Editor's Note: This is the third installment in an ongoing news series examining the details of the Nebraska State Patrol investigation into Bellevue Public Schools.
Sarpy County Attorney Lee Polikov thinks a legislative fix is needed before school officials anywhere in the state could be successfully prosecuted for violating competitive bidding requirements.
According to a report obtained earlier this month by the Bellevue Leader, the Nebraska State Patrol recommended that charges be considered last summer against former Superintendent John Deegan, former Assistant Superintendent Doug Townsend and current Fiscal Affairs Director Kyle Fairbairn.
The patrol recommended that each be charged with official misconduct of office, a Class II misdemeanor that carries a maximum penalty of six months imprisonment and a $1,000 fine if convicted. The patrol alleged that all three were aware that the district was violating a requirement that bids be obtained prior to certain school purchases.
No arrests were made, and none of them have been charged with any criminal wrongdoing. Polikov has said he lacked sufficient evidence that state statute had been violated to pursue any charges against the three BPS officials.
Many bidding irregularities
What started as questions about heating, ventilation and air conditioning repairs at Bellevue West High School blossomed into a list of projects identified by the State Patrol as not following district policies for competitive bidding.
An investigator found 13 projects in which purchase orders exceeded $40,000, the threshold where sealed bids are required, but it appeared no formal bids — or in some cases, no other price comparison whatsoever — took place before work was approved and payments were made to outside contractors and vendors.
The patrol also found "several other purchase orders" that appeared to be above the $40,000 threshold without appropriate bids, but the patrol report said those were already beyond the 18 month statute of limitations for misdemeanors.
"It seems they (BPS officials) did that all the time," Polikov said.
However, Polikov said most of the projects were not for "construction, remodeling or repair" of a school building, which are the only kinds of projects specified under Nebraska Revised Statute 73-106 as requiring bids for projects whose projected cost is greater than $40,000.
Of those projects identified by the patrol, however, three stood out as possible violations of state statute: HVAC repairs at Bellevue West and auditorium seat installations at both Bellevue West and Bellevue East high schools.
Polikov said he anticipated that the defense would argue each HVAC unit at Bellevue West constituted a separate project.
Deegan consistently has said he did not believe bids were necessary on the units that cost less than $40,000 and, in an interview in 2010, Fairbairn said the district was planning to bid larger units.
"I think the defense would be that they have a loophole," Polikov said.
As for the auditorium projects, Polikov said he and his staff discussed at length whether to bring charges but were unsure whether the projects would meet the requirements to be considered a violation of state statute.
"If you bolt the chairs on the floor, is it remodeling?" Polikov asked.
Determining when bids are necessary can be unclear, said Carol Ebdon, former finance director for the City of Omaha.
Ebdon, an associate professor of public administration at the University of Nebraska at Omaha, said requiring public entities to solicit sealed bids does more than ensure a good price.
"These bidding requirements are intended to show that government is open and transparent in the way that we provide services," Ebdon said. "In practice, it can become difficult. The bidding process takes time to do, and sometimes it is difficult to deal with the bidding because of the timeframe involved."
Ebdon said governments sometimes will split projects for different reasons. She said no consensus exists on defining a project, which could be divided into phases or based on timing or other considerations.
Ignorance, not malice
Beyond practical considerations, Polikov said he believes bringing charges for official misconduct would have been unethical.
Polikov said the goal of a prosecutor is to hold people accountable and find a just resolution. He said he has an ethical obligation only to pursue those cases that he believes he can win.
"A lot of this was not so much malice as they just didn't know any better," Polikov said. "I don't think Deegan was a mastermind criminal guy who sat around thinking about how he could rip the taxpayer off."
Polikov said he thought the school administrators believed they were doing the right thing for the community. Deegan said he felt his administration was doing "nothing but saving the taxpayers' money."
When asked whether he should have let a judge decide the interpretation of the statute, Polikov said county attorneys routinely decide not to pursue cases when they are unsure of the meaning of the law.
"I think it is up to me," Polikov said. "This is my job. This is a decision we go through with every case."
Rebecca Trammell, an assistant professor of criminal justice at UNO, said prosecutors must make sure a suspect broke the law and that they have sufficient evidence before filing charges. To do otherwise could waste time and money on an unsuccessful prosecution and would hurt the prosecutor's success rate.
When a statute is ambiguous, Trammell said that room for interpretation often can amount to reasonable doubt in a criminal trial, especially if there are not other cases to serve as precedent. That alone would not keep a prosecutor from filing charges to see if a judge or grand jury finds enough reason for a charge.
