East County’s largest school district inappropriately used at least $27,000 in bond money to pay a public relations firm to combat what it called a “barrage of misinformation” on its Alpine legal fight.
Reprinted with permission from Times of San Diego, a San Diego Online News Association member.
Photo: Scott Patterson (inset) is deputy superintendent of business for the Grossmont Union High School District.
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By Ken Stone
February 25, 2016 (San Diego's East County) - Documents obtained through a Public Records Act request and official statements confirm that Proposition U bond funds for Grossmont Union High School District projects were used to pay Apex Strategies, led by prominent local PR agent Tony Manolatos.
The case has drawn the interest of San Diego lawyer Cory Briggs, who filed a similar records request and says the district’s failure to reveal certain details may lead to a lawsuit by his client — San Diegans for Open Government.
“Secrecy is usually a really good indication that some illegal activity has taken place,” Briggs said. “So that would tend to confirm my client’s concern that money is being laundered by the district.”
Scott Patterson, Grossmont deputy superintendent of business services, told bond overseers Jan. 27 that “our lawyer — Orrick, Herrington — subcontracted” with Apex, “and what occurred was that [Apex] was inadvertently paid in its entirety out of bond funds.”
His comments, noting a $27,000 “transfer,” are heard in an audio tape obtained by Times of San Diego.
“We discovered that error and have since realigned that public-relations component … so the invoice will be paid against district funds,” Patterson said at the meeting.
A district spokeswoman said Tuesday that Apex no longer works for the district.
Manolatos, better known as the chief spokesman for Mayor Kevin Faulconer’s Citizens’ Stadium Advisory Group, said Wednesday that Orrick paid him on a month-to-month basis ending in late January and wasn’t aware that bond money was the source of his checks.
“We did the work for the client (Orrick),” he said in a phone interview, “educating residents in East County about the benefits of the bond and the issues that were surfacing at these schools” where the Alpine injunction was holding up projects.
Manolatos, who said “I’m not a political consultant — never have been,” indicated his deal with Orrick was a school district record, “so I’d let them deal with” requests for such documents.
Catherine Martin, Grossmont’s director of public affairs, said: “It was never the intent that bond funds be used to pay for their services. However, there was no line item identifying the Apex payments on the Orrick invoices, and they were initially inadvertently paid for with bond funds.”
Email exchange regarding Orrick subcontracting with Apex Strategies.
Patterson said the district took action in mid-December to rectify the payment error — about nine months after the school board voted in closed session to hire Apex at $6,000 a month.
(But in a mid-November email, school board member Priscilla Schreiber said: “I do not remember retaining these people as consultants for the amount and task that [Martin] has indicated. Still, I would not have voted for it.”)
Martin said Tuesday: “Our legal counsel (Orrick) initiated the appropriate request to retain a public relations firm to assist the district with the barrage of misinformation being put out in the public” regarding the lawsuit over a never-built Alpine high school.
She said the Grossmont school board discussed hiring Apex Strategies at a closed session April 16, 2015.
“During that meeting, Superintendent [Ralf] Swenson informed the board of counsel’s recommendation to retain a public relations firm. The board had previously appointed an ad hoc Alpine Lawsuit Subcommittee [trustees Robert Shield and Jim Kelly] to address the day-to-day issues related to the lawsuits. This subcommittee recommended that the board hire Apex Strategies.
“No board action was necessary as the firm would be hired directly by Orrick,” Martin said. “There was a board consensus that evening to retain Apex, with all five board members in agreement.”
Reacting to Martin’s statement, Schreiber on Wednesday said: “The name Apex Strategies never came up in closed session. I never knew anything about that firm until [Times of San Diego] shared that information with me.”
She added: “Please tell me what barrage of misinformation they had to counter with a hired gun? This should be interesting.”
The Citizens Bond Oversight Committee, chaired by Nancy Herbst, inquired about the Apex payments after a complaint was filed by Schreiber on Dec. 10 after a school board meeting where she raised the issue.
At the Jan. 27 CBOC meeting, Patterson said the school board never addressed the unlawful-payments issue. It was just resolved by district accountants.
Nick Marinovich of La Mesa, a former member of the Grossmont CBOC, has doubts about the “inadvertent” nature of the payments to Apex.
“We need the detailed internal approvals of that contract amendment,” he said Wednesday. “Grossmont seems like a very organized district with respect to internal controls and procedures, so I find it hard to believe they would miss this.”
