Santa Clara County’s District Attorney has accused the Mexican American Community Services Agency’s former chief executive officer and former chief financial officer of cleaning out their employees’ retirement accounts to the tune of $1 million. The third C-level MACSA employee at the time, former MACSA chief operating officer and current San Jose City Councilmember Xavier Campos, escaped criminal responsibility for the pension fund misappropriation. Campos is the brother of state assemblywoman Nora Campos, who preceded him as District 5 representative.
Former MACSA CEO Olivia Soza-Mendiola and former CFO Benjamin Tan were both charged with felony grand theft for illegally diverting retirement funds of teachers and employees of two schools the organization operated during the span of 2004 to 2009.
San Jose Councilmember Xavier Campos, held the role of Chief Operations Officer at the nonprofit organization during the time of the theft. Campos was elected to public office in 2010.
The arrest warrant and complaint notes that while “Campos was almost certainly aware that MACSA had failed to make at least some pension payments,” there was a lack of evidence that he had a direct role in stopping retirement payments.
“Our charging decisions are based on facts and evidence, not rumors and speculation,” District Attorney Jeff Rosen said during a press conference Thursday. “Mere knowledge of criminal activity” is not enough.
According to the complaint, MACSA stopped making nearly all employer payments to its pension plan provider (VALIC) in early 2004, began skipping payments to the provider for employee pension contributions in 2007 and stopped all payments completely in January 2008. Somewhere between 50-100 employees of the nonprofit were affected by the embezzlement, according to Deputy DA John Chase.
A DA investigation that began in 2009, after a Gilroy Dispatch story exposed the embezzlement, shows that Soza-Mendiola and Tan illegally directed pension contributions to avoid layoffs, support their high salaries and maintain day-to-day costs that included “sports, food, computers and office supplies,” according to the complaint.
But even though payments weren’t made into the pension plan on behalf of employees, their pay stubs showed otherwise.
If convicted, Soza-Mendiola and Tan face up to three years in jail and a $10,000 fine. The DA’s office also said the pair will be required to pay full restitution to the victims.
According to the complaint, Tan—who worked on a contractual basis and did not personally pay into the pension plan— often told one of his assistants, Arasselli Vassallo, which bills to pay and which to hold off from sending out. In 2004, Vassallo told investigators, Tan told her to stop making employee contribution payments to VALIC. The organization did keep photocopy records of those bills, although it’s difficult to determine how serious MACSA leadership considered the accumulating backlog. The complaint says that even when MACSA had the money to make retirement payments it chose not to in some cases.
Notes from board meeting packets in 2004 and 2007 show that MACSA’s top officials should have been aware of the lack of retirement payments being made. An email as early as Feb. 20, 2004, from Soza-Mendiola to Tan, included the note: “The agency’s portion of the retirement funds is not being paid as well.”
In June 2007, Soza-Mendiola reduced her personal contribution from $1,666 per month to $0. The DA believes that her action was motivated by her knowledge that the funds were being used for operations, including executive salaries, rather than being deposited to employee retirement accounts. The report says that more troubling than the fact that Soza-Mediola stopped her own contributions is that she failed to alert her employees to do the same. She also received 3-percent pay raises in mid-July 2007 and again a year later. Four months later, MACSA management, under pressure from employees and their union, took a 25 percent pay cut.
By that time, however, Soza-Mendiola “had already received at least $20,000 in extra take-home pay” since June 2007, the complaint notes.
MACSA’s office manager, Aurora Cespeda, was not charged Thursday, because she did not control the money in the organization’s bank accounts and there was no proof that she had a role in stopping retirement payments. Cespeda did, however, know about the retirement payment diversion and she stopped her personal pension contributions Nov. 30, 2007, well before most others—aside from Soza-Mendiola.
Campos regularly attended MACSA board meetings, which often discussed the pension obligations, leaving many to wonder if he was involved in the diversion of funds. The complaint notes that Campos “took a lead role in the effort to sell real property owned by MACSA in part to satisfy past due pension obligations.”
But Campos’ lack of control over MACSA’s money, as well as his decision to continue making contributions to the pension fund—when he should have known they were worthless—seems to have kept him out of the DA’s crosshairs.
Campos and most other MACSA employees handling the organization’s money stopped making pension contributions in August 2008. The complaint concludes: “Thus, the timing of Mr. Campos’ termination of his pension contributions suggest that he became aware of the seriousness of the problem at about the same time as the union and these other MACSA employees, which in turn suggest that Mr. Campos did not participate in the initial decision, made a year earlier, to stop the required pension payments.”