GPS Fraud, Waste & Abuse Report #13: Student Enrollment Fraud

This FW&A Report connects the dots between the million dollar ADE repayment demands and rampant consultant fraud that proliferated in GPS during Christina Kishimoto’s tenure.  There’s been a major turnover in the GPS administration since Kishimoto scurried to Hawaii before this news hit, but in the vacancies left by Kishimoto’s miscreants, GPS continues to promote the same folks who participated in various schemes that reek of fraud. The new GPS governing board members who promised change for the better are perpetuating Einstein’s definition of insanity … doing the same thing, hiring  and promoting the same people who caused problems in the first place, and expecting different results. Keep shoveling and maybe you’ll find that pony!

The scandal currently enveloping the GPS administration is a result of inaccurate enrollment data reported to the state. ADE uses that data to distribute state tax dollars to Arizona school districts because AZ public funds follow the student. You would expect that GPS could properly report student enrollment, but then you also would expect that GPS could pay employees on time and in full. GPS has been unable to do much of anything correctly in the business offices.

Christina Kishimoto’s disdain for following the law was on full display in the fiasco that’s behind the ADE million dollar repayment demand. Her top dogs fell into line and helped with this 2014-2016 atrocity that’s just now coming to light. It’s no wonder the CFO is one of the top dog administrators who left the district at the end of the 2016-2017 school year.

We already knew that Kishimoto hired *consultants* to do the jobs of regular employees.  It appears the guy whose official job was to report student attendance to ADE as a high-ranking employee in the GPS White Castle also was generously paid as a consultant to cook the books for GPS. Jeremy Betts, whose consulting company is SERS Consulting, apparently was collecting fees for his company’s services during fiscal year 2015-2016 that appear to be the same work that Betts did in return for his GPS salary. More fraud: GPS was at the same time violating crystal-clear Arizona laws and state procurement rules for school districts.

Recently, GPS actually answered Westie’s emailed question shown below (amazing, right?) with the following statement:

Westie: I requested information about all employees designated as coordinators. I note that Jeremy Betts, whose position description online is “SAIS Technology Coordinator,” was not included in the W-2s or in the contracts that were produced. Please produce the information for Jeremy Betts, whose online resume shows that he was employed by GPS through August 2016.

GPS response: Jeremy Betts’ online resume is incorrect, he does not have a 2015-2016 contract. All other legally disclosable documents within the scope of your request have been provided to you.

In February 2016, Jeremy Betts’ LinkedIn profile states he worked for GPS from 2011 until August 2016. The GPS website today shows Jeremy Betts is still the district’s SAIS Technology Coordinator Business Data Analyst:

GPS website, July 12, 2017

In fact, you can call Jeremy Betts’ phone number today and get his voicemail!


Betts’ LinkedIn profile states SERS Consulting provides “Consulting services for school districts covering enrollment reporting, state compliance standards, financial data analysis, and staff training.” Betts’ GPS job appears to be the same thing, according to the district website.

Here’s where the disgusting odor of fraud emanates.  It appears that immediately after Betts registered his company on May 20, 2015, Betts scored a lucrative consulting contract with GPS for the fiscal year July 1, 2015 through June 30, 2016, totaling $24,600.00 [it could be more $$$$, but this is the amount Westie documented]:

Acquiring *consulting services* from a full time GPS employee would put Kishimoto and her minions afoul of some strict state laws.  A.R.S. 38-503(C) prohibits public employees from providing their employers with any equipment, material, supplies, or services unless provided under an award or contract let after public competitive bidding. AZ Attorney General guidance states that districts must follow the School District Procurement Rules, regardless of the expenditure amount, when purchasing goods or services from employees: “Following the guidelines for oral or written quotations is not sufficient to comply with the requirements of A.R.S. 38-503(C).”  

It gets worse: the IRS has issued clear guidance about employing independent contractors, whether they’re called consultants or another name, but GPS regularly flouts such 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. [Ahem. Take a look at the regular payments under a *blanket purchase order* to SERS Consulting in the vouchers image above.]

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.

Lookie who pops up as the recipient of possibly fraudulent GPS consultant payments: Jeff Gadd, the newly named CFO for GPS for the 2017-2018 school year! [Another example of Einstein’s definition of insanity: hiring the same people again and again. Sheeeesh.] 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, 2014. Since CFO Thomas Wohlleber’s term began on July 1, 2015, it appears that Betts’s company’s consulting contract was awarded during Gadd’s days at the CFO helm. Dots connected! More insanity, more fraud, more fleecing the taxpayers?

In addition to the fact that fraudulent schemes appear to proliferate in GPS, with some of the same people turning up time and again in running the schemes, there’s a matter of fiduciary responsibility now that the currently serving members of the GPS governing board know about these schemes. 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.

It sure looks like the public is being fleeced while the people entrusted to administer the operation of the school district profit. Elected officials have allowed these conditions to manifest, multiply and mutate into a flagrant scheme of self-enrichment for a favored few public officers and employees. That cannot be tolerated in a public organization whose responsibility is to educate students.

Running off to Hawaii won’t save Christina Kishimoto from the long arm of Arizona law. As for the cloud over Kishimoto’s new job in Hawaii, there’s no umbrella big enough to shield her from what comes next.

You know there’s more to this story. Westie’s next FW&A report will detail another GPS employee’s lucrative consulting contract, illegitimate travel reimbursements and a full year’s pay for a job that appears to have been non-existent. All these gifts of taxpayer money constituted a big, fat wet kiss from Kishimoto to one of her BFFs. Sheeeeeesh.

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. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

Christina Kishimoto’s *National Reputation* Beats Her to Hawaii

Christina Kishimoto FAKE Time CoverChristina Kishimoto, outgoing superintendent of the Gilbert, Arizona public school district, has been feted with attention by news media all over the country, acknowledging that she has indeed acquired the *national reputation* she coveted. The people of Hawaii, where Christina Kishimoto is due to take the helm of their school district, are not pleased by the news … because it’s apparent that Kishimoto knew about a devastating audit and million dollar repayment demand she dumped on her former employer. Question: what did the Hawaii Board of Education know about this explosive development, and when did they know it?

Kishimoto had to know this devastating audit report revealing her mismanagement (and worse) would be released soon after she accepted the job in HawaiiThe audit report, dated May 31, 2017, examined GPS data submitted on Kishimoto’s watch (2014-2016) to the Arizona Department of Education (ADE). State funding for Arizona school districts is based on Average Daily Membership, which routine annual audits (by the GPS pet auditors) had been determined to be inaccurate for about the same number of years.

“Auditors determined that the District did not accurately report FTE status for some students, inaccurately reported some students’ enrollment data, and incorrectly reported AOI data for some students, which resulted in the District’s ADM being overstated by 182.23. As a result, the District was overfunded by $962,767.69, which the District must repay to ADE.”

Arizona press quickly picked up the story, which was grabbed by the Associated Press and blasted nationwide. Coverage was included in Hawaii newspapers,  on Hawaii television and even in U.S. News & World Report. The coverage was not flattering for Kishimoto, to say the least, but the news was indeed national!

The Arizona Department of Education is demanding that Gilbert Public Schools repay nearly $1 million after an audit found the district miscalculated its student enrollment and attendance figures for years. Auditors determined the district overcharged the state by $962,767 over a three-year period that ended in fiscal year 2016.

Critics say the audit is a black eye for Gilbert Public Schools Superintendent Dr. Christina Kishimoto. The report, dated May 31 but released online Monday, comes just weeks after the Hawaii Board of Education selected her to lead that state’s Department of Education as superintendent.

The intrepid journalists who broke this story contacted the Hawaii BOE to ask if the selection committee was aware of the impending audit release when Kishimoto was selected to be the next Hawaii superintendent. As anyone who has ever held a job knows, when your boss has to defend you, it’s not good. Kishimoto’s bosses in Hawaii are defending her six weeks before she even starts the job!

