ForensicAccountingExamination

BeaumontIndependentSchoolDistrict2007BondProgram
October9,2015

Background
OnJuly26,2001,3D/International(3D/I)providedBeaumontIndependentSchoolDistrict(theDistrictor
BISD)withitsDistrictWideFacilitiesAssessmentwhichwasacomprehensivestudyofthecosttorepair,
maintain, or replace the Districts facilities. In May 2006, Parsons Commercial Technology Group, Inc.
(Parsons) acquired 3D/I. The District made a recommendation to the Board of Trustees (Board or
Trustees) on September 21, 2006 to sign a Master Agreement with 3D/I to provide prebond services
which included both Level 1 and Level 2 assessments of the Districts facilities; this Agreement was
signedbybothpartiesonSeptember29,2006.Thetotalcostofthecomprehensivefacilitiesevaluation
wasnottoexceed$403,727.Thisprojectresultedinfourfacilitiesassessmentreports,culminatingwith
theOrangeBook,datedAugust27,2007.TheOrangeBookprovidedthebasisforthe$388.6million
Bond Program which was authorized by the Board on August 30, 2007 and approved by the voters
November6,2007.

ParsonswashiredtoactasProgramManagerfortheBondProgramonNovember19,2007.Parsons
oversawtheconstructionprojectsuntilitscontractwasterminatedonFebruary21,2013.Atthistime
therewerefourremainingincompleteconstructionprojectswhichwereturnedovertobemanagedby
Fittz&Shipman.

TheDistrictwasrockedbyaseriesofcriminalfraudinvestigationsandconvictionsstartinginlate2013.
DevinMcCraney,DirectorofFinanceforBISD,andSharikaAllison,ComptrollerforBISD,pleadguiltyin
April 2014 to embezzling $4,041,705.27 from BISD by means of 18 separate wire transfers to bank
accountsundertheirpersonalcontrol.McCraneywassentencedto68monthsinfederalprisonandwill
havetopaymorethan$4millioninrestitutiontotheDistrict.Allisonwassentencedto48monthsin
federalprisonandwillhavetopaymorethan$1millioninrestitution.

OnFebruary20,2014,theBoardhiredGayleBotley,CPA(Botley)whowasthecurrentexternalauditor
atthetimetoaudittheBondProgramfunds.Botleywaspaid$308,730toconductthisauditwhichwas
notcompleted;Botleydidnotissueanyreportsinconnectionwiththisaudit.TheBoardwasreplaced
bytheBoardofManagers(theManagers)onJune15,2014bytheCommissioneroftheTexasEducation
Agency.WeaverLLPwasengagedtoconductaforensicaccountingexaminationoftheBondProgram
onDecember19,2014(Exhibit01).Aftercompletingascopingexercise,WeaverprovidedtheManagers
itsFeeEstimateandPreliminaryWorkPlandatedJanuary15,2015(Exhibit02).Thislatterdocument
setsforththescopeanddeliverablesforthisengagement.

We conducted a detailed examination of documents related to the Bond Program and information
containedintheDistrictsfinancialrecords.Thisincludedthebondissuancedocumentationandrelated
bankingandinvestmentaccountinformation.

In addition, we examined IMPACT, Parsons proprietary program management database, and the
voluminous hard copy construction files left behind at the Districts Administration Building. We
accounted for the $388.4 million received in bond proceeds as well as the interest income earned on
thesefunds.Therewereabout$17.4millioninexpendituresrelatedtotheBondProgramwhichwere
miscoded in the Districts accounting records. After an unsupported and improper transfer of $8.1
milliontothegeneralfundandthensubsequentlytothedebtservicefund(theuseofbondproceeds
forinterestpaymentswasprohibitedunderthebondissuancedocuments),therewasabalanceinthe
bondprojectfundsof$225,559(asofFebruary2015).

We conducted over 145 witness interviews and collected and examined over 8,900 documents which
have been annotated and incorporated into our analysis and this report. The Managers directed
Weaver to assist the Federal/Local Task Force (Task Force) in pursuit of its own investigation and
prosecution of wrongdoing related to the Bond Program. To date, we have made the following six
written referrals to the Task Force regarding actions arising from the Bond Program and/or related
hurricanedamagerepairs.

1. ScottM.Favre,PA,LLC
2. JohnH.Elamad,InternationalDesign&ConsultingGroup,Inc.,dbaECM
3. HealthyResourcesEnterprise(EricBoutte)
4. ProtectorsInsuranceandFinancialServices,LLC
5. AndreLewis,dbaArchitecturalAssociates
6. W.B.Construction

We anticipate providing this report to the Task Force as well, which includes at least two more
recommendationsforprosecutorialconsideration.WehavemadeourselvesavailabletotheTaskForce
andprovidedassistanceasneeded.Wehavealsoidentifiedanumberofimproprietiesorquestionable
acts or practices involving the promotion, management, or oversight of the Bond Program which are
detailedbelow.

AswehaveadvisedtheManagersandtheDistrict,weweredeniedaccesstoanumberofcurrentand
former Parsons employees which we believe have critical information regarding the transactions
reported herein. This denial was at the direction of Parsons legal counsel. In the absence of this
testimony, we were forced to establish a largely circumstantial case regarding the activities reported
herein.

OnSeptember2,2015wecontactedDr.CarrolThomas(Thomas)inordertogivehimtheopportunityto
explaintheactivitiesreportedbelow.Thiswasaneffortonourpartstobefairandobjectiveregarding
ourfindings.Thomasadvisedhewouldgetbacktous.OnSeptember4,2015wewerecontactedby
legalcounselforThomaswhoadvisedhe,legalcounsel,hadbeencontactedbyScottFarve(subjectof
Task Force referral). Legal counsel stated Farve informed him he had received a federal grand jury
subpoenaforhisrecordsregardingworkperformedfortheDistrict.Wewerefurtherinformedthatlegal
counselwas advisingThomasnot tospeakwith usinlightofwhat counsel believedto beanongoing
criminalinvestigationintovariousmattersreportedbelow.

Dr. Willis Mackey (Mackey) was also contacted and requested to be interviewed regarding the facts
surrounding the hiring of Parsons. Mackey briefly discussed the circumstances and agreed to an
interview. Mackey was not available for interviews as promised. This lack of cooperation has been
reportedtotheTaskForceforwhateveractionitdeemsappropriate.

The following is a detailed analysis of our investigation, findings, and recommendations. We are
availabletodiscussthesefindingswiththeManagersandtheDistrict.

AccountingfortheBondProceeds
OneofWeaverschargeswastodeterminewhethertheproceedsfromthe2007BondProgramwere
properly accounted for and only spent on Boardapproved bond projects. We conducted a detailed
examination of the bond funds, both receipts and expenditures. A detailed explanation of our
examinationwaspreparedandisincludedherein(Exhibit03).

The 2007 Bond Program consisted of seven separate bond issuances, beginning in March 2008 and
ending in May 2011, which totaled $388,420,205. These bond proceeds were deposited into seven
separate, interestbearing investment accounts at Lone Star Bank. The total amount of bond funds
availablewas$391,394,467whichincludedinterestearnedof$4,038,291lessadebtservicepaymentin
August2013of$1,064,029.

On the financial accounting side, individual General Ledger bond fund accounts were created to track
eachofthebondissuances(Fundaccountnumbers628through634).Bondrelatedexpenditureswere
notpaidfromtheinvestmentbankaccountswherethefundswereoriginallydeposited.Insteadfunds
weretransferredperiodicallyfromtheseinvestmentaccountsandcomingledintotheDistrictsgeneral
fund bank account to pay Bond related expenses. These individual Fund transfers to the general
accountdidnotcoincidewithexpendituresbeingmadefortheBondProgram.

We identified bond related expenditures from the Districts check register totaling $359,703,689. In
addition, we also identified bond related wire transfers totaling $6,361,490. We further identified an
additional$17,399,466inbondrelatedexpenditureswhichweremiscodedtothe general fundorthe
capitalprojectsfund.Approximately$14.4millionoftheseentriesweremiscodedunderthesupervision
of McCraney and Allison. In total we identified bond related expenditures of $383,464,645, which
included$308,730paidtoBotleytoauditthebondfunds.WedonotbelievethatBotleysfeesarean
approveduseofBondProgramfunds.ItisourunderstandingtheDistricthasfiledsuittorecoverthese
andotherfundsfromBotley.

