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Seaside High School graduation, 2013


Like all California school districts involved in bond measures, the Monterey Peninsula school system has a citizens oversight committee. Oversight committees generally meet quarterly and confine their role to rubber-stamping whatever the district administration says about construction work financed by the latest bond issue.

But one project financed by the district’s $110 million Measure P of 2010, a new heating and air conditioning system for Seaside High School, proved to be so problematic that the committee made a special plea to the administration to be allowed to conduct a special study of the cost overruns and numerous other troubles.

Cost estimates had been exceeded and ultimately ignored. Administrative corners had been cut to speed up the project because students were shivering in unheated classrooms but everything was way behind schedule anyway.

Overseeing the project was Harris Construction of Fresno, which is now embroiled in a criminal investigation involving $117 million in school construction it performed in Fresno under a no-bid contract arrangement that has since been ruled illegal by an appellate court. It was a no-bid “lease-leaseback” bid contract arrangement much like its contract for the Seaside High work and several other contracts Harris was awarded by the Monterey Peninsula Unified School District.

Initially, the oversight committee’s request to investigate was ignored by then-Superintendent Marilyn Shepherd. But the committee persisted and, soon after she left the district, the school board authorized a special inquiry. The result was a special oversight committee report in March 2015, a remarkably pointed and candid report that found “utter disregard of contract provisions”and “blatantly obvious … lack of contract review.” (To view the report, click on this link, and when that opens, click on the “download now” button,)

The project was budgeted to cost $2.5 million but the price ran considerably higher because of general cost overruns and additional work that was not approved by the school board. Among other things, the contract that originally called for heating and air conditioning work morphed into one that included a new tennis court and repaving of outdoor basketball courts.

Rick Heuer, who chaired both the oversight committee and the subcommittee at the time, said it was impossible to determine the actual final cost to the district.

According to the report, “District staff did not inform the board of the project phasing, the increased scope of work, increased architect’s fees, increased cost estimates, scheduling or justification for the type of heating system selected. Design started in January of 2011. The board was kept in the dark about architect’s fees and phasing until August of 2013. Staff seems to consider this to be only a minor oversight.”


The report continues:

“Nowhere in the staff report was there any indication that the total value of the project would be. As a result no flags were raised regarding the potential overall cost of the project and its impact on the overall bond program and since no overall Bond Program Budget had been created there was no ability to assess the impact of what the total cost might be.

“It appears that little attention was paid to the accuracy of the contract documents. Besides the facts that not all provisions were enforced and contract amendments were not signed nor dated, the contract cover sheet was dated October 29, 2009, while the contract wasn’t executed until March 16, 2010 … .”

The report repeatedly complains that the school board was not kept up to speed on the work, the modifications or the increased costs.

“The inclusion of items totally unrelated to the heating system at Seaside High such as allowances for the tennis court, special education modernization and repaving of the basketball courts inflated the cost and were never reviewed in the context of the overall bond program. The title of the agenda item the board reviewed was ‘Discuss & Approve the Harris Construction Guaranteed Maximum Price for Seaside High School HVAC Upgrades, Paving and Various Related Projects.’ First, the items are not ‘related’ to HVAC upgrades. Second, the only place the costs of these add-ons are reviewed is in the contract itself.”

 Here’s the text of the Sept. 20, 2013, letter the MPUSD Citizens Bond Oversight Committee sent to the Board of Trustees requesting permission to investigate the cost overruns at Harris Construction’s Seaside High School project:

Dear Members of the Board:

At our last oversight committee meeting we were briefed on and briefly discussed the large cost overrun at Seaside High. Since that meeting we know that the board has been briefed on the overrun and it has been the subject of controversy. We continue to have questions about how it came to be, its impact on other bond projects and how we can ensure something such as this does not occur again. We would like your permission to do a full analysis of what occurred with this project, document for the public the entire process, make recommendations regarding any procedure changes which may improve the process and report back to you the results of our investigation. We feel this would allow for an objective review of this project and hopefully quell rumors and speculation.

Sincerely, Rich Heuer, Chairman

The report was available online, but never received outside attention. However, one of the committee members, Carole Dawson, says the situation has improved dramatically with Shepherd’s departure and the hiring of her successor, PK Diffenbaugh.

“The biggest improvement was getting a superintendent who is really good,” said Dawson, who now chairs the district’s bond oversight committee.