"Personally, if I was a prosecutor, if there were several ways to interpret the law, I probably wouldn't bring charges," Trammell said. "If the judge won't be able to give adequate instructions to the jury, that's going to be a problem."
Polikov said he thought his "best shot" at a conviction was pressing charges against Townsend, but he factored in Townsend's discipline by the district and his eventual separation agreement after being threatened with termination.
"Do I solve anything by getting a conviction on Townsend?" Polikov asked. "That wasn't going to accomplish the bigger picture."
Townsend declined to be interviewed for this article, and Fairbairn did not return phone calls. However, a summary of Fairbairn's interview with the State Patrol was provided to the Leader as part of the patrol's report.
Deegan said he's done nothing wrong and his opinion remains unchanged the past two years.
"I think it is pretty clear," Deegan said Tuesday. "Kyle (Fairbairn) and I never had anything to do with it."
A legislative remedy?
The criminal justice system is not a cure-all, Polikov said. But while he said charges would have been inappropriate, Polikov said a legislative remedy to address school purchasing would allow future prosecution if changes were not made to follow competitive bidding rules.
State Sen. Scott Lautenbaugh of Omaha introduced Legislative Bill 1168, which would essentially require Omaha, Lincoln and Bellevue public schools — those serving communities with population above 50,000 — to abide by the purchasing and bidding requirements used by county governments.
Polikov testified in support of the School District Purchasing Act on Feb. 21 before the Legislature's Education Committee. However, the bill was not named a priority and appears unlikely to leave committee in the remaining days of the current legislative session.
Ultimately, Polikov said he believes a solution like LB 1168 would be a more meaningful change than anything a criminal court could provide.
"It's a better vehicle or statute for the schools to operate," Polikov said. "The solution to this problem is legislative not criminal."
Board reaction mixed
Nina Wolford, the board member who prompted the district's initial internal investigation that first brought up the bidding concerns, said the patrol report shows why the school board needs to pay attention to purchasing decisions.
"We have learned that we need to watch carefully for bids that should come to us," Wolford said.
However, board member Frank Kumor said the school board is involved in approving large projects because of state statute. He said he doesn't think it is the school board's place to micromanage the bidding process.
"The school system has people in place to do the bidding," Kumor said.
John Hansen, the longtime board president who is not seeking re-election, said the issue of bidding has come up before. He said that if Polikov has an issue with how the district handles business, then he should file a charge.
"I'm not going to sit down there when they open for bidding," Hansen said. "These same items were brought up almost a year and a half ago."
District makes improvements
Annual external audits by Deloitte and Touche since questions began being asked in 2010 have asserted that the district may have violated statutory bidding requirements. To address the possible liability, the auditors made recommendations for improved policies, which the district has adopted.
Among the recommended changes were specific criteria for determining when work makes up a project that includes examples and training for district personnel who work with purchasing.
A review of the district's fiscal year 2010-11 books and improved policies earned praise from auditors for implementing their recommendations. But they suggested setting clear guidelines for what is considered a "project" because of concerns about subjectivity.
"We definitely saw them take the right approach," Tricia Montague of Deloitte and Touche said in December. "There were a lot of improvements on the process."
Superintendent Frank Harwood said sometimes deciding what constitutes a project can be "pretty nebulous," but he said BPS is asking for bids whenever they can be reasonably done — even under the $40,000 threshold.
In the months since Harwood took the district's reins in July 2011, he said additional improvements have been made in the process.
The district now provides an explanation for any purchase order in excess of $40,000 for which it does not seek sealed bids. Harwood said bids usually are not received because the product can only be obtained from a single source — such as copyrighted materials or Apple computers, which the company prohibits retailers from selling to schools directly — or because of an emergency situation.
Harwood said the district looks for patterns in those cases where change orders for unexpected work expand the scope of projects beyond the $40,000 threshold. He said the district also monitors when several buildings make similar purchases so that bids can be obtained whenever reasonable.
For smaller purchases, Harwood said district policy is to obtain multiple quotes, not sealed bids, because they are faster and easier to obtain. For purchases less than $5,000, BPS doesn't require obtaining quotes, but Harwood said employees are instructed to try to obtain the best price with a reasonable amount of research.
District employees also are forbidden to split purchase orders simply to avoid having to shop around for the best price, Harwood said. Purchases still may be split to spread costs out among multiple budget years, but he said those purchase orders will be viewed as part of the same project.
"We may still split projects," Harwood said. "The directive is right now that we will not split purchases to avoid bids or quotes."