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Complaint to DA Regarding Illegal Acts and Regulatory Violations by Marin County

Community Venture Partners, Inc., has filed the following complaint with the Office of the Marin County District Attorney. It is a complaint regarding numerous illegal acts and regulatory violations by the County of Marin, the Marin County Board of Supervisors, the office of the County Administrator, and other associated Marin County staff and agencies, over a period of 15 years, related to the County’s "Community Service Contracts Program."

This action by CVP is important because we all have the right to expect our government to adhere to the highest standards of integrity and honest and fair dealings, particularly when it comes to the distribution of taxpayer funds we entrust to them.

Some may find this a lofty notion or our arguments to be an overly detailed complaint. But, this is about much more than each specific action and violation, noted. This is about the importance of speaking out against the profound disrespect for the public's interests that each of these actions and violations represent. Because, ultimately it is that, which matters most and it is that, which is most in need of change, in our County. And, if we fail to do that each and every time it is required of us then we will inevitably only get what we deserve.


Please consider donating to Community Venture Partners to support our continued efforts on your behalf.

Here, then, is our letter to the Marin County District Attorney:


September 30, 2019

Dear District Attorney Frugoli,

We are writing to request that you investigate possible illegal activities, criminal acts, regulatory violations, and other malfeasance by the County of Marin, the Marin County Board of Supervisors, the office of the County Administrator, and other county staff (hereinafter “the County”), over a period of 15 years, in connection with what is called the “County Community Service Contracts Program.”

We consider this matter to be serious and of the utmost urgency because the improper activities described in the Report are presently ongoing.

Community Venture Partners, Inc., is a 501(c)(3) nonprofit organization (“CVP”) that works to ensure government transparency and adherence to state and federal laws. Attached, please find our Investigation Report, entitled: The Marin County Community Service Contracts Program - Investigative Report by Community Venture Partners, Inc., with Appendices A and B - Exhibits (the “Report”).

Based on the evidence presented in our Report, allegations of wrong-doing by the County of Marin, include but are not limited to:

INTRODUCTION

Beginning in early 2018, CVP submitted a series of Public Records Act requests specifically focused on financial transactions between the County of Marin and its agencies and bicycle advocacy groups. Our investigation took more than a year and expanded to include any and all organizations that benefited from what the County calls its “Community Service Contracts Program.”

The preponderance of evidence found in the documents we received in response to our PRAs, indicates that for more than 15 years the County of Marin, under the direction and at the sole discretion of the Marin County Board of Supervisors and the County Administrator, in collaboration with funding recipients, have knowingly and intentionally engaged in highly irregular and potentially fraudulent funding and accounting practices, by which third-party nonprofit and for-profit organizations have received gifts of tens of millions of dollars of taxpayer monies under the guise of “community service contracts.” The ‘payments’ on these ‘contracts’ were and are, for all intents and purposes, outright gifts of taxpayer monies that have essentially been processed by the County and treated by the recipients as grants funding by the recipients and which have been disguised as ‘contracts’ in the County’s budgets and accounting.

The County’s contention that these agreements and disbursements of general funds are for “contracts for community services” is, in light of the evidence, indefensible. There was and is nothing remotely “contractual” about these agreements or the payments made to the recipients.

The evidence or our allegations is overwhelming.

What these facts describe is the very definition of “charitable grants” and “gifts” for “general support,” not contractual agreements for services. The total annual payouts on these contracts have averaged approximately $1.8 million dollars per year, or $27 million dollars over the past 15 years.[1]

There is significant evidence that the process by which these “contracts” have been approved, the methods by which these funds have been disbursed, and the accounting practices employed by the County have been intentionally concealed from the public to the point that in some instances, records are nonexistent. This has been done with the full knowledge and cooperation of the Marin County Board of Supervisors.

The amounts of money involved are far in excess of the much-maligned “Community Service Grants” Fund, often referred to as the County’s “Slush Fund.” The evidence suggests that following the criticism of the Slush Fund by the Marin County Grand Jury in March of 2001, the County shifted many of its payouts to nonprofits to this new ‘contracts for community services’ funding method, and in doing so was able to perpetuate their ability to give away taxpayer monies at their discretion.