3TV/CBS 5 asked the Hawaii State Department of Education if its selection committee was aware of the audit before hiring Dr. Kishimoto. “Every candidate, including Ms. Kishimoto, was thoroughly vetted during the selection process,” spokeswoman Donalyn Dela Cruz responded by email. “Any questions regarding the Gilbert Public Schools system should be directed to the district.”

In other words, the Hawaii BOE most likely did not know about this audit and the obvious conclusion that Kishimoto was fleeing from the noxious odor before the news of her massive mismanagement in Arizona became public.  Commentary in Hawaii media included:

BoE: We Knew All About Kishimoto, And Picked Her Anyway

Hawaii Island BOE member Pat Bergin, part of the superintendent search committee, said Thursday the board is “very much aware of all the concerns raised” about Kishimoto and “we’ve completely vetted her.” “We’ve researched every single complaint that came through,” Bergin said.

Bruce Voss did respond, saying he hadn’t heard about the audit and had no comment.

There’s much public wariness in Hawaii of high-priced mainland hires who bring baggage from earlier jobs. (Translation: Hawaii political insiders hire someone like her every time they want a short-termer.)

Exactly what our DOE needs! A superintendent who can’t count. All joking aside, the DOE superintendent search committee knew from the get go that Kishimoto had problems involving her leadership at previous jobs and overlooked them. Sad state of affairs involving a public school system that wants to continue with status quo.

In an apparent bid to help Christina Kishimoto save face (and stay gone), GPS claimed the audit was unfair and that the state Dept of Ed was mean to them. It appears the GPS governing board believed ridiculous excuses Kishimoto concocted to cover her ineptitude, with something along the lines of “ADE is mean, I went to them for help and they got mad and audited GPS.” The GPS governing board then went forth and blasted the ADE for being mean. What’s incredible is that the board added claims that since a law is changing soon, GPS should not be held to account for the law that was in effect during the three years covered by the audit:

Carr pointed out that a newly signed state law will soon change how students are counted for funding purposes. “If they applied the new language of this bill, we would not have this issue at all,” he said in an interview.

GPS board clerk Reed Carr’s Facebook *explanation* of why GPS shouldn’t be required to give back money that ADE gave the district after GPS submitted false student data for funding:

What is most frustrating is that this audit came as a direct result of a GPS inquiry asking ADE to define how they were applying the instructional hour requirement. After an internal review that identified a potential risk, GPS asked ADE for its help to ensure compliance. ADE refused to meet with the district and instead initiated this audit.

ADE fired back about the false statements emanating from GPS in those ridiculous excuses:

ADE spokesman Stefan Swiat said Gilbert Public Schools was one of 32 districts audited as part of the agency’s annual review process. He said the district was randomly selected, not targeted. “It’s not like Gilbert is a special case,” he said. GPS had the largest amount owed of any district in this year’s auditing group, but Swiat said a handful of districts have owed more in previous years.

GPS is the state’s fourth-largest district. This year, auditors found that Tucson Unified, the state’s second-largest district, owed the state $46,269 during the same period. An audit of Peoria Unified, the state’s fifth-largest district, determined the state owed the district $7,766.

The new GPS governing board members already have been cutting services for students because families were fleeing the district during Christina Kishimoto’s reign. So what is the GPS governing board going to do to right this floundering ship? Spend tens of thousands more taxpayer dollars for lawyers to formally make the same lame excuses that ADE already shot down in the media!

The Gilbert Public Schools Governing Board voted unanimously to appeal an Arizona Department of Education audit that directs it to repay nearly $1 million for erroneous reporting of student enrollment numbers … SB 1156, which goes into effect Aug. 9, “will change the way that the full-time equivalent students’ minutes and hours of instructional time are calculated at the high school level,” said GPS attorney Jennifer N. MacLennan during a special meeting Tuesday. “That new calculation was not in effect at the time this audit has been published.”

ADE already called bullsh!t on this stupid excuse:

We performed an audit over the past three years; the law, the last three years, did not include SB 1156. Even if the SB 1156 was real, and existed at this time, we would have to perform another student calculation.”

No sh!t, Sherlock, the new law wasn’t in effect for 2014-2016. The GPS lawyer’s comments make absolutely no sense. It’s just another example of the GPS Lawyers Perpetual Employment Swindle, a subject for a new Westie post in the next few weeks (even though it’s a long, hot summer in Arizona).

Hawaii BOE, you’re getting a real piece of work in your new superintendent.

Citizens of Gilbert, Arizona: you know there’s much, much more to this story. Westie will publish another Fraud, Waste and Abuse post about Christina Kishimoto’s shenanigans that resulted in false student enrollment reports that were sent to ADE.  We know you can hardly wait!

Christina Kishimoto’s *Artful* Letters of Recommendation for Her New Job

Christina KishimotoAs promised, this post will examine the letters of recommendation Christina Kishimoto submitted to Ray and Associates, and then to the St. Paul school district, with her application to be a school district superintendent. Many Gilbert citizens disbelieved Kishimoto’s claim that she was *invited* to apply for the position of Hawaii superintendent, but it most likely was Ray and Associates who *invited* her to apply … they already had the big bucks contract to find someone for Hawaii, and they had made plenty of money the last time Christina Kishimoto got herself booted out of a district she almost destroyed in the name of reform. Not for the first time, Kishimoto trashed her former employer on her way out for treating her with *disrespect.*  

I think there just needs to be a line drawn in the sand that says that the one thing we’re not going to tolerate as we move forward is disrespect,” Kishimoto added. “They’ve been instances of deep disrespect that even I have experienced, that doesn’t [sic] belong in a public school system.”

It’s tempting to respond to Kishimoto that in order to be respected, you must act like someone who is worthy of respect.  That wasn’t what Kishimoto demonstrated as GPS superintendent; the most glaring of her unprofessional acts was her *alleged* inappropriate relationship with her subordinate … but that’s off topic for today.

Take a look at the letter written by Alex Nardone, Kishimoto’s Chief of Staff, which is dated February 2017.   His admiration for his boss, the gal who rescued him from Hartford when she was run out of town, seemingly knows no bounds. Maybe Nardone’s nose was so brown from his subordinate position in Hartford, he was run out of town, too. Nardone brought a sordid history with egregious conflicts of interests when he followed Kishimoto from Hartford. One example: he lined up for a bonus even though bonuses for senior staff had been prohibited because of a wage freeze for bus drivers. Nonetheless, Kishimoto’s chief of staff had no compunction about lining his pockets until the sh!t hit the fan after the school board got wind of the self-serving scheme:

Superintendent Christina Kishimoto has rescinded $38,976 in performance pay to six of her top deputies after the school board raised concerns that such payments would breach a 2011 board order to suspend central office bonuses. The payments, described as “variable pay” bonuses for the 2011-12 year, were scheduled to be issued Oct. 12. They ranged from $6,300 for Chief Advancement Officer Kelvin Roldan to $6,720 for Chief of Staff Alexander Nardone.

It’s interesting that before she became superintendent, Kishimoto received some mighty big bonuses, along with a LOT of other people at the Hartford district offices. $2.7 MILLION DOLLARS, in fact!

Over 97 of the payments were made to paper pushers and individuals working out of the Board’s Central Office at 960 Main Street. Some of those payments should definitely raise eyebrows as to why they deserved to get bonuses for just doing their jobs that they are being paid very well to do:
Alexander Nardone……Chief Operating Officer……….$11,306
Christina Kishimoto……Asst.Superintendent…………..$11,904

What a conflict of interest for someone pretending to give a genuine job reference! At any rate, Kishimoto promised that Nardone’s position in Gilbert Public Schools would be for one year only, and here it is three years later, and he’s finally on his way out. But he took the taxpayers of Gilbert for hundreds of thousands of dollars for brown-nosing Christina Kishimoto once again. This sleaziness makes you wonder if Nardone is taking hula lessons.

