Subpoena of West Contra Costa school district reveals scope of inquiry


SEC Subpoena Letter


By Theresa Harrington Contra Costa Times

"The fact that board members each appoint a member of the district's bond oversight committee takes away its independence...It's basically a conflict of interest when you have the people that you're overseeing appointing the overseers," Jungherr said"

RICHMOND -- The Securities and Exchange Commission appears to be undertaking a much broader probe of the West Contra Costa school district's controversial, $1.6 billion bond program than earlier thought, according to the subpoena released Tuesday in response to a public records request by this newspaper.

The subpoena and accompanying letter dated July 31 listed 20 separate requests for correspondence, financial documents, audits and audio and visual recordings with the Contra Costa County Treasurer, auditors, KNN Public Finance consultants, Piper Jaffray underwriters, SGI Construction Management, the state Board of Education and the Internal Revenue Service. The request included documents from the school board, citizen's bond oversight committee, district facilities subcommittee and others related to 11 bond sales between 2009 and 2013.

The SEC letter gave the district until Aug. 15 to comply or be subject to a fine and/or imprisonment.

News of the SEC inquiry broke in mid-August, but its scope and specifics have remained a mystery because neither the SEC nor the district will comment on specifics. The district would say Tuesday only that it is complying with the request.

"The district is still compiling information and delivering it on a rolling basis," district spokesman Marcus Walton said Tuesday. "Our attorneys are in communication with the SEC to ensure that we are complying with their wishes."

Since 1998, voters have approved six bonds worth $1.6 billion to finance the third largest school construction program in the state, behind San Diego and Los Angeles. The district has issued about $1 billion to finance an extensive school rebuilding program, with nearly $600 million remaining.

But growing opposition to the bond program, with watchdog groups calling for greater financial accountability, contributed to the failure of a seventh bond -- for $270 million -- in June.

Among others, the subpoena sought any and all documents relating to:

• the use of $1.6 mmillion of proceeds from Measure J, passed in 2005, to refund bonds sold pursuant to 2002 Measure D;

• $3.5 million transfer from bondd proceeds to the district's general fund in 2010-11 to offset legal costs;

• an approximately $7.3 million transfer of unspent funds ffrom Measures E and M to Measure J in 2010-11;

• $1.4 milllion transfer from the building fund to the bond interest and redemption fund for bond reserve accounts;

• $46.7 million "due from Meassure J" and "due to Measure D" listed in a 2011-12 bond audit;

• $316,867 from Measure J proceeds to pay IRS arbitrage rebate and late fees in 2010-11;

• $26,655 from Measure J bond proceeds ussed to pay Employers Advocate, Inc., in 2010-11;

• districct funds donated or transferred to, or for the benefit of, the Rosie the Riveter Park.

Board President Charles Ramsey said Tuesday that some of the transactions listed in the subpoena were approved by the district's finance staff, lawyers and even a Contra Costa County Superior Court judge. However, he said the $25,665 payment from Measure J bond proceeds used to pay Employers Advocate in 2010-11 may have been a mistake.

"It might have been an accounting adjustment error," he said. "Employers Advocate aren't involved in the bond sales at all. They make sure people are in compliance with the prevailing wage laws."

The donation for the benefit of Rosie the Riveter Park was related to the rehabilitation of the old Kaiser Maritime Center for Richmond College Prep charter school, located on county property leased by the Rosie the Riveter Trust, he said.

"That was our contribution," Ramsey said. "The city of Richmond paid $4.5 million and we contributed $1.5 million."

District resident and former bond oversight committee member Anton Jungherr said he was pleased that the SEC is investigating the district.

"Yes, I am encouraged by the SEC investigation. It's consistent with the letter I signed (asking for a third-party review of the district's bond program)," Jungherr said.

The fact that board members each appoint a member of the district's bond oversight committee takes away its independence, he said.

"It's basically a conflict of interest when you have the people that you're overseeing appointing the overseers," Jungherr said.

The SEC provided supplemental information to the district stating that it may share its files with other government agencies, particularly U.S. attorneys and state prosecutors. It has also subpoenaed Ramsey, members of the district's finance team, and some of its consultants and advisers.

Theresa Harrington covers education. Contact her at 925-945-4764 or Follow her at

The West Contra Costa school district's citizen's bond oversight committee will meet at 6 p.m. Wednesday in room 9 at Ohlone Elementary, 166 Pheasant in Hercules. More information is available by visiting Click on Citizens' Bond Oversight Committee.