Official Accused in $500,000 School Supplies Scheme

A “sting” operation has led to the arrest of a high-ranking Los Angeles Unified School District official in connection with an alleged scheme to embezzle at least $500,000 by stealing and reselling supplies, Dist. Atty. Ira Reiner said Friday.

The district’s deputy director of operations, Melvin N. Tokunaga, 42, was taken into custody Dec. 5 after he accepted $3,000 in cash wrapped in newspapers from an informant who had arranged to meet him in a restaurant parking lot, Reiner said.

The district attorney said Tokunaga is one of a number of people inside and outside the district who are suspected of participating in the alleged scheme, through which officials allegedly purchased supplies, purportedly for the district, and then resold them surreptitiously to others, splitting the profits.

‘Almost Non-Existent Controls’

Reiner said the investigation, which began last February, has been hampered by “the school district’s almost non-existent controls over their assets, at least over the assets that were involved here.”

Associate Supt. Jerry Halverson agreed that district auditing procedures may be at fault.

Tokunaga, who was booked on suspicion of embezzlement of public funds, was released on $50,000 bail and is scheduled to be arraigned in Los Angeles Municipal Court on Dec. 30.

Both Tokunaga and his boss, James L. Riley, director of operations, have been suspended, although they are still being paid, Halverson said. Although Riley, 55, has not been named as a suspect, Halverson said investigators obtained a warrant to search his home on Dec. 5 and “advised us that certain things in his residence constitute a violation of school district policy.” He would not elaborate on what was found.

Riley has been a district employee since 1957.

Reiner credited Van Waters & Rogers Inc., a distributor of industrial chemicals in East Los Angeles, with bringing the alleged scheme to light by alerting his office that other firms were selling chemicals that they were not licensed to distribute at prices “well below market value.”

In addition, he said, the company told investigators that the district “had purchased enough herbicides to kill every plant in the county of Los Angeles.”

Last spring, Reiner said, his office placed a $20,000 order with a “suspect dealer,” and “almost immediately” a district employee placed a similar order with a legitimate dealer.

An arrest was made April 1 after the suspect, Robert Barrios, 32, a senior district gardener, bought the chemicals from Van Waters & Rogers and delivered them to a resale company, Reiner said.

Barrios was not charged at that time because school officials could not ascertain the value of the missing supplies, Reiner said.

‘Weakened the Prosecution’

“In response to our investigation and our arrest, the school district conducted an internal audit of their procedures and assets to determine what exactly had happened,” Reiner said. “Unfortunately, their audit revealed that they had so few controls over their assets that they simply could not tell what had been stolen from them or what had not been. That obviously greatly weakened the prosecution.”

Reiner gave the following account of what happened afterward:

School officials were told in July that the investigation had ended, Reiner said, “to lull those employees involved in this into a false sense of security.”

Halverson, however, said a few top district officials were kept informed and cooperated with the ongoing probe.

It was not until December, Reiner said, that Tokunaga “felt emboldened enough to start stealing again.”

The incident that led to Tokunaga’s arrest began at 4:30 a.m., when a district gardener, Joe Brazile, transfered $7,000 worth of chemicals to a district attorney’s informant. The informant then arranged to meet with Tokunaga.

Both Barrios and Brazile, 52, remain under investigation, the district attorney said, but he declined to name other suspects.

Reiner said the scheme involved “almost everything you could imagine that would go through purchasing and supplies,” including such items as toilet paper, light bulbs and trash bags. In one instance, district officials bought furniture and resold it but reported it as rented, Reiner said.

“They found many, many ways to steal money from the district,” he said.

No precise figures are available on the extent of the suspected embezzlement, but Reiner said it could involve millions of dollars.

He said it was “pretty obvious (the alleged scheme) had been going on for a substantial period of time” before investigators learned about it.

Tokunaga was hired as a gardener in 1972, eventually becoming a gardening supervisor, district spokesman Bill Rivera said. He assumed the deputy director’s post in 1984.

Halverson did not deny that district auditing procedures may be at fault. “One could draw that conclusion,” he said Friday.

Normally, large purchases--which Halverson defined as costing more than $2,000--can be made only by following an elaborate procedure. A requisition order must be filed and approved by the district’s purchasing branch, which then takes steps that lead to the selection of a supplier. Board approval of the purchase contract comes about 45 days after the order is filed. Once the supplies are delivered to one of the district’s several warehouses, another requisition order must be filled out before they can be released.

However, Tokunaga apparently ordered more supplies than the district actually needed and then “got someone to sign off” for him and remove the surplus, which he then sold, Halverson said.

Purchases of Under $2,000

Many of the items stolen involved “a whole series of low-value purchase orders,” each amounting to less than $2,000 worth of supplies, Halverson said. Such purchases are not required to follow the same procedure used for large orders, he said, because they would take too long.

Tokunaga had the authority to place large and small orders for a wide variety of basic supplies, such as toilet paper, floor wax, cleansers and pesticides, Halverson said. Barrios and Brazile would cover up the false orders by filing a paper known as a “usage report,” which showed that the products ordered were used. In return, Tokunaga would grant the employees overtime credit.

Halverson said it would be impossible for the district to operate smoothly if all purchasing had to follow the longer procedure. But he conceded that “some improvements” will be needed to guard against future thefts.

“The thing we have to recognize,” he said, “is the person apparently responsible for this is a fairly high-level individual. . . . If someone is going to be dishonest, then he can defeat the system. . . . Ultimately, they will be caught, but they can go on a long time without being caught.”

Board members expressed shock and disbelief.

‘A Great Deal to Learn’

“I am just as appalled as the D.A. is,” said East San Fernando Valley board member Roberta Weintraub, who chairs the board committee that oversees business operations. “I feel strongly we have a great deal to learn . . . about the necessity of the type of details and controls essential in maintaining an inventory in a district this large.”

Jackie Goldberg, who represents Hollywood and northeast Los Angeles, said that based on her knowledge of the district’s business practices, “there are no safeguards missing that we could have had” to prevent such thefts from occurring. “These are people who managed to harm the system and the children of this district in spite of enormous safeguards. But size (of the district) is your enemy in something like this.”

Harbor-area board member John Greenwood said the board will examine ways to prevent such thefts from occurring, which may include more extensive use of auditors. But he suggested that because “one of the real problems is that any system has to depend on someone,” a person in an authority position may find a way to circumvent any additional precautions.