Thedifferencebetweenthetotalamountofbondfundsavailableof$391,394,467andthe$383,464,645
inexpendituresidentified was$7,929,822.OnAugust14,2014,$8,184,327wastransferredfrom the
remaining Lone Star accounts to the General Fund, and subsequently transferred to the Debt Service
Fund.Thebondfundhadabalanceof$225,559asofFebruary2015.

BasedonourdiscussionwiththeDistrictsInterimFinanceOfficerandthecurrentexternalauditors,this
transferof$8,184,327cashresultedfromapriorperiodadjustmentmadebyBotleyfortheyearending
August 31, 2012. According to this prior period adjustment, the bond funds were reimbursement for
amountsowedthegeneralfundforbondrelatedexpenditureschargedtothegeneralfund.Wenoted
this amount was transferred out of the bond funds to the Bank of America Consolidated account,
subsequentlytotheBankofAmericaDebtServiceaccount,andultimatelytotheBankofNewYorkasan
interestpaymentrelatedtothebondprinciplebalance.Wewereunabletofindanyevidentiarysupport
forthispriorperiodadjustmentjustifyingthe transferofthese bondproceeds.Aspreviouslystated,
theuseofbondproceedsforinterestpaymentsisprohibitedunderthebondissuancedocuments.

ConclusionandRecommendations
We noted numerous instances where the Districts accounting records regarding the receipt and
disbursementofBondProgramfundswerenotaccurateorproperlymaintained.TheDistrictsrecords
regarding Bond Program expenditures did not agree with the information in Parsons IMPACT system
which was supposed to track all the details regarding the Bond Program. Furthermore, the Bond
Program funds were improperly commingled with the general fund bank accounts making a proper
accounting of these funds extremely difficult. In addition we noted that cash account reconciliations
were not performed on a periodic basis. We recommend that in the future, the District does not
commingle bond proceeds with the general fund. Also, we recommend a proper accounting which
includes timely and accurate accounting entries be made and that cash account reconciliations be
performedonamonthlyorquarterlybasis.

FacilitySystemsConditionAssessment(s)
TheSeptember29,2006MasterAgreementcontractedwithParsonstoconductadistrictwideFacility
Systems Condition Assessment (Assessment). Parsons submitted four versions of the Assessment
between February and August of 2007. These reports played a pivotal role in the passage of the
November 2007 Bond Program by providing the basis for the Boards approval of the Bond Program
amount as $388.6 million. In addition, the detailed projectbyproject assessment and construction
budgetswererelieduponandusedbytheCommunityAdvisoryBondCommittee(CABC)(discussedin
detailbelow)togeneratethenecessarycommunitysupportforpassageoftheBondProgram.

CommunitysupportforanewBondProgramwaslackinginlargepartduetothecommunitysperceived
failure of the 1994 $56 million bond issue. The District was unable to complete the promised new
construction and improvements to existing facilities. As a result, the voters lacked confidence in the
Districttoproperlymanagealargescaleconstructionprojectorspendpublicfundsappropriately.The
CABCwasformed,inlargepart,tointeractwiththecommunityandpromotethepassageoftheBond
Program.ThecostprojectionscontainedintheAssessmentswereinstrumentalingainingthesupport
oftheCABC.Asdescribedbelow,CABCmembersfeeltheyweredeceivedastothecostsofthebond
projects,inparticulartheMultiPurposeFacility,throughtheinformationcontainedintheAssessments.

On July 26, 2001, 3D/I issued its DistrictWide Facilities Assessment which addressed Deferred
Maintenance,CapitalRenewal,andEducationalSuitability(Exhibit04).Thestudyincludedthirtyseven
constructionprojectswithanestimatedreplacementcostof$390.6million.Itisinterestingtonotethat
in20013D/Iestimatedthecostofthenewsportsfacilityat$33.4million(Exhibit04,page16).

On September 21, 2006, Jane Kingsley (Kingsley), BISD Chief Financial Officer, recommended that
Thomas approve the contract with 3D/I to conduct a comprehensive facilities evaluation (Exhibit 05).
The District executed a Master Agreement with 3D/I (Parsons acquired 3D/I May 2006), dated
September29,2006,toperformasecondneedsassessmentoftheDistrictsfacilities(Exhibit06).The
costpertheagreementwas$403,727.TheBoardapprovedtheagreementatitsSeptember21,2006
meeting. On March 19, 2007, Terry Ingram (Ingram), BISD Assistant Superintendent for
Administration/Operations, recommended Thomas to extend the agreement to December 2007 at no
additionalcost(Exhibit07).

Between February and August 2007, Parsons provided the District with four assessments, each one
containing detailed project information and budgeted construction costs for each of the 40 projects
detailedintheassessment.Thesereportsareasfollows.

The Red Book (Community Advisory Bond Committee Recommendations), estimated cost
$371,522,651 (exclusive of the MultiPurpose Facility (the Athletic Facility) at a cost of $33.4
million),datedFebruary24,2007(Exhibit08).

TheGreenBook(FinalReport),estimatedcost$443,903,945(includestheAthleticFacilitybudget
of$29.8million),datedApril27,2007(Exhibit09).

The Blue Book (Summary Report), estimated cost $443,903,945 (includes the Athletic Facility
budgetof$29.8million),datedJuly23,2007(Exhibit10).

TheOrangeBook(August27,2007Updates),estimatedcost$388,553,301(includestheAthletic
Facilitybudgetof$29.8million),datedAugust27,2007(Exhibit11).

Thesereportswillbediscussedinfurtherdetailbelow.

The Orange Book, dated August 30, 2007, was the final report and the one presented to the Board,
which on August 30, 2007, approved an order placing the Bond Program on the November 6, 2007
generalelection(Exhibit12).TheBondProgrampassedandonNovember15,2007.Ingraminformed
Thomasofthecertifiedelectionresults:8,634votesforand6,373against(Exhibit13).Asevidenced
bytheseresults,thevotewasveryclose,amplifyingthedeceptionsdetailedbelow.

The Orange Book listed 40 separate projects with total construction costs estimated at $295 million,
whichincluded$32millionforDesign&Contingency.TheTotalInvestmentsetforthintheOrange
Bookwas$388.6millionwhichincludedanadditionalamountforinflationof$72million.Otherfees
of $21 million include regional construction premium, management and expenses, bond fees, and
hazardousmaterialremediation(Exhibit11,pages12).TheaforementionedschedulefromtheOrange
BookwaspublishedontheDistrictswebsite,www.beaumont.k12.tx.usaswellasincludedinParsons
proposal in response to the Districts RFP for Program Management Services (Exhibit 14). Both Board
and CABC members advised us that the existence of the $72 million inflation figure was important in
lendingtheirsupporttotheBondProgram.Somestatedthecommunitywouldnothavevotedforthe
BondProgramiftherewasnomarginforcostoverruns.

Inflationsanalysis
TheOrangeBookincludedaschedulesupportingParsons$72millioninflationamount.The$72million
wascalculatedoverafiveyearperiod.Itisimportanttonotethis$72millionwasinadditiontothe$32
million in design and contingencies already incorporated in the total budgeted project costs of $295
million.Ouranalysisshowsthe$72millionwasallocatedtospecificconstructionprojectsconsummated
between March 2009 and March 2010, a one year period and not the five year period Parsons
represented in the Orange Book to the Board, CABC, and the community. There were 39 budget
reallocationstotaling$69.3millionfromthe$72 millioninflationamount.Thesebudget reallocations
occurredbetweenMarch2009andMarch2010.

Thebudgetreallocationsweremadetonearlyallbondprojects.WitnesseshavetoldusthatParsons
assessment was at a lower grade building material than what the District believed they were getting,
whichwasabouta$400,000upgradeperproject(Dishmanquality).Baseduponanalysisofsomeof
the projects, it appears that Parsons cost estimates were significantly undervalued, for example the
classroom additions at schools where Fibrebond provided prefabricated construction. The stated
purpose for using prefabricated construction was to provide the classrooms faster and not to save
moneyasthecostwaspurportedlythesame.Nevertheless,thecostofFibrebondsconstructionwas
the entire Parsons estimate of the construction, thereby leaving architectural and soft costs, which
wereaboutonethirdofthetotalcosts,ascoststhatfarexceededtheParsonsestimates.

