Tuesday, February 16, 2010

Arizona Auditor General Investigation into Mohave Educational Service Center has familiar ring to it

If details provided in a 2004 Arizona Auditor General's report of the Mohave Educational Service Center (MESC) has a familiar ring to it, perhaps it's because one of the names associated with the ESC is also one of the original agency representatives of the Nevada-based Association of Educational Purchasing Agencies (AEPA).

Jim Migliorino was listed as the Executive Director for the MESC in its Articles of Incorporation dated March, 2004, which was the same year the Auditor General's investigatory report was released. The audit covered the period for July 1997 through June 2001. Migliorino was also involved in the AEPA when it was first formed in 2000.

The AEPA has come under recent fire after receiving public scrutiny from taxpayers and public officials in various states. Most recently, it was the subject of an audit conducted by the Indiana State Board of Accounts into the Wilson Education Center, a member of the AEPA. Larry Risk, former Executive Director of the WEC, was also a founding member of the AEPA and one of its original incorporaters. According to AEPA meeting reports, Risk and Migliorino worked together for many years starting ten years ago when the AEPA was formed as an unincorporated entity.

An excerpt from the Arizona investigative report reads, "Our investigation revealed that from July 1997 through June 2001, Mohave Educational Services Cooperative (MESC) consistently failed to follow procurement rules and did not provide an economic value for its members. In addition, MESC charges its members inequitably and conducts improper financial practices. We submitted our findings to the Attorney General’s Office in July 2003, and corrective legal action by the Attorney General against MESC is pending."

After the Arizona Attorney and Auditor Generals initiated the investigation into the business practices of the MESC, officials for the service center reportedly restructured the organization to comply with state laws and procurement rules.

Ironically, the Arizona investigation was launched about the same time the AEPA and WEC came under fire in Indiana for some its questionable business practices. One would think that a few lessons should have been learned along the way, but it appears that what didn't work in one state was eventually tried in another.

It's time for the house of cards to take a full tumble.

Friday, February 12, 2010

Where is Larry Risk? He was a no show at the audit exit conference. Does what happen in Vegas really stay in Vegas?

Larry Risk, former Executive Director of the Wilson Education Center, refused an invitation to participate in the exit conference last September to discuss the examination results with auditors even though he was at the front and center of this questionable operation since the beginning. Rather, he left Executive Director Phil Partenheimer and Treasurer Pam Clover to answer for the agency's numerous misdeeds.

As was pointed out in the audit report, Larry Risk was listed as one of the original incorporators (or should I say perpetrators) of the AEPA corporation while Pam Clover, Treasurer for WEC, currently holds the position of Secretary for the Corporation.

In fact, Risks's fingerprints can be traced back to the origins of the AEPA, when it was formed without any articles of incorporation. From what I could tell, the AEPA was nothing more than a paper company being run from the offices of the Wilson Education Center in Charlestown, Indiana when details of this no-bid scheme began to surface in 2004. It wasn't until after the issue of lawsuits was raised that they decided to incorporate.

Heck, not long ago the AEPA didn't have any liability insurance! In my opinion, that's what you'd call a high risk liability. This excerpt from previous board minutes gives us a look into the shaky foundation of an organization that was initiating multi-million dollar no-bid contracts around the country.

"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)

Apparently, President Obama's warning about staying away from Las Vegas fell on a deaf ears since the AEPA is scheduled to meet at Harrah's Casino in Las Vegas, Nevada on April 18, 2010. I'm sure they'll have plenty to discuss.

I wonder if Tremco will host another meal for the group as they have done during past meetings? I wonder if Tremco will give out tickets or door prizes? I wonder if Larry Risk will be there. I wonder if what happens in Vegas will stay in Vegas.

Wednesday, February 10, 2010

AEPA Bidding Specifications Limited Competition in Indiana According to SBOA Audit Report

Were the bids rigged? The SBOA will report. You decide.

Indiana law requires that competition be encouraged when government entities solicit bids for public works projects, but a recent State Board of Accounts (SBOA) audit report indicates that didn't happen at the Wilson Education Center (WEC) when it came to certain Association of Educational Purchasing Agency (AEPA) bid categories. Government agencies are also strictly prohibited from unduly limiting competition, but it reportedly didn't deter the AEPA or the WEC from shutting out the competition when it came to certain school roofing and floor covering contracts in the state of Indiana.

In fact, the WEC continued with the illegal bidding practices even after the Rossville School District was cited in a 2004 audit report for violating Indiana's public works statutes by initiating a roof contract via the WEC as was duly noted in an audit report that was released to the public today.

An excerpt from WEC board minutes, which was included in the audit report, made it clear that WEC board members were well aware that they were potentially breaking laws by continuing with the illegal scheme in December of 2004; however, they continued promoting the illegal bidding program despite the warnings.

"...Lengthy discussion ensued that included the status of the Rossville Schools audit, implications for the Wilson Education Center, and is there a possibility of lawsuits. Mr. Risk also distributed letters from corporations across the state that have used TREMCO and would like to have the bid awarded so that they may use them in the future. Following discussion a motion was made by Mr. Schroeder to approve the AEPA Bid Award for year five of the multi state buying consortia to Shaw Industries and Interface Flooring for Commercial Floor Covering, and Weatherproofing Technologies (Tremco) for Roofing Related Services; with a disclaimer stating the Wilson Education Center Governing Board recommends any corporation using this award, and any vendor used under this award go through the necessary steps to meet requirements of public works and prevailing wage law..."