While Diffenbaugh has inherited some problematic contracts from the $110 million Measure P bond, he has improved oversight of the various processes and created an effective facilities advisory committee, said Dawson and others.


Ironically, Diffenbaugh was hired in 2014 as the result of an executive search headed by Terry Bradley, the former Clovis school superintendent who was largely responsible for hiring Harris Construction and the Fresno architectural firm, the Teter Partnerships, that were responsible for the cost overruns on the Seaside High project. Bradley maintained his office at Harris Construction and also was a partner for a solar company that did considerable work for Monterey Unified, but it isn’t known whether he disclosed his various roles.


Carole Dawson

Bradley was recently fined $50,000  by the U.S. Securities and Exchange Commission for leaking confidential information from five school district clients to a bond firm, Keygent Advisors. Though Monterey Peninsula Unified School District was not one of the five districts, Keygent did serve as the lead financial adviser for Measure P and Bradley worked from January 2011 to January 2016 as a general financial adviser for MPUSD.

(While working on the superintendent search for the district, Bradley visited the Monterey Herald, ostensibly to question editors about the type of superintendent they would like. He spent most of the time, however, pitching the idea of a new bond measure to improve conditions at Marina High School, which he said was one of the worst school facilities he had ever seen.)

The special oversight subcommittee produced a remarkably comprehensive report on the Seaside H.S. with numerous suggestions for improving the district’s overall performance on renovation work. The committee itself was also remarkable, consisting of three people with particularly strong credentials.

Dawson is a retired civil engineer who worked in the public works departments for the cities of Monterey and Seaside, serving as project manager for several infrastructure improvements. She has been president of the California Society of Professional Engineers and has been highly active in neighborhood issues for the city of Monterey.  She has degrees in philosophy from the University of California Santa Barbara and in civil engineering from California State University Sacramento.

Heuer is a hotel consultant in Monterey and an active member of the Monterey Taxpayers Association. He has served on the Monterey planning and architectural review commissions. He holds degrees from the Monterey Institute of International Studies and the Fisher Graduate School of International Business.


Alastair Rodd

Committee member Alastair Rodd of Marina works as an international education consultant, primarily in Third World countries on projects involving education reform, decentralization and education financing. He holds bachelors degrees in economics and economic and social history from Bristol University and a masters in economics and African studies from Johns Hopkins University. He also has taken advanced studies in accounting.

School districts promoting bond issues invariably put heavy emphasis on the existence of a citizens oversight committee, creating the impression that a group independent of the district will be monitoring or even directing key decisions involving use of the bond money. In fact, such committees are generally relegated to simply certifying that the spending is legal. Heuer, who also has served on a bond oversight committee at Monterey Peninsula College, calls them “toothless.”

“If they spent $100,000 on a toilet, we couldn’t do anything about it,” Dawson said. Usually, such committees meet four times a year and are presented with little more than a list of spending in the previous quarter and a rubber stamp.


For the Seaside High project, however, the committee saw quickly that much more scrutiny was needed.

Dawson said the district staff early on informed the school board that the $2 million effort was going to cost at least $4 million, “but the explanation was just seven sentences. No detail.”

She recalled that the fees for Teter, the Fresno-based architect, “just kept going up and up, and they say, ‘Oops,’ it’s $400,000 instead of $250,000’ and ‘Oops, the project is $4 million instead of $2.5 million’ and ‘Oops, this urgency project, this the-kids-don’t-have-any-heat urgency project is going to take four years.’”

The report, authored by Dawson, said, “There seems to be a blatant disregard for completing this ‘urgent’ project in a timely manner. There was no time schedule for this project. The Board approved the Master Contract with Teter on October 5, 2009. The contract with Teter was not executed until nearly five and a half months later. Design did not begin until ten and a half months after that. Therefore, from Board approval to start of design was one year and four months. Then, design (for all three phases) took another two years to complete. Construction took eight months to complete. For this ‘urgent’ project, the total time from Board approval to construction completion for three phases was four years.”

Dawson said she was relieved when Shepherd left the district, following significant controversy, but disappointed that she had not authorized a special inquiry before she left.


