L.A. Unified manager indicted for alleged conflict of interest

A grand jury has indicted a top Los Angeles Unified School District manager for allegedly funneling business from the district’s massive school-building effort to a company he co-owned, highlighting possible flaws in the way one of the nation’s largest public-works projects has been overseen.

The indictment charges Bassam Raslan with nine counts, accusing him of conflict of interest. But it also takes the school district to task for failing to prevent the alleged crime even though it knew of his interest in the company.

“LAUSD management knew of this but did not direct Mr. Raslan’s supervisors to take action or implement specific policies to prevent” the conflict, the grand jury said. “LAUSD senior management did not implement any effective means of preventing conflict of interest other than relying on those committing the crime to self report.”

The indictment comes three years after a Times investigation raised questions about the ability of Raslan’s company to win lucrative school district contracts while he worked as a regional director of construction.

Details about the contracts, including how much money was involved, remained under seal Thursday, and prosecutors said they could not provide more information because state law prevents them from discussing secret grand jury testimony.

L.A. Unified hired Raslan, 52, to help oversee its $20-billion school construction effort. He worked as subcontactor rather than adistrict employee. The district has relied heavily on contractors to supervise construction, defending the practice as a way to attract higher-quality employees while providing the flexibility to quickly increase or reduce their numbers as needed.

The indictment is the latest black eye for L.A. Unified’s building program. An internal audit completed last year found that consultants working for the program cost taxpayers 70% more than if district employees had done the same work. The audit also found that some contractors did not meet required qualifications.

Raslan’s attorney, Daniel V. Nixon, described his client as a vital member of the construction team.

He said district officials were well aware of Raslan’s co-ownership of the consulting company, TBI Associates.

“He is outraged at the fact that criminal charges have been brought against him,” Nixon said. “Mr. Raslan’s conduct at all times was in accord with district policy, was open and fully understood by people at the district.”

Nixon insisted that state conflict of interest laws apply only to employees or officers with a public agency -- not contractors, like Raslan -- and he vowed to vigorously fight the charges.

Deputy District Atty. Max Huntsman said an appellate court has ruled that some contractors are subject to the same conflict-of-interest rules and that the prosecution was appropriate.

“He made decisions that concerned money that went into his own pocket,” Huntsman said. “That’s a conflict of interest.”

David Holmquist, the district’s general counsel, said L.A. Unified plans to examine the evidence collected by the grand jury before passing judgment.

“We are very interested in reviewing the grand jury’s findings and revealing through our own investigation any wrongdoing,” Holmquist said.

A district spokeswoman said TBI is still operating as a subconsultant on four construction management contracts.

Raslan founded TBI in 2002 with two other men, who worked for the district. They aimed to profit from the enormous need for construction managers on the building program that was underway, according to the grand jury indictment.

The Times found that the district was using consultants for about 70% of the staff managing the school construction program. Many of those consultants were paid high hourly rates to make key decisions about how money was spent.

In TBI’s case, the district was billed nearly $500,000 for 25 consultants in one month during 2007. Of those, nine consultants worked under Raslan, who approved time cards for five, records showed.

The Times found that Raslan repeatedly signed timecards for one TBI contractor after his direct supervisor refused to sign them, suspecting that the hours were padded.

The indictment, issued Tuesday in L.A. County Superior Court, describes a series of failures by the district as the reason why law enforcement authorities didn’t learn about Raslan’s activities until September 2006.

In August 2003, L.A. Unified distributed a policy against conflict of interests in hiring. The grand jury said the policy clearly prohibited what Raslan was doing. But the district failed to say that any violation was a crime and should be reported to police, according to the indictment.

About the same time, one of Raslan’s business partners at TBI, Ivan Kesian, was fired by the district for a conflict of interest, the grand jury said. The indictment does not explain the conflict or say whether it was similar to Raslan’s.

Despite Kesian’s firing, Raslan remained in his post and continued to recommend the hiring of TBI employees without telling his supervisors about the conflict, the indictment alleges. The grand jury said his supervisors did not realize he was recommending his own employees for hire.

In December 2005, James O’Reilly, then director of construction, discovered what Raslan was doing. But O’Reilly did not believe Raslan would participate in hiring panels or influence panel decisions so never took action, the indictment says.

The grand jury said Raslan was not ordered to report his finances under the district’s conflict of interest policies until 2006.

The indictment covers a period from 2004 to 2007 and involves the work of nine TBI employees.

Raslan’s attorney said his client has taken a leave of absence from his duties with the district but continues to work for TBI. But Holmquist, the district’s general counsel, said Raslan had been placed on unpaid administrative leave.

The head of the district’s construction program resigned in September after Supt. Ramon C. Cortines made cuts as the district faced a massive deficit. District officials said they have assumed greater oversight of the building program since then.

“The whole idea is to become more efficient in all areas,” Holmquist said.

andrew.blankstein@latimes.com

jack.leonard@latimes.com

Times staff writer Jason Song contributed to this report.