Former GPS board member Lily Tram’s letter is less effusive, but no less laden with hypocrisy. Again, look at the date of the letter: February 10, 2017. Kishimoto was plotting her escape from GPS about six months after her three year contract was extended to 2019. It’s really tempting to pull out a red pen and edit Tram’s letter, but we already knew Lily Tram was not especially literate. Tram was, however, famous for giving parents the cold shoulder in her few written communications. Mostly, Tram ignored the proletariat, which contributed greatly to getting tossed off the GPS board in the 2016 election. Lily Tram’s history on the GPS governing board finally led citizens to take control of various scams engineered by Lily Tram:

The GPS community is really, really dissatisfied with this situation: it exposed Kishimoto as operating solo, making decisions and usurping the powers that Arizona law reserves to elected officials, the members of the GPS governing board. The effects on GPS students, parents and taxpayers will be long lasting and expensive … probably long after Kishimoto and her carpetbagger administration high-tail it out of Gilbert, Arizona.

Kathy Tilque’s undated letter of recommendation paints GPS as a failing district before Christina Kishimoto rode in on a white horse to save it.  That’s not quite true: GPS was an *A* rated district and several schools were rated *A+* but you would never know it from Tilque’s rant. The clearest image from Tilque is of a so-called business leader whose ego makes her a legend in her own mind … like her buddy Kishimoto. BTW, be sure to notice that Tilque takes credit for the initiative “to bring business and education together to address workplace readiness issues.” Kishimoto’s various proclamations assert that nothing like that possibly could have happened before she arrived in Gilbert, Arizona. Sheeeeeesh.

Here’s a truer description from outside Gilbert about the situation Tilque deceptively described: 

Highly respected educator Diane Ravitch sums up what’s happening in Gilbert Public Schools: “Education is in crisis because of the calculated effort to turn it into a business with a bottom line. Schools are closed and opened as though they were chain stores, not community institutions.  How did Diane Ravitch know that Christina Kishimoto was nominated by the Gilbert Chamber of Commerce as *Business Woman of the Year*? [rhetorical question] It’s not like Christina Kishimoto wasn’t fully and personally participating in that business process – look at what Kishimoto had to do to be named an *honoree* after being nominated by her peers (not that Christina Kishimoto thinks anyone is her equal, but we digress):

To be considered for these awards, men and women are nominated by their peers. Once nominated, they must submit a written questionnaire and participate in a personal interview.

… Of course, a fiasco like Kishimoto’s Great Payday Melee would get most business leaders fired, but hey, it’s for the kids, right? Anything goes in GPS while Christina Kishimoto is superintendent, like thousand dollar lunches for board members and favored staff … at just about every meeting, it appears. After all, corporations can buy lunches for employees and give the CEO an unlimited expense account – why can’t GPS do the same? Oooops, there’s this concept called *public funds* that is at stake in GPS, and the rules are different for public entities. That must distress Christina Kishimoto to no end … not that she pays attention to things like *public policy* or cares that her position is endowed with *public trust.*

Recommendation letter number four, dated February 13, 2017, was written by Julian Trevino,  who unabashedly states he “had the opportunity to collaborate” with Kishimoto in both Hartford and in Gilbert. Of course, Julian Trevino is just another dude whose financial star is hitched to Kishimoto. Go ahead and read the minutes of the February 6, 2017 board retreat; do you think the governing board got their money’s worth ($6,000.00++) of training from this dude Julian Trevino? Trevino had cashed in at Kishimoto’s invitation before:

[Kishimoto] set up a *Board Retreat* to brainwash the three new board members about her reformy ideas. This 2017 meeting featured the same guy [Julian Trevino] who taught the same stuff to the board in 2015 for a total cost of about $18,000.00. Don’t worry, taxpayers, apparently the guy charged only $6,000.00 this year to spend a couple of hours going over reformy stuff; we figure his travel costs will be extra and will appear on the vouchers much later. That way, fewer people will connect the dots, you know.

The Hawaii BOE got themselves an A-number one carpetbagger when they hired Christina Kishimoto. Of course, the Hawaii BOE won’t have a problem unless citizens [again] expose Kishimoto as a fraudster, as happened in Connecticut and Arizona. We’re sure Hawaii public school watchdogs will rise to the task.

Lies Christina Kishimoto Told While Looking for a New Job

Superintendent Christina M. Kishimoto, Ed.D.While Westie was on vacation, the Intertubes on both sides of the Atlantic and Pacific buzzed about Superintendent Christina Kishimoto going out and getting herself a new job … apparently without telling her then-current employer, the GPS Governing Board. Never fear, citizens of Hawaii! Westie does the due diligence about Christina Kishimoto that your Board of Education may have spurned when they hired this charlatan. The Hawaii BOE won’t have a problem unless citizens [again] expose Kishimoto as a fraudster who cuts and runs before the full extent of the damage she wrought becomes public, as happened in Connecticut and Arizona. We’re sure Hawaii public school watchdogs will rise to the task. 

Backstory: the GPS Governing Board apparently found out about Kishimoto’s treachery when Hawaii media proclaimed that she was a finalist for the job of Hawaii superintendent. When someone who has two more years to go on her employment contract considers herself free to jump ship with no warning, you just know there was mischief afoot. Especially considering that Kishimoto was the author of the infamous hostage clause in GPS employee contracts to reverse the rampage of employee defections (“See, I fixed it!” she exclaimed gleefully).  Citizens in Gilbert, Arizona condemn Kishimoto’s hypocrisy … while they dance in the streets singing “Na Na Na Na Hey Hey-ey Goodbye.”

Those of us who have endured Christina Kishimoto’s superintendency knew that evidence would surface about her typically dishonest behavior in her haste to get out of Gilbert before accountability came knocking at the door. Westie’s beloved birdies crowd-sourced public records and hit the jackpot, which we’re happy to share with you folks in Hawaii.

As Christina Kishimoto said to Hawaii media, “her record ‘speaks for itself.’”  It sure does! Here’s a hint for you Hawaii Watchdogs: the “shared vision” Kishimoto touted in her Hawaii interview is the same thing she claimed  when she was hired in Gilbert, Arizona. Apparently, those words have no real meaning to Kishimoto, which is what folks learned … the most important aspect of her superintendency was building her personal *national reputation* and the Hawaii BOE fell for it. Sad.

Kishimoto’s claim that she “reconfigured the financial structure of the district, including transitioning to Infinite Vision — our new finance and staffing system”  deserves scrutiny.  Notice she did not say she did so “successfully,” as she made in other claims on her resume. That system implementation, after more than a year, still isn’t working. Kishimoto blamed others, but the fact of the matter is that even now GPS employees still are not being paid on time for all hours they worked. What started as a Great Payday Melee morphed into a Great Wage Theft Caper under Kishimoto’s *leadership.* Hope you folks who work for the Hawaii BOE are good at tightening your belts when your payday doesn’t arrive! Plenty of GPS employees can share their tips on which bills to pay first when your paycheck is short or missing entirely.

Other matters that don’t appear on Kishimoto’s resume include that GPS lost 10% of total student enrollment during Kishimoto’s tenure, but she continued her extravagant spending and diverted countless thousands of dollars from the classroom. That was the genesis of Westie’s Fraud, Waste & Abuse series.

Let’s examine Christina Kishimoto’s job application and other documents she used to get herself hired through her old pals at Ray and Associates, the folks who garnered yet another major six-figure fee for getting a new job for disgraced candidate Kishimoto. We’re sure Ray and Associates hope to land the contract for finding a new superintendent for Gilbert Public Schools, too. <gag>

First, Christina Kishimoto’s Job Application, which appeared online in conjunction with her application for the superintendent job in St. Paul, Minnesota.  This was just two weeks before Kishimoto wrote to the Hawaii BOE: “Please hire me before they fire me!”

Kishimoto’s lies to the St. Paul folks were ridiculous. Maybe that’s why they rejected Kishimoto as a candidate. First, Kishimoto claimed to be “Founding Board Member, Gilbert Parks and Rec.” Why? Anyone with elementary online search skills could find that list of board members, and it doesn’t include Christina Kishimoto, as the image on the right shows.

