Santa Clara County District Attorney Jeff Rosen has declined to file charges after a three-year investigation into millions of dollars of contracts between Alum Rock Union Elementary School District and Del Terra Real Estate Services.
The East San Jose school district has for years been shrouded in controversy over the way it mishandled tens of millions of dollars in voter-approved bonds.
In 2013, Alum Rock awarded its first contract to Del Terra for construction management. But four years later, an audit conducted by the state’s Fiscal Crisis and Management Assistance Team revealed double billing and invoices for work that hadn’t started.
A subsequent 2019 audit conducted by California State Auditor Elaine Howle found that the school district didn’t follow its own policies when it came to keeping track of hundreds of millions of dollars in bonds.
A memo obtained by San Jose Inside from the DA’s Public Integrity Unit states that prosecutors found contractual breaches by Del Terra and negligence by district staff and board trustees, but they didn’t rise to the level of criminal violations.
“Although no charges were filed, this Office’s deep diligence in investigating this case speaks to its great import,” DA Jeff Rosen said in the memo. “Our school districts deserve rigorous, competent, and ethical oversight over their finances. These are not just dollars and cents or obscure line items in a contract, they are our hard-earned tax dollars and they are meant to bolster the minds and well-being of our children.”
According to the DA memo, the investigation focused on three issues: whether Del Terra committed conflict of interest crimes by securing additional contracts with the district, whether the firm defrauded taxpayers through change orders that upped costs by $600,000 and whether it pilfered $200,000 in fees for overseeing construction of multi-purpose buildings that have yet to be built at Fischer and George middle schools.
Prosecutors say they did find evidence of Del Terra possibly committing conflict of interest crimes back in 2014, when CEO Luis Rojas “persuaded the school board and district staff to award Del Terra the construction management contract and two smaller contracts.” However, the DA said his office was ultimately unable to file charges due to the crime’s four-year statute of limitations.
In a media statement, the district expressed its disappointment in the DA’s decision.
“With Del Terra’s Chief Executive Officer having recently been charged for criminal activity by the Los Angeles County District Attorney’s Office, it is baffling to believe that charges could not have been raised in Santa Clara County for similar activities,” the response read. “The Santa Clara County District Attorney’s Office missed a clear opportunity to send a message to anyone seeking to exploit public agencies in an effort to access tax dollars, and that this type of behavior will never be tolerated in our county.”
Alison Cingolani, who chairs the district’s Citizens’ Bond Oversight Committee echoed the school district’s dismay.
“The previous board majority of Esau Herrera, Khanh Tran, and Dolores Marquez repeatedly defended the contracts with Del Terra that their own lawyer said were unethical and illegal,” she said. “Now the students, families, and taxpayers of Alum Rock are paying the price. It is beyond belief that DA Jeff Rosen could not find evidence of the criminal behavior readily apparent to auditors and investigators for years.”
Rojas told San Jose Inside that he was “pleased that the investigation has come to a conclusion and that the exhaustive investigation turned up no evidence to support any legal actions.”
Del Terra and Alum Rock, however, are still locked in a legal battle. In August 2019, the school district filed a civil suit against Del Terra for fraud, negligence and breach of contract, among other charges.
“As for the litigation with the district, we are confident that the merits of the case will show the true facts and evidence demonstrating that Del Terra fulfilled its contractual duties and obligations under the contracts, which were both prepared and reviewed by the district’s own legal counsel,” Rojas said. “We look forward to our day in court to resolve these matters.”
Del Terra Real Estate Services has been embroiled in multiple scandals over the years and has been the subject of several state audits.
More recently, the mayor of Pico Rivera and Rojas were charged with illegally making reimbursements to donors of a school board candidate.