In addition, the WEC could not provide information "that a process was in place which ensured the multi-state service agreement did not eliminate bidders that were qualified to provide products and service of their products within the State of Indiana except for the 'office/classroom supplies' bid category."

In other words, Indiana roofing businesses were screwed when it came to AEPA bids related to roofing products and services since a multi-state roofing contract was awarded to Tremco, an Ohio-based roofing manufacturer, for consecutive years since the AEPA originated it's multi-state program in 2000.

"Bidders for 'Roofing Related Services' and 'Commercial Floor Covering Systems' were required to be manufacturers by the AEPA specifications. Consequently, local or regional general contractors, roofing installers, and carpet installers in the State of Indiana would not be eligible to bid on public works projects based on the above requirement," read an excerpt from the lengthy SBOA report.

Were the AEPA bid specifications designed to eliminate competition? Who wrote the specs?

Bidders for roofing related services and commercial floor covering systems were required to meet AEPA specifications; otherwise, they would be ineligible to submit a bid. But who wrote the AEPA specifications since the educators who run the questionable AEPA organization are highly unqualified to understand the complicated process involved in writing bid specs for specialized industries. And why does the same Ohio-based roofing corporation continue to be the only company able to meet the roof bid specifications?

According to the audit report, Johns Mansville, a major roofing manufacturer, showed that they were eligible to bid on the AEPA multi-state roofing contract; however, their bid was rejected for consideration based on a bid specification requirement that an eligible bidder must serve all member states.

It would appear that this particular bid specification violates Indiana's Public purchasing law.

Indiana law requires that plans and specifications for public works projects "shall avoid specifications which might unduly limit competition..." The statutes also require public agencies to "encourage competition in satisfying the governmental body's needs."

The fact that Johns Mansville had not been approved for a general contractor's license in Arizona during the intitial bidding phase did not excuse the WEC or the AEPA from eliminating them from the competition in Indiana where the company was approved to conduct business. The audit report indicates that Indiana taxpayers could have saved a significant amount of money had Johns Manville been allowed to compete.

The AEPA multi-state roofing bid package also required a whopping minimum $50,000,000 million dollar bond in order to meet the bid specification, a standard that few companies would be eligible to meet; however, no bond was required for Commercial Floor Covering Systems or the various athletic services categories.

Why was the roofing bid singled out for an exorbitant bonding capacity while other bids were not required to have one? Was it a way to eliminate competition in favor of Tremco?

This particular bid requirement also appears to violate Indiana law.

Indiana Public Purchasing Law IC 5-22-16-5(c) states:

"If a bond or certified check is required as the evidence of financial responsibility, the amount of the bond or certified check may not be set at more than ten percent (10%) of the contract price. The bond, certified check, or other evidence of financial responsibility shall be made payble to the governmental body."

Based on the information provided by the SBOA, none of the school roof jobs would have required that a bond be posted in the amount of $50,000,000 million dollars. To do so would violate Indiana law and unfairly prevent many Indiana businesses from competing for AEPA school roof jobs. Why wouldn't anyone be suspicious of the motivation behind requiring such an outrageous bond to be posted?

Is it time for taxpayers to start interviewing anti-trust attorneys to possibly represent them in a class action lawsuit against multiple parties?

Next Up: How much did unfair bidding practices cost Indiana taxpayers? A Price Comparison between Tremco and Johns Manville

SBOA Audit of Wilson Education Center Reveals Shocking Results in AEPA No-Bid Scandal

The State Board of Accounts released the results of a lengthy investigation into questionable practices at the Wilson Education Center and its involvement with the Association of Educational Purchasing Agencies (AEPA).

Many problems with potential legal consequences surfaced during the investigation, and I will be analyzing the audit findings over the next few days.

There are over 47 pages of data to analyze, but it's much worse than we originally thought. After reading through the documentation, there is absolutely no doubt that taxpayers were correct in their initial analysis that the no-bid scheme was illegal and that it was costing taxpayers mega bucks.

Perhaps the most startling news was the fact that the Wilson Education Center illegally initiated AEPA bid contracts and conducted official business without a quorum, which would in effect render all decisions to be null and void.

Contracts and contract extensions that were approved without a quorum being present were as follows:

Carpeting, Copiers, Roofing, Furniture, On-Line Training, Portable and Modular Buildings, Sports and Health Catalogs, Technology Catalogs, Office Supplies, Classroom Supplies, Web-Based Auction Services, Administrative Software, Food, Transportation, Professional Development, Facility Management Systems, Custodial Supplies, Athletic Equipment, Artificial Surfaces, Tracks and Courts, and Hardwood & Synthetic Flooring.

You can read the entire audit report at this link.

There's no doubt that the public trust has been broken. In light of this report, an appropriate course of action for the General Assembly to take would be to eliminate Educational Service Centers. Schools could do much better by negotiating their own discounts or, as was suggested by various legislators, to purchase through the State of Indiana.

The dedicated auditors at the State Board of Accounts should be commended for the fine work they have accomplished on behalf of Indiana taxpayers. The undertaking was monumental, and I am personally grateful to everyone involved.

Stay tuned...much more to come.