Senior Montebello school officials misled investors about serious financial and management problems in the district when they marketed $100 million in school construction bonds, federal investigators said in charges announced Thursday.
The actions could have led to more favorable interest rates, and lower costs, than the Montebello Unified School District would have otherwise received for its construction projects, said an official with knowledge of the investigation.
Montebello schools Supt. Anthony J. Martinez agreed to pay a $10,000 fine as a result of the Securities and Exchange Commission investigation. In addition, the district’s former chief business officer, Ruben James Rojas, has been charged in federal court with falsifying a number of bond documents supplied to investors, the SEC said.
The superintendent agreed to the fine as part of a settlement that also included the school system. Under the settlement, neither Montebello Unified nor Martinez admitted wrongdoing. But the district agreed to establish proper procedures, provide appropriate training for its employees and hire an independent consultant to review district policies and procedures.
Martinez did not respond to a request for comment on Thursday.
Rojas faces trial in federal court, which could result in as yet unspecified civil penalties. He could not be reached Thursday by phone or email.
In the legal filing, the SEC laid out a pattern of alleged misconduct, especially by Rojas, whom investigators singled out as the individual most responsible. The filing accuses Rojas of thwarting oversight of district finances and personal allegations of wrongdoing and then painting a falsely rosy picture of district operations to investors.
Rojas played a central role in managing a $300-million school construction bond that voters passed in June 2016. So far, the district has sold $100 million of those bonds.
In that capacity, “he was ... the primary person” who supplied information through what are called “offering documents” to attorneys, underwriters and advisors for potential investors, according to the SEC filing.
“Rojas received, reviewed and provided edits for multiple drafts of the Offering Documents, and was the only Montebello staff member whose approval was required before any of the three Offering Documents could be disseminated to investors,” the SEC alleges.
In November 2016 the Los Cerritos Community News reported on allegations that Rojas had falsified his resume and also raised questions about his handling of district finances. The firm that conducted the district’s annual financial audit told district officials and the school board that it had a duty to examine these allegations — and that it would need more time and an additional payment to do so, according to the SEC filing.
Instead, the district fired the auditing firm.
In December 2016 the district was ready to start selling the bonds. The bond filings submitted by Rojas indicated merely that the audit was behind schedule. To suggest that all was well, Rojas instead supplied a clean audit from the prior year, the SEC filing states. The district submission did not mention that officials had just fired their auditing firm, which had called for further investigations.
As the district’s top official, Martinez was also responsible for the misconduct as he talked regularly with Rojas and met with the elected Board of Education, the SEC concluded.
At the time the district was experiencing turmoil in its leadership ranks. Martinez had only recently been appointed as interim superintendent. He was later named superintendent. His predecessor, Susanna Contreras Smith, was fired by the board in November 2016, shortly after placing Rojas on leave, pending the results of an internal investigation.
The board quickly reinstated Rojas after removing Contreras Smith. She, in turn, sued the school system, along with another former senior official, Cleve Pell. Both alleged that they were targeted for attempting to blow the whistle on corruption.
In 2018, a Los Angeles County civil jury awarded Contreras Smith and Pell a combined $3.7 million.
Few officials and senior administrators associated with Montebello Unified in recent years have emerged untainted. Board members accused Contreras Smith of leading Montebello toward financial ruin. And the actions of Pell, a beloved figure by many locals, were singled out for criticism by different auditors. They concluded that he had improperly approved questionable and excessive spending in a division he oversaw. He has denied any wrongdoing.
Rank-and-file teachers and employees said the wave of scandals has taken a toll on morale and on resources in the county’s fourth-largest school system. The district nearly became insolvent, and a county-appointed fiscal advisor, Mark Skvarna, has the authority to veto spending decisions. The district successfully cut costs through an early retirement program, but it’s also had to cut back on school maintenance, making it harder to keep campuses clean and presentable.