I spent a few hours reading through Meeting Minutes for the Association of Educational Purchasing Agencies and am still trying to digest much of what I've read. One thing is for certain; however, and that is, there are serious questions as to the nature of this organization and the legality of some of their activities. I am currently working on writing a detailed report of my findings, which I will release to various investigative agencies around the country. In the meantime, I'll share a few possible headlines, along with a few details to give you an idea of what's coming.
AEPA Member Admits "Bids" Have the Potential to be Illegal
"John Jankowski said that when NJPA bids on behalf of 30 or more states, the bid has the potential to be illegal because of different terms and conditions required in each state. Mike Hajek said they had never said it was legal. John Jankowski said that AEPA needs to be certain all activities associated with AEPA are legal so that AEPA is not damaged in the future." (Ma7 9, 2004)
Maybe a better headline for this should read, "AEPA Should Have Listened to John Jankowski"
You Scratch My Back and I'll Scratch Yours
Most of the records reflect that Tremco personnel played a key role at the bi-annual AEPA meetings. During the May 9, 2004 meeting, Craig Nelson of Tremco/Weatherproofing Technologies, Inc. issued a report on the vendors' meeting regarding marketing. One of the ideas presented by Nelson was to "involve vendors in adding new states" to the AEPA membership. Did anyone besides me see the conflict-of-interest that would present itself with the implementation of this idea?
The concept of co-branding was also discussed. I have one of those co-branded brochures marketing the roofing program. Tremco and the Wilson Education Center are jointly visible on the flyer that was apparently distributed to potential member school customers in Indiana. This doesn't pass the smell test either.
"The concept of co-branding was discussed at length, where members would market their logo in tandem with AEPA. This would allow vendors to provide a single AEPA brochure that would be recognized by all procuring bodies." (May 9, 2004)
AEPA Admits Possibility of 'Bid Law Problems' as Early as 2004
"Liz Storey made a report on roofing, incidicating that there had been $29 million in roofing sales. She reported a survey of the states showed extreme satisfaction with the vendor and the volume of sales. Problems included the lead-time required for roofing sales, and in some states, bid law problems. Craig Nelson of Weatherproofing Technologies said they were using good marketing efforts and had a growing momentum. The committee recommended bidding roofing again this year..."
"Craig Nelson from [Tremco] Weatherproofing Technologies, Inc. (WTI), stated he would like to see the minimum quality sought in the rebid of roofing be the same as in the previous solicitation. He also stated he expected WTI's volume to increase from $35 million to $50 million." (May 9, 2004)
Hey Craig, I have a question for you. What do you mean by "minimum quality?" Would your competitors consider your definition of "minimum quality" to be proprietary, which would effectively lock Tremco's competition out?
Of course the ESC's were satisfied with Tremco as its roofing vendor. They were raking in huge profits in the form of "administration fees!" More details to come on that later. I'll be checking with each state to find out which ones experienced bid law problems and how it was addressed by Tremco and the gang.
Conflict-of-Interest Question Raised in bidding process by Kyocera National & Government Accountant
From the December 28, 2003 report: "An email from Philip Borchardt, National and Government Accounts for Kyocera, a letter from Kevin Flood, V.P. of National/Government Accounts and a response from Max Luft were reviewed. One item that needs to be addressed was the statement from Flood, stating, 'we have...been told, that the only surviving bidder was in fact a Co-op Member of AEPA, which was bidding on behalf of a manufacture (sic). If this fact is true, it poses, in our opinion, a 'Conflict of Interest' in the bidding process." (December 28, 2003)
Mr. Flood, you are spot on. In my opinion, there are many conflicts-of-interests abounding at the AEPA, and the organization should be dissolved.
"AEPA has no legal status or liability insurance"
This is a big one, folks! Apparently, there was a discussion about forming a strategic alliance between the AEPA and the AESA; however, lawyers for the AESA recommended against it.