Our research regarding trends in construction costs during the period covering the bond construction
projectsshowedalmostnoinflation.TurnerConstructionpublishedits2012FourthQuarterForecast
which included a table indicating building costs declined in 2009 and 2010 by 8.4% and 4.0%
respectively (Exhibit 15). It should be noted that the majority (59.4 million) of the above budget
reallocations occurred in 2009. On March 1, 2007, Carl Rabenaldt, Parsons Executive Committee
Member, reported to the CABC and Trustees Terry Williams and Dr. Bill Nantz that The total cost of
labor,softcosts,inflationwasabout$409M.E&Rconstructionmagazine,reportedflatinflation.This
statement by Rabenaldt clearly contradicts the $72 million inflation amount included in the Orange
Book. Rabenaldt also stated: Multipurpose Facility football stadium with natatorium, parking lot,
property,soccerandfootballfield,$26.4M(Exhibit16).

ThisisevidenceParsonsdidnotexpectanyinflationinconstructioncostsin2010.Furthermore,Ingram
advisedthat itwascommonknowledgeintheDistrictthat therewasnoinflationand the $72million
wasputinthebudgettocovercostoverruns.Thelargestsinglebudgetreallocationof$14.1millionwas
made to the MultiPurpose Facility. The community was promised the new schools would take
precedenceoverthestadiumandwouldbestartedfirst.Contrarytothesepromises,thestadiumwas
startedbeforetheconstructionofthenewschoolsundertheguisethatbeingthebiggestproject,the
stadium,wouldbeworsthitbytheprojectedinflation.WeweretoldbymanyoftheTrusteesthatthe
reason they supported the Bond Program was that they were ashamed of the conditions of the
elementary schools that were being replaced. Most of these Trustees believed that construction on
these elementary schools began before construction on the Athletic Facility, but our analysis
determined that construction on the Athletic Facility began in June 2009 and was completed by
September 2010, while the schools were begun in late 2009. As of Parsons termination in February
2013,fourprojectsremainedincompleteandwerenotcompleteduntilAugust2013.

Parsons promoted its Fast Start program as a way to minimize the impact of inflation. The $14.1
millionbudgetreallocationfortheMultiPurposeFacilityindicatedachangeinscopeoftheprojectas
thejustificationforchange.AllbudgetreallocationswereapprovedbyThomas(Exhibit17).

MultiPurposeFacility
TheMultiPurposeFacilityprovidesanexampleofthefalsecostinformationincludedinprojectbudgets
as represented by Parsons, Thomas, and District Administration. The Orange Book listed the
constructionbudgetfortheMultiPurposeFacilityat$29.8million.Thiswastheamountsubmittedto
the Board, CABC, and community. The MultiPurpose Facility actually cost $47.3 million (Exhibit 18).
According to witnesses, Thomas wanted to duplicate the stadium complex at CyFair Independent
SchoolDistrict.AccordingtoIngram,ParsonstoldThomastheycouldnotbuildastadiumasniceasCy
Fairswithinthecurrent($29.8million)budget.ThoseTrusteesinterviewedstatedtheywouldnothave
approvedtheBondProgramhadtheyknownthestadiumwasgoingtoactuallycost$47.3million.The
CABC members also stated they would not have supported the Bond Program had they known this.
Furthermore,theTrusteesandCABCmembersstatedthecommunitywouldnothavepassedthebond
eitherifthisfactwasknown.

The Red Book, dated February 24, 2007, budgeted $43.8 million for the MultiPurpose Facility. This
amountwasreducedto$29.8millioninthenextthreefacilityassessmentsdonebyParsons,including
theOrangeBookapprovedbytheBoardandauthorizing theBondProgram onAugust30,2007.The
$29.8millionamountwasalsopostedontheDistrictswebsite.ParsonsresponsetotheDistrictsRFP
forProgramManagerincludedascheduleshowingtheprojectedcompletioncostoftheMultiPurpose
Facilityas$47.3million.Thefollowingisachronologyofthestadiumproject.

March 3, 2008 RFP issued for Construction Manager At Risk (CMAR) with an estimated project
budgetof$25million(Exhibit19).

March21,2008TurnerConstructionCompanysubmitsaproposalforCMAR(Exhibit44).

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April17,2008BISDBoardauthorizesSuperintendenttoenterintocontractwithhighestrankedfirm
(Exhibit20).
June19,2008Boardapprovespurchaseofpropertyforstadiumfor$33.7million(whichappearsto
beatypoontheBoardminutesasthecontractstates$3.6million)(Exhibit21,ApprovalofExhibit
Xintheminutes).

July21,2008agreementbetweenOwnerandConstructionManager(signedbyThomasandJason
Freeman)for$65,000preconstructionservices(Exhibit22).

September10,2008TurnercompletesConceptualWorkSheet,estimatingthecostofthestadiumat
$41.7 million (Exhibit 23). Notation that the costs are $6.5 million beyond what Galena Park ISD
required.DocumentfoundinParsonsrecords,noindicationtheBoardorCABCsawthis.

October14,2008CABCmeeting.ParsonsprojectmanagerstatesWehavestartedtheboringson
the stadium only. This project is being fast tracked: the stadium will be started first (Exhibit 24,
page2).

February17,2009CABCmeeting.Thomasstates:TheMultipurposestadium,thenewsignwillgo
upinabout3060dayssopeoplewillknowwhereitwillbe.TheofficialsatParsons,hasguaranteed
methatthepriceofthenewcenteriswithinthebudget,thatincludesthebudget(Exhibit25,page
2).ThereisnoevidencethattheBoardorCABCareawareofanybudgetotherthan$29.8millionat
thispoint.

March 11, 2009 original budget allocation request approved in the amount of $29.8 million by
ThomasandTerryIngram(Exhibit26).

April 16, 2009 the Administration (Thomas) recommends East Texas Precast subcontract for $3.5
million(Exhibit27).

April16,2009BoardapprovesEastTexasPrecastsubcontract(Exhibit28).

April 21, 2009 Thomas approves stadium budget of $44.0 million budget (Exhibit 29). There is no
evidencethisbudgetwassubmittedtotheBoard.

May20,2009Turnerpreparesapartialguaranteedmaximumprice(GMP)for$9.5million(Exhibit
30).NoindicationBoardwasmadeawareofthis.

May28,2009groundbreakingonMultiPurposeFacility.

May29,2009TurnersubmitsConceptualEstimateof$41.1million.NoevidenceBoardwasmade
awareofthisestimate.

June11,2009BoardapprovesGeneralConditionsandRequirementsfor$2.99million(Exhibit31).

June18,2009BoardapprovesGMPsof$4.7million;$53,380;and$146,035(Exhibit32,seeagenda
itemQ.1).

August20,2009BoardapprovesGMPsof$749,208;$121,590;and$319,638(Exhibit33).

August26,2009TurnersubmitsChangeOrderNo.1for$14.0million(Exhibit34).

September14,2009TurnerpreparesitsfinalGMPintheamountof$38.5million(Exhibit35).

September17,2009TurnersubmitsChangeOrderNo.2for$24.3million(Exhibit36).

September 17, 2009 Board is made aware of the total GMP amount of $38.5 million (Exhibit 37,
agendaitemM.1).

August26,2010openingceremoniesforMultiPurposeFacility

Conclusion
ItiswelldocumentedthatThomas,Ingram,andParsonsallknewpriortotheNovember6,2007bond
electionthattheMultiPurposeFacilitycouldnotbebuilttoThomasspecificationsfor$29.8million.On
September10,2008Turnerpreparedaconceptualbudgetintheamountof$41.7million.Thereisno
evidencethisconceptualbudgetwasprovidedtotheBoard.OnFebruary9,2009Parsonssubmitteda
Budget Allocation Request and Approval for the stadium in the original amount of $29.8 million.
ThomasandIngramapprovedthedocumentonMarch11,2009.OnApril21,2009Thomasapproveda
$44.0 million budget for the stadium. Between June 19, 2008 and August 26, 2009, District
Administration and Parsons provided the Board with about $14 million of authorizations for the
stadium.ItwasnotuntilSeptember17,2009thattheBoardwaspresentedwithTurners$38.5million
GMP. Common practice for construction projects was to get Board approval of the construction
managersGMPpriortothestartofconstruction.Thiswasnotthecasewiththestadium.Therewas
apparentlyaconcertedeffortbyThomas,DistrictAdministration,andParsonstoconcealthetotalcost
ofthestadiumfromtheBoard,CABCandthecommunity.

