P rivate Emails Show How "Pay to Play" Deals in Fresno Unified Began


by Mark Arax

06/27/16
      








As federal authorities continue to build a timeline in the lease-leaseback corruption case involving Fresno Unified, they are able to access thousands of district emails to trace the real-time actions of the main public and private players.

The stacks of offical documents subpoenaed by the feds include the back-and-forth emails of Supt. Michael Hanson, Ass’t Supt. Ruthie Quinto, former district administrators Samantha Bauer and Lisa Leblanc, Richard Spencer and Michael Spencer of Harris Construction and former Clovis Unified Supt. Terry Bradley, the “man in the middle” who became one of the chief architects of the lease-leaseback deals.

But it is the private, off-the-books emails of some of these same players that could prove even more enlightening—and incriminating. A handful of these private emails obtained by the Arax File reveal the origins of a “pay to play” scheme between Fresno Unified and Harris Construction dating back to the summer of 2010 and the launch of the Measure Q bond campaign.

Top administrators in Fresno Unified, using their private email accounts, developed a shared purpose with Terry Bradley and Richard Spencer and his son Michael as they worked together to get the $280 million bond measure passed by voters. These ties then became so close-knit that the school district and the builder struck a mutually-beneficial deal: the Spencers would donate tens of thousands of dollars to the Measure Q campaign, and Fresno Unified would change the way it awarded construction contracts—to the primary benefit of Harris Construction.

With his office located in the same Harris Construction building as the Spencers, Bradley played a key role in bringing the two parties together, the emails show. It was Bradley, also acting as a paid consultant to Fresno Unified, who helped persuade the district to convert to a lease-leaseback method of school building. In doing so, the district's long practice of competitive bidding gave way to a controversial—and ultimately abused— method in which a single favored contractor controlled the construction process from design to turnkey.

The private emails, covering a period between the summer and fall of 2010, spell out the earliest stages of the quid pro quo deal. In August 2010, Supt. Hanson and Ass’t Supt. Quinto teamed up with Bradley, the Spencers and Mayor Ashley Swearengin to lead the Measure Q campaign.

Persuading taxpayers to pass the bond was no easy challenge. The economy was mired in a deep recession, for one. The school district and its public and private partners—the so-called Citizens for Quality Neighborhood Schools— were trying to raise tens of thousands of dollars for yard signs and radio, TV and newspaper ads.

As the campaign kicked off, Richard Spencer and his subcontractors were playing hard to get, emails show. Early on, Spencer had committed $5,000 to the Measure Q effort, but weeks passed without a cash contribution from him or his family members. Inside Fresno Unified, Hanson, Quinto and Bauer became concerned about who would fund the campaign.

Hanson and his team stuck to the same routine. On Fridays, they would meet with Mayor Swearengin at the River Park law offices of Walter & Wilhelm, where Bauer’s husband, Paul, was a partner. Sitting around the firm’s conference table, they’d throw out names of potential campaign donors, mostly large construction companies and real estate developers.

In August 2010, according to sources, Quinto let committee members know that her family and the Spencers enjoyed a decades-long friendship rooted in a shared alma mater, San Joaquin Memorial. If need be, she would personally reach out to the Spencers for additional money.

On Aug. 11, 2010, emails show, Terry Bradley stepped forward to assume the role of a broker. For the first time, he informed a member of the Measure Q committee that the Spencers were holding back on campaign cash because they were unhappy with the way Fresno Unified awarded its construction contracts.

Whether Quinto or Hanson knew it at the time, Bradley was a man with divided loyalties. He was wearing—or was about to wear—three different hats: a paid consultant to Fresno Unified on Measure Q, an advisor to an education bond firm based in El Segundo called Keygent and a promoter of lease-leaseback contracts on behalf of Harris Construction.

This juggling feat, as it turned out, was not only impressive and highly lucrative but a flagrant conflict of interest that would land Bradley, six years later, in the crosshairs of the U.S. Securities and Exchange Commission.

In the Aug. 11, 2010 email, Bradley offered up the possibility that the Spencers would happily hand over more money to the Measure Q campaign if Fresno Unified would only agree to a more Harris-friendly method of awarding construction contracts.

“If FUSD would use construction delivery methods that Harris has emphasized for the past several years (construction manager with multiple primes and/or lease-leaseback), the contribution would have been much higher,” Bradley wrote.

“Contractors are reluctant to give large contributions to bond campaigns when projects are awarded on a design-bid-built delivery method with the project always going to the lowest bidder.” 

On Sept. 27, 2010, Bradley wrote an email to Fresno Unified’s Bauer that continued to play on this same theme. He expressed frustration over his inability to get the building industry to open up its pocketbooks to fund the Measure Q campaign. “I have many calls out but not getting many return calls. Tim Marsh from Harris (Construction) is calling some of their major subs and, like me, not getting much response.”

The next day, Bradley sent a follow-up email to Bauer with a none-too-sly suggestion: “Ruthie (Quinto) might want to start with Mike Spencer who does a lot of business development for both Harris and Spencer companies.”

That evening, Bauer wrote back to Bradley on her private email account. “Please note that Ruthie is making some headway with that angle… More on that soon.”

Indeed, Quinto and Mike Spencer, vice president of Harris Construction, had either met or talked on Sept. 28, 2010, the emails show. Their conversation seemed to chart a new and fateful course. Over the next several weeks, the Spencers and their subcontractors would pony up tens of thousands of dollars in campaign contributions for Measure Q; Fresno Unified would soon begin to tout the lease-leaseback method in its public presentations.

