Scottsdale Schools’ Ex-CFO Indicted On 11 Felony Charges

On May 8, 2018, the Arizona Attorney General’s Office presented evidence to the Arizona State Grand Jury that led to the indictment of Laura Smith, the former chief financial officer of Scottsdale Unified School District. Smith was charged with 11 felony counts of conflicts of interest and fraudulent schemes.

The Arizona Attorney General’s Office and the Office of the Auditor General conducted a joint investigation revealed that from February 2017 through January 2018, Smith failed to disclose her substantial interest with a district vendor, The Professional Group Public Consulting, Inc. (PGPC), and she participated in district decisions affecting PGPC.

The joint investigation found:

Laura Smith began working for the District in February 2017 as the chief financial officer and was responsible for budget planning, financial management, business services, and internal auditing. In addition to her district employment, Smith was employed by PGPC, a for-profit corporation engaged in the business of providing consulting services to Arizona schools and public entities, including the District. The District had an ongoing contract with PGPC through a purchasing cooperative at the time of Smith’s hiring.

Smith and her sister were shareholders of PGPC with respective interests of 17.72 percent and 50.63 percent. They each also held director and officer positions in PGPC, and until December 2017, Ms. Smith was PGPC’s statutory agent, which is the individual designated to receive service of process when the business is a party to a legal action.

In November 2017, the District’s general counsel retained outside legal counsel to review certain issues, including the procurement of PGPC’s services and Ms. Smith’s alleged conflict of interest with PGPC. On January 19, 2018, after outside legal counsel interviewed Ms. Smith, the District placed Ms. Smith on administrative leave, and on January 26, 2018, Ms. Smith submitted her resignation effective that day.

Although Ms. Smith signed a district staff conflict-of-interest form in February 2017 shortly after being hired, she made no mention of PGPC or any other substantial interest. She completed another form in May 2017 after a constituent inquired about Ms. Smith’s conflict-of-interest disclosures, yet she identified only that she was a part owner of PGPC. She failed to disclose the proportion of her ownership and that she was also an employee, director, and president. Additionally, Ms. Smith made no mention of her sister, who is also a shareholder and director, and was at the time secretary and treasurer.

All these situations, including those of Ms. Smith’s sister, meet the criteria of substantial interest and should have been disclosed.

Ms. Smith should have known the importance of adhering to conflict-of-interest statutes and policies. In particular, prior to becoming a district employee and during her work with PGPC, Ms. Smith conducted at least one consulting review of the District’s special education department in which she and another consultant specifically addressed whether district employees were also vendors and had conflicts of interest.

Additionally, Ms. Smith was a member of the Arizona Association of School Business Officials whose Code of Ethics states, in part, that members should “Avoid conflict of interest situations by not conducting business with a company or firm in which the official or any member of the official’s family has a vested interest.”

District conflict-of-interest policies specifically cite Arizona Revised Statutes (A.R.S.) §§38-501 through 511 and require that employees affirm that for any substantial interest circumstances, they will refrain from participating in any manner; however, Ms. Smith still participated in district decisions affecting PGPC. Specifically, in March 2017, Ms. Smith coordinated with her sister and several district employees concerning hiring PGPC for services involved in reviewing one of the District’s construction procurements.

Further, she participated in the approval process from March through May 2017 for three change orders increasing payment thresholds for PGPC by $8,863. All three PGPC change orders lacked the required procurement officer approval signatures, and for one change order, Ms. Smith more than doubled the purchase order amount from $5,400 to $11,400.

Finally, from April through October 2017, Ms. Smith participated in the approval process for six purchase orders to PGPC totaling $43,766, two of which were improperly issued after PGPC services had already been provided. During Ms. Smith’s employment with the District, the District paid PGPC $86,733.

Smith reportedly divested herself of PGPC when she sold her PGPC shareholder interest back to the company in May 2017. However, she continued to receive payments from PGPC through January 2018 while employed by the District and participating in district decisions affecting PGPC. Specifically, in addition to the $10,000 payment for her PGPC shareholder interest, from April 2017 through January 2018, Ms. Smith received commissions, hourly wages, and travel, mileage, and other reimbursements of $18,004 and an Individual Retirement Account match of $426 from PGPC.

Certain administrators, including the former superintendent and an assistant superintendent, were either already aware through general knowledge or were informed by others that when Ms. Smith was hired, she and/or her sister worked for and/or owned PGPC. Nonetheless, these administrators failed to take timely action, which allowed Ms. Smith to continue participating in district decisions affecting PGPC.

5 Comments on "Scottsdale Schools’ Ex-CFO Indicted On 11 Felony Charges"

  1. If ever there was impropriety in TUSD , Sunnyside , Foothills or Flowing Wells
    I am certain that the Education Director of Pima County and BabblaWallz would have been on it eventually.

  2. and my comment was censored

  3. The Evil One | May 15, 2018 at 6:11 am |

    WOW.
    The Arizona Attorney General’s Office and the Office of the Auditor General can find misuse of money in a school district, but can’t find it in a sheriffs office?

    • Smith and her sister were shareholders of PGPC with respective interests of 17.72 percent and 50.63 percent. Low hanging fruit

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