Ex-Official’s Spending of $351,000 Is Questioned : Inquiry: Auditors warn that job agency may have to repay the money. Former chief John Chase is a scapegoat, his lawyer says.

The former director of a county job-training agency improperly spent $75,000 in federal money and approved another $276,000 in questionable expenditures during the 1980s, state auditors have concluded.

The auditors, in a preliminary report to the Job Training Policy Council of Ventura County, said the agency must repay the $351,000 unless it can show that the money was spent properly, according to a memo prepared by the job agency’s lawyer.

“Nearly all of the disallowed and questioned costs result from the actions of the former JTPC Executive Director, Mr. John Chase,” special counsel John Chamberlin wrote in a January memo to the agency’s board of directors.

Chase was chief executive of the semiautonomous county agency until he was fired last June amid allegations that he had misused government money, awarded a contract to a company he owned and had worked for two government-funded job-training agencies at the same time without telling superiors.

Chase, 47, had headed the job-training council since it was formed in 1983. The council, whose 19 members are from public agencies and private companies, distributes about $6 million in federal grants annually to companies that train poor people and help them find jobs.

In addition to the state audit by the Employment Development Department, a parallel U.S. Department of Labor criminal probe of Chase’s activities has been under way for more than a year. A final audit report is expected within a month and a decision on criminal prosecution will be made thereafter, officials said.

Chase declined comment on the state’s preliminary audit last week.

But his attorney, George Eskin, said Chase feels he is being made a scapegoat by the job-training council. The council knew he was working two full-time jobs and was aware of Chase’s decisions that investigators apparently view as conflicts of interest, he said.

“This is a classic example of finding a scapegoat for what was bureaucratic and political confusion,” Eskin said.

Allegations against Chase, and the preliminary audit findings, “make it sound like Mr. Chase misappropriated a lot of money, but I don’t think that was what occurred at all,” Eskin said.

Indeed, Chase’s old employer has recently taken a position that could help Chase defend himself. The job-training agency, in an April 8 response to the state’s findings, maintains that nearly all of the expenditures questioned by auditors are justified, current Executive Director Francisco De Leon said.

“I don’t think we agree on any of the expenditures being improper. We certainly had an answer for what they found questionable,” De Leon said. “Even in the cases where they might have had a point, we said . . . if we account for the money this way, then everything will be OK.”

However, job council member Jim Compton said he resigned from the board two weeks ago to protest its decision to fight the repayments.

Compton, who had represented the county superintendent of schools on the council for eight years, said he believed many of the audit’s conclusions were correct.

“I didn’t want to sit on the opposite side of the table from the state auditors and have the JTPC’s arguments be mine. I don’t believe them,” he said.

Compton said he could not be more specific about those arguments because they were discussed in a private session and will not be made public until the final state audit is released.

Investigations into Chase’s activities began in January, 1990, in response to charges by the job council’s former controller, Randy Winton.

Winton, in a report distributed to state and federal agencies just days after he was fired, alleged that the council was “administratively in shambles.” He said he had been dismissed because of questions he raised about apparent improprieties.

Winton questioned whether mileage claims by Chase and other staffers were legitimate and concluded that Chase was functioning not only as the council’s executive director but as a manager for two other corporations that did business with the council.

He also said that Chase and some members of his staff were apparently “multi-organizational floaters” who would shuffle back and forth between work for the council and other job-training corporations--and apparently receive pay from them all.

Winton maintains in a lawsuit filed recently that Chase, other agency employees and an Oxnard employment service “participated in the misappropriation, misuse and mismanagement of government funds channeled through the JTPC.”

He was fired, the former controller says in the suit, because Chase and others wanted “to cover up an embezzlement scheme and to shift the blame” to him. An internal memo to justify Winton’s firing accuses him of incompetence and abuse of co-workers, says the suit. Winton seeks $11 million for alleged wrongful termination and defamation of character.

Chase remembers Winton as an “inadequate employee” who lashed out at his former boss because he was fired, Eskin said.

But investigators tracking Winton’s allegations have confirmed some of them, sources said. They have found that Chase directed not only the Job Training Policy Council for a salary of more than $50,000 a year but also continued to operate the agency the council had been formed to replace--the Private Industry Council of Ventura County.

The Private Industry Council, commonly known as PIC, lost its county sanction in 1983 and was thought to have been dissolved in 1985, county officials have said.

But Chase maintained it and moved tens of thousands of dollars in and out of its checking account, job council members have said.

Council members said that when Chase was asked about the Private Industry Council before his 1990 firing, he replied that he had maintained it so he could accept private donations and keep them separate from federal funds, which come with many restrictions on how they can be used.

The Private Industry Council was also used to issue contracts to small companies owned by Chase and a friend of his, sources said.

Chase also worked a second full-time job at a private corporation, the Business Labor Council, while he was running the job-training council in the late 1980s, sources said. The labor council received a small federal contract from the job-training council in 1987, records show. And the Chase-run Private Industry Council also wrote checks to the labor council, sources said.

Chase’s relationship with the Business Labor Council had been an issue in the mid-1980s, when Chase was executive director of both the labor council and the job-training council, Compton said. Chase was directed to relinquish his labor council post to concentrate on his work at the Job Training Policy Council, Compton said.

Attorney Eskin said that Chase was employed by the Business Labor Council while chief executive of the job-training council, but that the council knew about the second full-time job.

“It wasn’t a secret,” Eskin said. “He wasn’t getting paid by somebody in an overcoat meeting him in a parking garage. He had these two positions and he thought they blended well. . . . He was working his butt off.”

The job-training council was aware that the Private Industry Council was still alive, Eskin said.

Indeed, the PIC secured a $544,000, three-year federal contract in 1985 after council approval, the lawyer said. Eskin said he did not know if the board acted on any PIC item after that.

It would be a conflict of interest if Chase, as a government employee, approved contracts with firms from which he made money, Eskin said. But the contracts might not be improper if the conflict was known by both parties and the contracts were approved anyway, he said.

State auditors apparently have focused on Chase’s relationship with the labor council and the PIC.

“The auditors believe that Mr. Chase received compensation simultaneously from the JTPC and from either the PIC corporation or the Business Labor Council,” attorney Chamberlin said in his memo to the job-training council. “The extra compensation was, according to the auditors, both a conflict of interest and improper, resulting in disallowances and questioned costs.”

But Chamberlin advised the council that much of the $75,000 that auditors found to be “clearly improper” costs by the Private Industry Council might not have to be repaid. About $18,000 of the money remains in a bank account and can be retrieved, he said. Additionally, Chamberlin questioned the auditors’ conclusion that money paid by private parties to the Private Industry Council belongs to the federal government.

“There is an excellent chance we can substantially reduce the amount disallowed through information gathering, by argument and by recapturing the $18,000 in banked funds,” he said.

It could take years for the audit to be finally resolved, since the state’s findings can be appealed to state and federal agencies.

The criminal investigation could be concluded much sooner. Last fall, federal agents turned over financial documents and summaries of statements by potential witnesses to the county district attorney’s office.

Deputy Dist. Atty. John Geb, chief prosecutor of major fraud cases, said last week that he will decide whether to file charges after evaluating the state’s audit and the job council’s response to it.