CitizensAdvisoryBondCommittee
TheCABCwasformedinOctoberorNovember2006tooverseetheBondProgramandinteractwiththe
community.OnOctober15,2007ThomasrecommendedthattheBoardapprovetheResolutionofthe
Bond Oversight Committee (Exhibit 38). The Board approved the Resolution for the Bond Oversight
CommitteeDutiesfortheCitizensAdvisoryCommitteeinExhibitVtotheRegularMeetingOctober18,
2007 (Exhibit 39). Each Board Member nominated five persons to serve on the Committee. Thomas
appointedtheremainingtocompletethe49membercommittee.

Amongotherthings,theCommitteesresponsibilitiesincluded(Exhibit40):

Monitorprogressofproject(s)
Reviewandanalyzeallavailabledataandreports
ReportallinformationtoTrusteesandpublic
Establish trust and credibility within the community about projects and how the funds are being
handled
Ensurethatfundsdesignatedforcertainprojectsidentifiedinscopeofworkarededicatedtobudget
ofsaidprojectandwithinprojectguidelines
Relayandmakeavailableallappropriateinformationtopublicforscrutinyandreview

The 49 CABC members were assigned to different subcommittees including High Schools, Middle
Schools,ElementarySchools,andOtherFacilities.AccordingtotheRedBook(Exhibit08),TheCitizens
AdvisoryBoardCommittee(CABC)wasformedtoassisttheBISDBoardofTrusteesinworkingwiththe
communityandserveasoverseersoftheimprovementsforthenext5years.TheCABCwasprovided
Fact Sheets dated March 6, 2007 which contained cost budgets totaling $443.6 million and other
informationregardingthebondprojects(Exhibit41).

CABC members advised that early on, they regularly met with the District and Parsons to discuss
construction design, timing, and budgets. Members further advised that they originally viewed their
role as one of oversight for the Bond Program. Shortly after the bond passed in the November 2007
election,CABCmembersadviseditbecameapparentthattheDistrictwasexcludingtheCABCfromany
oversightroleanddisregardingthemembersinput.Asaresult,CABCmemberparticipationdiminished
as it became apparent to them the District and Parsons were ignoring their input and excluding
membersfromanyoversightofthebondprojects.

Conclusion
TheCABCwasanintegralpartoftheDistrictsplantogaincommunitysupportfortheBondProgram.
Assetforthabove,theCABCwasnotprovidedaccurateinformationregardingtheprojectedinflationor
known costs for specific projects, such as the MultiPurpose Facility. CABC members interviewed
advisedtheywouldnothavesupportedtheBondProgramhadtheybeentoldtheMultiPurposeFacility
wouldcost$47million.

RFPforProgramManagementServices
The District issued the Request for Program Management Services for the Beaumont ISD 2007 Bond
Program(RFP#08.043)September21,2007(Exhibit42).TheoriginalresponsedateofOctober5,2007
wasextendedtoOctober9,2007.TheRFPsAntilobbyingProvisionstatesinrelevantpart:

Consultants are specifically prohibited from contacting any BEAUMONT ISD administrators or
trustees other than the contacts listed in this RFP. If a consultant is determined to be in
violation of this policy, this too shall constitute grounds for immediate disqualification from
considerationbythedistrict(Exhibit42,page6).TheDistrictscontactforquestionsislistedas
JaneKingsley,ChiefFinancialOfficer.
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TheRFPalsoincludesaVENDORINFORMATION/NOTICEOFNOSUBMISSIONwhichstatesinrelevant
part:

I certify that I have carefully examined the Invitation for Proposal, Specifications, General
Conditions,Certifications,andPriceSheetsandattachments.Iagreetofurnishsuppliesand/or
servicesinstrictcompliancewiththespecificationsandconditionscontainedinthisdocument.
Ifreelysubmitthisofferandhavenotcolludedwithotherpartiestofixprices,orinanyother
mannerunderminethecompetitiveprocurementpractice(Exhibit42,page16).

ThisformincludesalinefortheSIGNATUREOFAUTHORIZEDREPRESENTATIVEandDate(Exhibit42,
page16).

ParsonsExecutiveProposalReview
ParsonsprepareditsinternalExecutiveProposalReviewfortheProgramManagementServicesforthe
Districts2007bondprogramonOctober1,2007(Exhibit43).Section1states,inrelevantpart:Parties
and Percentage Participation: Ware & Associates (1%), MWBE sub TBD (9%). The Proposal Review
notesParsonsconfirmeditsstrategiesforwinningthePMprojecttheweekofSeptember10th(2007).
Marvin Daniels and Johnnie Jordan were mentioned as participating in the process. The Executive
Proposal Review states Parsons helped the District establish the $11.6M budget for the program
managementfee(Exhibit43,Section2,page3,paragraph16).ItwasnotedParsonsfeeproposalwas
considerablylowerinordertocounteractJacobsexperienceadvantagewithTexasschooldistricts.

Paragraph 20 of the Executive Proposal Review is titled Political Concerns and notes the lack of
supportbytheBeaumontEnterprise(localnewspaper)andtheimportanceofmaintainingthesupport
of the local business community. Paragraph 20 goes on to state Team members include local firms
recommendedbytwoofBISDsassistantsuperintendents.Weareintheprocessofvettingthesefirms
and making a final selection (Exhibit 43, Section 2, page 3, paragraph 20). Section 3, page 1 of the
Executive Proposal Review states We are in contact with several local architectural and construction
firmsinterestedinteamingopportunities.Thesefirmscommandtherespectandloyaltyfromseveral
keystaffmembersassociatedwithBISD.

At the time the Proposal Review was prepared, the two known Assistant Superintendents at the
District were Ingram and Mackey. We believe Marvin Daniels and Bob Menefee, former Parsons
employees,havedirectknowledgeregardingthissituation.Aspreviouslymentioned,legalcounselfor
Parsons blocked our access to Daniels and Menefee asserting a nondisclosure agreement with them.
WehavediscussedwiththeManagerspotentiallegalactionagainstParsonsinordertoforcediscovery
(includingidentifyinganypaymentstopartiesrecommendedbytheDistrict)aimedatobtainingrelevant
informationregardingthissituationfromParsonsandtheexistingandformeremployees.

ParsonsProposalforProgramManagementServices
In response to RFP # 08.043, Parsons submitted its proposal (Program Management Services for the
Beaumont ISD 2007 Bond Program) dated October 5, 2007 and signed by Alvaro RizoPatron, Vice
President,SouthSectorLeader(Exhibit44).

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TheproposalincludestheVENDORINFORMATION/NOTICEOFNOSUBMISSION,signedbyRizoPatron
anddatedOctober5,2007(Exhibit45).TheProposalincludedthefollowingProjectTeam:

BobMenefee,ProgramManager
AlvaroRizoPatron,OfficerinCharge
MarvinDaniels,ExecutiveCommitteeMember
CarlRabenaldt,ExecutiveCommitteeMember
JohnnieJordan,FastStartTeamLeader
ParkeSmith,FastStartTeamLeader
CarlTickel,FastStartTeamLeader
SteveFulwider,ProjectManager
Wyntress B. Ware, Public Engagement, Public Relations & MWBE Outreach (Ware was
interviewed)

Legal counsel for Parsons has blocked our access to former and current employees whom we believe
have relevant information regarding the events surrounding the Program Manager contract award to
ParsonsaswellasitsperformanceundertheProgramManagementAgreement(theAgreement),dated
November19,2007(Exhibit46).

IrregularitiesInvolvingtheAwardofProgramManagerContracttoParsons
LANWalton, a program manager located in Bryan, Texas, submitted its response to the RFP, dated
October9,2007,whichincludedHealthyResourceEnterprises,Inc.(HRE)asoneofitsAdditionalTeam
Members(Exhibit47).LANWaltonisdescribedasacertifiedfederal8(a)smalldisadvantagedbusiness
and a minorityowned firm specializing in delivering comprehensive emergency, engineering,
construction and environmental services. Eric Boutte was listed as CEO/President of HRE. A copy of
Bouttes resume was included in LANWaltons proposal (Exhibit 47). HRE was listed as one of
LANWaltonsOnsiteProjectManagers.

