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Court: Adams 12 Schools Vindicated in Firing Financial Accuser

A judge has vindicated Denver-area school district officials for their decision to remove an employee whose accusations of financially “cooking the books” led to a series of sensational 2013 local TV news reports.

A Sept. 12 ruling by U.S. District Court Senior Judge Richard P. Matsch summarily dismissed claims made by former internal auditor Gina Holub in a lawsuit against Adams 12 Five Star Schools officials. The decision came more than a year and a half after Fox 31 News aired several stories featuring Holub’s claims, such as “State’s 5th largest school district hid millions while cutting services to students?”

In the end, however, the allegations of fraudulent accounting proved to be fueled more by union desires for subsidized pension benefits than by concerns about student services or programs.

Holub’s February 2013 lawsuit claimed that district leaders systematically underspent millions of dollars and hid them in reserves, that she was fired unfairly for blowing the whistle on the practice, and that she was publicly defamed by Superintendent Chris Gdowski and Board of Education Vice President Norm Jennings. Judge Matsch rejected all claims.

“I’m glad this ill considered case was closed in such a fashion that it left no ambiguity surrounding our districts’ high standards for legal and ethical integrity,” Jennings said in response to the ruling. “Our staff won’t have to deal with the distractions of this case and can now focus all their attention on achieving better outcomes for our kids, families, and broader stakeholders.”

Allegations and union protest

In early 2012, new district Chief Financial Officer Shelley Becker “identified a number of issues with the District’s prior budgeting practices,” and began working to fix prior areas of reported underspending and improve budgeting accuracy. An Adams 12 employee since 2007, Holub presented to district leaders and board officials potential concerns with the 2012-13 budget overseen by Becker. The court noted that Holub sent an Aug. 21 memo to the superintendent “in which she claimed that the District was acting illegally and unethically by using inflated salary figures to achieve a fund balance of 10 percent of expenditures.”

Adams 12 contracted with former Colorado Department of Education school finance official Vody Herrmann to independently investigate the allegations of financial misdeeds. Both Herrmann and the district’s external auditors later refuted Holub’s claims and vindicated the district’s efforts to clean up financial practices, the judicial ruling affirmed.

Yet while the investigation was ongoing, Holub privately took her concerns to local and state teachers union officials, a fact district leaders learned months later. The District Twelve Educators Association (DTEA) was locked in a contract dispute over the school board’s 2012-13 budget decision that teachers join other employees in paying for some of their additional retirement costs. The effective 1.5 percent cut in teacher take-home pay was redirected to help cover the funding demands of the Public Employees’ Retirement Association (PERA).

On the same day Holub approached DTEA representative Amie Baca with claims that “the District’s budget expenses had been intentionally inflated by approximately $17 million,” the Colorado Education Association (CEA) president and members of seven different union locals showed up at the Adams 12 board meeting to protest the PERA-related budgeting decision.

TV reports unsubstantiated

Fox 31 reporter Josh Bernstein interviewed both Holub and state and local union officials on multiple occasions to provide criticisms of the school district for his February and March 2013 investigative series. A week after the first story aired, Holub formally took her case to federal court.

CEA filed a letter on March 26, 2013, with the State Auditor’s office demanding “a formal investigation into the budgeting and financial management practices” of Adams 12. The office has released no specific audit of Adams 12 in response to this request. But the State Auditors’ Office July 2013 fiscal health analysis of Colorado school districts identified Adams 12 as one of five districts at high risk for “spending down fund balances.” The concern, no longer identified in the 2014 fiscal health analysis, contradicts the union’s claims of an “excessive fund balance.”

Holub was dismissed from Adams 12 employment in October 2012, which she claimed to be retaliation for her efforts to uncover unflattering information about her employer. District officials said she developed “a personal vendetta” against Becker, her supervisor, that affected her ability to do her job. The court found no basis that she was wrongfully terminated, nor that there could have been any sort of cover-up, as the independent financial investigations were conducted “in good faith.”

A few months after the Adams 12 series aired, Bernstein left Fox 31 News to take a job with Al Jazeera America.

Ben DeGrow

Ben DeGrow is co-editor of Watchdog Wire - Colorado. Contact him at Colorado@WatchdogWire.com to learn how to get involved with citizen journalism in the Boulder State. Follow him on Twitter: @bendegrow

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