Fresno Unified under federal investigation for no-bid construction contract

The contract for constructing Fresno Unified’s Gaston Middle School is being investigated by federal officials.
The contract for constructing Fresno Unified’s Gaston Middle School is being investigated by federal officials.

The Fresno Unified School District is under a federal investigation over how it handled a $37 million contract to build a middle school.

The U.S. Attorney’s Office subpoenaed district officials this week in an investigation about the no-bid contract with Harris Construction to build Gaston Middle School.

Fresno Unified spokeswoman Amy Idsvoog said Friday the district needed to confer more with attorneys before elaborating on the investigation.

“We’re trying to understand what this means for us and for the district,” Idsvoog said. “We hope to be able to speak more on it next week.”

Lauren Horwood, U.S. Attorney’s Office spokeswoman for the Eastern District of California, said Friday she could not confirm or deny the investigation.

The contract in question has been disputed by Fresno contractor Stephen Davis, who alleged in court that Fresno Unified used the “leaseback” method to avoid the traditional competitive bid process and guarantee the multimillion-dollar project go to Harris Construction.

Leaseback agreements were designed to allow cash-strapped districts to build schools by going outside of the traditional bidding process and handpick consultants who will front the cost of a project and then be repaid by the district in increments.

But the 5th District Court of Appeal in Fresno ruled in June that Fresno Unified’s leaseback contract was not genuine because it was not used the way the law was intended. Fresno Unified had the money to pay for the project upfront and paid the project off as soon as it was completed.

The court’s opinion has resulted in calls for Fresno Unified Superintendent Michael Hanson and some trustees to resign, with critics alleging the Harris Construction project was a “sweetheart deal.”

The FBI and the Fresno County District Attorney’s Office have also become involved in the case.

The California Supreme Court this week denied Fresno Unified’s request to depublish the 5th District opinion. That means the 5th District opinion is currently considered the binding precedent, and could affect how school districts across California handle construction projects.

Kevin Carlin, attorney for Davis, said Friday he plans to take the case back to Fresno County Superior Court, where he is asking that Harris Construction return the $37 million to Fresno Unified.

Carlin has urged Fresno Unified to join him in that fight, wondering why the district would not want that money returned. But school district officials have said the current leaseback laws are conflicting and that the latest decision hurts districts and contractors all over the state.

Los Angeles Unified submitted a brief in support of the district, saying it, too, often uses leaseback contracts for projects.

Proposed state legislation aimed at protecting school construction contractors if their leaseback deals are voided by the courts died this week in the Legislature.

Mackenzie Mays: 559-441-6412, @MackenzieMays