She said the committee hung back on the issue for a time but was motivated to move ahead when Monterey Herald reporter Claudia Melendez Salinas wrote about the delays and cost overrun in January 2014. While the school board was going through the process that would lead to Diffenbaugh’s hiring, the committee sent a follow-up letter to the interim superintendent. He obtained board approval and the special committee inquiry began in April 2014.

Dawson said she was not surprised when she saw news accounts about Harris’ legal troubles in Fresno and Bradley’s SEC problems.

“We always suspected it could be something like this,” she said.

Harris installed air conditioning and heating systems at the district offices and in several schools under the lease-leaseback system, which the courts have now ruled to be an illegal device intended to circumvent the competitive bidding process.

In Fresno, where an FBI investigation appears to be in full swing, the school district hired Harris Construction to build a new middle school. It then leased the property to  Harris, putting the company instead of the district in charge of the project and enabling it to hire and manage subcontractors however it chose. Fresno blogger Mark Arax reported that Bradley, on behalf of the Fresno district, essentially promised construction contracts to Harris Construction in exchange for help financing the bond measure election campaign, which could amount to the type of quid pro quo that leads to bribery charges. Harris and several other firms involved in both the Fresno and Monterey bond measures also contributed to the Measure P campaign.

In Monterey and elsewhere, the lease-leaseback process was altered because schools were being renovated rather than built yet the properties were still technically leased to the contractor and various steps in the normal bidding process were eliminated.

An appeals court in Fresno ruled the practice illegal and the state Supreme Court let that opinion stand. The lawsuit that resulted in those rulings continues and, unfortunately for the Fresno district, the contract it signed with Harris requires the district to pay Harris’ legal fees in addition to its own. At least some of the Harris contracts with MPUSD contain the same provision.


Hand holding out a stack of money tied to the end of a stick for briberyCAST OF CHARACTERS HERE PERFECTED ‘PAY TO PLAY’ SCHEME IN FRESNO



For more than a year, the FBI and federal prosecutors have been conducting a criminal investigation of the construction contracting process used by the Fresno Unified School District – and it turns out several of the key players in the Fresno scandal have been involved in a remarkably similar series of transactions at the Monterey Peninsula Unified School District.

In both districts, the construction contracts were financed by huge bond measures approved by district voters in November 2010. In both districts, much of the construction work was awarded to Harris Construction of Fresno, much of the architecture work went to the Teter Partnerships of Fresno and the financial adviser overseeing both bond measures was Keygent Advisors.

Each set of bonds was underwritten by a team of bond firms. In Monterey, they were Piper Jaffray and Stone & Youngberg. In Fresno, it was Piper Jaffray and Stifel, which acquired Stone & Youngberg the next year.

And in both cities, the various entities were linked through one man, Terry Bradley, the former superintendent of the Clovis Unified School District, who agreed last month to pay a Securities & Exchange Commission fine of $50,000 for providing Keygent Advisors with confidential information that enabled the company to obtain bond work with five school districts while he was a paid consultant to Keygent.

Though the Monterey and Fresno bond issues — for $110 million and $280 million respectively — were among the largest that involved Bradley and Keygent, they were not among the districts involved in the conflict-of-interest scheme uncovered by the SEC. Those districts were in the San Joaquin Valley communities of Clovis, Caruthers, Dinuba, Reedley and Sanger, each of which was using Bradley as a financial adviser. (See the previous Partisan article on SEC case.)

Newly surfaced emails subpoenaed by the FBI suggest that while Bradley was helping administer the proceeds of Monterey’s Measure P by helping the coastal district select architects and contractors, he also was the mastermind behind a creative contracting process in Fresno designed to guarantee large construction contracts with Fresno firms that agreed to help finance successful bond measures. The biggest beneficiary of that scheme, focus of the FBI inquiry, was Harris Construction, where Bradley maintains his office.


Terry Bradley, wearer of many hats

Critics of school bonding practices in California have long complained that it has become a “pay-to-play” system: Companies that cough up money for bond campaigns have a distinct advantage when it comes time to divvy up the bond consulting and contracting work. But according to numerous news reports in Fresno, it appears that Bradley took the system a step forward and created a way to guarantee that big campaign spenders would get their reward in the form of construction contracts. Apparently as reward for contributing to the Fresno bond campaign, Harris was given a contract to build a middle school without having to go through a competitive bidding process. Instead, the district used a “lease-leaseback” method, involving secret negotiations with Harris, in a process that an appellate court later ruled to be illegal.