Lamar Urbanovsky (Urbanovsky), former Chancellor of Lamar University, was listed as LANWaltons
PrincipalinChargeinitsproposal.UrbanovskystatedhewascontactedTexasStateRepresentativeJoe
Deshotel(Deshotel)aboutproposingontheDistrictsProgramManagementjob(Exhibit 48,interview
memorandum).AccordingtoUrbanovsky,DeshoteladvisedhimthathewouldneedAfricanAmericans
on his team to get the job and in particular, Eric Boutte with HRE out of Houston, Texas. It was
Urbanovskys understanding that Boutte was a former aide to Deshotel. Urbanovsky stated they had
difficultygettinganybackgroundinformationonHRE,inparticularanypriorengagements.Accordingto
Urbanovsky, HREs company information showed it had 23 employees; however, Urbanovsky
determinedHREonlyhadthreeemployees,oneofwhichwasasecretary.AccordingtoUrbanovsky,this
madehimverynervousinthathedidnotthinkHREwasalegitimatecompany.

Urbanovsky stated when he contacted Boutte about being part of LANWaltons proposal, Boutte
demanded a preagreement which would guarantee HRE a fee for showing up at the proposal
presentation.UrbanovskydeclinedtogiveHREthisfee.

12


PatriciaAttaway,Districtemployee,advisedshewastaskedbyKingsleytopreparethebidspecifications
fortheProgramManagerproject.AttawaybelievedtherequirementsshereceivedfromKingsleyand
Thomas were slanted towards Parsons because they had performed the cost analysis for the bond
project.AttawaypreparedaspreadsheetratingtheProgramManagersbasedupontheirqualifications
as they pertained to the job specifications. According to Attaway, Parsons came in second. Attaway
statedThomasandKingsleytoldhershewouldbepartoftheselectioncommittee;however,sheleft
beforetheDistrictinterviewedtheProgramManagercandidates.

WeexaminedtheproposalscoringsheetsfortheProgramManagerwhichwereratedbysixcommittee
members.Itappearsthescoringsheetsusedtoranktheproposalswerealtered,ratingParsonsasthe
best(Exhibit 49).Ingram andKingsley bothparticipatedinthescoring. Ingramrecalledthatthefirm
from College Station, Texas (we presume LANWalton) was rated the highest and that both he and
Kingsley rated this firm highest. Kingsley recalled the votes were tied for Parsons and LANWalton.
Uponexaminingthescoresheetforvoterform#6of6,Kingsleyrecalledonevotewaschangedbutshe
couldnotrecallwhoorwhy.

UrbanovskyreceivedaphonecalladvisingLANWaltontheywerebeinggrantedaninterviewat8:00am
Friday morning. He did not recall the exact date but believed it was late October just before the
November 6, 2007 bond vote. Urbanovsky informed CMTS and Ray Marshall, another blackowned
business LANWalton was including on its team. Likewise he informed Boutte of the interview.
UrbanovskyspokewithBoutte telephonicallythe Thursdaybeforetheinterviewatwhich timeBoutte
toldLANWaltonwouldnevergetthejobandLANWaltonwasnothingbutwindowdressingforbidding
purposes.

Urbanovsky advised he never met Boutte before the proposal presentation and arranged for the
LANWalton team to meet at a hotel prior to the presentation. Urbanovsky was at the hotel and
observed a black man and asked him if he was Boutte. This individual stated he was Bouttes HR
DirectorandthatBouttewouldnotbepresent.

Urbanovsky stated the interview was held in Thomas conference room in his office. Present at the
interview were Thomas, Patricia Attaway, Kingsley, Mackey, Ingram, Johnny Casmore, an Exxon Mobil
engineer,andBennyHickmanwithEnergywerepresent.Urbanovskyadvisedtheyhadalivelyexchange
withthestaffand got a lot of questions. Thomas and Mackey were relatively quiet. The LANWalton
team was the first interview, followed by 2 others. Urbanovsky left the interview and believed the
LANWaltonteamwasthereonlytohaveseveralproposalsandthattheDistricthadalreadydecidedto
go with someone else. Paul Hawryluk with LANWalton was also interviewed (Exhibit 50). Hawryluk,
howeverstatedhebelievedthattheinterviewcommitteevoted52forLANWaltonandthatonlythe
Superintendent(Thomas)andtheAssistantSuperintendent(Mackey)votedagainstthem.

Around11:30am,onhisreturntoAustin,UrbanovskyreceivedatelephonecallfromBouttestatingthey
gotthejob.Atthistime,BoutteaskedifUrbanovskywasgoingtodumpBoutteaftertheygotthejob.

13


Urbanovsky also received two separate calls from Deshotel asking if Boutte was going to be dumped.
UrbanovskyadvisedbothBoutteandDeshotelthatBouttewasstillincludedintheproposal.Atabout
1:00pm, Urbanovsky received another call from Thomas Administrative Assistant informing him
LANWaltongotthejobandrequestedUrbanovskytomeetthenextMondaymorningwithThomasto
discussfees.

UrbanovskystatedMackeycalledaround7:30pmFridayandtoldUrbanovskythatLANWaltonwouldnot
have been selected had Mackey not backed them. Mackey told Urbanovsky he needed to hold open
twopositionsonLANWaltonspayrollforlocalcostsforstafftorepresentus,meaningtheDistrict.
Urbanovsky has no idea who these individuals or companies could be but believed one was a former
CountyCommissionerorJudgewhogotMackeyhisjobwiththeDistrict.MackeytoldUrbanovskytobe
attheDistrictsofficeSaturdaymorningat8:00amtodiscussfees.UrbanovskytoldMackeyhecould
notbethereSaturdaymorning.WhenUrbanovskyaskedhowmuchinfeeswouldberequiredforthese
two positions, Mackey suggested a telephone conference on Saturday on a land line which never
occurred.UrbanovskyreceivednophonecallsSaturdayorSundayfromMackey.

IngramstatedthatpriortothestartoftheMondaymorningmeetingtodiscussfees,Mackeyentered
theconferenceroomandadvisedThomasthatthephonecallovertheweekenddidnotgowell.We
presume this to mean the call wherein Urbanovsky questioned Mackey about the cost of the two
individualsrecommendedbyMackey.

Urbanovsky,Hawryluk,andDr.NedWaltonattendedthemeetingwhichwasalsoattendedbyThomas,
Mackey,Kingsley,IngramandpossiblyHickman.UrbanovskybelievedLANWaltonhadbeenselectedfor
the job when they walked into the fee negotiation meeting. However, Urbanovsky stated that the
meeting was immediately very contentious with Thomas and Mackey being very antagonistic towards
them.HestatedthatMackeyaccusedLANWaltonofbeingnontrustworthybecausetheydidnotbring
theirminorityownedbusinesscontractorswiththemtothemeeting.

HawrylukrecalledthattheysubmittedafeerangetoBISDdependingonthescopeoftheproject.He
stated that this fee range was between 2.9% and 3.2% of the construction dollars or total dollars
managed as he could not remember the exact bond amount. He stated that they never provided a
round number because BISD would not give the specific scope of the project for them to make that
determination.Hawrylukadvisedthattheirfeesincludedexpenses,asettimeframeofaboutthreeto
fouryearsanda12monthwarrantyaftercompletionofthecontract.Hebelievedthattheirbidwasin
the$10to$12millionrange.ThebidscoringsheetspreparedbytheDistrictlistedLANWaltonsfeeat
$15million(Exhibit49).Hawrylukalsostatedthattheirfeeswouldnotchangeduetoanychangesin
constructionestimates.

ThomastoldUrbanovskywecantburnupthebondpayingfees.UrbanovskybelievesLANWaltons
fees were about $3 million. Thomas told Urbanovsky the staff needed about an hour to discuss the
numbersandsuggesttheLANWaltonteamcomebackinaboutanhour.

14


Despite the forgoing presentation on fees, Hawryluk stated the District advised them that they had
failedtonegotiatefeesandthereforethejobwenttothenextbidder.UrbanovskyadvisedtheDistrict
toldhimthatParsonsunderbidLANWaltonby$90,000andwasthereforebeingawardedthecontract.
This contradicts the position that LANWalton failed to negotiate fees, because, if true, how could the
District determine Parsons bid was $90,000 lower? Urbanovsky cited a news article shortly after the
meeting wherein Thomas stated LANWalton was not willing to negotiate fees. Hawryluk also
commentedthattheycouldhavebeencompetitiveat$9million,buttheDistrictnevergavethemthe
opportunitytomeetanumber.