Our findings are supported by the documents and records referenced herein and provided as Exhibits in APPENDICES A and B.


[1] Appendix A - Exhibit 19 04 15 19 – List of Community Service Contracts 2005 – 2018, 3 years missing data


DISCUSSION OF ALLEGED VIOLATIONS

Accounting fraud and conspiracy to commit accounting fraud and falsify Marin County budget and accounting records;

Generally accepted accounting principles require that gifts of public funds and contracts for services be recorded as two distinctly different categories of expenses. However, for more than 15 years the County of Marin, members of the Board of Supervisors, the office of the County Administrator, and other associated agencies and staff have knowingly, collaboratively, and intentionally miscategorized expenditures of public funds, in County budgets and other documents and at public hearings, as “contracts” when the expenses were, in fact, gifts and grants. They have also made false statements to the public about those accounting items in order to conceal the intent and illicit nature of their activities.

As confirmed to us by the Office of County Counsel, the dollar amounts and the names of recipients of individual community service contracts have never been disclosed to the public in the County’s Annual Budgets. They have been intentionally recorded under a catchall budget line item called “Community Services” and these payments have, at times, been drawn funding from multiple county agencies.

As such, it has been virtually impossible for even a professionally trained accountant to find any specific information about these so-called “community service contracts” anywhere in the County’s published budget. CVP was only able to discern the accurate accounting through more than 14 months of Public Records Act requests for financial records and ledgers.

It is, therefore, our contention that the County’s actions have been deliberate and manifestly criminal and that their actions constitute accounting fraud and conspiracy to commit accounting / financial fraud under state and federal law, by intentionally falsifying public records, under state and federal law. The County’s improper gifts of public funds, under the guise of contracts for services, also constitutes misuse or misappropriation of government funds under Penal Code § 424.

For a complete description of why the Marin County Community Service “Contracts” are, in fact, gifts of public funds and not contracts, see Part I of the Report.

Regarding our allegations of conspiracy, please see California Penal Code 182 PC - CHAPTER 8. Conspiracy [182 - [185.] (Chapter 8 enacted 1872.)182, which defines the crime of “conspiracy” as,

(a) If two or more people conspire

(1) To commit any crime;

(5) To commit any act injurious to the public health, to public morals, or to pervert or obstruct justice, or the due administration of the laws. [Emphasis added]

Put more plainly, “A conspiracy takes place when one… agrees with one or more other people to commit a crime, and one of them commits an overt act in furtherance of that agreement. Any member of the conspiracy may commit the overt act, which doesn't need to be criminal in and of itself.”[2] [Emphasis added]

Failure to keep adequate and complete records of financial transactions regarding public monies;

As evidenced our Report and as fully admitted to by Matthew Hymel, the Marin County Administrator and the Office of County Counsel, the County is unable to find detailed records of Community Service Contracts Program expenditures of approximately $2 million per year, for a period of 3 out of the past 15 years. For more information see Part IV of our Report.

The County’s failure to keep complete records of all payments under its Community Service Contracts Program violates state regulatory record-keeping requirements.

Failure to adhere to state competitive bidding regulations for contracts for services, including but not limited to failure to provide public notice or public solicitation of such services;

Marin County claims that the monies spent over the past 15 years (approximately $27 million) for “Community Service Contracts” were for legitimately contracted services provided by local nonprofit and for-profit organizations. However, as shown in our Report, these so-called “contracts” were entirely discretionary, their scope of work was drafted by the recipients, and they were solicited by the recipients and not the result of any determinations of need for those services, by the County, and were not subject to public notice, competitive bidding, or any other normal contractual procedures.

It is clear that these so-called “contracts” have been fraudulent and outright gifts of public funds, intentionally disguised as contracts for service to avoid public scrutiny.

If, however, the County insists that that these so-called “contracts” were legitimate, then they would have been subject to state regulations regarding public notices, RFPs, and competitive bidding requirements, with which they failed to comply. It is either one or the other. The County cannot have it both ways.

