GPS Fraud, Waste & Abuse Report #11: Gilbert Education Foundation Schemes

The relationships and concerted operations of public officers of Gilbert Public Schools (GPS) and the Gilbert Education Foundation (GEF), a 501(c)(3) tax-exempt organization, are rife with intentional lawbreaking that likely invalidates GEF’s tax-exempt status. It appears GEF does not meet the statutory requirements of being both organized and operated exclusively for exempt purposes. Instead, GEF appears to be another way to funnel taxpayer money as well as charitable donations to selected recipients within GPS and “friends” of the district without oversight.

For example, a Memorandum of Understanding with GPS shows that GEF operates under GPS control and uses GPS resources.  Through that MOU and intentional misdeeds that violate the public trust, top GPS leaders scorn best practices recommended in a September 2014 presentation by a team of  staff attorneys from the Arizona Attorney General and Auditor General, plus attorneys from Udall Shumway, a law firm that has represented the district for many years. In 2013, the Attorney General’s Office advised more than one Arizona school district that they had acted without statutory authority when creating and operating an education foundation, thereby misusing district supplies, equipment, and personnel to administer the foundation’s finances and assist with foundation fund raisers.

For example, GEF intentionally encouraged, planned, and sponsored an illegal fundraising event involving gambling, thus violating public policy and Arizona law. Only persons over the age of 21 may participate in the few categories of legal gambling in this state. The October 25, 2014 Gala, a first-ever event for the organization, was promoted and supported with taxpayer funds and resources by GPS Superintendent Christina Kishimoto and the GPS Governing Board. GEF posted photos online showing that GPS students actually ran the raffle and collected money. Since GPS is a K-12 school district, there is no way those students representing Campo Verde High School’s extracurricular club “PAWS for a Cause” were over 21.

The GEF photos also show that Gilbert High School students under the direction of art teacher Shalei Webb created table centerpieces and other decorations that were raffled. After the Gala was over and the money was counted, Shalei Webb was the lucky recipient of a pottery wheel as an award from GEF, which appears to be a quid pro quo for those student-created raffle prizes. The Campo Verde High School students from PAWS for a Cause appear to have gained a GEF award for their teacher, as well. Photographs also showed students performing at the Gala while alcohol was served, students with ticket money from the raffles and a GPS teacher winning a bicycle as a raffle prize.

Superintendent Christina Kishimoto, GPS Governing Board members and many GPS top administrators were present at the Gala. Each of them, individually and severally, knew or should have known that GPS was violating district policy and state law by allowing minor students to remain on the premises during the Gala, according to GPS Policy GBEC-E: Drug Free Workplace:

YOU ARE HEREBY NOTIFIED that it is a violation of Policy GBEC for any employee to violate the law or District policy… or use, on or in the workplace, of alcohol…

Workplace includes any place where work is performed, including…off school property during any school-sponsored or school approved activity, event, or function… where students are under the jurisdiction of the District.

It is clear that Christina Kishimoto and GEF violated GPS policies and fundraising guidelines, in addition to violating public policy and Arizona laws. GPS Fund Raising Guidelines specify exactly how a raffle should and should not be conducted, including that no STUDENTS or EMPLOYEES [capitalized in the original] are to sell any tickets, that the organization issue a donation check to the district to be deposited in the district donation account, and that the event may not be advertised on the district’s webpage.

A former GPS board member who later voted against the Memorandum of Understanding between GPS and GEF made a statement about the GEF gala she attended, where there were “minors handling alcohol and raffle tickets.” Board member Julie Smith singled out a fundraiser she attended, questioning if GPS was going to cover legal issues: “Like minors handling alcohol, the raffle tickets, stuff like that.” Christina Kishimoto responded that a 2016 event hosted by an organization other than GEF did not have student performances because alcohol was served. It was a masterful attempt at deflection, but Christina Kishimoto was trying to close the barn door after the horses had left.

Superintendent Christina Kishimoto and her Chief Financial Officer Tom Wohlleber explained to the Governing Board that one of the driving reasons behind this MOU was bringing GEF under the GPS insurance umbrella, as GPS does for parent support organizations such as PTSOs and booster clubs. Ooopsie, that violates the Arizona Gift Clause. See Slide #20 in the Best Practices Presentation: “The District cannot purchase liability insurance for the school support organization or extend its own insurance to such organizations (this would violate the Gift Clause).” The attorneys’ presentation warns school districts not to co-mingle private monies with public monies in district accounts (Slide #25). GPS processes expenditures for GEF using the GPS financial system. In the consolidated 2015 voucher report, GPS showed expenditures of more than $23,000.00 for GEF, itemizing expenses for I-Pads and Chromebooks, attendance at several conferences (including airfare and lodging in South Seas Resort), field trip transportation, books and much more.

New board members, you really should review the entire Best Practices presentation … you’ll be shocked at how many violations GPS racks up on a daily basis.

During the presentation at the work study session, Kishimoto told the board that “their” attorney had reviewed the MOU. New board members, this is why you MUST get legal advice on your own, not filtered through the superintendent who doesn’t tell the truth. Get that legal advice in writing so you can avoid the situation you have here: on information and belief, the legal advice Christina Kishimoto conveyed was that the cited MOU review was to determine whether or not the memorandum was a legally binding document. It’s very convenient for the attorney, Kishimoto and board president Tram, who devised the MOU, that the video archive for the September 27, 2016 board meeting at which the MOU was discussed and approved by a 3-2 vote was “corrupted” and not posted online. The written minutes of the meeting don’t describe any of the discussions; those minutes simply record the motion and the vote.

Hey, Gilbert Education Foundation Folks: don’t think that you’re in the clear because GPS policies don’t apply to you and your companies. Our next FW&A report will outline the ways GEF follows the GPS lead: “Laws are for little people, not local celebrities like us.” Au contraire! A 501(c)(3) tax-exempt organization has some special laws to obey.

When an organization intentionally encourages, induces, plans, and sponsors an event that is contrary to public policy as the 2014 GEF Gala was, it is not a charitable organization for purposes of 501(c)(3). Directors of charities are required by law to carry out their responsibilities as directors “in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.”

Bottom line: Christina Kishimoto and the two GPS board members who served as liaisons to GEF during 2014 and 2015 (Tram and Humpherys), as well as other GEF Directors,  could be held personally and professionally accountable for violating state gambling laws and restrictions on activities of this tax-exempt organization, including personal liability for taxes and penalties that accrue to GEF as a result of those violations of laws. GEF could lose its tax-exempt status as a result of organizational wrongdoing. Nothing less would restore community trust.

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. Participating in those schemes could result in serious consequences for those who put themselves and their organizations at risk of losing their tax exempt status. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

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