P-Cards: After the Million Dollar Investigation

With just $20,000 remaining of the $1 Million dollars allocated, lawyers Paul Coggins and Madeleine Johnson submitted Fish & Richardson's final report to DISD Board Members and DISD Superintendent Michael Hinojosa during Thursday's board briefing.

An 82 page report, along with 4,000 pages of exhibits and 93 pages of "employee referral reports" were being distributed to board members late Thursday. Most of the documents have been placed on the DISD website for the public to view (view here).

"There were no sacred cows," insisted Coggins when asked by a board member, "...there was no sense of protection [for any employee from investigation]"

Coggins' firm, for its $1 million dollar tab, examined only a fraction (200) of the 1,400 employees and their 3,100 credit cards.

Among the 200 employees whose charges were examined, was fired-then-rehired Principal Ardis McCann.

Fish & Richardson attorney Kip Mendrygal, barely 3 years out of law school at the time, and private investigator Peter Nielsen (hired by Fish & Richardson) recommended McCann be fired for his failure to produce sufficient charge receipts.

When McCann's staff subsequently located a lost box of receipts, Mendrygal and Nielsen testified they believed McCann was lying and still made the recommendation to fire him.

Fish & Richardson referred the matter to the Superintendent's Ad-Hoc Legal Committee--a committee charged with "hearing and reviewing" disciplinary suggestions from the firm. The committee, made of of Superintendent Michael Hinajosa's top brass, included Deputy Superintendent Steve Flores.

Flores, with his memory failing him often throughout his deposition, testified that even if he had been able to produce 100% of his missing receipts, McCann should have still been fired (read the story and Flores' deposition).

After legal wrangling, an agreement (the details of which are secret) was reached and McCann was reinstated to a different position.

So Who Is Getting The Blame?

Recurrent themes throughout Coggins' report were references to deficiencies in the "Quality Control Office" headed by Sherri Brokaw--currently on administrative leave after being publicly called "incompetent" by, former DISD spokesman Celso Martinez.

Brokaw's job was to oversee the procurement card program.

Coggins' report seemed to place much of the blame on Brokaw, and her 2 fellow staff-members for failing to monitor over $71 million dollars in expenditures and over 250,000 transactions on the District's 3,100 cards.

Brokaw was accused by former District employee Gloria Orapello, according to Coggins, of removing a "red flag" system in the District's "flawed" Oracle-based credit card reporting database--an automatic message intended to notify supervisors when card holders made charges.

According to the Fish & Richardson report, several supervisors complained the Oracle reporting system was "confusing at best and essentially worthless at worst" because it would notify supervisors "thirty, sixty, or ninety days after the Pcard purchases were made and did not include the name of the Pcard holder..."

Orapello pled guilty to embezzling funds from DISD and is awaiting sentencing.

But is Brokaw merely a scapegoat, as she claims, for costly mistakes of more senior officials?

Multiple Audit Reports Ignored By Senior Officials

Who was responsible for Brokaw's department--and her 2 employees?

DISD's organization chart shows Brokaw to be a lower level manger reporting to Financial Services Associate Superintendent David Rastellini.

Rastellini reports to Business Services Division Deputy Superintendent Ron Peace.

Peace reports to Hinojosa.

Records show that District superintendents (executives) ignored and failed to act on multiple audit reports which raised red flags about the District's P-Card program in 2003 and 2005. One of the three ignored audits was performed by KPMG in 2005.

All reports were presented to the Board of Trustees and the Superintendent (excerpts are on the District Website).

These audit reports indicated that Brokaw's office, which devoted most of its time to training, was overwhelmed and could not adequately monitor the District's procurement card system.

Further, questions have been raised as to whether Brokaw had the power to implement changes recommended in the reports.

So who did? Rastellini? Peace? Hinojosa?

When asked if District officials were "scapegoating" a low-level manager for executive-level failures, Coggins indicated he was not in a position to comment.

[Obviously, Dallas.Org will monitor this situation as it develops.]

How Fish & Richardson's Bills Broke Down

Madeleine Johnson said, today, that out of the $980,000 final bill, about $660,000 was for attorney's fees. Another $280,000 was paid to private investigator Peter Nielsen.

An analysis of Fish & Richardson's bills (view the summary here) found that:

• A total of 2,125 total hours had been billed by Fish & Richardson's staff as of March 15, 2007

• Kip Mendrygal racked up 884.5 hours, or 41.6% of the total time billed to taxpayers

• Amalia Macias, a paralegal, billed 897.8 hours, or 42.2% of the total time

• Madeleine Johnson billed 194.9 hours, or 9.2% of the total

• Paul Coggins billed 102.8, or 4.8% of the total

There were several instances where attorneys billed for discussions among themselves, each charging $350-an-hour. They also charged for reviewing and responding to each other's email--which we're told is a common, but expensive, practice at some large law firms.

Navigant Consulting (a firm hired to "crunch" data for Fish & Richardson), records show, has already been paid $165,708.40--leading to the question: will this investigation exceed $1,000,000?

Wrapping It Up

Fish & Richardson ended up reviewing 200 of the 1,400 DISD cardholders and their 3,100 credit cards. Their bill will cost taxpayers about $980,000.

Out of those employees examined, 45% (about 93 employees) were found to have violated the rules. A handful have been disciplined:

• Two secretaries, who were the focus of investigations by the Dallas Morning News, have been prosecuted

• Around 10 employees are currently on administrative leave

• Six employees have resigned or been fired

• Two employees have been reinstated

So what's next for the other 1,200 employees never investigated?

The answer may be in a statement Superintendent Hinojosa made to the Dallas Morning News (read the article):

"There are things that have occurred that we're not proud of ... and we apologize. But, also, we have a much bigger mission here. Our mission here is to become the best urban district in the country by 2010. We have a lot of important work to do for the young people of this city."

So with multiple audit reports ignored, and $1,000,000 all-but-spent, only 14% of spenders were actually examined.

Out of the other 1,200 who may have charged $100 here-or-there, all indications are that they've "gotten away with it."

Several of the board members praised Coggins for his firm's hard work (video coming).

Board President Jack Lowe, in addition to thanking Coggins, went a step further and praised "the other 19,000 employees" who didn't steal from "DISD's open till."

No one apparently pointed out to Lowe that only 1,400 employees had credit cards--and out of those, only 200 were even reviewed.

So, is this the end of it?

Will this turn out to be another million-dollar debacle with a few "sacrificial scapegoats" and the rest "swept under the rug?"

Only time, and perhaps a few more lawsuits, will tell.