At the Monterey Peninsula Unified School District, or MPUSD, the 2010 bond measure financed considerable renovation work, not new schools, but the district used the same non-competitive, “lease-leaseback” structure to award several renovation contracts to Harris, some of which were worth more than $1 million.

On its Facebook page in 2011, Harris Construction congratulated MPUSD for its facilities upgrade project and said it was “proud to be part of the Lease-Lease Back team implementing the plan ….”

Based on the number of commonalities, including the timing, it seems likely that the Monterey school district’s Measure P of 2010 and Fresno Unified’s Measure Q may have been sold to bonding and construction companies as a package deal. Harris and the Piper Jaffray bond firm contributed to both bond campaigns, for instance. Keygent contributed to both the Monterey and Fresno bond measures.

Although they sound complicated, school bond measures really aren’t that difficult to understand. In most cases, districts wanting to build or renovate schools ask voters to allow the district to borrow money. Rather than simply go to a bank to borrow cash, the districts hire various bond specialists who invite investors to buy the bonds or, in other words, to lend money to the districts at a pre-determined interest rate.

With California schools borrowing billions of dollars annually, a cottage industry has grown up around the state’s education system – a self-perpetuating, self-dealing cottage industry. Bonds can’t be issued without the approval of district voters, so the districts set up quasi-independent committees to run campaigns to persuade the voters to say yes. Those campaigns are largely financed by the various bond specialists who hope to obtain contracts to handle the technical aspects after the successful elections.

In the case of MPUSD’s Measure P, the committee was headed by Sharon Albert, wife of Dan Albert Jr., who retires this week as MPUSD’s associate superintendent for business and finance. Only three bond firms contributed to the campaign and each received a piece of the action. Those were Stone & Youngberg and Piper Jaffray, which each gave $20,000, and Keygent, which gave $10,000. In other words, the decision on who would handle the bonds was essentially made when the bond companies wrote their checks out to the Measure P campaign. Presumably Keygent didn’t need to contribute as much because it had already been hired as the district’s bond overseer.

The San Francisco law firm of Stradling Yocca Carlson & Rauth contributed $3,000 and was later hired as bond counsel for Measure P.


Measure P-financed construction work at Seaside High School

Fresno’s Harris Construction contributed $2,500 to the Measure P effort. The Teter architecture partnership in Fresno, closely affiliated with Harris, contributed $10,000 to the Measure P campaign before the November vote and $5,000 more two months after voters enthusiastically approved the measure. Like Harris, Teter received several significant contracts for projects financed from the Measure P proceeds.

Which bond firms get the work matters because lack of competition enables them to charge higher fees and could take away incentives to shop for the lowest interest rate for the district. With such a large amount of money being financed over a long period, even tiny variations in interest rates can cost or save a school district considerable sums. In the case of Measure P, MPUSD officials have said it is costing the owner of a $500,000 property about $150 annually.

The best reporting on the Fresno investigation has been by author Mark Arax, a former Los Angeles Times reporter who now produces a blog, the Arax File. In a post this week, he wrote of a series of emails dating to 2010 in which Bradley apparently hatched his plan to attract bond campaign money by promising construction contracts for contributors.

Arax referred to Bradley as “the man in the middle,” a role he played in Monterey as well as Fresno.

In Fresno, Arax wrote, “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.”

Key to making it all work was getting the Fresno bond measure passed. To do so, the district turned to Bradley, Fresno Mayor Ashley Swearengin and Harris Construction, headed by Richard Spencer, one of Fresno’s most active builders and most generous campaign contributors.

“Persuading taxpayers to pass the bond was no easy challenge,” Arax wrote. “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 ….

“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.


Marshall Elementary School receiving part of its Measure P facelift

“Whether (district officials) 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 adviser 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.”

Arax wrote that Bradley suggested that Harris would hand over more money for the bond campaign if the district would 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 in one email. “’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.’”

Additional discussions transpired and, with the bond measure election rapidly approaching, “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,” Arax wrote.

Over the next two weeks, campaign records show, Richard Spencer gave $25,000 to the Measure Q effort. Over the next four years, without competitive bidding, Harris Construction would receive $117 million of the more than $280 spent by Fresno Unified.




