After the federal government recently fined a prominent former superintendent for allegedly playing both sides in several school financial deals, a review by The Bee shows that many Valley school districts don’t have safeguards to prevent possible conflicts of interest. And because these districts don’t police these possible conflicts, well-connected contractors can reap hundreds of thousands of dollars in public funds.
The U.S. Securities and Exchange Commission censured School Business Consulting, a company owned by former Clovis Unified Superintendent Terry Bradley, for allegedly helping Keygent LLC of El Segundo ace its interviews with five California school districts. Keygent is a financial advisory firm that has worked on many local education bonds.
Bradley, who currently works as an education adviser, was accused of sharing interview questions and information on competitors before Keygent’s meetings with the districts, which also were employing him.
The SEC never identified the five districts. Attempts to reach the SEC for further comment were not successful.
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The SEC said Bradley was paid $2,500 per month from September 2010 to presumably June 2016, when it barred him from working with financial advisers. He declined to be interviewed for this story.
$845,000Payments to Terry Bradley from Keygent and local school districts since 2006
Bradley agreed to a settlement that included $50,000 in fines and a sanction barring him from acting as a municipal adviser. It did not require him to admit any wrongdoing. Beyond the SEC findings, neither Bradley nor any local districts have been accused of breaking any laws with regard to their dealings with each other.
Section 18734 of the California Code of Regulations specifies that contractors who “make or participate in the making of decisions that may foreseeably have a material effect on any financial interest shall file interim disclosure under this category.” Because Bradley was contracted only to advise, most of the districts he dealt with did not require him to disclose any potential conflicts.
Contracts with at least six districts in the central San Joaquin Valley did not include a conflict clause. Only Fresno Unified had Bradley sign anything regarding conflict disclosure. But a district leader signed off on Bradley’s lack of conflict when Bradley actually was involved with at least two other contractors involved in million-dollar deals with Fresno Unified, according to records.
Since 2010, Bradley made $845,000 from his contract work with districts and his consulting work with companies awarded district projects. His pension with Clovis Unified also paid him $1,034,585 since 2011.
Bradley is a former chairman of the Coalition for Adequate School Housing, which advocates for the state’s school bonds and contractors in the school construction industry. CASH also has defended school districts’ use of “lease-leaseback” contracts amid recent scrutiny of the financing process.
Harris Construction has sponsored CASH events, including its annual conference and golf tournament.
Tom Duffy, legislative director for CASH, said Bradley still is affiliated with the organization, which represents 1,500 school districts, county offices and private businesses. Duffy called him a “credible, honorable man.”
“We support Terry. He has a great deal of credibility because of his honesty and what he’s done in California for a long, long time,” Duffy said. “I’m sure that he’ll work through this and so will the SEC. The work that school districts do is some of the most complex work in California because of laws and regulations, and also because of federal oversight when it comes to anything involving bonds. It’s complex and it’s ever-changing, and is a world that requires a great deal of expertise.”
Fresno Unified had two contracts with Bradley between 2010-12. The first paid him $54,000 for what was outlined as approximately 12 to 16 hours of work per week in 2010-11. The next paid him $12,000 for approximately 10 to 12 hours per month in 2011-12.
Unlike Bradley’s similar contracts with other districts, the Fresno Unified contracts had conflict-of-interest stipulations.
The documents, signed by Bradley and district Chief Financial Officer Ruth Quinto, read: “The contractor does not have, or anticipates having, any interest in real property, investments, business interests in or income from source which would provide contractor … with personal financial gain as a result of any recommendation, advice or any other action taken by contractor during the rendition of services under this agreement.”
However, Bradley did have relationships with two companies chosen for major district projects during his advisory contracts.
Bradley and Harris Construction Co. Chairman Richard Spencer are known as two of the main proponents of using “lease-leaseback” deals in area schools. Bradley has spoken at several bond-related events hosted by Harris, and his office is in the Harris building. Bradley was also in a video for Harris’ “Empowering Series” that has since been taken off Harris’ website.
However, the video is still on YouTube.
Harris did not return a phone call from The Bee.
A federal grand jury is investigating the no-bid deal between Harris and Fresno Unified used to build Gaston Middle School. Harris agreed to consult with Fresno Unified for free if it won the nearly $42 million contract.
The 5th District Court of Appeal ruled in June 2015 that Fresno Unified’s contract with Harris Construction was not a genuine leaseback agreement, even though it was labeled as such.
The court said that plaintiff Stephen Davis, a Fresno contractor, adequately alleged that because Fresno Unified’s leaseback wasn’t used the way the law intended, it should have been competitively bid out like normal contracts. The district had money available to pay for the project – and didn’t pay it back to the contractor over a long period of time, as is typical for leaseback contracts.
The Gaston project was paid for with funds from the district’s $280 million bond, Measure Q. Both Bradley and Keygent worked with Fresno Unified on the bond measure, which voters approved in 2010. Spencer and Keygent contributed $30,000 and $10,000, respectively, to the bond’s campaign.
Bradley also is linked with TerraVerde Renewable Partners LLC, a consulting firm in Larkspur that advises school districts on green energy projects. According to its website, TerraVerde worked on projects in the following districts: Clovis Unified, Visalia Unified, Corcoran Unified, Golden Valley Unified, Firebaugh-Las Deltas Unified and Fowler Unified.
Bradley is listed as one of two “strategic partners” on TerraVerde’s website. The site lists his accomplishments and qualifications.
TerraVerde President Rick Brown said Bradley’s “limited consulting role for us has been to primarily make introductions.” He would not say whether Bradley was paid.