Then, Kishimoto answered “No” to the question, “Have you ever been involved, or are you currently involved, or do you anticipate involvement in litigation either as the plaintiff/complainant or defendant/respondent?” Anyone who has read Westie posts knows this is not true, but we’ll work through the details for the benefit of the Hawaii Board of Education. We’ll start with the baggage Kishimoto brought with her to Gilbert, Arizona:

Who would have thought that when Gilbert Public Schools hired Christina Kishimoto as superintendent two years ago, her legal problems from her time as superintendent in Hartford, Connecticut would escalate after she fled to Arizona? Reasonable people would believe that those legal problems most likely distract Kishimoto’s attention from educating students here and now.

We know that due diligence on such an important matter as defending lawsuits requires in-depth searching, so we did some of that for the Hawaii BOE.  At the time that Christina Kishimoto was named Hawaii superintendent, there were three lawsuits pending in Connecticut in which she was a named defendant. There’s no way Christina Kishimoto was not aware of this; in one case, Kishimoto failed to make an appearance until after the plaintiff moved for a default judgment against her. By the way, Hawaii BOE, that case is set for jury selection and trial on January 5, 2018. We’re sure Christina Kishimoto won’t be distracted from her new job during all these legal proceedings. <sarcasm>

Claiming that she has never been a plaintiff is so ridiculous, Westie can hardly stop laughing: the evidence has been online since February 2015! 

** Superintendent Kishimoto Gets Mad, Calls the Police and Goes to Court
More About Superintendent Kishimoto’s Romp through Gilbert Municipal Court
Christina Kishimoto’s Very Bad Day in a Secret Court Hearing

For your convenience, Hawaii BOE, Kishimoto’s court case file is here and her filed petition is here (she was the plaintiff, as it clearly states on the court record and her petition).  To be clear, Christina Kishimoto’s petition was denied, but that does not mean she didn’t file a lawsuit against one or more defendants.

There’s no question that Kishimoto knows that lying on a job application is good and just cause for firing. She attested, “The information in the Application for Employment is true, correct, and complete to the best of my knowledge. I certify that I have answered all questions to the best of my ability and I have not withheld any information that would unfavorably affect my application for employment. I acknowledge that any misrepresentation or omission of any fact in my application, resume, or any other materials, or during any interviews, may be the cause for my rejection from employment or may result in my subsequent dismissal if I am hired.”

To deal with this mess dumped in their laps by feckless Christina Kishimoto, the GPS Governing Board met behind closed doors. That’s because there’s a clause in Kishimoto’s Gilbert employment contract that all of her evaluations and the board’s discussions will be held in executive session … a reaction to the public dressings-down Kishimoto received at the end of her contract in Hartford. After several closed-door sessions, the GPS Governing Board voted 4-0 to accept Kishimoto’s resignation. Rubber stamper Charlie Santa Cruz abstained. One more illustration of her tone-deafness: Christina Kishimoto listed her home for sale before the GPS board accepted her resignation. Sheeeesh.

The bottom line is that Kishimoto can take personal credit for driving a few thousand students and their families out of the district due to policies she pushed through her rubber stamp governing board and stupid stunts that gave the entire district a black eye. For example, Kishimoto delivered a frizzled, frazzled and frenzied diatribe to the Gilbert Town Council that made her, and Gilbert Public Schools, look like total idiot losers who can’t compete for students fair and square.

She worked herself up into a lather and told the Town Council it was costing GPS millions of dollars in lost revenue to lose thousands of students to those nefarious charter schools. Kishimoto looked all the more stupid because the land in question isn’t within GPS boundaries. [Here’s the link if you don’t see it:]

New charters are popping up all around GPS boundaries because it is so easy to poach GPS students. Fact: since Kishimoto made that speech, the 2016-2017 GPS hundred day student enrollment declined again … more than 700 student losses this year alone. Of course it’s not HER fault; Kishimoto is hell bent on destroying the pride of GPS, the neighborhood schools that attracted tens of thousands of students in past years. <snark> It’s also not Kishimoto’s fault that her ill considered foray into *school design* in the form of having Gilbert Classical Academy take over a neighborhood junior high school has already caused significant student losses, with more losses to come, as parents have promised. <sarcasm>

Hawaii Board of Education, you got yourselves a pig in a poke when you hired Christina Kishimoto; St. Paul, you dodged a bulletBTW, Westie’s next post will examine the letters of recommendation Christina Kishimoto submitted to Ray and Associates in support of her application. The good people of Gilbert, Arizona will learn some surprising new facts about certain people they thought they knew.

GPS Fraud, Waste & Abuse Report #12: Prohibited GEF Electioneering

As a 501(c)(3) tax-exempt organization, Gilbert Education Foundation has some specific laws to obey. Consequences of failure to fulfill statutory requirements to be organized and operated exclusively for exempt purposes include revoking GEF’s tax-exempt status. That will be a gigantic mess for Gilbert businesses and civic-minded citizens who believed they were supporting an organization dedicated to “the kids.” Worse, PERSONAL liability for taxes and penalties accrue to GEF directors as a result of those violations should GEF lose its tax-exempt status. What a mess!

There are five basic components to qualifying and maintaining tax-exempt status under Section 501(c)(3):

(1) an organization must be organized exclusively for charitable purposes,
(2) it must be operated exclusively for charitable purposes,
(3) no part of its net earnings may inure to the benefit of any private shareholder or individual,
(4) it may not conduct more than an insubstantial amount of lobbying activities, and
(5) it may not intervene in a political campaign.

GEF photos posted on social media show that the 2014 GEF Gala appears to have been nothing more than an exclusive social event where selected GPS employees and “community leaders” could mingle. An additional bonus for preferred candidates for the November 2014 election for two seats on the GPS governing board: two candidates, seated board member Jill Humpherys and candidate Charles Santa Cruz, were feted by gala attendees. Other candidates that were not favored by GEF and/or the GPS administration did not attend.

Red flag of election fraud: 2014 GEF Gala political activist involvement. The first-ever GEF Gala on October 25, 2014 was timed for the run-up to the November 4, 2014 elections and appears to have been used to advance two candidates. According to his Political Action Committee Report through October 23, 2014, Dr. Charles Santa Cruz used campaign funds in the amount of $228.00 to pay for his tickets to the Gala.

A serious concern is the cozy relationship between GEF and the Gilbert Chamber of Commerce and their prohibited involvement in local elections. The Chamber of Commerce is a non-profit organization whose activities also merit close scrutiny. It was well known throughout the community that GPS and GEF supporters had their favorite candidates in 2014; it was just as well known that those supporters strongly opposed two candidates: Ron Bellus and Dawn Brimhall.  The Gilbert Chamber of Commerce allowed four of the five GPS governing board candidates to use the Chamber’s website to advance their campaigns, but Dawn Brimhall, one of the candidates, was denied that opportunity. In fact, the Gilbert Chamber of Commerce *endorsed* their two favorites, Jill Humpherys and Charles Santa Cruz.

GEF Engages in Express Advocacy for Political Candidates.  The Chamber designated three candidates as **Endorsed by the Gilbert Chamber of Commerce** on the Chamber website in 2016. There was no daylight between GPS, GEF and the Chamber when it came to favoring certain candidates in local elections. The problem for GEF and perhaps the Chamber: Section 501(c)(3) of the IRC provides federal tax exemption to a charitable organization so long as it “does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.” The prohibition on supporting or opposing candidates for public office is strict: even a de minimus (minimal) amount of campaign intervention violates IRC Section 501(c)(3).

GEF and the Gilbert Chamber became even more brazen during the 2016 election for three open seats on the GPS governing board. Sitting board member Jill Humpherys spilled the beans on her Facebook page: “I am supporting those candidates endorsed by the Gilbert Chamber of Commerce, Gilbert Education Foundation and Unite for Education—Lily, Sheila and Reed.” The Gilbert Chamber of Commerce echoed the endorsements.

Anything flowing from an organization’s activities other than public, charitable benefits may be serving private interests and therefore a nonexempt purpose. Examples include excessive compensation paid to employees, certain payments to outsiders for goods or services, or steering business to a for-profit company. Oh snap, more trouble for GEF and GPS!

