Missing, altered documents raise questions for auditors looking at Houston school district

Some documents went missing, and others were removed, altered and returned to the file for a contract with eight firms including Westco Ventures LLC — a company owned by a close friend of Trustee Paula Harris — an audit of the Houston schools procurement practices found.

The companies were vying to be put on a list of minor suppliers, providing services worth less than $25,000 a pop, for a construction project. Texas Watchdog investigated the contract and Harris’ role in how it ultimately was awarded by the Houston Independent School District early last year.

Auditors with Null-Lairson found other problems with the way the contract was awarded. There were no notes or records to show why Westco and two other firms were added to the contract, and in general the procurement lacked controls to detect typos in the paperwork – a problem that “can result in non-compliance” and “lawsuit exposure to the district,” the auditors’ draft report said.

HISD officials provided an explanation for some of the missing documents, but not others, Null-Lairson certified public accountant Charles “Chuck” G. Yaple said last week during a presentation on the audit. Auditors found transparency problems with the district’s overall procurement process, and district officials have pledged to implement reforms based on the recommendations.

“The missing records is a serious problem,” said Trustee Juliet Stipeche, who called for an official investigation of the missing documents three separate times during the presentation. “I’m disturbed by it, and not just because a person from the public might be walking off with it. An investigation is warranted.”

Auditors first reviewed the file where the documents went missing in November.

“When we returned on January 26, 2012 several documents that were included within the file during our initial visit were no longer present in the file,” auditors wrote in the draft report released last Thursday.

“Discussion with the Procurement staff indicates that the file was reviewed by several parties including the general public prior to our second review,” the report’s authors wrote. “Per the Procurement staff, this could result in misplaced documents.”

Those documents included confidentiality agreements for the evaluation team and an evaluation matrix analysis for contracting services with a company identified as minority- or women-owned, Yaple said. HISD officials strive to meet a goal that at least 20 percent of contractors consist of minority- and women-owned businesses on all the district’s contracts, board President Mike Lunceford said.

But HISD Inspector General Robert E. Moore told reporters during a discussion after the auditor’s presentation that “documents weren’t missing.”

“One (spreadsheet) was changed,” he said. “A different document was put back in the file.”

Bill Aleshire, an Austin attorney and former Travis County judge, said district officials are supposed to safeguard any document they produce, collect and maintain.

“If they don’t, technically, that’s a violation of the law,” Aleshire said. He also said that both spreadsheets should be in the file and available to the public.

“There’s no such thing as a correct one and an incorrect one,” said Aleshire, who answers open government questions from the public through a hotline provided by the Freedom of Information Foundation of Texas in Austin.

Aleshire said the Texas Local Government Records Act requires that school districts keep records for a minimum of two years. When those records pertain to a government contract, the school district must keep the record for the life of the contract plus an additional two years, he said.

“It’s a crime to steal a government record, I know that,” Aleshire said.

HISD spokesman Jason Spencer said the district is looking into the matter.

“Senior HISD staff became aware of the document issue at the same time the rest of the public did – the day the audit was released,” Spencer said in an e-mail on Wednesday. “We are now investigating in the hopes of determining exactly what happened, and we will report those findings to the Board of Education at the appropriate time.”

The audit was conducted after Trustee Anna Eastman called in August for an examination of HISD’s procurement procedures. HISD has come under heavy criticism and media attention from Texas Watchdog and others over how the district has done business in recent years.

Auditors also found other problems with the way the contract involving Westco was awarded.

In October, HISD staff put forward a list of eight companies for board approval, according to the meeting agenda. The list was in error, HISD staff told auditors, which is why they recommended a new list of companies in November, excluding Westco and three other companies originally on the list. The board approved the new list.

Two of the excluded vendors contacted “various members of the board” and HISD procurement officials to ask why they weren’t on the new list, the auditors wrote in their report. The chief procurement officer and other staff met with the Westco and Sparks Construction, a company based in The Woodlands, in late November 2010.

HISD officials gave Westco, Sparks and another company, Hallmark Capital Group LLC, a “best and final offer,” auditors wrote in the report. If Westco accepted the terms, the company would receive a contract.

Houston school board members voted to add the three companies to the contract on Jan. 13, 2011.

The audit does not name the board members involved, but the district’s procurement chief at the time has said he had concerns centering on communication with Harris — godmother to the children of Nicole West, the owner of Westco. The two are close enough that they traveled to Italy together last year.

Harris was not present at the meeting last Thursday.

Stephen Pottinger, HISD’s former procurement chief, described a 2010 phone call from Harris requesting that he meet with two vendors, one of whom was West, as “a debacle.”

“Harris said, ‘I have two vendors that are upset about a recent contract award, and I need you to meet with these vendors and get it resolved,’” Pottinger said in an interview last fall. “It turns out (one of the vendors) was her best friend (West). And, interestingly enough, this woman was absolutely obnoxious. I mean, you would think somebody who was trying to earn — and I can’t stress the word ‘earn’ enough — district business would be a little more friendly or accommodating. But she was demanding. Her attitude was, ‘I deserve this. I have contacts. I know people.’”

Harris told Texas Watchdog in August that she never discussed West with Pottinger — an assertion Pottinger says is false. Pottinger’s contract was not renewed in July after 11 years with the district.

“I wonder if it was (Harris’) intent to sway me toward awarding West a contract,” Pottinger said late last year. “(Harris) was so adamant that she never knew who I was.”

The addition of Westco and the other two companies was poorly documented, auditors concluded. The report said: “E-mails supporting correspondences associated with the addition of the three (3) vendors were not included in the procurement file, nor was documentation maintained in the file regarding the rationale for the best and final offer and the rationale to add additional vendors. … Without this type of documentation on file, the public is left to speculate on contract awards and board influence.”

Controversy engulfed Harris last year when she was board president due to her decision to continue voting on contracts with Westco — despite her friendship with West.

Harris voted to approve at least four contracts with Westco before stating in August she would would abstain from such votes due, in part, to repeated questioning from Texas Watchdog and the Houston Chronicle.

Westco has been paid at least $3.7 million by HISD in the last two years, according to the district’s check register.

The school board hired Null-Lairson in October for $87,500. Null-Lairson together with two other companies analyzed 15 contracts, ranging from less than $50,000 to greater than $100,000 and spanning July 2010 through mid-September.

HISD’s board audit committee requested that Null-Lairson specifically review the Westco contract. Auditors did not note any issues with missing or altered documents in the other contracts.

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Contact Mike Cronin at mike@texaswatchdog.org or 713-228-2850. Follow him on Twitter at @michaelccronin or @texaswatchdog.

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