OnOctober16,2007ThomasmadearecommendationtotheBoardtoapproveParsonsproposalfor
ProgramManagerServices(Exhibit51).ThomasinformedtheBoardthatthetopthreeproposerswere
selectedandanegotiationofcostwiththetopproposerwasbegun.ThomasaddedtheDistrictandthe
topproposercouldnotagreeontheamountofthefeeafterwhichnegotiationswerestartedwiththe
secondrankedproposer.ThomasrecommendedParsonsatafeeof$9.0million.AccordingtoIngram,
BobMenefee,incharge oftheParsonsteam,wasnotqualified tomanagetheprojectin thathewas
neither an architect nor an engineer and had no experience in building schools, having specialized in
buildingprisons.

ItisnotedthatwhileLANWaltonbroughttwominorityownedbusinesspartners(atleastoneofwhich
wouldhaveprovidedsignificantconstructionservices)totheinitialinterview,Parsonsdidnotbringany
and only provided Wyntress Ware as a minorityowned partner who would provide recruiting of
minorityownedcontractors.

Conclusions
Parsons Executive Proposal Review documents that contact was made with two District Assistant
Superintendents.TheRFPforbidscontactwithanyoneotherthanthedesignatedcontact,JaneKingsley
whowasnotanAssistantSuperintendent.Parsonsalsomadethesignedstatement:Ifreelysubmitthis
offer and have not colluded with other parties to fix prices, or in any other manner undermine the
competitiveprocurementpractice.TheabovescenarioindicatesLANWaltonwasnotselectedbecause
it questioned Mackey regarding the costs of the two parties Mackey demanded be placed on
LANWaltons team. The scenario further supports the reference contained in the Executive Proposal
reviewaboutincludingfirmsrecommendedbytheDistrict.Thisparticularsituationhasbeenreferred
totheTaskForceforitsconsideration.

ParsonsProgramManagement
TheProgramManagementAgreement(Agreement)betweentheDistrictandParsonswasexecutedon
November19,2007(Exhibit46).Asdescribedfurtherbelow,theAgreementsetforthaScopeofWork
and deliverables which provide the basis for evaluating Parsons performance under the contract
(Exhibit46,page13).Asdescribedbelow,issuesaroseandatleasttwolawsuitswerefiledregardingthe
bidding and procurement practices over which Parsons had Prime responsibility. Issues were also
identifiedwithParsonsIMPACTsystemwhichwasitshighlytoutedinformationmanagementsystem.

15


ConstructiononthebondprojectsstartedinMarch2008withtheconstructionofadditionalclassrooms
at the three High Schools with modular buildings. Parsons received two contract extensions and was
paid an additional $818,240 (Exhibits 52 and 53), bringing its total compensation to $9.8 million,
exclusive of cost reimbursements. Parsons was fired on February 21, 2013 and was replaced by Fittz
andShipmantocompletethecloseoutonthefinalfourprojects.FittzandShipmanwaspaid$45,000
for their services. Ingram and other witnesses stated the District was promised the A team and
receivedtheFteam.ParsonsmanagementoftheBondProgramwasplaguedwithturnoverwithinits
team.

MWBOE
The District stated its purpose was to favor local and minorityowned businesses and promoted a
minoritymentoringprogram.OnDecember3,2007ParsonssubcontractedwithWare&Associatesto
managetheLMWBE.Warewasresponsibleforkeepingthecommunityapprisedoftheprogressofthe
BondProgram.ParsonspaidWare$298,000(Exhibit54).WarechargedtheDistrictanother$25,000
(and was paid $12,000) to produce a newsletter touting the success of the LMWBE program. This
program was designed to inform local and minority contractors of the opportunities to work on the
bondproject.

It was further noted the MWBE teaming partners role was going to be field inspections with a 10%
share.TheroleofWare&Associateswascommunityoutreachfora3%share(Exhibit43).Bothteam
membersstatuseswereshownastobedetermined.ItshouldbenotedParsonshadapreexisting
relationship with Ware & Associates, and it appears unlikely Ware was one of the local firms
recommendedbytheDistrict.Also,WarewasnotalocalfirmwithitsofficesinFortWorth,Texaseven
thoughWarewaspreviouslyaBeaumontresident.

ParsonsvieweditsexcellentrelationshipwithBISDssuperintendentandfacilitiespersonnelaspartof
itswinningstrategy.ItfurthernotedBISDrecognizedCarlRabenaldtandJohnnieJordanaskeyplayers
in getting the bond referendum on the November ballot. Parsons action plan included selecting an
LMWBEteamingpartner.

Itwasdeterminedthat,contrarytothepromisesinWarescontract,itarrangedseveralmeetingswhere
theDistrictandParsonscouldpromotetheLMWBEprogram.Waremerelyarrangedthemeetingsand
collected contactinformationfromtheattendees. Waredidnotdoanything todetermineorvet the
qualificationsoftheattendees.

General contractors understood that in order to be awarded a project they must team up with a
minority owned business. This resulted in a number of brokers, that is minorityowned businesses,
participatinginthebondprojectswhowerelittlemorethanwindowdressing.Theseminoritybrokers
providedlittleornoactualconstructionservicesbutratherhirednonminoritysubcontractorstodothe
actualworkordidworkthatwasunnecessary.

16


AnexamplewasHallmarkGroupwhichteamedwithTurnerConstructionontheMultiPurposeFacility.
Jason Freeman (Freeman), President of Hallmark, advised he was given a $5.0 million portion of the
stadiumproject.FreemanadvisedJuanReed(Reed)ofHallmarkactedasabirddog,someonewho
chased leads on new work. According to Freeman, Hallmarks profit on the stadium and Martin
ElementarySchoolwasabout$700,000,ofwhichReedwaspaid50%foracquiringthiswork.Freeman
further stated that Turner had Reed removed from the worksite for undisclosed behavior issues. We
were unable to determine what services were provided by Reed on the stadium project. Freeman
informed us he, Freeman, hired all nonminority contractors to do the work he was contracted to
perform. In the end, it appears no minority contractors benefited from the contract with Hallmark.
Other general contractors referred to similar arrangements calling the minority contractors trailers,
meaningtheywereplacedontheteamforappearances,paidaportionofthecontract,andhirednon
minoritycontractorsordidunnecessarywork.FormerTrusteeWoodrowReeceadvisedheconstantly
complainedtoParsonsthattherewerenominoritycontractorsonanyoftheconstructionprojectshe
personallyobserved.

Anotherexamplewasthatafterbeingrankednumberonetwiceandnotgettingacontracttobuildone
ofthethreesetsofelementaryschools,DanielsConstructionpartneredwithAndreLewistofinallywin
the bid for the construction of the third set of elementary schools. According to Daniels, Lewis, an
architect,actedasaconsultantontheprojecteventhoughDanielsProjectManageradvisedthatLewis
added no value to the project and Lewis work could and would have been done by the Project
Supervisors. Lewis advised that he spent most of his time working with the individual schools
representativesastocolorschemesandthefaade,dutiesusuallyhandledbytheArchitect.Matrixwas
retainedbytheDistrictasthearchitectforthisproject.Inaddition,Lewishadafulltimejobwiththe
CityofBeaumontduringthisprojectwhichresultedinhimusuallyonlyspendingaboutonedayaweek
workingontheproject.LewisreceivedapercentageofDanielsfeeswhichresultedinLewisbeingpaid
approximately$180,000byDanielsfortheproject.

ParsonsScopeofWork
The effective date of the Program Management Agreement was November 19, 2007 (Exhibit 46).
ParsonsagreedtoperformtheservicessetoutinExhibitA:ScopeofServicesandDeliverables(Exhibit
46,page12).TheAgreementalsosetsforthascopeofresponsibilitywhichParsonsstatesiskeyto
thesuccessofaprogramofthismagnitudeandcomplexity.Theagreement(Exhibit46,page13)shows
a responsibility matrix setting forth the division of responsibilities between BISD, Parsons,
Architects/Engineers,andPrimeContractor.Thelevelsofresponsibilityinclude:Prime;Review/approve;
Prepare/present;Verify/coordinate;CoordinateandSubmit.