By and large, all contracts by public agencies require competitive bidding. There are almost 100 state statutes that define competitive bidding requirements. They generally require public notice and that the contract to be awarded to the lowest “responsible” bidder. Pub Con Code §§ 20161-62.

The California Code provides for exemptions in certain instances. However, none of these exemptions apply to the so-called “contracts” discussed in this complaint. Also, the County cannot claim an exemption under any “small contracts” provisions in the law, because these “contracts” are fraudulent in the first place, are intentionally disguised gifts of public funds, and the amounts at times exceed one hundred thousand dollars, far in excess of any county provisions that might construe them to be “small.”

Regarding exemptions, note that Public Contract Code; Division 2. General Provisions, Part 2. Contracting by State Agencies; Chapter 2. State Acquisition of Goods and Services, Article 4. Contracts for Services, states,

“(a) Except as provided by subdivision (b), state agencies shall secure at least three competitive bids or proposals for each contract. [Emphasis added]

“(b) Three competitive bids or proposals are not required in any of the following cases:

(1) In cases of emergency where a contract is necessary for the immediate preservation of the public health, welfare, or safety, or protection of state property.

(2) When the agency awarding the contract has advertised the contract in the California State Contracts Register and has solicited all potential contractors known to the agency, but has received less than three bids or proposals.

(3) (A) The contract is with another state agency, a local governmental entity, an auxiliary organization of the California State University, an auxiliary organization of a California community college, a foundation organized to support the Board of Governors of the California Community Colleges, or an auxiliary organization of the Student Aid Commission established pursuant to Section 69522 of the Education Code. These contracts, however, shall not be used to circumvent the competitive bidding requirements of this article.

(B) Notwithstanding subparagraph (A), until January 1, 2020, an inter-agency agreement that is in effect pursuant to an amount appropriated to the Office of Planning and Research for precision medicine, including a contract between the Office of Planning and Research, the Regents of the University of California, or an auxiliary organization of the California State University, may include a subcontract not subject to any competitive bidding requirements of this article for the limited purpose of researching or developing precision medicine.

(4) The contract meets the conditions prescribed by the department pursuant to subdivision (a) of Section 10348.

(5) The contract has been awarded without advertising and calling for bids pursuant to Section 19404 of the Welfare and Institutions Code.

(6) Contracts entered into pursuant to Section 14838.5 of the Government Code.

(7) Contracts for the development, maintenance, administration, or use of licensing or proficiency testing examinations.

(8) The contract is for services for the operation, maintenance, repair, or replacement of specialized equipment at facilities of the State Water Resources Development System, as defined in Section 12931 of the Water Code, and meets the conditions established by the Department of Water Resources for those contracts.

(9) The contract meets the conditions prescribed by the Department of Water Resources for contracts subject to Section 10295.6.

(10) Contracts entered into by the Commission on Peace Officer Standards and Training or the Office of Emergency Services solely for the services of instructors for public safety training. For the purpose of this paragraph, “public safety training” includes, but is not limited to, training related to law enforcement, emergency medical response, emergency volunteers, and fire responders.”

Again, there is nothing about the community service contracts discussed in this complaint that would qualify for exemption under any of these provisions.

Violation of the California State Constitution regarding the gifts of public funds;

The actions taken by the County of Marin in making large annual gifts of public funds to local organizations, at the sole discretion and based on the personal preferences of the Board of Supervisors and the County Administrator, under the guise of community service contracts, violates the California State Constitution. This has been brought to the County’s attention on two separate occasions, in 2001 and 2013, by the Marin County Civil Grand Jury. In both instances, those criticisms have essentially been ignored.

Beginning around the time that the Marin County Civil Grand Jury first criticized the County about this issue, the County quietly shifted their gift-giving from what was publicly chastised as the “Supervisor’s Slush Fund” to the new, unpublicized method of calling grants funds “contracts,” to avoid public scrutiny. The wording, processing, and amounts of these new “contracts” were virtually identical to the previous grants given to each organization.