On Oct. 6, 2010, Mike Spencer wrote to Bauer to inform her that Measure Q campaign contributions were now rolling in. That the younger Spencer was comfortable enough to address Samantha Bauer as “Sam” was only one indication of the friendship he had developed with Bauer and, later on, with her colleague Leblanc. Spencer made sure to cc the email to Quinto, who was using her husband’s private email address to communicate on Measure Q fundraising activities.

“Sam, here are the donor cards from Wednesday. I apologize for the delay in getting these over to you,” Spencer wrote. “The stack represents about $14K. In addition, there were a number of people who mentioned that they were willing to make a contribution, but needed to check with the ‘boss’ or were willing to pursue contributions from others, e.g. unions, etc. So we’ve got some follow-up to do.

“On the attached, please proceed by invoicing and sending your thank you notes to them all. On a number of them, we’ll be sending thank you notes as well.”

Over the next two weeks, campaign records show, Richard Spencer gave $25,000 to the Measure Q effort.

If Quinto felt comfortable asking the Spencers for money, she was drawing on the goodwill of a longstanding relationship. The Measure Q campaign wasn’t the first time that Quinto and the Spencers had worked side by side on behalf of a cause. Quinto’s family and the Spencers shared a deep commitment to the local “right to life” movement that bands together so many San Joaquin Memorial alumni.  In 2006, Spencer had served as the chair and Quinto and her husband, Frank Hambalek, as “tee sponsors” of the annual “Pro-Life” golf tournament at Brighton Crest County Club.

In Nov. 2010, as Measure Q passed with 76 percent of the vote, Hanson, Quinto and Spencer celebrated a victory for the “schoolchildren of Fresno.” Seeing a big opportunity ahead, Spencer decided to turn the Measure Q formula into a model for school districts across the valley. Working closely with Terry Bradley, Spencer began to franchise the formula and press his subcontractors for donations to other bond campaigns.

In early Dec. 2010, four weeks after Measure Q passed, Spencer held a luncheon forum to boast about his success. The event, billed “Empowering Your District,” was hosted by Michael Spencer. The speakers that day included a formidable trio. Samantha Bauer was asked to detail how the school district ran the Measure Q campaign from “the inside.” Mary Beth de Goede, the attorney representing Fresno Unified, was asked to list the legal “dos and don’ts” of running the bond campaign. Mayor Swearengin was asked to discuss how the campaign was able to successfully link the community’s needs to the schools’ needs.

Soon after the event,Fresno Unified put into official place its controversial method of lease-leaseback. Over the next four years, without competitive bidding, Harris Construction would receive $117 million of the more than $200 million awarded by Fresno Unified, more than 50 cents of every dollar, locking out other qualified builders.

To steer construction jobs to Harris, Supt. Hanson and Asst. Supt. Quinto bent what few rules there are to lease-leaseback. The method was designed to give cash-strapped smaller districts a way to build classrooms. School districts lease land to a contractor for a nominal amount, say $1. The contractor then covers all the upfront costs to build a school. The district then “leases back” the new building from the contractor and pays down the project costs over several years, as funds roll in.

But Fresno Unified isn’t a small, cash-deprived district. It’s one of the largest school districts in the state awash in bond monies. Records show that Fresno Unified never leased back the buildings from Harris Construction. It paid for the projects outright.

In this way, lease-leaseback became a mechanism for Fresno Unified to avoid open and competitive bidding. It became a device for Hanson and Quinto and their top aides to steer the contracts to Harris Construction and a few select other builders in a series of back room deals.

In return, tens of thousands of dollars have gone from the pockets of Spencer and his family members into the campaign coffers of school board trustees Carol Mills, Janet Ryan, Valerie Davis, Cal Johnson and Christopher de la Cerda. This is the board majority that Hanson counts on to keep his $430,000-a-year job. The donations even included wine from Spencer’s Cru winery in Madera.

But the "pay to play" gifts went even further. Harris Construction purchased radio ads on KMJ praising the “fine job and good work” of Hanson. Harris Construction helped fund Supt. Hanson’s annual “State of Education” event and Fresno Unified’s annual rally known as “The Convocation.”Indeed, Hanson would come to count on Spencer’s largess as his own political slush fund.

It’s been more than year since the U.S. Attorney’s Office and the FBI in Fresno started gathering information on the “pay to play” dealings inside Fresno Unified. If federal authorities were looking for a break in the case, it came a few weeks ago when Terry Bradley—his conflicts of interest finally exposed—settled with the SEC, paying $50,000 in fines and agreeing to a sanction that now bars him from acting as a municipal advisor on bond deals.

Bradley’s continued exposure would seem only a matter of FBI pursuit. Do his conflict of interest forms filed with Fresno Unified show, for instance, any rent he was paying to Richard Spencer for his office inside Harris Construction? Do they show the fees Spencer was paying Bradley to operate on his behalf for each lease-leaseback deal? Did Bradley reveal his paid consultant role with Keygent? Little white lies in such disclosure forms can sometimes lead to wire fraud charges, as Operation Rezone showed years ago.

This is why the SEC case against Bradley has sent such shockwaves through the downtown offices of Fresno Unified. With the right push, Bradley, all by himself it would seem, could bring down the whole house of cards that is lease-leaseback in Fresno and Clovis Unified.

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Contact Mark Arax