Successful political intervention in 2014 reaped rewards: GPS contract for vehicles was convoluted, but ended with an award to the major 2014 GEF Gala sponsor. At the January 13, 2015 board organizational meeting, Humpherys was reelected to the board and became clerk; Santa Cruz was elected; Tram became board president. An override and a new bond were approved by voters. Flush with the prospects of more money in the coming year, there was great urgency to awarding some new GPS contracts. That process took some unusual twists and turns: San Tan Ford, the featured sponsor of the 2014 Gala, won a contract with GPS in what appears to be a circumvention of Arizona Procurement Code in order to benefit private interests. The GPS Business Services staff prepared a Board Agenda Submission Form for the January 27, 2015 board meeting for the purchase of eight Ford 10-passenger vans using a state contract. Kishimoto and Tram set the agenda for the January 27, 2015 meeting, but the van contract proposal never made it on the agenda. If it had, the state contract would have been awarded to Sanderson Ford. Instead, GPS went out for a bid. Apparently they needed five responsive bids to put a fig leaf on an ersatz procurement process that appears to have had one predetermined outcome: award the contract to a GEF featured sponsor, San Tan Ford, instead of Sanderson Ford, through the state contract. This required knowing, intentional action on the part of Kishimoto and Tram to veto the Business Services recommendation. And veto they did, setting in place a procurement process that would benefit San Tan Ford. Top 2014 GEF Gala sponsor San Tan Ford won the GPS vehicle contract with the lowest bid: $219,744.00, underbidding the next lowest bid by $719.04, or $89.88 per van procured.

Red flag of gambling law violations: raffle tickets restricted to purchasers of Gala tickets. It appears that only people who bought or were given tickets to the Gala were allowed to participate in the GEF raffle. It also appears that raffle tickets were exclusively sold at the GEF Gala, meaning the raffle was never open to the public. Lay people call that sweet situation “Pay to Play.” This is a violation independent of prohibited gambling operations described in our previous FW&A report about illegal gambling at the 2014 GEF Gala. BTW, since Christina Kishimoto became superintendent, GPS appears to have looked the other way when organizations other than GEF used gambling as fundraisers, such as poker tournaments for Mesquite High School athletic teams. You can bet that Westie has the flyers for these events.

Other indications that this illegitimate relationship between GPS and GEF was set up to flout state and federal laws intentionally: GEF did not report the income from gaming on their 2014 IRS Form 990. GEF did not list any gross income from fundraising events, and did not file Schedule G listing income from fundraising and gaming activities.

More tax fraud indicators: GEF intentionally failed to report the value of public support received from GPS on annual IRS Forms 990. Christina Kishimoto and her top administrative staff used the GPS resources to benefit GEF and preparations for the Gala. Both Kishimoto and Executive Director of Secondary Education Brian Jaeger sent emails to remind employees of the Gala and urge them to attend. GPS *vendor* Carole Bartholomeaux submitted a public relations consulting invoice for August 19, 2014 that included “researching information for GEF Gala event.” GPS paid that invoice. Until the 2016 MOU was signed, GEF held many events in GPS buildings, apparently without maintaining the minimum insurance liability required to use district facilities. The MOU was intended to illegally “bring GEF under the umbrella” of insurance procured by GPS with taxpayer funds.

We’ll close with a comment about that $90,000.00 that the 2015 GEF Gala raised. The 2015 IRS Form 990  shows that expenses exceeded income for that year (see page 14 of the linked IRS Form 990). Does the community feel bamboozled? You bet!

GEF could lose its tax-exempt status as a 501(c)(3) tax-exempt organization as a result of organizational wrongdoing. 

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.

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.

GPS Fraud, Waste & Abuse Report #10: More Tax Evasion Schemes

Gilbert Public Schools has been spending like the district has money to burn, after voters approved a tax override and a new bond issue. Beyond the blatant failure to protect public funds that you would expect from a Governing Board of elected officials, GPS has engaged in financial schemes large and small that run afoul of federal and state tax laws. The end result is that GPS and individual employees who profited from these schemes are at risk of back taxes, penalties, interest and other expenses that occur when the IRS goes after scofflaws. GPS employees, you’re the one left holding the bag when you don’t report taxable income from the fringe benefits you receive

Private citizens know that you must meet the requirements for tax deductions and expense write offs. GPS spent more than a million dollars on the software they seem to override in order to perpetuate some of these financial games. Any wonder why GPS can’t figure out how to pay employees properly? It might be because the folks in the Finance Office are *protecting* those who direct the payroll and tax scams described in these Fraud, Waste and Abuse Reports.

Many GPS tax evasion schemes revolve around questionable payments to consultants and apparently illegal gifts of public funds to *special* employees. Some of these schemes are meant to look like simple *mistakes* … making it really, really suspicious that superintendent Christina Kishimoto’s current contract says can’t be fired for *mistakes in judgment.*  So what we have to do here is show that the mistakes are actually well-thought out schemes that have been perpetrated over a long, long time for the specific purpose of enriching certain special someones at taxpayer expense. Westie’s up to the challenge!

It appears that GPS does not report to the IRS such things as working condition fringe benefits–that is, property and services provided to an employee so that the employee can perform his or her job. For example, it’s impossible to track donations and expenditures for GPS events such as the GPS Education Technology Summer Institutes of 2015 and 2016. Christina Kishimoto’s May 15, 2015 board brief indicates there was $60,000 in donations for the 2015 GPS event. Some donated funds were used for meals, gift bags and snacks for attendees, who were GPS employees whether they were on the clock or off. Sixty thousand dollars buys a lot of meals, gifts and snacks! But what’s $60 grand, when GPS has what’s essentially seven-figure slush funds from a tax override and bond issue?

The question of whether or not the things that GPS deems to be *de minimis fringe benefits* (and therefore not taxable) is complicated. Free lunches are provided to the same employees regularly, justified by the fact that GPS inserted a provision into employment contracts that meets Arizona Attorney General guidelines to avoid gifts of public funds to employees a few years ago. The result was that GPS has created an entirely new fringe benefit that mostly accrues to top level administrators: free lunches at virtually every meeting they attend. GPS vouchers show district maintenance and operations funds (taxpayer money) and district donation funds have been spent on catered meals for staff and lavish events, which have cost thousands upon thousands of dollars. In fact, it appears that just about every staff meeting or administrative training session is catered. Every monthly policy committee meeting of the GPS board, as a Committee of the Whole, is catered using taxpayer funds. Similar to the GPS travel junkets, these free meals tend to accrue to the same employees time and again.

In general, the IRS does not consider meals that are furnished regularly to a select group of employees to be *de minimis.* GPS staunchly defends these taxpayer funded meals as “morale” expenditures. To say otherwise would run afoul of the Arizona Constitution prohibition of gifts of public funds that GPS addressed through the provision inserted into employment contracts for limited permission for expenditures authorized by Attorney General Opinion I10-003. But it will get GPS in trouble with the IRS, who expects a business connection, at a minimum, while GPS is jumping through hoops to avoid violating the Arizona Constitution’s gifts of public funds prohibitions. Then there are the taxpayers, who are mightily p*$$ed at spending a hundred thousand dollars each year on free lunches for the highest paid admins and their buddies on the governing board.

GPS seems to believe there is only a rule limiting the cost of each meal provided to employees under this burgeoning program to “foster good working relations.” As a result, some administrators hold routine staff meetings in restaurants on some occasions and have meetings catered on campus by restaurants on other occasions. Some administrators take employees to restaurants for small group meetings; other times employees purchase refreshments using GPS vouchers. The superintendent and governing board routinely have their meetings catered by GPS Food Services.

Think of all the meals that GPS top level administrators gobble down … they want you, the taxpayer to believe that they’re using money that doesn’t come from your taxes, like donations. But public funds include all money that GPS holds. There’s a difference, again, between IRS rules and the Arizona Constitution prohibition on gifts of public funds, but GPS generally manages to violate one when admins try to *fix* the other. It’s a mess, and it most likely will be very expensive to taxpayers when accountability comes knocking. But GPS coffers are full with a tax override and a bond issue, so what’s the problem?

