Montebello school district officials discussed ways to ‘reward’ certain companies, notes about contract meeting suggest

The Montebello Unified School District raised eyebrows last year when it awarded a $2.5-million painting contract to a firm even though a competitor offered to do the same work for less than half the price.

School leaders defended the decision, saying the lower-bidding contractor didn’t have its paperwork in order.

An internal document obtained by The Times shows that a district finance manager had become alarmed by what he saw as pressure to reward certain companies in the contract bidding. Kevin Lee wrote in notes of a meeting with other officials that he told them they were “very close to breaking the law” as they discussed ways to structure the bid so Castlerock Environmental Inc. and another company would get the work.

Castlerock was not bidding directly for the job but would be a subcontractor to GDL Best Contractors Inc. GDL was not mentioned in the notes, but it ended up giving Castlerock a $706,000 job as subcontractor, according to contract records.

In the notes — which describe a Feb. 3, 2016, meeting with other staff — Lee expresses unease about the process.

“I warned that we were getting very close to breaking the law and operating in a very gray area and that I wasn’t comfortable doing that,” Lee wrote.

The deal had become a heated political issue at Montebello Unified and sparked a lawsuit by the losing bidder, A.J. Fistes Corp., which claimed the district violated public contract laws in awarding the contract. Fistes’ suit centered on whether the district improperly required Fistes to submit a financial statement and corporate seal at the time of its bid, not on the issues mentioned in Lee’s notes.

A judge dismissed the suit earlier this month over lack of standing, according to Fistes’ attorney Kevin Carlin, who added that they plan to appeal the ruling.

GDL’s bid was $1.4 million more than Fistes’ bid, bidding records show. Lee’s notes include only statements about district officials and make no claims about the conduct of GDL, Castlerock or any other firm.

Marty Gonzales, a partner with Castlerock, said his company got the job in a legitimate bidding process that included a site walk with other potential bidders and said there was no favorable treatment given.

“It’s news to me, and basically absurd,” Gonzales said.

GDL could not be reached for comment.

Montebello Unified said in a statement that Lee’s notes describe a “totally fabricated” conversation.

The district said it reviewed schedules, interviewed a majority of those named as having attended the meeting and “concluded” that there was “no manager or project meeting” that day and that a meeting on those “topics” did not occur.

“This is clearly a false and dishonest accounting,” the statement said.

A chain of emails involving district officials indicates that a meeting about the painting contract did occur on Feb. 3. The emails support parts of Lee’s account — including that the district was looking to do business with Castlerock and that officials were considering structuring the bid as described in Lee’s notes.

In an interview with The Times, Lee stood by the account he described in his notes but declined to comment further.

Two other district officials listed as having attended the meeting spoke to The Times on condition of anonymity and said that the meeting occurred as Lee described.

Carlin said he also obtained a copy of Lee’s notes through a document request he made to the district as part of the lawsuit. He said the district’s lawyer at the time, David Kenney, gave him the notes last November.

Kenney confirmed to The Times that he obtained the notes “in the course of litigation” and gave them to Carlin.

The Montebello Unified School District has been mired in controversy over a major budget shortfall, potential layoffs and allegations of mismanagement and corruption. A state legislative committee in March approved an audit of the district.

According to Lee’s account, during the meeting it was mentioned that Ruben Rojas, a former chief business officer, and school board members wanted to “reward” companies that previously worked with the district on an asbestos cleanup, including Castlerock and another company, Argus, which the district said did not end up bidding for the contract.

Mike Weaver, a facilities project coordinator, argued that might not be possible because the “public contracting code” requires the district to award the contract to the lowest bidder, according to Lee’s account.

Rojas told The Times that he could not comment because he was not present at the meeting.

District officials then discussed changing the contract award from a painting one to an environmental consulting job because such a contract did not have to adhere to the lowest-bidder rule. Lee agreed that hiring an environmental consultant “could be based on who we wanted, not necessarily the lowest bidder,” according to his note.

Eventually, according to Lee’s account, someone suggested awarding the consulting contract after the bid, “in case Castlerock or Argus was not the lowest bidder.” That’s when he told them “we were getting very close to breaking the law,” Lee wrote.

The Montebello school district’s board ended up approving the “Exterior Environmental Remediation and Painting” contract with GDL, with Castlerock as the subcontractor, on April 7 of last year. The district disqualified the less-than-half-price bid submitted by A.J. Fistes because the proposal didn’t include a corporate seal and financial statement.

Art Revueltas, a former deputy superintendent with the district, said it was common for the district to reissue the bid if another bidder had a much better price and was only disqualified because of paperwork.

Revueltas also said Lee was an “honest” person who was a “stickler” for rules and that he did not believe the district’s statement that Lee had fabricated the conversation.

The district in a statement said that allowing A.J. Fistes to rebid to fix its paperwork, “no matter how minor” the issue, would have been an “exploitation and corruption of the system designed to protect the public trust.”

Adam.Elmahrek@latimes.com

@adamelmahrek