"This Agreement was sent to AESA whose lawyers reviewed it. The AESA council recommended against AESA entering into the agreement because AEPA has no legal status or liability insurance, and any legal action against AESA might include anyone with a relationship, hence AESA." (December 28, 2003)
No legal status?!! No liability insurance?!! This is the organization that hatched the bidding scheme that has been deemed illegal in Indiana by the Attorney General. Does this mean that individual members are legally liable for the decisions they made prior to their recent incorporation? Those AESA attorneys were sure on the ball! They deserve a little bonus for that piece of golden advice.
Lack of Oversight Raises Concerns
A Summary of Use report was presented during a meeting in 2003, wherein it was reported that a total volume reported by the members for the nine month period was $58,842,500.
"The greatest volume was reocrded by Weatherproofing Technologies (Tremco) with $21,464,000 for the period through September 30...There was a concern that there were no comparative volume and participation from vendor records." (December 28, 2003).
AEPA Financial Concerns Raised in 2005
"Max Luft, chair reported Cooperative Educational Services of Albuquerque, New Mexico, is serving as fiscal agent. Records indicate a balance of $4,700 down from $7,240 last year. The decrease is due to high costs for the Las Vegas meeting which included an event Tuesday evening, without increasing registration costs."
AEPA Admits to 'Varying standards' in approving Vendor Contracts
This is another big admission by the AEPA. This shows that the entire 'bid' process was illegitimate. The fact that a handful of self-serving educrats from around this country perpetrated an illegal bidding scheme of such an enormous magnitude is almost hard to comprehend. Here it is from their January 20, 2006 report:
"A general concern was expressed that a report of vendor dollars be gathered prior to the spring meeting. General comments included those made by Elmo Kallner of Ohio that surveying each member in the use of each contract is essential, and that those summaries need to be made by each committee chair. Liz Storey indicated that there appears to be varying standards in approving and extending the vendors and that a consistent assessment protocol needs to be established..." (1/20/2006)
It's a little late to be thinking about protocol and standards, don't you think, Liz?!! According to this, there was absolutely no oversight, and the so-called bidding process was a sham to begin with! The timing of this new revelation is also revealing. Was this issue raised because of the controversy that erupted in Indiana? Did this same controversey also cause AEPA officials to recently incorporate its organization to limit individual liability? I think that will only protect the officers from decisions made after the incorporation.
A Question for Law Enforcement Agencies: 'Administrative Fees' or Kickbacks?
This is another whopper, folks! This is where it gets sticky for the ESC's. The issue of "Establishing a common vendor fee" was raised at the May 2, 2008 AEPA Meeting. This vendor fee has also been referred to as an "administrative fee." But is it really something else?
The trouble with this is, at least in Indiana, there is nothing to administrate for the ESC's since Tremco handles all its own sales-related work, and the individual school corporations maintain the records. I know this, because after four years of research, I've learned how the scheme operates.
When I first began requesting bidding documents and related materials from the Wilson Education Center, I was informed by former director Larry Risk that the WEC does not maintain any of the records related to the roofing "bid." And yet, there is a full admission in other records that it not only receives "money back" from Indiana Tremco roof sales, but it also gives "money back" to the various ESC's in which district various roof projects are sold. This does not constitute administration.
Furthermore, this is a huge amount of money "given back" for doing almost nothing to earn it. Tax dollars are tight. This money could be spent for real education. Just imagine how many teachers could be hired using the "give back" money!
In fact, Larry Risk admitted as much in his deposition that he was compelled to give in the matter of Brennen Baker vs. Tremco. Here's a little tidbit from that:
Q. Okay. Okay. After the -- the bid is the -- the Tremco bid is reviewed and accepted by your organization, is there any oversight that Wilson has over the --the - to-be-installed roof?
Diana's note: There you have it, folks! Not one bit of oversight from the state agency that claims to be qualified to sell roofing materials and services. This is why this entire scheme must be investigated by state and federal agencies.
