Sorry tale of millions squandered

0 Comments | Oakland Tribune, Jun 26, 2007

THIS IS A sorry tale best told in chronological fashion, if for no other reason than it is very complicated, and it begins in the early 1990s when California's Department of Education gave millions of dollars in federal funds to some so-called "community groups," ostensibly to underwrite citizenship and English language classes for recent immigrants.

It didn't take long for departmental civil servants to conclude that much of the money was being, in effect, siphoned off by executives of the supposedly nonprofit groups for other purposes, such as their own salaries and expensive cars. And it didn't take long for those state employees to learn that the executives had a lot of political pull, especially with members of the Legislature's Latino Caucus and the state schools superintendent, Delaine Eastin.

Nevertheless, one department official who discovered the discrepancies, James Lindberg, persisted, and reported his findings to an assistant superintendent, Robert Cervantes, who joined with an auditor at the office of the state controller, J. Alan Cates, to blow the whistle on what was truly a massive fraud.

Eastin and controller Kathleen Connell should have thanked the trio profusely for their diligence and acted decisively to recover the misused millions of dollars. But they were unwilling to buck the politically connected heads of the organizations, and all three whistle-blowers were punished with demotions or letters of reprimand.

Republican legislators petitioned the Legislature's Democratic leadership to investigate but were rebuffed -- even though Democrats had been eager to investigate allegations against Republican Gov. Pete Wilson's administration and Republican Insurance Commissioner Chuck Quackenbush.

Cervantes filed a federal whistleblower lawsuit alleging that more than $23 million in federal funds was fraudulently obtained, that when he attempted to bring the program into compliance he was pressured by a top Eastin aide and the representative of a powerful Latino legislator to back off, and that when he refused, he was demoted.

Eventually, some "community group" leaders were prosecuted, the feds got a $3.3 million refund from the state, and both Cervantes and Cates received some compensation for their shabby treatment. Lindberg, who had been demoted, sued the department, Eastin and one of her underlings, Joan Polster, saying he suffered two heart attacks from stress.

In 2002, a Sacramento Superior Court jury awarded Lindberg $4.5 million for his demotion and specified that another $150,000 should be paid by Eastin personally, saying she "acted with malice" against the veteran state employee. The trial judge reduced the award to $4 million and voided Eastin's punitive damages.

The Department of Education won a new trial on appeal, but it lost again when a second jury upped the judgment against the department and Eastin to $7.6 million. This month, Sacramento Superior Court Judge Talmadge Jones denied the state's request for a third trial. The Department of Education, now headed by Jack O'Connell, says, however, that it will appeal again.

The Department of Education has spent millions of dollars to defend itself against the Lindberg suit, and The Associated Press reported that much of the money was shifted from funds designated for educational purposes.

So there we have it. Taxpayers' money was ripped off, and politicians were at least compliant, if not complicit. Those who tried to set things right were punished and the taxpayers were tapped again to compensate them. Finally, taxpayers' money meant to educate children is, instead, being spent to fight a whistleblower.

What's wrong with this picture? Everything.

Dan Walters (dwalters@sacbee.com) writes for the Sacramento Bee.