Apparently, GPS has used a number of subterfuges to provide meals to employees without reporting them to the IRS. A small, but inappropriate gift of public funds and unreported income was the practice of giving free lunches to select employees in GPS high schools that GPS abruptly terminated during the summer of 2016. The email below shows GPS admins are fully aware their schemes are prohibited by the IRS:

GPS does not report clothing as income to the employees who receive those items, nor does GPS withhold or remit taxes on those taxable fringe benefits. GPS policy simply identifies which funds can be used for shirt purchases in Policy DKC-R. Photos of staff (including Christina Kishimoto) wearing polo shirts sporting the GPS logo at conferences and other events, show that GPS does not meet IRS requirements for making a clothing a non-taxable fringe benefit. A good explanation of taxable fringe benefits for a school district can be reviewed here. GPS admins know what they’re doing. But why would they risk angering the IRS over the hundreds of tee shirts the district buys for employees each year, seemingly for any old event? Hey, GPS teachers, if you were important, you would be getting free polo shirts instead.

A related scheme to give GPS employees gifts of public funds comes through buying gift cards at various stores.  Entries appear for three gift cards from Fry’s grocery store lumped in with expenses annotated as staff appreciation, retirement and parent meetings in Vouchers 5222-5253 June 2015. The same scheme was used at Basha’s grocery store to buy seventy gift cards for teacher appreciation and two gift cards for retirements. At Sam’s Club, public funds were used to buy twenty eight gift cards for an undocumented purpose; gift cards for “admin appreciation” were purchased from Fry’s. Public funds also paid $3,350.00 for teacher appreciation gifts and $2,080.00 for gift cards for teachers. A gift card was folded into purchases for student organizations candy and dance gifts purchased at Target; eight gift cards for $100.00 were purchased at Basha’s for $847.60.

The IRS is adamant that when the employer knows of *gifts* to employees, the employer must withhold, remit and report taxes on those payments. Although others may have paid for these gifts to teachers and administrators, GPS was well aware of that unreported income to employees and responsible for all applicable payroll taxes and withholding, because GPS bank accounts were used to pay the vouchers. Yes, we all know the dots connect to the Gilbert Education Foundation, and we’ll reveal plenty of evidence about the hinkiness of that slush fund operation in future FW&A reports.

GPS also solicits gifts to be raffled to employees attending GPS sponsored events, such as the 2017 Employee Benefit Fair. For that event advertised by email to all GPS employees, the GPS Talent Office bragged they would distribute gifts valued over $10,000.00 to the subset of all GPS employees who attended this event. Whether or not this raffle complies with Arizona gambling statutes is a related and serious issue that GPS routinely ignores in conjunction with the uncounted and largely unregulated fundraisers that proliferate across the schools … including for PTSOs, booster clubs, student organizations and teacher appreciation events. Oopsie! New board members, this is happening  on your watch! BTW, a favorite *gift* to GPS employees is their own personal Chromebook. Guess how those are bought…

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. Word of warning to those who might consider the business-as-usual tricks employed by GPS admins in the past: it won’t help to lose files, forge signatures or *create documentation* after the fact. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

GPS Fraud, Waste & Abuse Report #9: Don’t Mess with the IRS

Unreported income is pervasive in Gilbert Public Schools. Gifts of public funds to GPS employees funnel unreported income to select employees. Favored employees, however they are selected, enjoy special privileges and monetary benefits (meaning untaxed cash bonuses) associated with their employment. But apparently, you have to be really *special* to qualify. 

This pattern and practice of unequal benefits again raises questions of whether the GPS Business Office is properly reporting all taxable income, let alone withholding and remitting taxes. Many of those GPS employees are the level administrators whose contracts said nothing about Professional Development, which often is the vehicle for said gifts of public funds. Some lower-level employees have had professional dues paid by the district, in addition to registration and travel expenses for employees attending various conferences, all without statutorily required board approval. As with the case of Robyn Conrad-Hansen, employees contracted through SmartSchools also can receive benefits of illegal gifts of public funds from GPS without reporting those payments as income.

There’s a “Professional Growth Stipend Benefit” that is a lump sum that should have been included as taxable income during the years that GPS paid this benefit. The problem is that the GPS Employee Handbooks state that such payments have been suspended for the past many years, according to page 35 of the GPS Employee Handbooks from 2013 through 2016. GPS *helpfully* removed those handbooks from their website, but Westie archived them and provided them to state and federal elected officials and enforcement agencies, along with records of exact payments over the years that prove which employees received these gifts of public funds that enriched their pocketbooks with public funds. Hint: it’s often the same folks, year after year.

The GPS Employee Handbook contained other gifts of public funds each year to selected employees. For example, the so-called transportation benefit routinely was provided to some 100 administrators as a nice check for $350.00 at the end of each school year. One hundred GPS administrators received annual checks of $350.00 in 2014; they didn’t have to travel, and they didn’t have to keep records unless they wanted to claim additional reimbursement for travel over 750 miles. Interim Superintendent Jim Rice received a check from GPS for his travel between home and work, something that is so fundamentally wrong, there’s no way GPS can explain that, or the perhaps double payment that occurred.

There’s no doubt that these gifts of public funds were purposeful, because GPS answered an inquiry about these payments with an email from the GPS Director of Finance explaining that GPS decided 100 administrators would be deemed *vendors* so they could cut sweet little tax-free bonus checks for them: 

Every year administrators are required to sign a form that states that they will accept this amount in lieu of submitting additional miles for reimbursement. The expectation is that in the course of doing business throughout the year Administrators generally travel during work hours. And over the course of the year the miles that would be claimed would be in excess of the $350.00. Those that do not sign that form do not receive this money and they would have to collect and submit miles for every trip taken during the year. I would not necessarily categorize these as stipends. This is an arrangement to minimize the administration of mass submissions of mileage reimbursements.

That self-incriminating explanation was written to Suzy Horvath, who was absolutely livid when Westie first wrote about these GPS illegal gifts of public funds in 2014; more Westie posts on the subject appear here and then again here, verified by Vouchers 4218-4226 June 2014.  “But it’s District Policy,” she proclaimed, among some other stuff that passes for smack talk or worse in her constricted community. Thanks so much for getting this verification of tax evasion made into a public record, Suzy Horvath!

As Director of Finance, Teddy Dumlao knew that he was in the group of employees that would be improperly compensated; the group also included Budget and Procurement Coordinator Crystal Korpan, whose role was essential in recharacterizing payments to these employees as so-called vendors. GPS gave the same gifts of $350.00 again in 2015 in Vouchers 5222-5253 June 2015. This time, the payments to GPS administrators were listed as “Admin Travel Stipend.” In GPS, stipends are paid for *additional work* and other salary related reasons; those payments appear to be administered within the Talent Office rather than the Finance Office. Board members really should cut the ostrich act and look into these illegal payments and so-called stipends, but who is going to make them do that?

It appears that GPS not only failed to report the payments as taxable income, GPS also failed to properly withhold taxes and other deductions from employees. Do you believe that GPS filed IRS Forms 1099 for these payments to and/or on behalf of employees? They certainly were not included in the very few 1099s Westie received from public records requests.

GPS Director of Finance Teddy Dumlao, who regularly attends professional development and business administration conferences at GPS expense, also had his college tuition reimbursed. It appears that he is the sole GPS employee who received tuition reimbursement for college courses, which were shown in *Vouchers through April 2016* in the amount of $3,400.00. In this case, GPS recharacterized income to the Director of Finance, apparently as a reward for making possible financial schemes of various tax-evading strategies that were operating out of the GPS Business Services offices.

Teddy Dumlao readily admits he does not have a college degree that one would assume is essential for his position in GPS or any other school district. Also attracting critical scrutiny, GPS does not have a policy or practice of reimbursing college tuition for the several thousand teachers who work for GPS and who take classes to maintain their certifications. How sweet it is to be Teddy Dumlao, the same guy who shamelessly made possible the apparently illegal gifts of public funds discussed in this post!

