PAY TO PLAY? Fired El Rancho Unified Bond Construction Management Firm Rehired After Donating Thousands to Board Member’s Election Campaign

BY BRIAN HEWS

A Hews Media Group-Community News investigation has uncovered a wide-ranging scheme involving over $212 million in school bond funds perpetrated by El Rancho Unified School District (ERUSD) Board Members engaging in pay-to-play politics, financial cover-up, blatant conflicts of interests, and willful violations of California’s Education Code.

The long-running plot has involved ERUSD President Jose Lara and Vice-President Gabriel Orosco since 2015, with newly elected Board member Leanne Ibarra joining the two controversial board members immediately after she was elected in November 2018.

The malfeasance is of such magnitude that it surpasses what HMG-LCCN uncovered inside Montebello Unified, when the LA County Office of Education and the Financial Crisis Management Team (FCMAT) were called in to investigate and audit the district, with the Securities and Exchange Commission filing for documents soon thereafter.

Jaime Ortiz and HPLE

The recipient of Lara and Company’s actions is Jaime Ortiz, a good friend of Lara and Orosco’s, and owner of High Performance Learning Environments, Inc., which was incorporated only five years ago as a two-person company.

Like many of Lara’s friends, Ortiz has an extremely checkered past, including a stint as senior manager at the Seville Group (SGI), a construction company that managed school bond programs.

SGI was involved in the Sweetwater Unified High School District (Sweetwater) corruption and bribery scandal related to the district’s massive $600 million bond, the largest corruption scheme in San Diego history.

According to reports by the San Diego Union-Tribune, Ortiz was given protection from prosecution under a plea deal involving his boss, SGI owner Rene Flores.

For that protection, Ortiz testified in front of a grand jury and threw everyone under the bus wearing, according to sources, listening devices -“wires” – to entrap the players in the scheme.

Five Sweetwater Board members plead guilty to bribery charges in the pay-to-play scheme, Sweetwater Superintendent Jesus Gandara was charged with eight felony counts.

Even though the San Diego D.A. let him get away with a plea deal, a common practice as the D.A. goes after “bigger fish,” Ortiz was involved in some very questionable dealings in the Sweetwater scandal.

It was reported Ortiz was caught working back channels and demanding campaign donations to Sweetwater officials from his subcontractors so SGI would be selected for the Sweetwater bond.

Hector Romero, President of HAR Construction, reported he was pressured by Ortiz to donate to organizations affiliated with Sweetwater so SGI could win the bond management contract.

Further, under “Evidence of wrongdoing,” the San Diego D.A. offered contribution details provided by Romero: “He [Romero] reported being with Superintendent Gandara in Mexico when Gandara contacted SGI Program Manager Jaime Ortiz and solicited a $20,000 contribution to Jim Cartmill’s campaign for the Sweetwater board. Romero also said that SGI made a $12,500 contribution to John McCann’s campaign for the school board…”

Romero later told the D.A. that he hoped to get lucrative “lease-leaseback” contracts from Ortiz and SGI for his contributions.

Lease-leasebacks authorize a school district to lease a school site to a contractor for a token amount, even as little as $1. The contractor would then build the school and lease it back to the district for up to 40 years. After the lease period, the ownership will revert back to the district.

In an email Ortiz denied the Union-Tribune’s report, “the [U-T’s] statement is incorrect. I did not have a plea deal.” Ortiz did not respond when asked why he did not ask for a retraction of the UT’s article.

Many involved in the Sweetwater scheme were sentenced to jail time and given heavy fines. With his plea deal in hand, Ortiz left the company and started HPLE.

And he would use what he learned at Sweetwater inside ERUSD with Lara and Company.

Sweetwater Shenanigans Surface at ERUSD

By 2015, a total of $12.6 million was available for construction purposes from two ERUSD bonds: Measure A approved in November 2003 for $49.5 million and Measure EE approved in November 2010 for $52 million.

During that time, ERUSD initiated a request for proposal (RFP) and interviewed five construction companies to award a $234,000 Facilities Plan to manage the $12.6 million: Cummings, Vanir, Lundgren, and Bernard.