A school management consultant and a bond firm that have done considerable work for the Monterey Peninsula school system have been implicated in a conflict-of-interest scheme uncovered by the U.S. Securities and Exchange Commission, but the head business official for the Peninsula district, Dan Albert Jr., says their work for the local system played no role in the federal investigation.

Terry Bradley agreed this week to pay a $50,000 fine for improperly steering work to Keygent Advisors, which was the financial adviser to the Monterey Peninsula Unified School District when it began issuing $110 million in school renovation bonds in 2010.

The Securities and Exchange Commission said Bradley of School Business Consulting Inc., became a paid member of the Keygent advisory board in 2010, shortly before MPUSD hired Keygent as financial adviser on the bond known as Measure P. The SEC complaint against Bradley, formerly the superintendent of schools in Clovis, says he improperly leaked information to Keygent to help the company obtain bond consulting contracts with five school districts, but the complaint does not identify the districts.

Albert said Wednesday that MPUSD’s hiring of Keygent predated its hiring of Bradley. District records indicate that Keygent was first hired in 2008 to perform work related to health insurance and that Keygent was already serving as the Measure P financial adviser when Bradley was hired as general financial adviser in 2011. Albert said the district terminated Keygent’s services in January after the company notified the district of the investigation.

Bradley, 72, retired in 2009 from Clovis Unified School District, which is well known for its expansive and expensive campuses. Despite an annual pension of $198,000, he moved quickly into the private realm, capitalizing on a multitude of contacts throughout the educational establishment to become a consultant throughout California.

For MPUSD, Bradley principally consulted on bond matters, accounting methods, the hiring of architects and, two years ago, the hiring of a new superintendent. As a financial adviser, working closely with Albert and Keygent, he was paid $2,000 a month. At the same time, he was being paid $2,500 a month by Keygent, according to the SEC. He was paid $24,000 for the superintendent search.

In 2010, when voters overwhelmingly approved Measure P, the local district was thin in the area of financial and construction management. The superintendent at the time was Marilyn Shepherd, who knew Bradley from her days as a school administrator in Madera and Fresno counties, and the assistant superintendent for district operations was Albert, whose experience was mostly campus-based. He had previously been principal at Monterey High School.  (Albert is scheduled to retire at the end of this month.) The district’s business manager and fiscal affairs managers also were relatively new.

Keygent is a large bonding company with offices in El Segundo.  It works solely on bonds issued by California school districts and community colleges. One of two underwriters of the initial Measure P offerings, Piper Jaffray, was also based in El Segundo. The SEC documents released this week say Keygent was fined $100,000 and censured and its principals were fined  $50,000 because of the conflict involving Bradley.

Albert said it was Shepherd who brought Bradley on board in Monterey. In Clovis and elsewhere, Bradley also had worked closely with the law firm representing MPUSD, Lozano Smith.

In documents related to the case, the SEC says Bradley solicited many of his clients on behalf of Keygent after joining the bond firm’s board. He told school officials about his relationship with Keygent and did not participate in the formal interview process of bond advisers but “improperly provided Keygent with confidential information about the hiring process, including advance notice of the draft interview questions, the specifics of some competitors’ proposals, and other information. “According to the SEC:


  • Bradley gave Keygent officials advance copies of draft interview questions on several occasions, and Keygent also provided input in the initial drafting of the questions on one occasion so they were aware going into the interview what could be asked;
  • For one school district, Bradley gave Keygent a draft of the district’s RFQ document and then incorporated a change to the document suggested by Keygent which was designed to require a known competitor to disclose in its proposal potentially negative information concerning a past legal issue;
  • For two of these school districts, after they received the proposals from the municipal adviser candidates, including Keygent, Bradley shared information about competitors’ proposals with Keygent, including, in one instance, a chart with all of the other candidates’ fee proposals and, in another instance, a copy of the entire proposal submitted by one of the candidates;
  • Bradley discussed with Keygent how to answer certain interview questions and suggested topics they could discuss at the interview to preempt other candidates’ proposals.

Albert said his recollection was that Bradley was not involved in MPUSD’s hiring of Keygent because the district went through a formal request for qualifications process. The SEC said that in several cases, Bradley helped districts prepare the requests for qualifcations that led to contracts with Keygent.

In addition to being fined, Bradley is barred from any involvement with bond or securities dealer and from working for or with any financial underwriter or investment company. He told the Partisan via email that he could not have any contact with the media but would make his attorney available.