Four indicted in probe of school funds

A Santa Barbara County grand jury has indicted a former school district official in Santa Maria and three former executives of a defunct Temecula company for allegedly siphoning off $3.6 million in state funds intended for school construction.

The 45-page indictment, unsealed Monday, alleges that Cynthia Lynn Clark, 54, a former assistant superintendent of the Santa Maria-Bonita School District, allowed TurnKey, a firm that manufactured prefabricated school buildings, to file expense reports she knew were phony. Clark, who left the district in 2005 and now lives in Cape Canaveral, Fla., could not be reached for comment.

The indictment capped a three-year investigation by the state attorney general’s office. It also was a milestone for the Santa Maria district, whose board president, David Riloquio, called the indictment “an important step toward obtaining justice for our students, parents, employees and community.”

The district has pursued lawsuits against TurnKey’s former officers and has settled lawsuits from subcontractors that TurnKey failed to pay, according to a statement released Monday. The district had contracted for $62 million worth of work from the company but stopped all payments in 2004, when district officials suspected they were being defrauded.

TurnKey was founded in 1998 and expanded so rapidly that it made Inc. magazine’s 2004 list of the nation’s 500 fastest-growing companies. But that explosive growth also was the company’s downfall, said Harold Leo Clark III, its former chief executive.

“We didn’t have sufficient resources to successfully handle it, and we went out of business,” said Clark, 46, who is charged in the indictment along with his former colleagues Michael P. Bannan, 43, and David A. Irwin, 39. Attempts to reach Bannan on Monday were unsuccessful, and Irwin declined to comment.

Harold Clark, who is not related to Cynthia Clark, denied any wrongdoing by himself or his company and said prosecutors did not interview him before they brought their case to the grand jury.

Atty. Gen. Jerry Brown said in a news release that the TurnKey executives used the schools’ money to buy expensive cars and artwork, and to give themselves bonuses. Clark called the allegation “absurd.”

“It’s just his attempt to get press,” he said.

Before TurnKey filed for bankruptcy protection in February 2005, just one of the 16 projects the company had contracted for the Santa Maria district had been finished, according to state officials. The projects have since been finished by other builders.

All four people named in the indictment are charged with misappropriation of public funds, embezzlement of public funds, diversion of construction funds and grand theft.

School districts in San Jose, San Diego and Riverside County had contracts with TurnKey that ended with the company’s collapse.

Gareth Lacy, a spokesman for the attorney general’s office, said the Santa Maria district was by far the hardest hit. He said he was unaware of any other criminal charges against the company.

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steve.chawkins@latimes.com