Clovis Unified’s $25 million, 19-school solar project in 2012 was by far the largest TerraVerde worked on. According to district records, TerraVerde was paid nearly $2 million.
The solar project was paid for by Measure A, a bond measure spearheaded by Bradley. The district selected Keygent to be its financial adviser for the bond after interviewing several candidates. According to district records, Keygent received $55,000 to $75,000 for each bond transaction.
Spokeswoman Kelly Avants said the district first contacted TerraVerde in 2010. At that time, Bradley worked with the district through another company, the consulting firm School Innovations and Advocacy. He was its vice president for facilities before forming his own company in 2010.
On the solar project, TerraVerde’s Brown offered to do all the planning for free if it won the contract.
Avants said the district reached out to other solar advisory companies, but none were willing to do the planning work for free. The district concluded TerraVerde was the only company willing to meet its terms, so it did not interview other candidates or send out requests for qualification forms.
Clovis Unified still plans to name its proposed southern educational center after Bradley, Avants said. Bradley retired from Clovis Unified in 2009 after 33 years with the district.
The district had three annual contracts with Bradley in 2011-14 that each paid $30,000 to his firm, School Business Consulting. A fourth contract paid the company $1,250 per month in 2011 but did not specify how long the contract would be in effect. All four lacked clauses concerning conflicts of interest.
Avants said that district policy does not require consultants to sign conflict-of-interest forms, because consultants don’t have decision-making authority.
Sanger Unified has an agreement with School Business Consulting that began on July 1, 2015, and ends Thursday.
The district is paying Bradley’s company for advice in a variety of areas, including assisting with construction deals.
In September, the Sanger Unified Board of Trustees entered into a $9 million leaseback deal with Harris Construction to build an addition to Sanger Academy Charter School. Superintendent Matt Navo said at the time that Sanger had used leaseback deals for years and that they were needed to stretch a thin budget.
Sanger’s agreement with Bradley’s company requires the services of a municipal adviser, which the SEC has forbidden him from doing.
The agreement requires the company to “work with district administration and their consultant to ‘match’ facility projects using local bond funds with modernization or other state facility program(s) for which the district is eligible.”
The SEC did not elaborate on how its sanctions would affect contracts with Bradley and his company, and SEC officials did not return phone calls.
The SEC defines municipal adviser as “a person that provides advice to or on behalf of a municipal entity or obligated person with respect to municipal financial products or the issuance of municipal securities, including advice with respect to the structure, timing, terms, and other similar matters concerning such financial products or issues, or undertakes a solicitation of a municipal entity.”
The SEC states that a municipal entity “includes, but is not limited to, public pension funds, local government investment pools and other state and local government entities or funds.”
Part of Bradley’s settlement with the SEC bans him from acting as a municipal adviser or associating with them, so it would seem he is now legally unable to fulfill part of this contract.
When asked if Bradley still was acting as a municipal adviser for the district or would be retained, assistant superintendent Eduardo Martinez said Bradley has consulted for the district for three years. He plans not to retain Bradley once his contract is up, saying the district always had planned to transfer his duties to in-house personnel beginning in July.
According to the district contracts, Sanger paid Bradley $40,000 per year from 2010 to 2014. He was paid $36,000 in 2015. In all, the district has paid him $236,000.
Fresno County Office of Education spokeswoman Lisa Birrell said Bradley was paid $1,500 in fiscal year 2015-16 to help with the office’s Successful Project Workshop Series at schools throughout the Valley.
The county’s contract with Bradley does not have any clauses on conflicts of interest.
Madera Unified School District Superintendent Ed Gonzalez said the district never contracted with Bradley or his company directly.
However, it did award a $24,500 contract to the Cosca Group on April 23, 2013, to lead its search for a new superintendent, Gonzalez said. The Cosca Group is a collection of education consultants. Bradley is listed on the Cosca Group’s website as one of 28 partners. All of the partners have biographies except Bradley. Clicking his name leads to a screen that reads “access denied.”
Madera Unified’s contract with Cosca does not include any clauses covering conflicts of interest.
Officials with Cosca did not return phone calls.
Bradley has contracted with the Dinuba Unified School District every year since 2010. His first two deals in 2010 and 2011 paid him $40,000 each, and he received $30,000 per year in 2012, 2013, 2014 and 2015. The deals total $200,000.
Cindy Kaljumagi, administrative assistant to the superintendent, said the district plans to retain Bradley after his current deal expires on June 30. That contract would presumable pay him another $30,000.
Like the Sanger deals, Dinuba’s most recent contract asks him to work on behalf of the district on a possible bond and soliciting state money for projects – which he may no longer be able to do after the SEC’s ruling.
Dinuba Superintendent Joe Hernandez said Friday that Bradley is one of the few experts in both school finance and construction. He added that Dinuba’s facilities have “improved dramatically” since the district hired Bradley as an adviser.
“(Bradley) is a man of great principle who has loyally and faithfully served the needs of school districts throughout his career,” Hernandez said. “That his integrity would be questioned by anyone is irresponsible and highly offensive to those who know him.”
Bradley has been under contract with Caruthers since 2010. He was paid $10,000 per year in 2010-12 and $15,000 annually in 2013-2015, for a total of $75,000. The district intends to renew his contract at the end of June.
The most recent contract asks Bradley to work on finalizing leaseback deals with Harris. It also involves Bradley in the bond and state financial advising he is apparently no longer legally allowed to do.
Both Bradley and Keygent worked with Kings Canyon Unified to create its 2012 facilities master plan. Attempts to reach the district for copies of Bradley’s contracts were not successful.