He also admitted in that deposition the he had "no expertise in roofing at all." Well, that's obvious!
Here's the details of the discussion from the May 2, 2008 report:
"There was agreement that the decision needs to be reviewed at the next meeting, prior to the next bid. Some concerns to be considered include:
Ohio: Vendors need to figure a way to do this, it is a bid requirement
Minnesota: What you do with increased administrative fee is to reinvest
Indiana: Our agency keeps 1.2% and gives 1% to other ESA's
New Mexico: It is difficult for smaller vendors to keep different rates for each agency
Nebraska What is most beneficial to the vendors is probably a uniform percentage
Asked if any agencies could not go with a 2% administrative fee, Arizona and Indiana said no. Pennsylvania could only make that adjustment with board approval.
A subcommittee was appointed with the task of providing a report at the next meeting. The subcommittee consists of Llew Perry from New Mexico, Katrina Burnett from Michigan, Larry Risk from Indiana and Elmo Kallner from Ohio."
The next meeting is scheduled for April 19 thru April 21, 2009 at the Embassy Suites Miami International Airport Miami, Florida.
You can read the agenda here: Agenda
More Financial Concerns
"Max Luft, Chair, reported that Cooperative Educational Services (CES) in Albuquerque, New Mexico is serving as AEPA fiscal agent. Records show (#41) a balance of $22,453.82, up from $6,999.84 last year. The increase is due to lower costs and higher vendor contributions for the Albuquerque meeting."
Vendor contributions?!! Really?! Isn't that interesting?
What amazes me the most, perhaps, is that a poorly run organization with a shoestring budget, no legal status, and no liability insurance could reek so much havoc on taxpayers throughout this nation!
The first meeting report reveals the fact that they had no money at all, and now it appears as though vendors are coming to the rescue. Report after report also reveals the fact that Tremco hosts many of the meals and receptions for the AEPA meetings, which raises additional questions of conflicts-of-interest.
Tremco Given AEPA Approval to Provide Full Envelope Maintenance Services
"The Roofing Committee from the previous meeting of the unincorporated AEPA presented the request from WTI/Tremco to add additional items to their line items. A written request to include full envelope maintenance had been provided to the committee by WTI/Tremco."
What is a line item you ask? According to AEPA minutes, the price for a line item for a particular product provided by a vendor can be be changed and additional items can be added. A catalog item could not be changed. The bottom line for taxpayers is that line-item pricing was arbitrary. As we've read from previous minutes, there were absolutely no control measures to determine whether or not taxpayers were being gouged. This is the anti-thesis of what the AEPA and ESC's were designed for!
Secret Meeting Held Despite Warnings from Some Member States
According to the Revised Meeting Report dated July 30, 2007, a secret meeting took place regarding AEPA structure discussions.
"A motion was made and seconded to go into Executive Session to discuss the structure of AEPA. A roll call vote, as follows, indicated the motion passsed.
For: Connecticut, Kentucky, Minnesota, Nebraska, Texas, Virginia
Against: Iowa, Indiana, Missouri, New Mexico, North Dakota, Ohio, Oregon, Washington
Abstain: Colorado, Kansas, Michigan
Because the Executive Session was not to discuss personnel issues, potential litigation or other issues permitted by their state government the following members withdrew from the meeting and did not participate in the Executive Session: Iowa, Missouri, New Mexico, North Dakota, Ohio, Oregon, and Washington." [April 24, 2007]
My first question is why did Indiana participate in the secret meeting after voting against the secret session? It is a violation of Indiana law to discuss this type of business in secret. This item proves that the AEPA is a shady organization that begs for a full and complete investigation by the federal government. Indiana must sever ties with this organization immediately! Other states should also be concerned.
There's much more to report, but this should give readers and investigators enough of an idea that there's trouble in AEPA paradise. I hope this helps. I'll send the full-report upon completion. I have a few phone calls to make and interviews to conduct.