By 2013, when the Marin County Civil Grand Jury again criticized the County’s discretionary gift-giving, the County responded by claiming they had “reformed” their gift-giving and increased transparency, putting the entire process online for the public to see. However, by that time, they had already shifted most of their discretionary giving to the new, non-public community service “contracts” method.

The California Constitution prohibits gifts of public funds by state local agencies. The California Constitution prohibits giving or lending public funds to any person or entity, public or private. The prohibition includes aid, making of a gift, pledging of credit, or payment of liabilities. (Cal. Const., art. XVI, § 6 b.) This encompasses not just the giving of monetary funds but any “thing of value.” There is some discretion granted to agencies to determine what constitutes value, but it would not be applicable in this instance.

One factor considered is whether there is a valid public purpose justifying the expenditure. City and County of San Francisco v. Patterson, 202 Cal. App. 3d 95, 103-04 (1988). See also McQuillin, Municipal Corporations, § 39.19 (3d ed.) All expenditures must be for a public purpose, i.e., “serve” the public interest.

The County will likely contend that the payments of community service contracts conveyed public benefit and therefore serve the public interest. However, this has not been demonstrated by the County, and it in no way invalidates the facts and evidence presented in our Report, that the contracts’ payments were actually gifts without any public process or competitive bidding and that the County knowingly and intentionally hid the discretionary nature of these “contracts” from the general public. To argue otherwise would be a “have my cake and eat it too” defense and be patently absurd.

We would also go so far as to say that the magnitude and duration of these discretionary gifts to third party organizations and the circumstances surrounding their instigation and approval clearly suggests political favoritism on the part of the County with the obvious intention of “buying” political support for their “generosity.”

In particular, note that Gov. Code § 8314 prohibits personal or campaign use of public funds. It states,

This is the very reason why this kind of discretionary giving is illegal. One could argue that in this instance, the personal purpose of the Marin County Supervisors (and particularly, based on the evidence, Supervisor Kate Sears) may have been to curry favor with groups to support those individual supervisors. There is ample evidence in the Report that individual Supervisors were heavily lobbied by and were, as a result, “hands-on” and instrumental in directing funding to certain community service contract recipients.

Violations of the Ralph M. Brown Act, over a period of 15 years, for failure to properly and accurately describe and disclose the true nature of items posted on public agendas, regarding such so-called contracts.

The County Administrator contends that the Board of Supervisors approved the community service “contracts” at public hearings and that the approval of those contracts was noted on the agenda under “consent calendar” items, and described as being payments for “community services.”

However, since all evidence indicates that these payments were, for all intents and purposes, simply outright discretionary gifts of public funds to private, third-party organizations, without any public review, their description on the agendas and their presentations to the public, as being contracts, were then violations of the Brown Act.

The Brown Act requires that the agenda accurately describe each item so that the public clearly understands what is being approved. Therefore, if the County contends that the Board was being asked to approve “contracts for services,” when in fact both the Board and the County Administrator (who prepared the recommendation report to the Board) knew in advance that they are actually “gifts” of public funds, and that they all worked together, behind the scenes, to promote these gifts and intentionally disguise them as “contracts,” then the descriptions in the public agendas for all past meetings have been incorrect and fraudulent.

This would suggest that the County of Marin has violated the Brown Act at every community service contracts approval hearing, over the past 15 years (approximately 60 violations over the past 15 years).

Thank you for your time and consideration and the opportunity to submit this complaint.

Please do not hesitate to contact me with any questions or need for clarification.

Respectfully,

Bob Silvestri - President, Community Venture Partners, Inc.


[2] https://www.shouselaw.com/conspiracy.html


Attachments:

CVP Report - The Marin County “Community Service Contracts” Program

The Marin County “Community Service Contracts” Program - Appendix A - Exhibits

The Marin County Community Service Contracts Program - Appendix B - Exhibits


Bob Silvestri is a Mill Valley resident and the founder and president of Community Venture Partners, a 501(c)(3) nonprofit community organization funded only by individuals in Marin and the San Francisco Bay Area. Please consider DONATING TO CVP to enable us to continue to work on behalf of Marin residents.