Honig’s Home Searched in Funding Probe

State investigators armed with a search warrant on Thursday entered the San Francisco home of State Supt. of Public Instruction Bill Honig, looking for evidence that state funds were used illegally by a consulting firm run by his wife, sources said.

Officials from the office of Atty. Gen. Dan Lungren removed records of Nancy Honig’s Quality Education Project, a parent involvement program that she operates from the Honig residence.

Dave Puglia, a spokesman for Lungren, said the search is “(part of) an ongoing investigation and it is not something we would comment on at any point.” The attorney general’s office launched its investigation last April.

However, sources close to the investigation said it centers on the possible use of between $200,000 and $250,000 in federal funds disbursed by the state. The money was used to pay school district employees to start QEP programs in several California school districts, sources said.

Misappropriation of state funds in this manner is a felony punishable by two to four years in state prison and results in disqualification from holding public office.

Democrat Honig, clearly agitated over the search ordered by the Republican attorney general, said in a telephone interview, “I don’t understand why they send a guy with a search warrant when we’ve cooperated with every request they’ve made.”

He said auditors from the attorney general’s office spent three days at the QEP offices in the Honig home last winter and that Lungren later wrote Nancy Honig a letter “clearing her of any wrongdoing.”

However, sources said the letter related to the nonprofit status of QEP and not to the possibility that federal money distributed by the state had been given improperly to QEP.

Honig called the investigation “very far-fetched” and suggested it has “political overtones” because “it appears that somebody is trying to manufacture a negative news story here.”

In the past, Honig has accused his conservative opponents on the State Board of Education and leaders of the religious right of fueling the QEP investigation.

Honig insisted that no state or federal money was used improperly.

He praised QEP as an effective way to involve parents in their children’s educations. Honig also has praised the work of his wife, who he said has raised more than $10 million for the nonprofit consulting firm since 1982.

QEP has become a major force in the parent-involvement field, where parents, primarily in low-income families, are encouraged to participate more actively in their children’s education.

In the last four or five years, QEP has worked with 340 schools, enrolling more than 200,000 pupils, in 54 school districts, Peg Rybicki, the organization’s national director said Thursday.

Most of these schools are in California but QEP also operates in 28 Mississippi schools and is starting a program in Indiana, Rybicki said.

Nancy Honig was paid $108,000 last year as QEP president. The organization has an annual budget of more than $3 million and a professional staff of 24, many of whom work in the Honigs’ San Francisco home. QEP once paid rent to the Honigs for the office space but now uses the space rent free.

The attorney general’s investigation centers on allegations that the State Department of Education, at Honig’s direction, used federal funds to start QEP programs in Fremont, Pasadena, the Sweetwater Union High School District in San Diego County and possibly other school districts, according to sources familiar with the case.

In each case, the education department is alleged to have used state and federal money to pay for one or two school district employees to work full time on QEP.

They worked part of the time in the school districts and partly at QEP headquarters, according to sources, who also said that two of the employees later went to work for QEP and did not return to their districts.

These districts needed state and federal “seed money,” Honig said, because QEP was in an early stage of its development and did not have enough money to pay for all of the work in these particular districts. But he noted that the school districts also received money directly from QEP, as well as the federal funds funneled through the state.

Honig said the state made no direct payments to QEP. “There are no checks from the state to QEP or to Nancy Honig,” he stated.

But critics of that argument say that QEP eventually benefited from the federal funds, because they were passed on to QEP by the education department.

The say the central problem is that local school districts were used to give federal money, administered by the state, indirectly to QEP, a private consulting firm. The problem is made worse, they say, by the fact that Honig’s wife is president of QEP.

“That’s very flimsy,” Honig said. “We didn’t do anything wrong. We made no attempt to hide this. We did everything up front. Everybody knew all the time the money was going for QEP projects, it’s not like we were trying to hide anything. . . . It’s a huge, huge reach to try to turn this into a violation of the law.”

The U.S. Department of Education, which sent the money to California for parent involvement project grants, also is looking into the relationship between Honig, the state Department of Education and QEP.

A spokesman for the federal agency said “there is some audit work going on about the Department of Education in California but that’s as much as I can say at this time.”

Sefton Boyars, the federal department’s regional inspector general for audits, confirmed that the California education department is being audited but cautioned against drawing the conclusion that this means there has been wrongdoing.