Lara and Orosco, who was running for ERUSD Board in December 2015, insisted that HPLE be included on the list, and their crony, former ERUSD Superintendent Martin Galindo, obliged.

Then-ERUSD President Dr. Aurora Villion voiced her disgust, asking why HPLE was in consideration for the agreement when Ortiz had been involved in the Sweetwater scandal.

Galindo astonishingly vouched for Ortiz at the board meeting claiming he was innocent; Lara and then-candidate Orosco parroted Galindo’s statement while all of them knew Ortiz took a plea deal at Sweetwater.

The interviews commenced, and, according to documents obtained by HMG-LCCN, both Cummings and Vanir beat out HPLE in overall scoring.

THE NUMBERS showing HPLE placing third overall: fourth in “PGM;” third in “PJ;” and third in “CM;” yet HPLE was awarded the facilities contract.

But, similar to how Sweetwater Superintendent Gandara chose Ortiz and SGI over other firms, HPLE, with the help of Lara, Orosco, and Galindo, won the $234,000 contract despite placing third out of the five firms.

Ortiz did not answer questions about the third place award. HMG-LCCN emailed President Lara and Vice-President Orosco, but the two refused to address the question in a joint written statement.

“The District and Board of Education remain committed to working to invest in our community through our Project Labor Agreement, which creates employment opportunities for local residents and disabled veterans, as well as by supporting small business enterprises and women and minority-owned enterprises.”

“That’s interesting,” said one local contractor who wished to remain anonymous, “Ortiz’ El Rancho High project is separated into large projects only. Firms must have previous construction and bonding experience of between $50 and $70 million. That eliminates any local business and a vast majority of minority firms in the area.”

$350,000 Innovation Labs, Most Were $250,000 Over Budget

Just months later, HPLE parlayed winning the facilities agreement into securing the contract to manage the $12.6 million in funds from Measures A and EE.

Standard fee structures for program management companies average 4% but Ortiz, according to ERUSD documents, received 8%, meaning HPLE was paid upwards of $1.1 million in fees, not counting the money HPLE would earn subcontracting projects.

Instead of replacing HVAC and other badly needed upgrades, Ortiz spent a large portion of the $12.6 million for “innovation science lab-classrooms” for all eight elementary and four middle schools at ERUSD.

According to ERUSD officials, Ortiz originally budgeted $350,000 per classroom but “encountered complications” and issued several change orders.

By the end of the project, the average classroom cost $600,000, more than building a large home in Pico Rivera.

Documents from ERUSD showed that total costs ranged from a low of $482,000 to a high of $682,000. Of the twelve classrooms, over half were over $600,000, $250,000 over Ortiz’ original budget.

ERUSD officials told HMG-LCCN that Ortiz bragged about the installation of floor to ceiling fold-up type garage doors in all classrooms. The doors were completely see-through where anyone could view the entire classroom from the street.

ERUSD parents later voiced their anger and safety concerns that their children could be seen from the street, but, according to ERUSD officials, Ortiz brushed the complaints off.

$200 Million High School

As the $12.6 million began to run out, another bond was set into motion, the $200 million Measure ER slated for the November 2016 election.

Eleven months prior to election day, a political action committee (PAC) to support Measure ER was established called the Committee for Transforming El Rancho Schools, FPPC ID #1389341.

Within nine months, the money started pouring in.

Philanthropist Monica Rosenthal donated an eye-popping $159,000 – 84% of the monies taken in by the PAC – while only four companies and two trade associations donated the remaining $29,500.

One of the companies was HPLE, who gave $11,000, three other companies also donated monies: BPI Inspection, CF Environmental, and Dougherty & Dougherty Architects.

The three companies would reap the benefits of their donations at a later time.

DONATIONS showing HPLE giving $11,000, and Monica Rosenthal giving $159,000.

Starting in October, money began flowing out of the PAC including over $125,000 to San Francisco-based TBWB Strategies and over $22,000 to Rodriguez Strategies based out of Los Angeles.

In addition, the investigation found large sums of money paid to people with non-existent addresses, including a “Kevin Allen,” who was paid over $13,000 in consulting fees.