PrimeResponsibility
Bidding,evaluationsandnegotiations.TheAgreementstatesinpartDuringtheconstructionphaseitis
important to select the best qualified contractors to do the work. Parsons further stated it will
accomplishthisbyworkingwiththearchitectstodevelopproposalpackagesthatclearlystatewhatBISD
is looking for in a contractor. Parsons also suggests raising contractor awareness through hosting
luncheonmeetingstopublicizetheupcomingprojects.

17


Parsons introduces Ware & Associates as its public engagement partner which will assist with the
process.Parsonswillworkwiththestafftodevelopaselectionprocessandseesitsroleasafacilitator.
Parsons further states During the selection process we will review the proposals, check references,
determine the contractors ability to perform, and evaluate alternatives. Parsons failed to perform
thesecontractualrequirementsasthefollowingexamplesdemonstrate.

Parsons,BISD,andThomasweresuedbyA.B.BernardandBGIContractors,LLCforallegedviolationsof
Tex.Educ.Code,Section44subchapterB.ThelawsuitwasfiledDecember30,2008(Exhibit55).The
lawsuit arose out of the March 2008 RFP for the construction of a group of prototype elementary
schools.DanielsBuildingandConstructionandA.B.Bernardjointlysubmittedtheirproposalwhichwas
determinedtobethehighestratedofallthecontractors.TheaforementionedTexasEducationCode
Sectionisintendedtoallowschooldistrictstoselectthecontractorprovidingthebestvalueand to
avoidanyfraudandfavoritismintheexpenditureofgovernmentfunds.ThelawsuitallegedParsonsand
Thomas did not apply the proper evaluation process and manipulated same. Bob Menefee testified
duringhisdepositionthathewasawareofthissectionoftheTexasEducationcode.Thelawsuitwas
settledJuly9,2009withtheawardofBernardsattorneyfees.Asstatedabove,Parsonswastowork
withthestafftodevelopaselectionprocess.

Within18monthsofsettlingtheA.B.Bernardlawsuit,Parsons,Thomas,andBISDwereagainallegedto
have engaged in bid related improprieties. L & L General Contractors filed a lawsuit against Parsons,
Thomas, BISD, and select Trustees on March 31, 2011 (See Exhibit 56). This lawsuit arose out of a
Request for Competitive Sealed Proposals for RFP 10.029B (the West Brook Field House) dated
December 7, 2010. L&L General Contractors was the highest rated contractor of the eight bidders.
Amongthoseproposing,HREwasratedasthefourthhighestbidder.TheEvaluationCommitteeranked
HREnumberfour(4)oftheeightrankedcontractors,noting,withoutlimitation,seriousandsubstantial
performancerelatedconcernsaboutotherBISDworkHREhadperformed.

DuringthepresentationtotheBoardonJanuary20,2011severalTrusteescriticizedParsonsforitslack
ofselectingminoritycontractors.AttheFebruary17,2011BoardmeetingParsonsrecommendedthe
fourthhighestrankedcontractor,HRE,totheBoard.TrusteeTomNeildraisedconcernsoverviolating
Tex.Educ.Codesection44.039byselectingthefourthrankedcontractor,especiallyinviewofHREspast
performance issues with BISD. In response, Ed Cailloutte, Parsons employee and designated Bond
Program Director, stated HRE had failed on another BISD project by failing to follow bulk purchase
directives,costingBISDasubstantialamountofmoney,andbywalkingoffaBISDproject.Theprojectin
question was the $19 million renovation project on Smith Middle School which was reported on
separatelytotheFederal/LocallawenforcementTaskForce.Itshouldbenoted,Thomasorchestrateda
highly questionable emergency, no bid contract in favor of HRE and Eric Boutte on this project.
Althoughthisprojectwastobepaidoutofthehurricanefunds,ouranalysisshowedthatapproximately
$6millionofbondfundswereadvancedtogetthisprojectstarted.

18


Conclusion
BiddingwasoneofParsonsPrimeresponsibilities.TheabovelawsuitsdemonstrateParsonsfailure
to perform these tasks. During our investigation we have documented a number of instances where
ThomashasintercededonBoutteandHREsbehalf,includingtheawardofa$19millionnobidcontract
whichisthesubjectofareferraltotheTaskForce.

Costverification/estimating.
Parsonsnotescostestimatingisbothanartandasciencewhichisongoingfromthepredesignphase
throughconstruction.Parsonsclaimsithasinhouseestimatorstoprovidecostestimatesateachstep.
Cost estimates will also be provided by the architects and in certain cases the construction manager.
Each member of the team will review the others numbers and come to an agreement as to which
estimate reflects the projects actual cost. The cost estimates are to be checked during the drawing
reviewprocessat25,50,75and95percentcompleteconstructiondocuments.Thestatedgoal,onbid
day,weareabletomeetourbudgetandawardacontracttobeginconstruction.

Conclusion
This did not occur in regard to the MultiPurpose Facility for which the Board, Citizens Advisory Bond
Committee,andthevotersweretoldthisprojectwouldhaveacostof$29.8millionpriortothebond
election in November 2007. The contractors bidding on the job advised there were no construction
drawingsatthetimeofthebiddingprocesswhichmadeitalmostimpossibletoprepareanaccuratebid
beforethecontractaward.ParsonsandtheDistrict,inparticularThomas,wereawarewellinadvanceof
thecontractawardtheactualcostwouldbeinexcessof$44million.

Developmentofcontracts/RFPs.
TheProgramManagementAgreementstates,inpart:

Wewillevaluatetheprojectlistandrecommendhowtheprojectsshouldbeassignedbasedon
thebestinterestsofBISD.Eachfirmsstrengthsandresourceswillbeconsidered.Parsonswill
identify candidates for design teams, and contractors to notify about upcoming projects,
develop and review of the RFPs and contracts to ensure that they address specific functional
and design experience and presentation of options for client review, development of specific
questionsforinterviews,andparticipantsintheactualinterviews.Wewillworkwiththelocal
community and minority firms to ensure that they are aware of the upcoming work and that
theyparticipateintheprocess.

AccordingtoMelodyChappell,theDistrictscounsel,aboutsixmonthsafterParsonswasretained,she
wasaskedbytheDistricttohandlethepreparationofalloftheconstructioncontractswiththevendors.
SheadvisedthatshewasbroughtinbecauseitwasdeterminedthatParsons,especiallyParsonsProject
ManagerBobMenefee,hadnoclueastohowtowriteacontract.SherecalledthatEdCaillouettewas
inchargeatParsonswhenshebecameinvolved.ChappelladvisedthatshedidbilltheBondFundforthe
work she did in helping Parsons with contracts. She believed her billings would have easily exceeded
$100,000forthiswork.

19


Conclusion
Parsons was paid $9.8 million to provide Program Management services, which included a number of
enumerated Prime responsibilities. The above examples demonstrate Parsons did not perform a
numberofthoseareas.AsnotedaboveseveralofthosefailuresexposedtheDistricttolitigation.

IMPACTProgram

ParsonsproposalinresponsetoRFP#08.043forProgramManagementServicesfortheBeaumontISD
2007 Bond Program was the first of many Parsons documents referencing proprietary program
management software (IMPACT) that would provide numerous benefits managing the BISD Bond
Program.Theproposalspecificallynotesthatinthepastprogrammanagementtoolsoftenimpededthe
actualworkandthatIMPACTchangesthat.Itrecordstheagreementsandthecost,scheduleand
scopeinformationnecessarytodeliveraprogram,leavingmanagersfreetoconcentrateonthecritical
issues.

IMPACTiswhatParsonstermedtheirprogrammanagementsolution,acentralfilingcabinettotrack
andmaintaindocumentsrelatedtoallphasesofthevariousprojectscoveredbyBeaumontISDs2007
BondIssue.Oneofthesupposedbenefitswasthatitwaswebbasedsoinformationwouldalwaysbe
accessible, timely, and correct. There are two different IMPACT web sites, IMPACTprogram and
IMPACTteam.IMPACTprogramofferscostandschedulestatusreportingtoownersandclientsandwas
for Parsons use only according to the IMPACTteam Training Reference Guide. IMPACTteam is the
collaborative site that offers document sharing and managing communication between project
managers,architects,engineers,etc.

The proposal, the program management agreement, the program management plan, and policy and
procedures documents listed certain commitments from Parsons in regard to the information that
would be collected in IMPACT, as well as their responsibilities related to that data collection, and
highlighted the benefits of using IMPACT. In particular, assurances were provided in three main
categories: centralizes and stores large volumes of documents (document retention); accessibility to
documents/information by various users (accessibility); and maintains a current accounting status
(currentaccounting).

