Criminal indictments have been issued against a former Higley USD superintendent and three other people who are being charged with financial crimes, according to the State Auditor General’s Office.
Former Superintendent Denise Birdwell is charged with 18 felony counts, and two employees of a district vendor are being charged with three counts each related to the construction of the district's two middle schools, Cooley and Sossaman, with the charges coming from events that unfolded from May 2012 to April 2016, according to the Auditor General's Office report.
The report indicated it was done to assist the Arizona Attorney General's Office, which presented evidence to a grand jury on July 13.
The charges include conspiracy, procurement fraud, fraudulent schemes, misuse of public monies, false return and conflict of interest.
The contractors named in the charges are Gary Aller and Steven Nielsen of Educational Facilities Development Services, according to the report. Brian Robichaux, former president of Hunt & Caraway Architects, also Is implicated in the report, but is unnamed by more than his position and is not charged as he has since died.
Additionally, Birdwell attorney Kay Hartwell Hunnicutt, who the report says has a personal and financial relationship with Birdwell, is charged with three counts of false filing.
The people charged are no longer associated with the district.
The report from the Auditor General’s Office alleges that Birdwell conspired with the contractors to circumvent school district procurement rules and gave Educational Facilities Development Services an unfair advantage over other vendors to win a $2.56 million project development contract for the middle schools in 2012.
The district identified a need for the schools that year, but because it did not have enough available bonding capacity to build the schools, it issued a request for proposals for a private developer, working with a nonprofit to design, finance, construct and manage the schools. The district then agreed to 40-year lease-purchases of the schools.
EFDS won the contract and utilized The James Megellas Foundation and a limited liability corporation formed by the foundation, JMF-Higley 2012, to manage the leases. EFDS was incorporated only 14 days before the district issued its request for proposals, according to the Auditor General’s Office.
The report alleges that Birdwell, Aller and Nielsen falsely certified on documents from 2012 that they had followed the procurement rules.
Voters in November 2012 then rejected a bond question on the ballot that was meant to help finance the project and purchase furniture, fixtures and equipment for the schools.
The report alleges that, in response, Birdwell illegally authorized the use of $6 million from a restricted adjacent ways fund to pay project costs. The adjacent ways fund, by state law, is limited in its usage to purposes generally relating to improving public property adjacent to land owned or leased by a school district.
Finally, the report alleges that Birdwell, Hartwell Hunnicutt or Hartwell Hunnicutt’s law firm may have received a number of payments from Hunt & Caraway Architects, Robichaux and CORE Construction between 2014 and 2016 totaling $105,000, often marked for consulting services, but which were unsupported with contracts or invoices. CORE Construction had a contract with EFDS on the middle schools project, according to the report.
The $105,000 payments also were not reported on their respective income tax returns, the report stated.
Birdwell started in the district as associate superintendent in 2007 and became superintendent in 2009, serving through June 2015 when she retired, according to the district.
She subsequently was hired in 2016 as interim and then permanent superintendent for Scottsdale USD, but the SUSD governing board approved a severance agreement with her April 6, 2018, after an investigation into financial improprieties in that district, according to SUSD board minutes.
A statement from the district indicated current officials cooperated with investigating authorities, but said it did not have information beyond the Auditor General’s Office report and had no further comment on the incident.
The report called upon the district to take actions to prevent a similar occurrence in the future, including creating a culture where employees could report misconduct without fear of retribution and implementing a number of best practices to comply with procurement policies.
“As a district, prior to this report being released, our team has been working to ensure that our processes and procedures meet all applicable state and federal regulations,” the district’s statement read. “Under new leadership, the district has been diligently working with experts in these areas to align all practices to meet state and federal compliance.”
The statement was sent in the late afternoon of July 22 to the district’s employees and to Community Impact Newspaper.
According to the district, that has included trainings on appropriate and inappropriate usage of funds, required annual conflict of interest forms for all HUSD employees and appropriate procurement procedures.
The district’s latest audit for fiscal year 2019-20 had no material findings in the areas of procurement and compliance set forth by the Uniform System of Financial Records for Arizona school districts.
"The district will carefully review all findings in the report to make sure that it has brought its current practices into alignment with applicable requirements," district officials said in the statement. "Our entire leadership team is confident that with staff’s commitment to adhere to the current procedures and policies already in place, the issues raised in the report will not be repeated."
Dawn Foley, the new HUSD superintendent as of July 1, was not in a financial procurement position for facilities with the district when she was director of curriculum and instruction from 2008-14. She then left for the Mesa Public Schools district in 2014, according to HUSD. She returned in 2019.