DA: Felony grand theft charges for MACSA leaders

The former leaders of the Mexican American Community Services Agency are being charged with felony grand theft and must pay employees full restitution after a three-year investigation into the skimming of employee retirement funds from 2004 to 2009, Santa Clara County’s District Attorney Jeff Rosen announced Thursday morning.
Olivia Soza-Mendiola, 53, of San Jose, and Benjamin Tan, 61, of South San Francisco, served as MACSA’s CEO and CFO respectively for the San Jose-based organization known commonly as “MACSA,” and are suspected of misappropriating and embezzling more than $1 million from employee retirement funds to pay for operating costs for a now closed charter school El Portal in Gilroy, according to the DA’s Office.
Soza-Mendiola and Tan are each charged with felony grand theft.
“From 2004 to 2009, they used money that was supposed to be paid to employee retirement accounts to pay other MACSA expenses,” read a press release from the DA. “They did this knowing that the employees’ paycheck stubs falsely represented that this money was being paid to the retirement accounts.”
If convicted, the Soza-Mendiola and Tan face up to three years in jail and a $10,000 fine. They will be ordered to pay full restitution to the employees who lost their retirement funds, according to the DA.
A press conference is being held at the DA’s headquarters in San Jose. Check back later for more details from the conference with District Attorney Jeff Rosen and the prosecutor who leads the Public Integrity Unit John Chase.
As workers discovered their pension system had not been properly credited with money deducted from their paychecks, it came to light employers had been skimming from wages to cover operating costs. El Portal later shut down in 2009.
The DA announced Thursday that more than $1 million was illegally diverted from employee retirement accounts.
“The victims were dedicated, hard-working employees who truly believes in MACSA’s mission in the community. Many of them would have donated their own money to help MACSA out, if needed,” said Chase.
“For the leaders of MACSA to spend the employees’ retirement money on other things behind their back is inexcusable.”
The DA’s announcement of criminal charges culminates an extensive investigation that involved dozens of interviews, a review of 400,000 pages of seized documents and the forensic search of more than 5 million computer files.
“This case represents our commitment to aggressively investigate conduct aimed at stealing workers’ hard-earned retirement savings,” said Jean Ackerman, the regional director of the Employee Benefits Security Administration’s San Francisco Regional Office.
“It’s an excellent example of federal and county authorities working together,” she said.
South Valley Newspapers broke the story of MACSA’s questionable financial practices in early 2009, when allegations of MACSA’s crippling mismanagement and financial scandal surfaced at the agency’s two charter schools: Academia Calmecac in San Jose and the now defunct El Portal Leadership Academy on IOOF Avenue in Gilroy.
Now under new management, the social services agency is working to recover from haphazard leadership and decision-making in the face of fiscal adversity.
As for MACSA’s former management and certain employees, they’re also taking heat from John Marshall Collins, the San Jose lawyer retained by MACSA’s new leaders who filed a lawsuit in January 2011.
The complaint is filed against Joe Chaidez, a Certified Public Accountant in Clovis, former CEO Olivia Soza-Mendiola and Former Chief Financial Officer Benjamin Tan, in addition to a slew of suggested but unnamed additional 100 “Doe Defendants,” according to court documents obtained by the Dispatch.
The suit contends negligence and breach of fiduciary duty on top of damages including injury to reputation, lengthy and probing investigations by the Santa Clara County District Attorney’s Office, lost ability to raise funds by means of charitable donations and severe damage to employee morale.
Collins, along with MACSA’s new Executive Director Michael Lopez, were contacted for updates regarding the current status of this lawsuit but have not returned phone calls.
Details illuminating MACSA’s financial finagle – largely shrouded in confusion until in-depth reviews were eventually conducted and made public via a bulky 33-page affidavit presented to the Santa Clara County Superior Court Oct. 12, 2011 – reveal accusations of monetary delinquency, blame shifting and “illegal fiscal practice” that allegedly occurred between 2002 and 2009.
The nonprofit, which ran Gilroy’s only charter school at the time, became the subject of heated controversy after investigations revealed its top administrators had skimmed about $400,000 in payments from its charter school employees’ retirement accounts over the course of several years, using those funds to pay for operational costs, according to an August 2010 audit.
“Why was it decided that withholding our retirement fund was a sound solution, and how could you morally allow that?” one teacher asked in a Feb. 27, 2009 meeting between MACSA’s charter school teachers and former CEO Olivia Soza-Mendiola.
The teacher was referring to the news MACSA owed several hundred-thousand dollars to employee pension funds. At that time, the teachers were still unaware that MACSA owed an additional $700,000 to its employees’ 403(b) retirement accounts.
Soza-Mendiola replied she had no choice: it was either do business that way, or fire people.
If forced to fire people, the schools would be dysfunctional. So in her mind, Soza-Mendiola reasoned, she chose the best solution.
This is just one incident reported in the Oct. 13 affidavit.
Other standout findings include:
– The Santa Clara County District Attorney’s Office is investigating events that transpired between 2002 and 2009 at two charter schools that were operated by the Mexican American Community Service – El Portal Leadership Academy in Gilroy and Academia Calmecac in San Jose. Michael Sterner, investigator with the Santa Clara County District Attorney’s Bureau of Investigation, filed an extensive affidavit Oct. 13 documenting the case and executed a search of MACSA headquarters in San Jose the following day.
– As of April 2009, MACSA had failed to submit $309,179.92 in retirement contributions from the charter schools to the state CalSTRS and CalPERS retirement programs – pension funds operated for state and local public employees in California.
– Employee’s paystubs showed MACSA was deducting money for retirement programs, union dues, medical and dental plans. Sterner learned MACSA was not making payments on its Kaiser Permanente health plan, dental plan and had been significantly behind on union due payments.
– Aurora Cepeda, the interim CEO for MACSA and former director of Human Resources, told Sterner she believed the executive team at MACSA – whom she identified as team CEO Olivia Soza-Mendiola, Chief Operating Officer Xavier Campos and Chief Financial Officer Ben Tan – was responsible for diverting money away from employee retirement accounts … as they were the individuals who made the decisions for the organization at the time.
– When preparing to sell two of its buildings and consolidate operations to the main office at 660 Sinclair Drive in San Jose, Aurora told Sterner MACSA had removed all of their financial records from storage and were preparing to shred everything prior to and including 2004.
– During a six-month period in 2008, MACSA owed more than $400,000 in delinquent payroll taxes.