Certain lawyer fees paid out of the Proposition U bond funds — about $2 million so far — are legal under the state Constitution. Otherwise, only specified building projects can use bond money.
Briggs has other problems with payments to Orrick.
The man once labeled “San Diego’s most disruptive lawyer” and “the aircraft-carrier-size thorn in the side of City Hall” says he wants to see the actual Orrick billings to ensure that no illegal activity took place “and, if there has been, to seek a remedy in court if the culprits refuse to reimburse the taxpayers without litigation.”
He even thinks school board members might be subject to criminal prosecution.
“It appears that there has been some illegal money laundering,” Briggs said, though noting that San Diegans for Open Government is not making any formal accusations.
He said the group’s request for public records, “if fully honored by the district, would help confirm or rule out” the laundering suspicions.
Although the district doesn’t dispute that inappropriate Apex funding took place, Grossmont officials are pushing back against hints that taxpayer money went to illegal electioneering.
The school board hired an Apex partner named John Hoy to help do a feasibility study on a bond re-authorization valued at $128 million — which would raise property taxes after another public vote.
But was Hoy, or Apex, involved in softening up potential voters with a hard sell against building an Alpine high school?
A Facebook page called Protect GUSHD Schools was created by Apex at a cost of $88.96, Martin says, but she stressed: “The bill was paid out of non-bond facility funds.”
Critics of the page, however, consider it an attempt to sway public opinion against advocates of an Alpine high school, who have sued to force the Grossmont district to set aside $42 million in bond money for campus construction. An April trial is planned.
District spokeswoman Martin said the “only activity related to a potential new bond authorized and paid for by district funds to this point has been a feasibility study with [the political strategy firm] Clifford Moss.”
Based on well-established case law and attorney general opinions, she said, “this is appropriate, allowable and is currently occurring up and down the state. It is also very clear to all that public funds may not be used for electioneering.”
She defended the district’s refusal to share the contents of Orrick invoices involving Apex as protected — eligible to be kept confidential — under the attorney-client privilege and “are thus exempt under the [California Public Records Act].”
Martin cited several legal cases to support her stance.
But Terry Francke, a leading expert on freedom of information, says the law is not settled.
“The question of whether a public agency’s legal billings are protected by the attorney-client privilege is now before the California Supreme Court,” said Francke, general counsel for Californians Aware.
Francke said via email that the state Supreme Court has held that the state Constitution’s prohibition on a government agency’s use of public funds to influence the outcome of an election depends on the “style, tenor and timing of the communication” — whether it’s a “campaign” message or a simple “informational” statement, for example.
“The use of public funds to purchase such items as bumper stickers, posters, advertising ‘floats,’ or television and radio ‘spots’ unquestionably constitutes improper campaign activity,” he said, “as does the dissemination, at public expense, of campaign literature prepared by private proponents or opponents of a ballot measure.”
On the other hand, Francke said, it is generally accepted that a public agency pursues a proper “informational” role when it simply gives a “fair presentation of the facts” in response to a citizen’s request for information or — when requested by a public or private organization — “it authorizes an agency employee to present the department’s view of a ballot proposal at a meeting of such organization.”
No Grossmont bond vote has yet been scheduled.
“Hiring a PR firm may not be outright illegal if what it’s paid to do is simply provide objective information on request,” Francke said, but “spending public funds for public relations specialists on any subject understandably raises taxpayers’ suspicions.”
Schreiber, a longtime dissenter on the board who favors building an Alpine high school, said: “As for electioneering, I wonder how the state board [of education] will view [GUHSD] activities to hire a PR firm to turn a whole district against one of its own communities and then give the vote to approve unification across a tainted voter block?”
Ten years ago, political consultant Larry Remer and former Southwestern College President Serafin Zasueta were sentenced to three years’ probation for using school funds in a political campaign.
Each was ordered to pay $2,945.24 in restitution as well as a $5,000 fine, according to a San Diego Union-Tribune report.
Asked if he were concerned that a Cory Briggs lawsuit would accuse him of wrongdoing, PR consultant Manolatos answered: “No.”
Rachel Laing, a spokeswoman for the San Diego County Taxpayers Association, said Tuesday: “Without time to thoroughly review all the circumstances of this particular situation, I’m afraid we can’t weigh in on whether funds were used and disclosed appropriately in this specific case.”
She instead shared policy papers the group has prepared on disclosure of bond fund spending.
Lawyers for Irvine-based Orrick, Herrington & Sutcliffe LLP didn’t respond to a request for comment.