Another top level GPS employee who enjoys the superintendent’s favor is Communications Director Irene Mahoney-Paige, whose tuition for a Chamber of Commerce program was paid directly to the Chamber by GPS. That $800.00 payment appeared in *Vouchers through August 2016.* The program seeks “to expose promising leaders to issues that affect our communities, businesses, and the public … to be better able to contribute their resources to making a difference in many ways.” Again, this appears to be a sweet reward to a selected employee.

A big question is whether Irene Mahoney-Paige has been paid as if she were on duty at GPS for the time she spends on the Chamber of Commerce program. That would allow her to collect a salary as a public employee while at the same time accumulating benefits such as paid time off, when she’s really partying with the Chamber of Commerce. Thanks for *making a difference* at taxpayer expense, Irene!

In addition to tax irregularities resulting from GPS paying the Gilbert Chamber of Commerce for a program to advance “promising leader” Irene Mahoney-Paige, these expenditures are gifts of public funds and an abuse of Kishimoto’s authority. So what did the GPS governing board know, when did they know, and what did they do about it?

Keyboard: Don’t ask the questions if you can’t stand the answers.
Westie: But taxpayers want to know!
Keyboard: So does the IRS.

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. Public trust can be restored only through an impartial forensic audit by someone who doesn’t have a stake in these matters. It’s not nice to mess with the IRS! Penalties, interest, back taxes and more come to mind…

GPS Fraud, Waste & Abuse Report #8: Illegal Gifts of Public Funds

GPS Superintendent Christina Kishimoto and CFO Tom WohlleberWe’ve shown that GPS payments to “consultants” appear to be designed to recharacterize salaries and reimbursements to evade employment taxes, among other fraudulent schemes. Would it surprise you to know that Christina Kishimoto profited handsomely in other strategies to enrich herself from the public purse? Kishimoto received about $25,000.00 that was gifted to her before she became superintendent. This seems to have run afoul of federal laws and IRS regulations in addition to flagrantly violating state laws and the Arizona Constitution. 

As a consultant, Christina Kishimoto was reimbursed for some hefty and unidentified travel expenses before she began her job as GPS superintendent. The Governing Board was aware that Kishimoto planned to travel between her home in Connecticut and her new job in Arizona; the board authorized up to five trips “without further approval by the Board” in her first employment contract. The Arizona Republic reported on April 11, 2014 that Kishimoto, her husband and their daughter visited Gilbert, Arizona on a house hunting trip: “The last thing I want is someone to say, ‘She’s coming in with preconceived notions about who we are,’ ” said Kishimoto, who met with principals during a house-hunting trip to Gilbert during the first week of April.”

The State of Arizona Accounting Manual and GAO policies to which GPS policies refer specifically prohibit reimbursement or payment for house hunting. Additionally, even though paying for travel of family members is prohibited, it appears Kishimoto may have been able to use some of the five trips with advance authorization in her consulting contract to benefit her family members. There is an appearance that an improper house hunting trip was disguised as consulting so that GPS would pay Kishimoto’s expenses in the amount  of $2,063.65 on Vouchers 4162-4172. This appears to be a gift of public funds for an illegal purpose that contributes to public distrust of GPS.

Inappropriate payments to Christina Kishimoto that were recharacterized as “per diem pay for contractual work” include $9,321.95 paid to Kishimoto before her contract as superintendent began on July 1, 2014; she had a separate contract for that work, signed at the same time as her superintendent employment contract. In her contract, Christina Kishimoto agreed to record the date of every day she performed work as a consultant and submit it to GPS within ten days of the completion of that work. Westie requested public records in May 2015, fully expecting that a complete record of Christina Kishimoto’s consulting services would be produced. It’s not surprising that GPS did not produce any such documentation, but determined the request was fulfilled by producing 141 pages listing contract labor payments to various *vendors,* with no supporting documentation for the services performed.

How GPS determined Kishimoto’s contracting work was worth $9,321.95 is a mystery. It appears that Kishimoto did not fulfill her responsibility to keep detailed records and submit them to GPS; she just asked for a check and received it. No taxes or other payments were withheld, although her consulting contract specified payment would be “minus any necessary withholdings.” Instead, GPS recharacterized wages paid to Kishimoto by treating $9,321.95 as a non-taxable reimbursement to an employee who had not incurred bona fide business expenses.

Kishimoto’s contract includes a $15,000.00 payment for moving expense, paragraph 2J.  This was not a reimbursement or payment to a vendor for services rendered as indicated on Vouchers 4200-4209-May 2014, it was a check to Kishimoto for $15,000.00, no accounting required. GPS reported this payment on an IRS Form 1099 and showed it on vouchers as a *vendor payment.* Therefore, GPS did not withhold state or federal taxes and did not make any payment into ASRS, among the many questionable choices the district made in this charade concocted to give unearned money to a public officer. Instead, GPS recharacterized wages paid to Kishimoto by treating $15,000.00 as a non-taxable reimbursement to an employee before she possibly could have incurred bona fide business expenses. Indicators of public corruption include that these payments recharacterized as reimbursements created a conflict of interest for Kishimoto, because payments were not reimbursements for actual and necessary expenses incurred in the performance of her official duties. Further, Kishimoto had a monetary interest in receiving gifts of public money that were not reported on IRS Forms W-2.

There are other indicators of potential fraud about this transaction; for example, the State of Arizona Accounting Manual prohibits advance payment of authorized moving expenses. Arizona caps reimbursements of moving expenses for newly hired employees at $5,000.00 (see page 7 of the linked pdf document):

Limit of Reimbursement. The limit of reimbursement for any one relocation—including the transport of household goods or mobile home hauling, travel, lodging and other costs— shall be the lowest of:

(1) The actual reimbursable relocation costs incurred, or
(2) The sum of the applicable limits by category expressly set forth below, or
(3) The applicable ceiling, which, in the case of:
(3a)Current employees is ten thousand dollars ($10,000).
(3b) Newly hired employees is five thousand dollars ($5,000)

Whether or not the $5,000.00 State of Arizona ceiling for moving expenses applies to this $15,000.00 payment of public monies, those funds were described in Kishimoto’s employment contract as “to defray expenses.” That payment should have been taxable income for both state and federal income tax purposes, since it was not reimbursement for expenses, whether reimbursing that travel was lawful or not. Kishimoto collected for her travel expenses in advance, which would obviate any need to file receipts for reimbursement in accordance with both state and federal law. In other words, GPS offered Kishimoto a specifically prohibited gift of public funds, which she accepted.

It appears GPS hired “consultants” to provide professional services without following procurement procedures. The Arizona Auditor General specifically advised school districts on requirements for retaining professional services: “The Rules are located in Title 7 Education, Chapter 2 State Board of Education, Articles 10 and 11, School District Procurement.” Uh oh, none of those consultants in FW&A Report #6 were on the list that exempts school districts from advertising for *consultants.*

5. Does a District need to advertise when procuring professional services?

Yes. A District must advertise the notice of the IFB/RFP if procuring services other than the following:

*  clergy
*  architect
*  certified public accountant
*  engineer
*  physician
*  land surveyor
*  dentist
*  assayer
*  legal counsel
*  geologist
*  landscape architect

Further, for all other goods, services, and construction procurements, if there are four or fewer bidders on the bidders list, then the notice of the IFB/RFP must be advertised. School District Procurement Rule R7-2-1022(A)12.

Any way you look at the state of fiscal affairs in Gilbert Public Schools, it’s apparent that there’s a lot of monkey business going on! Members of the governing board can continue the ostrich maneuver, i.e. hiding their heads in the sand so they don’t see what’s right in front of their faces.

But that could backfire when the inevitable confrontations come: what did you know about wrongdoing and when did you know it? And what did you do about it? The public also would like to know if you are adequately guarding their tax dollars.

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. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies. A genuinely impartial forensic audit is the only way to know the extent of wrongdoing in GPS.

