GPS Fraud, Waste & Abuse Report #6: Consultant Fraud

Superintendent Christina M. Kishimoto, Ed.D.Gilbert Public Schools has hired a lot of *consultants* since Christina Kishimoto has been superintendent. This FW&A Report examines the hinkiness of GPS consultant contracts against the indisputable requirements of Arizona state laws and the Procurement Code, as widely disseminated by The Arizona Auditor General. In other words, Christina Kishimoto and her enablers either knew or should have known better. Then there’s the IRS, which certainly is not pleased with employers who try to evade federal tax laws by recharacterizing payments to *consultants.* The public is being fleeced. Elected officials allowed these conditions to manifest, multiply and mutate into a flagrant scheme of self-enrichment. 

The GPS Governing Board’s disinclination to oversee the superintendent’s financial management of district funds back in 2014 furthered this fraudulent scheme of hiring *consultants.* GPS didn’t even go through the motions of procurement regulations for work purportedly done by consultants. Kishimoto has paid a number of consultants without having contracts, statements of work or other documentation to verify and justify payments for work done by these consultants. As long as a name appeared on the vouchers, GPS paid the tab and sometimes issued IRS Forms 1099.

It appears that Kishimoto hired consultants to do the jobs of regular employees to circumvent the bureaucratic burden of “real” employment. In some cases, this allowed Kishimoto to report to the Governing Board that key positions were unfilled, and therefore administrative costs were low, although the work was getting done. The IRS has issued clear guidance about employing independent contractors, whether they’re called consultants or another name, but GPS seems to flout all the rules.

A big red flag for the IRS is when employers pay consultants on a regular basis, such as bi-weekly or monthly, instead of when a consulting project is completed. Another is paying departing employees as consultants shortly after they leave; those payments have the appearance of being improper parting gifts or rewards. GPS hits all those marks, and more, in what appears to be a pattern and practice of funneling public money to selected recipients, including the superintendent herself, which has the appearance of a prohibited act under A.R.S. §38-504. Such contracts should be voided as described in A.R.S. §38-506, and also be subject to the penalties of A.R.S. §38-510.

According to documents produced by GPS in response to public records requests for consulting contracts, they never existed. GPS produced only a few invoices in response to public records requests. There were no contracts describing duties or rates of payment for consultants, nor any documentation describing the scope of work or any deliverables associated with consultants’ work. In fact, on August 1, 2014 at 8:23 AM, GPS responded to Westie’s email inquiry: “Follow up: Jeff Gadd is classified as a vendor, no contract. Carole Bartholomeaux is classified as a vendor, no contract.”

Jeff Gadd’s consulting invoices consist of dates and numbers of hours, with nothing more to indicate what was the “financial consulting” he did for GPS during selected periods from May through July 2014. It’s significant that GPS did not produce a purchase order along with Gadd’s invoices and copies of checks. Gadd’s consulting payments were not included in the consolidated report of payments to vendors for 2013-2015 that GPS produced, but GPS issued checks to him in the amounts of $6,937.50 on May 21, 2014; $9,250.00 on June 16, 2014; and $4,750.00 on July 8, 2014 for a total of $20,937.50. To all appearances, Gadd was a GPS employee, not a consultant. Hmmmm … GPS had a highly-paid Assistant Superintendent for Business Services, Clyde Dangerfield, Esquire, at the same time they were paying Jeff Gadd to *consult* about finances.

Jeff Gadd transferred from being a vendor, or consultant, depending on which GPS report you use, to a lucrative six-figure executive job as the GPS Chief Financial Officer for a one year term on September 2, 2014The GPS Governing Board approved his employment, as noted in the minutes of the August 26, 2014 board meeting. As Chief Financial Officer, Jeff Gadd’s salary was $102,320.00 plus fringe benefits available to other administrative employees, including 18.66 vacation days, a $3,000.00 automobile allowance, health insurance in the amount of $7,091.00 and an annual physical examination reimbursement of $800.00, with an additional 1% annual salary contribution in a tax sheltered annuity. Gadd also was paid by GPS according to the February 2016 vouchers for “financial consulting” at $125.00 per hour, totaling $1,281.25.

In the case of Carole Bartholomeaux, there were several invoices and receiving reports that indicate she performed “public relations” consulting and other services, billed in what appears to be increments of 20 hours, over the period of July and August 2014. To all appearances, Barthololmeaux was a GPS employee, not a consultant. Invoices were paid for $800.00 on July 16, 2014; $4,480.00 on July 30, 2014; $4,480.00 on August 5, 2014; and $6,720.00 (consolidated payment) on August 15, 2014 for a total of $16,480.00. The purchase order was for $20,000.00. A GPS consolidated report of payments to vendors for 2013-2015 showed prior year payments to Bartholomeaux for $26,880.00 and $16,480.00 for 2014. Of particular concern is the note on Barthololmeaux’s invoice for August 19, 2014 that her services including “Researching information for GEF Gala event.” We’ll circle back to that in a future FW&A post.

Another GPS employee received payment for finance consulting after she left the district in 2015. Payments to Crystal Korpan, former GPS Coordinator of Budget and Procurement, were listed in GPS vouchers. Those payments also appeared in the consolidated report of payments to vendors in the amounts of $720.00 on May 1, 2015; $600.00 on May 19, 2015; and $240.00 on June 23, 2015 for a total of $1,560.00. A public policy question: did Korpan collect her salary from the Queen Creek School District, where she is now Chief Financial Officer, for the same time that she collected payments from GPS as a consultant?

Provisions of A.R.S.§35-211 should be applicable in this situation, requiring public employees return any unauthorized payments plus legal interest:

A.R.S.§35-211 When any person who is obligated to approve, audit, allow or pay claims or demands upon the state, approves, audits, allows or pays, or consents to, or connives at, approving, auditing, allowing or paying a claim or demand against the state not authorized by law, such person, and the person in whose favor the claim or demand was made, shall be liable for any funds procured in such manner, plus twenty per cent of such amount and legal interest upon the amount paid from date of payment.

Bottom line: GPS payments to “consultants” included serious anomalies and appear to be designed to recharacterize salaries to evade employment taxes. This should require that any contract be voided even if it were fair; GPS should recover payments whether or not there was actual fraud or dishonesty, because public officers and employees have accrued benefits far beyond what would normally accrue to them as part of their official duties.

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The Fine Print: Westie’s Fraud, Waste & Abuse Reports chronicle deliberate misuse of authority and public funds, abuse of authority, gifts of public funds and intentional violations of Arizona statutes and administrative rules by Gilbert Public Schools top-level administrators at the behest of superintendent Christina Kishimoto. These  reports come directly from public records, many of which GPS slow-walked and stonewalled in attempts to keep perfidies hidden. Public trust can be restored only through an impartial forensic audit by someone who doesn’t have a stake in these matters.


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