With the campaign now armed with a huge amount of cash, backed by perennial bond strategy firm TBWB, the $200 million bond predictably passed in November 2016.

And much like Sweetwater, the award process and subsequent operations were fraught with corruption, questionable practices, and violations of the state’s Education Code.

Who’s Watching the Bond Money?

Just three months after the bond passed, an extremely short period of time in the bond construction industry, HPLE, backed by Lara and Orosco, was awarded the lucrative bond construction management contract.

The deal appeared to be pre-negotiated; HPLE signed the management agreement February 7, 2017, then billed over $39,000 for “work completed in February.”

According to documents, all of the contractors that donated to the ER campaign committee, including BPI Inspection, CF Environmental, and Dougherty & Dougherty Architects, won awards from HPLE and Ortiz.

In addition, ERUSD officials indicated that Ortiz added personnel not listed on his initial agreement, including a Construction Hygienist earning over $4,000 per month, $49,000 total.

Ortiz later added a Communications Director who earned $144,000 in nine months, an eye-opening $16,000 per month.

At Sweetwater, Ortiz and SGI did the same thing, subcontracting with Marston + Marston Inc. for communications. “We wanted to communicate as much as possible,” Ortiz told the Voice of San Diego in 2011, “I don’t know of any bond program doing this as well, it’s not tooting our own horn it’s making people more informed.”

But the VOSD reported that the Marston workers billed substantially more hours than expected.

Outside communications was expected to involve 1,700 to 3,000 hours annually under the plan, yet Marston blew over the higher budget number by 57% billing 4,700 hours. Marston eclipsed the lower budget number by 276%.

Marston later said the company conducted a survey to judge the effectiveness of the outreach, incurring many of the extra hours. At the time, Sweetwater and SGI said they “did not have a breakdown of subconsultant costs.”

Lara and Orosco No-Shows at Oversight Committee Meetings

Of even more concern was the lack of transparency in the spending of bond funds.

From February 2017 to March 2018, HPLE was paid over $1.163 million, with other companies billing $1.266 million for their services.

Yet, according to ERUSD online documents, the Measure ER Bond Oversight Committee did not conduct their first meeting until November 2017, a violation of California’s Education Code that dictates a committee must be convened within the first six months after passage of a bond.

More alarming, the minutes of the November 2017 meeting listed ER bond monthly expenditures in total only.

After the monthly expenditure totals was a note, “the committee would like to see more description of these expenditures.”

The next meeting occurred in April 2018 with the minutes once again showing only monthly expenditures, with no back-up, totaling over $1 million.

At the meeting, the ERUSD Bond Oversight Committee, without following guidelines, violated the state’s Education Code, consolidating the financial records of Measures A, EE, and ER.

Three committee members complained, including Ester Mejia, but they were overruled by members who were affiliated with Ortiz and Lara.

The committee could not muster a quorum in June 2018, waiting to meet until September. According to the September documents, over $1.993 million in ER funds was spent from April 2018 to June 2018, but the minutes did not indicate the committee had back-up documentation of the expenses.

Jaime Ortiz did not attend the September meeting.

Then, two months before a crucial ERUSD Board election, a scheduled October meeting was cancelled for lack of quorum, those absent were Lara, Orosco, and Dr. Teresa Merino.

By that time, ERUSD officials had assembled strong evidence of malfeasance from a months-long internal investigation and wanted to act.

Ortiz Terminated

Based on the findings, then-President Villon placed the bond program discussion on October 28, 2018 agenda and terminated the agreement with HPLE. The termination was approved on a 3-2 vote, with Lara and Orosco voting to retain Ortiz and HPLE.

Ortiz demanded $100,000 to “go away” but the board majority refused, and reluctantly negotiated a $50,000 release.

Meanwhile, the Board was forced to initiate another RFP to hire a firm for the structural assessment of El Rancho High.

Ortiz’ plan was to tear down the entire school and spend the entire $200 million, but the $234,000 plan ERUSD paid for in 2015 shockingly did not include the required structural assessment; HPLE did not take core samples either.

