One teacher summed up the debacle of the Mexican American
Community Service Agency
– a case that involves skimming retirement money from charter
school employee paychecks to pay for operating costs due to
financial mismanagement.
”
Why was it decided that withholding our retirement fund was a
sound solution, and how could you morally allow that?
”
This is just one incident reported in a bulky affidavit
presented Oct. 13 to the Santa Clara County Superior Court.
One teacher summed up the debacle of the Mexican American Community Service Agency – a case that involves skimming retirement money from charter school employee paychecks to pay for operating costs due to financial mismanagement.
“Why was it decided that withholding our retirement fund was a sound solution, and how could you morally allow that?” the teacher asked in a Feb. 27, 2009 meeting between MACSA’s charter school teachers and CEO Olivia 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.
If forced to fire people, the schools would be dysfunctional. So in her mind, Soza-Mendiola reasoned, she chose the best solution.
This is just one incident reported in a bulky affidavit presented Oct. 13 to the Santa Clara County Superior Court. The 33-page document spins the ongoing saga of the local nonprofit, which is recovering from haphazard leadership and nonsensical decision-making in the face of fiscal adversity.
The motion to file charges against school administrators, however, still hangs in the air.
“It’s very important for us to resolve the investigation,” said Jeff Rosen, district attorney-elect of Santa Clara County. “I can’t tell you how many people we have working on it, or when the investigation is going to be completed. What I can tell you is that it’s important for me to resolve it.”
Allegations of MACSA’s misappropriation of public funds and the embezzlement of private funds arose more than two years ago. Complaints at MACSA’s two charter schools, El Portal Leadership Academy in Gilroy and Academia Calmecac in San Jose, surfaced after employees discovered their pension system had not been properly credited with money deducted from their paychecks.
Soza-Mendiola, Chief Operating Officer Xavier Campos and Chief Financial Officer Ben Tan are no longer employed with the organization.
“Xavier encourages MACSA to provide the district attorney’s office with every document in their possession requested by the district attorney’s office. 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,” said Rolanda Bonilla, a spokesman for Campos.
Soiza-Mendiola was unable to be reached for comment.
Key investigator Michael Sterner with the Santa Clara County District Attorney’s Bureau of Investigation, filed an extensive affidavit stating reasonable cause to believe “evidence of the commission of felonies” Oct. 13, and executed a search of MACSA headquarters in San Jose the following day.
Though the Office of the District Attorney had expected to reach a decision by June at the latest, criminal charges have not been filed.
Since the Oct. 14 search warrant, Deputy District Attorney Bud Frank said the investigation is still ongoing.
“It is our duty to do a thorough inquiry and examination of all of the evidence,” he said over the phone Nov. 26. “We’re still working with the materials, analyzing the proceeds of the search warrant and proceeding with the case as described in the search warrant affidavit. We want be as thorough and diligent as we can, determining what the evidence is, and what the facts are.”
Frank, assigned to the Government Integrity Unit as part of the case, said the affidavit contains every detail available to the public at this point.
“We can’t talk about an investigation in progress,” he explained. “We can tell you what’s in the public record.”
Frank explained sometimes, complicated cases such as MACSA require more of what’s allotted within the statute of limitations – an enactment stating the maximum time after an event that legal proceedings need to be initiated.
“The legislature specifies a three-year statute of limitations,” said Frank. “Of course, most cases don’t often take that long.”
The affidavit chronicles events occurring between 2002 and 2009, building an inside case based on personal accounts of former MACSA staff, business records and various audits. It’s riddled with circumstances of monetary delinquency, blame shifting and “illegal fiscal practice.”
Prior to the search, Sterner stated in the affidavit he believed records and evidence sought by the warrant would allow him to determine exactly how the skimmed retirement funds were used, and who was responsible for it.
The Dispatch was unable to verify which specific documents were successfully seized during the search, but Sterner’s affidavit requested permission to obtain an extensive list of materials including Citibank checking account records, all MACSA correspondence in any form and filings relevant to retirement plans and contributions.
Sterner also requested permission to analyze all seized computers in a law enforcement forensic lab.
Prior to the Oct. 14 search, Sterner stated in his affidavit that he believed MACSA diverted money from employee retirement accounts to pay for operation costs, based on the evidence already available.
He said misuse of appropriated funds was also evident.
According to page 11 of the affidavit, former employee Supreet Pabla, who worked as a contract negotiator and shop steward for MACSA up until 2009, said MACSA received a $250,000 21st Century Grant and misused it for general operating expenses.
Sterner verified the 21st Century Grant was specifically designated for the creation and enhancement of specialty programs during nonschool hours.
Supreet said Susan Arias, head of after school programming for MACSA, complained she was running the programs on “the bare minimum.”
“Investigation to date has revealed substantial commingling and diversion of funds,” wrote Sterner on page 1 of his affidavit. “I learned that approximately $823,000 was advanced by MACSA to its housing subsidiary (KETZAL), and that those funds have been written off as ‘unrecoverable.’ ”
When confronted with surmounting employee grievances, the affidavit states Campos blamed the issues on administrative errors.
“It’s practically absurd to claim he had no involvement,” said Tab Berg of Tab Communications, Inc.
Tab Communications is a consultant for the San Jose Silicon Valley Chamber of Commerce’s political committee, and helped to obtain the public records.
“It was absurd for them to not know they were doing something wrong. They were stealing people’s retirement money,” said Berg.
He mentioned an East Coast teacher, who was passionate about the charter system and moved his entire family all the way to California just to work for MACSA.
“He ended up losing his job,” said Berg. “This ended up having hundreds of students teachers without jobs, and without schools.”
Standout findings listed in the affidavit
– The Santa Clara County District Attorney’s Office is investigating events that transpired between 2002 and 2009 at two charter schools that were operated by the Mexican American Community Service – El Portal Leadership Academy in Gilroy and Academia Calmecac in San Jose. Michael Sterner, investigator with the Santa Clara County District Attorney’s Bureau of Investigation, filed an extensive affidavit Oct. 13 documenting the case and executed a search of MACSA headquarters in San Jose the following day.
– As of April 2009, MACSA had failed to submit $309,179.92 in retirement contributions from the charter schools to the state CalSTRS and CalPERS retirement programs – pension funds operated for state and local public employees in California.
– Employee’s paystubs showed MACSA was deducting money for retirement programs, union dues, medical and dental plans. Sterner learned MACSA was not making payments on its Kaiser Permanente health plan, dental plan and had been significantly behind on union due payments.
– Aurora Cepeda, the interim CEO for MACSA and former director of Human Resources, told Sterner she believed the executive team at MACSA – whom she identified as team CEO Olivia Soza-Mendiola, Chief Operating Officer Xavier Campos and Chief Financial Officer Ben Tan – was responsible for diverting money away from employee retirement accounts … as they were the individuals who made the decisions for the organization at the time.
– When preparing to sell two of its buildings and consolidate operations to the main office at 660 Sinclair Drive in San Jose, Aurora told Sterner MACSA had removed all of their financial records from storage and were preparing to shred everything prior to and including 2004.
– During a six-month period in 2008, MACSA owed more than $400,000 in delinquent payroll taxes.