GPS Fraud, Waste & Abuse Report #7: Illegal Payments and Tax Evasion

As every forensic accountant knows, reimbursements to employees for expenses incurred in performing their duties is ripe for fraud, waste and abuse, particularly in government entities. In GPS, it appears to have become an art form: recharacterizing expense reimbursements as a cover for paying illegal expenses from the public purse. Let’s explore some obvious GPS financial shenanigans like *consulting* that isn’t really consulting; overpaying consulting invoices to boost payments to privileged persons; forgiving a contractual obligation to pay *liquidated damages* for breaking an employment contract; paying an allowance (taxable income) and also *reimbursing* expenses incurred for the same purpose; and finally, *reimbursing* future expenses. However you look at it, GPS plays fast and loose in hocus-pocus transactions that create a financial windfall for selected employees. You won’t be surprised to see that GPS superintendent Christina Kishimoto’s name is linked to those transactions. 

It appears that GPS recharacterized a “consulting” payment because travel reimbursement was prohibited when Christina Kishimoto interviewed an out-of-state applicant for a vacant position. After Christina Kishimoto’s top choices for two leadership positions in GPS were rejected by the Governing Board on May 27, 2014, Mark Gabrylczyk’s name appeared on Vouchers 5040-5062, Sep-Oct 2014, for “Consulting Expenses” in the amount of $750.00. Superintendent Mark Gabrylczyk had been fired resigned in June 2015 from his position in Idaho; media reports showed he was looking for positions in districts around the country during the summer and fall months.

The subject of payment of travel expenses for candidates had been addressed by the Governing Board. During the superintendent search leading to Kishimoto being hired earlier in 2014, the firm conducting the search paid those expenses for all candidates who interviewed with the GPS Governing Board. Payments in amounts shown on the contract of the firm Ray and Associates appeared on GPS vouchers; travel expenses for candidates did not appear. The Arizona Attorney General public service orientation guidance is instructive: “State officials recruiting others to State service should know that the Legislature has forbidden expending any appropriations for transportation or other travel expenses, for moving expenses, or for bringing any person who is not an Arizona resident to interview for prospective employment unless such monies are appropriated for such specific purposes. A.R.S. § 35-196.01(A).” Appropriations require a vote of the governing board in a public meeting … BEFORE the funds are spent.

Kishimoto’s recharacterization of this payment to Mark Gabrylczyk as “consulting expenses” indicates a purposeful fraudulent scheme that most likely was concealed from the board. Apparently, Kishimoto charged expenses for hiring a consultant without revealing that she had interviewed an out of state applicant who certainly did not have a sterling work history (which a Google search would have revealed immediately in great detail). Of course, there was no way of assuring the Governing Board that the benefits to be realized from payment for a candidate’s transportation or other travel expenses substantially and demonstrably exceeded the costs GPS incurred (a consideration required because of the Gifts of Public Funds clause in the Arizona Constitution) when it was absolutely prohibited to pay those costs in the first place. Sounds like a repetition of how the GPS governing board did not approve GPS employee travel, doesn’t it?

In the case of former Interim Superintendent Jim Rice, the amount of the invoice and the amount of the check he was issued for *consulting services* he provided after his employment contract ended were vastly different. Kishimoto’s administrative assistant performed the only oversight noted in the public records GPS produced about this matter, including records where Rice invoiced $1,562.50 but was paid $5,687.50. GPS also produced a consolidated report of payments to vendors for 2013-2015; Rice had received $6,198.10. The difference between the check issued to Rice and the amount shown on the consolidated report is $510.60.

Oh, lookie here: Jim Rice also was “reimbursed” for $255.30 for traveling between his office and his home, an amount that should have been reported on an IRS Form 1099 for 2014 in addition to an IRS Form W-2 for Rice’s GPS employment. Reimbursement for that particular travel violates state and federal laws. And gee whillikers, if you double pay for that *travel,* the amount is exactly $510.60, just like the discrepancy that appeared on the consolidated vendor payment report! What a coincidence!!

The public records GPS produced in response to requests for payment information were incomplete, but nonetheless were filled with inconsistencies indicating fraud. In November 2016, the GPS Administrator newsletter acknowledged GPS had been misclassifying independent contractors. The belated attempt to clean up the mess doesn’t excuse the deliberate misuse of authority and public funds, let alone the fraudulent schemes to enrich select “consultants” and GPS employees.

When GPS instituted *hostage fees* in employment contracts, Christina Kishimoto was desperate to keep employees from jumping ship in the middle of the year. Later, we learned that although the contracts specified that the board could forgive the hostage fees upon individual consideration of departing employees, Christina Kishimoto and her minions took over that job and made their own decisions about who paid the hostage fee and who did not. Perhaps they were unaware that the IRS considers a debt that is forgiven as income to the recipient. Yep, propelled by arrogance and ignorance, Christina Kishimoto waded into yet another pit of quicksand in employment law. New board members, she’s trying to pull you in, too!

According to the IRS, if a debt is canceled, forgiven or discharged, you must include the canceled amount in your gross income, and pay taxes on that “income.” Do you think GPS filed required IRS Forms 1099-C when hostage fees were forgiven? Certainly, when Westie requested IRS forms as public records from GPS, no IRS Forms 1099-C were produced. Like so many of the boneheaded maneuvers GPS financial folks pulled in recent years, this stunt could backfire spectacularly on former GPS employees who did not report that additional income. GPS could be on the hook for back taxes as well for penalties and interest for screwing up so many basic payroll functions in the past several years. Let’s hope the IRS doesn’t go after those employees who were not aware they were receiving taxable income due to GPS duplicity.

In terms of Kishimoto’s total compensation, it appears that allowances (taxable income) and reimbursements of accountable plan expenses are duplicative. It’s pretty much impossible to determine which of Kishimoto’s fringe benefits over and above her base salary are paid as allowances as opposed to reimbursements; that’s by design, as are many of the GPS shenanigans. Some of the payments shown in vouchers appear to be reimbursements for expenses that are itemized in allowances described in Kishimoto’s contract. That could allow Kishimoto to collect the allowance as part of her salary and also collect reimbursements of expenses that should have been covered by the allowance.

One such allowance appears to be prohibited by Arizona statute, as discussed in an Attorney General Opinion. That allowance is described in Kishimoto’s employment contract as an annual “Civic Responsibility Expense” payment of $3,000.00, paragraph 2I. There should be no question that such payments violate the Gift Clause and Arizona law, but the allowance is in Kishimoto’s contract and GPS also pays expenses for civic activities, as shown by vouchers.

Kishimoto’s self-serving expenditures of public funds, as well as her reimbursements for expenditures that violate state law are prohibited. From Arizona’s Attorney General:

The Legislature has not authorized school districts to pay dues for district employees and board members to join private civic organizations… The only mention of membership dues in the statutes governing schools is the authorization for districts to pay dues “for membership in an association of school districts within this state.”  A.R.S. § 15-342(8).

Although not expressly authorized by statute, dues for organizations that directly concern education or aspects of managing a public school district may be justified to the extent they enhance the district’s ability to fulfill its statutory responsibilities.  However, the connection  between  membership dues for private civic organizations with a more general purpose (such as the Chamber of Commerce, Kiwanis, and Rotary Clubs you identified in your opinion request) and a district’s statutory responsibilities for educating children is too attenuated to conclude the Legislature impliedly authorized those expenditures. Thus, there is no express or implied statutory authority for school districts to pay for dues to private civic organizations.

It appears Kishimoto also submitted for reimbursement of future expenses. “This will be used for Dr. Kishimoto’s expenses per the superintendent’s contract” appears on vouchers from at least September 2015 through the present. It sure looks like someone is drawing down the amount specified as an allowance in Christina Kishimoto’s contract; what do you think the chances are that she collects the allowance AND files for reimbursements? Do you think there’s any chance Christina Kishimoto’s reported taxable income includes that allowance? You never know with the way GPS ping-pongs salaries and reimbursements between the Talent Office and the Business Office. What a deal!

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. Word of warning to those who might consider the business-as-usual tricks employed by GPS admins in the past: it won’t help to lose files, forge signatures or *create documentation* after the fact. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

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