Many ERUSD officials were insisting that complete demolition was not necessary, but an assessment and core sample was needed.

The RFP was sent out, five companies responded and two made the cut, GKK Works and WLC Architects. HPLE was now completely out of the ERUSD bond bidding process.

The Board scheduled presentations and selection for the December 10, 2018 meeting, anticipating a clean up of the bond mess.

PAC Pours Massive Cash Into ERUSD Election

Most political observers were shocked when newcomer Leanne Ibarra won a El Rancho Unified School District Board seat in the November 2018 election.

Ibarra’s only political experience was as a member of several PTA associations, prior to that her website indicated she was a “stay-at-home-mom.”

But Ibarra did have the backing of Union del Barrio (UdB), a radical communist organization led by current ERUSD Board President Jose Lara.

In June 2018, HMG-LCCN was first to report about UdB and how the organization, since Lara’s election in 2013, was using Russia-type social media and intimidation tactics in an attempt to take over the beleaguered school district.

Radical Communist Organization, Led by El Rancho Unified Board Member Jose Lara, Trying to ‘Take Over’ the School District

Lara and UdB were recruiting radical left-wing teachers, indoctrinating high school teenagers, and harassing students and board members all in an effort to inject the anti-establishment sentiment on campus of advocating violence and espousing hatred for the police and the military.

With those plans put into motion to take over the campus and staff, Lara set his sights on the ERUSD Board. He recruited Ibarra to run for a seat which would give him the majority along with his ally Gabriel Orosco.

But Lara did not have the funds to support Ibarra’s campaign, so he called on his friend, HPLE owner Jamie Ortiz.

Just like Sweetwater, a PAC called Citizens for Leadership in Education was established with Ortiz and HPLE immediately donating $15,000.

HPLE’s $15,000 donation to the PAC that spent $20,000 on Ibarra.

The PAC spent nearly $20,000 on Ibarra’s campaign, $16,281 in hard costs and over $4,000 in-kind donations.

And Ibarra won.

The PAC did not report spending money on the Lara campaign, but many of the PAC’s campaign advertisements featured both Lara and Ibarra.

Pay to Play?

Lara now had the majority he always sought, and the outcome of the Dec. 10 meeting was now pre-determined.

After the official swearing-in of Lara and Ibarra, Orosco abruptly pulled the agenda item for GKK and WLC, who were both attending to present their structural assessments projects, without notice or explanation.

Orosco, who is a teacher with zero construction experience, later told the audience that he “believed an assessment was not required.”

The Board reorganized with Lara appointed President, Orosco as Vice-President, and their new ally, Ibarra as Clerk; the board then adjourned until their next meeting.

At the next meeting on January 15, only three months after HPLE was terminated and given $50,000 to go away, Lara completed the circle and called for a vote to re-hire HPLE as the management firm for the $200 million bond.

Lara and Orosco’s yes votes were a given, as was Merino and Castillo’s no votes, the only question was Ibarra.

After receiving nearly $20,000 in support from a PAC Ortiz donated $15,000 to, and knowing about the Sweetwater scandal, Ibarra remained loyal, voting to reinstate the company as ERUSD’s program management firm.

HMG-LCCN asked Ibarra to comment on her vote, in an email she wrote back, “it is my understanding that the El Rancho Federation of Teachers and the local CSEA chapter regularly contribute to candidates and endorse in campaigns, but I would not accuse their endorsed candidates of being bought. We should all hold ourselves to the highest ethical standards, and in this case I believe I have.”

Brown Act Violation?

The group continued their cover-up scheme at the March 2019 ER Bond Oversight Committee meeting claiming that two members, Ester Mejia and Dr. Joseph Rivera, who were constant critics of the entire process, were suddenly ruled ineligible and voted off the committee.

VP Orosco made the motion to remove Mejia and Rivera, with Ibarra seconding. The vote was 3-2 to remove with Lara, Orosco and Ibarra voting yes, while Carolyn Castillo and Dr. Merino voted no.

The last item for discussion was 5F: Bring forth a report on bond expenditures.

Up next: The El Rancho Education Foundation.