s office.

If convicted, Soza-Mendiola, 53, of San Jose, and former CFO Benjamin Tan, 61, of South San Francisco, could be sentenced to jail, get slapped with a $10,000 fine each and be ordered to pay full restitution to the employees who lost their retirement funds, according to the DA.

Rosen said Thursday there are warrants out for the arrest of Soza-Mendiola and Tan. 

Soza-Mendiola turned herself in Wednesday and was released right away, according to Jose Cardoza with the Santa Clara County Sheriff’s Department. Soza-Mendiola’s court date is set for 9:30 a.m. May 2 in the Hall of Justice in San Jose. 

Tan has not turned himself in yet, Cardoza said Friday.

The fact Soza-Mendiola “suddenly stopped” her own personal retirement plan contributions just months before MACSA ceased to make its required contribution payments for employee pensions “suggests (she) knew this in advance,” according to the statement.

When asked during a press conference if Soza-Mendiola used the diverted money to give herself a raise, Chase replied “the retirement money was used to pay other obligations of MACSA. One of those was (Soza-Mendiola’s) paycheck, and during this period of time, she received a raise.”

MACSA’s former Chief Operating Officer Xavier Campos, who blamed the issues on administrative errors when confronted with surmounting employee grievances in 2009 according to a court affidavit, has not been charged with anything.

When asked if the DA’s Office believes Campos did not have any knowledge of the financial mismanagement of employees’ retirement money – despite the fact Campos was MACSA’s chief operating officer prior to its closure of its Gilroy charter school in 2009 – Chase replied “mere knowledge of criminal activity is not enough for criminal liability.”

If Campos knew of the decision to illegally divert employees’ retirement funds to pay for school operating expenses, but did not participate in the decision to carry out the embezzlement, that’s not enough to merit a charge, according to Chase.

The statement of probable cause shows Campos was “almost certainly aware” of what was going on.

MACSA board meeting minutes indicate Campos made an effort to sell MACSA-owned property “in part to satisfy past due pension obligations. Thus, Mr. Campos was almost certainly aware that MACSA had failed to make at least some pension payments,” according to the statement.

Final conclusions drawn by DA investigator Lit. Michael Sterner however, state that Campos and other MACSA board members are not criminally responsible for actions taken by the former CEO and CFO. The board did not have direct control over MACSA’s money and there is no evidence of any action taken to endorse or approve the decision to stop making retirement payments, according to Sterner.

MACSA had “more than enough” money to cover operating costs

Charges levied against MACSA’s former leaders were announced Thursday following a “careful, deliberate and detailed” review by the DA’s Office and U.S. Department of Labor, who spent two-and-a-half years conducting dozens of interviews, pouring over more than 400,000 pages of seized documents and executing forensic searches of more than 5 million computer files.

When asked Thursday at the press conference in San Jose by a reporter what spurned the investigation, Rosen replied “our office became aware of (the case) because of that newspaper – the Dispatch.”

The Dispatch broke the story of MACSA’s questionable financial practices in early 2009, when MACSA workers discovered their pension system had not been properly credited with money deducted from their paycheck. Around this time allegations of MACSA’s crippling mismanagement and “self protective measures” ignited a financial scandal at the agency’s two charter schools: Academia Calmecac in San Jose and the now defunct El Portal Leadership Academy on IOOF Avenue in Gilroy.

Extensive review later revealed that Soza-Mendiola and Tan knowingly diverted money that was supposed to go into their employees’ retirement accounts; instead using the funds to cover ongoing operating expenses such as a YMCA membership, food from local supermarkets, computers, sports and office supplies.

“They did this knowing that the employees’ paycheck stubs falsely represented that this money was being paid to the retirement accounts,” read a press release from the DA.

Details illuminating MACSA’s fiscal finagle, which were made public via a bulky 33-page affidavit presented to the Santa Clara County Superior Court Oct. 12, 2011, reveal haphazard leadership and decision-making.

“Why was it decided that withholding our retirement fund was a sound solution, and how could you morally allow that?” one teacher asked in a Feb. 27, 2009 meeting between MACSA’s charter school teachers and Soza-Mendiola.

The teacher was referring to the news MACSA owed several hundred-thousand dollars 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 do business that way, or fire people.

If forced to fire people, the schools would be dysfunctional. So in her mind, Soza-Mendiola reasoned, she chose the best solution.

Further forensic analysis shows MACSA “had more than enough money” in its bank account at the end of each month to have made the required contributions to pension and retirement accounts, according to the statement of probable cause in support of arrest warrants released Thursday.

“There were even months in 2008 when MACSA had the money to make the required (contribution) payments, but instead paid less important obligations,” the statement reads.

MACSA files lawsuit against former leaders

MACSA is now under new management and continuously striving to rise above the negative publicity, which has 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.

As for MACSA’s former management and certain employees, they’re also taking heat from John Marshall Collins, the San Jose lawyer retained by MACSA’s new leaders who filed a lawsuit in January 2011.

The complaint is filed against Joe Chaidez, a Certified Public Accountant in Clovis, Soza-Mendiola, Tan and a slew of suggested but unnamed additional 100 “Doe Defendants,” according to court documents obtained by the Dispatch.

The suit contends negligence and breach of fiduciary duty on top of damages including injury to reputation, lengthy and probing investigations by the DA’s Office, lost ability to raise funds by means of charitable donations and severe damage to employee morale.

Collins, along with MACSA’s new Board Director Michael Lopez, were contacted for updates regarding the current status of this lawsuit but have not returned phone calls.

During Thursday’s press conference, Chase described the MACSA victims as “dedicated” employees who “would have donated their own money to help MACSA out, if needed,” said Chase. “For the leaders of MACSA to spend the employees’ retirement money on other things behind their back is inexcusable.”

Rosen said there is currently no court date set for this case, but it’s likely to be scheduled for a month or so down the road.

In spite of MACSA’s drawn-out saga that has yet to be played out in court, Rosen made victims’ financial restitution a sticking point during Thursday’s crossfire of questions.

“This case is about hard-working people whose retirement money is gone,” he said. “We’re going to try and get it back.”

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