Three former executives of TurnKey Schools of America, a construction firm that manufactured and installed prefabricated school buildings across the state, have pleaded no contest to charges of siphoning millions in construction funds from a Santa Barbara County school district.
Four years ago, a grand jury indicted TurnKey CEO Harold Lee Clark III, Chief Operating Officer Michael P. Bannan, Vice President David A. Irwin and Cynthia Clark, the school district's former assistant superintendent for business services, on 74 felony counts, contending that they misappropriated $3.6 million from the Santa Maria-Bonita School District.
Last week, Harold Clark pleaded no contest to five counts of diverting construction funds as part of a plea agreement with the state attorney general's office. Bannan pleaded no contest to three counts, and Irwin pleaded to one count of the same charge. Harold Clark could receive a maximum of four years in state prison. Bannan and Irwin face up to one year in a Santa Barbara County jail.
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According to grand jury testimony, TurnKey executives diverted the school district’s money to lease expensive cars, throw parties, buy artwork and pay themselves exorbitant cash bonuses. When the company began to run short of cash, it submitted false invoices to the district. Prosecutors have accused Cynthia Clark, who was in charge of the project, of paying invoices she knew were fraudulent because she had plans to work for TurnKey after she left the district.
The Santa Maria-Bonita School District was the subject of a California Watch investigation last year that found numerous structural flaws, code violations and unresolved safety hazards at school buildings. From 2000 to 2005, TurnKey managed 16 building projects for the district, which operates elementary, middle and high schools in Santa Maria Valley.
John A. Martin & Associates, a structural engineering firm hired by the district to investigate problems, concluded that the structural frames in every TurnKey building were too weak to resist an earthquake, a defect affecting buildings at more than a dozen schools.
To date, the structures remain occupied by children and teachers. District leaders told school board members in January that they have been assured that there are no safety hazards. Talks are ongoing with engineers from the Division of the State Architect on what work, if any, will be required to clear state concerns, district officials said.
Lynda Gledhill, spokeswoman for the attorney general's office, said state prosecutors were satisfied with the plea agreements. Irwin's attorney, Thor Emblem, said his client had mixed emotions about his plea.
"Sometimes, you make a life-business decision," Emblem said. "Do I want to spend six months in trial, lose my job, lose my home, maybe lose custody of my children and run the risk of going to prison? Or do you do something, pinned against your will (and plea)? Certainly, in my client's case, he felt he never did anything wrong. In light of the fact that the grand jury indicted him, you have to admit that a rational juror could find the allegations true."
Harold Clark didn't respond to a California Watch request for comment, and Bannan's lawyer, Robert Sanger, declined to comment.
Santa Maria-Bonita school officials issued a statement praising the attorney general's work: "SMBSD’s past and present Board of Education, which supported the Department of Justice’s efforts, should be commended for insisting that justice be done in this matter. Now that they have been convicted of felonies, justice has been achieved against the three TurnKey executives who defrauded the District and local contractors."
But William Smith, a Santa Maria-Bonita school board member, said the sentencing didn't go far enough. Smith said he was considering talking with prosecutors to see if more could be done.
"We got people that robbed convenience stores who get 10 years (in jail), and these guys have robbed the children of our community and robbed the taxpayers – and they're looking at months," Smith said. "That's ridiculous."
In September, a judge will decide whether the former TurnKey executives will have to pay up to $1.5 million in restitution to contractors who did project work for the company. Despite shelling out millions in repair costs, forensic evaluations, attorneys' fees and civil settlements connected to TurnKey's collapse, Santa Maria-Bonita will not ask the defendants for repayment in September, which Gledhill said was part of the plea agreements.
District Superintendent Phil Alvarado and Timothy Cary, the district's attorney, did not respond to California Watch requests for comment about the decision. But Smith said the school board was not told that the district would forgo financial damages from the former executives.
Lisa Silverman, executive officer at the state Office of Public School Construction, said her office has been monitoring the attorney general’s investigation and "would review any State-funded projects that may be affected by the outcome." The school construction office gave Santa Maria-Bonita officials the bond money that was ultimately siphoned by the TurnKey executives.
"Please be assured that these projects will be re-opened in the event that there is legal finding of unlawfulness by district employees associated with the projects," Silverman wrote in a statement to California Watch.