AspartoftheforensicaccountingexaminationoftheBondProgram,athoroughreviewwasperformed
of all the various documents referencing the benefits of the IMPACT system and the related
commitments made by Parsons in managing the Bond Program. In addition, analysis of the IMPACT
systemitself wasperformedtodeterminewhether Parsonssatisfactorilyuphelditscommitmentsand
promises regarding documentation and data management for the Bond Program. In order to fully
understandtheassurancesmadebyParsonsrelatedtoIMAPCT,wereviewedParsonsproposalentitled
theProgramManagementServicesBook,theProgramManagementAgreementbetweenBeaumontISD
andParsons,theProgramManagementPlanthatParsonspresentedtoBeaumontISD,ParsonsPolicies
andProceduresregardingdocumentmanagement,theIMPACTUserManual,theIMPACTteamTraining
ReferenceGuide,theIMPACTteamFolderStructure,theIMPACTFolderMatrix,andParsonsElectronic
WorkflowDistributionguide.

20


TheresultsofourexaminationoftheIMPACTsystemareasfollows.

1. Ahighlevelreviewofdocumentationmaintainedin29distinctcategoriesfor46uniqueprojects
managedbyParsonsresultedinthefollowing:only30%ofthecategoriesappearedtohaveall
thedocumentationuploadedintoIMPACT;24%ofthecategorieshaddocumentationpartially
accounted for; and 46% of the categories had no documentation at all (no supporting
documentsforbudgetreallocations).

2. Some pertinent documents were frequently missing from IMPACT, for example, Purchase
Orders, Construction Manager At Risk Contracts, Contract Amendments, Subcontractor
Contracts,BidTabulations,WarrantyDocuments,andArchitectAgreements.

3. Of the 46 CMAR contracts for the bond projects, 80% are missing signed contract copies in
IMPACT.

4. Any incoming hard copy documents were to be immediately scanned, logged, and copied to
IMPACT.Weanalyzedthedifferencebetweenthepaymentapplicationdatesandthedatesthe
paymentapplicationswereuploadedintoIMPACTfornine contractorsandnotedtheaverage
daysforapaymentapplicationtobeuploadedwas55days.

UndertheiragreementParsonswastoworkwiththeDistrictsaccountingdepartmenttoestablishan
interface with the Districts software so payment data could be verified and transferred without the
need for reentry. Beginning in October 2008 and continuing through August 2012, Sharika Allison
maintainedmonthlyschedulesforeachprojectthattrackedtheopenpurchaseorders,invoicescharged
against those purchase orders, and checks used to pay those invoices. With these schedules was a
summarythatcomparedthoseexpenditurestotheOrangeBookbudgets,listedcurrentencumbrances,
andultimatelycalculatedtotalremainingbondfundseachmonth.

Parsonshiredacontractadministrativeassistant(theAssistant)theendofMay2012wholeftParsons
July2013(stayingfivemonthsafterParsonswasterminatedbytheDistrict).TheAssistantadvisedus
thatuponherarrival,thebonddocumentswereamess,strewnallovertheportablebuildingsusedby
Parsonsasitsoffice.Atthetimeofheremployment,TedSimswasinchargeofParsonsoperationsat
theDistrict.AccordingtotheAssistant,Simstoldherjusttopilealltherecordsorfilesinboxesandhe
did not care if anyone could find anything after Parsons left. The Assistant advised she got 20 file
cabinetsfromtheDistrictandorganizedthefiles.TheAssistantadvisedusshewasawarethatallthe
bond related documents were supposed to have been scanned into IMPACT, which they were not.
Parsonsdidnothaveenoughmanpowertocompletethistask.KeithSchedel,ParsonsProjectManager,
informedherhedidnotgetpaidenoughtodoallthiswork.TheAssistantstatedSchedelwasaware
Parsonswasresponsibleforscanningallthedocuments.

21


TheAssistantstatedParsonswasreconcilingthebookswithspreadsheetspreparedbyAllisonwhich
werenotcorrect.TheAssistantadvisedshereceivedspreadsheetsfromAllisondetailingdisbursements
andwouldinputtheinformationintoIMPACT.TheAssistantnoticederrorsinAllisonsspreadsheets,for
example the payees did not match, check amounts were different, dates were incorrect, and the
expenditurewasnotrelatedtotheprojecttowhichitwascoded.AccordingtotheAssistant,Simstold
herbudgetingwasnotParsonsproblemandshewastoacceptwhateverAllisonsenther.

SimsrefusedtotalkwithusupontheadviceofParsonslegalcounsel.OureffortstocontactSchedel
werealsoblockedbyParsonslegalcounsel.

Conclusion
TheIMPACTsystemwashighlytoutedbyParsonsinbothitsProposalforProgramManagementServices
andProgramManagementAgreement.ParsonsstatedIMPACTwouldprovideacentralrepositoryfor
current and accurate bond project information and be accessible by the District, contractors,
subcontractors, and the public. As detailed above, the IMPACT system was not complete, lacking
requiredinformationregardingthebondprojects.Wealsofoundinformationthatwasnotinputina
timelyfashion.Oneofthestatedpurposesand/orbenefitsofIMPACTwastobecompleteandavoid
duplicative record keeping. In fact, IMPACT apparently uploaded bond project financial information
fromspreadsheetspreparedbytheDistrict.

ROCIP(ReportedtoManagersseparately)
Parsons recommended a ROCIP (Rolling Owner Controlled Insurance Program) to the District. The
ROCIPpolicywasacquiredbytheDistrictatanadditionalcostofnearly$5million.Theacquisitionof
suchapolicyshouldhavereducedthecoststotheDistrictbyprovidinginsurancetothevendorsata
lower cost than they could separately purchase. However, the general contractors informed us that
theyalreadycarriedthiscoverageforthemselvesandtheircontractors.Therefore,thisinsurancewas
duplicativeandunnecessaryandthiscreatedunwarrantedexpensefortheDistrict.Adetailedreporton
theROCIPisbeingprovided.

Overallconclusions

1. WeexaminedtheoverallsourceanduseoftheBondProgramfunds.TheBondProgramfunds
were not accurately accounted for evidenced by the more than $17 million in misclassified
accounting entries. We determined that all but about $7.9 million were spent on approved
bond projects. This $7.9 million was transferred to the General Fund pursuant to an
unsupportedduetotheGeneralFundfromtheBondProgramfunds.However,itdidappear
this amount was used for Bond Program debt servicing, which we concluded was not
appropriate.Inaddition,weconcludedthe$308,730paidtoBotleytoconducttheauditofthe
Bond Program was not an appropriate use of Bond Program funds. As indicated above, this
auditwasnotcompletednorreportedupon.

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2. We have referred six matters arising from our investigation of the Bond Program to the Task
Forceforconsiderationofprosecution.ThesematterswerealsoreportedtotheManagerswith
our recommendations regarding seeking civil recover of any amounts improperly received by
thesubjectsoftheinvestigativematters.

3. Parsons prepared and reported upon four facilities assessments between February 2007 and
August 2007. The project cost budgets contained therein served as the basis for the Boards
approval of the $388.6 million Bond Program, as well as the promotion of same to the
communitybytheCABC.Thisprojectcostdatawasmisleading,ataminimumbyincludingthe
$72millioninflationamountandthemateriallyunderstatedcostoftheMultiPurposeFacility.
Both factors played an important role in gaining Board and ultimately community support for
theBondProgram.Asreportedabove,ThomasandotherswithintheDistrictsAdministration
wereawareofthismisleadinginformation.

4. Parsons obtained the Program Manager contract under suspicious circumstances, indicating
impropercommunicationsbetweenParsonsandtheDistrict.ThereisevidencethattheDistrict
made improper demands on Parsons and LANWalton in exchange for awarding the Program
Manager contract. We have been blocked by Parsons legal counsel from contacting at least
eight present and/or former Parsons employees whom we believe have critical information
regardingthesecircumstancesandParsonsperformanceasProgramManager.Inadditionto
thereferencedParsonspeople,Thomas,throughlegalcounsel,hasrefusedtocooperatewith
us.ThisobstructionhasbeenreportedtotheTaskForce.

5. ThelocalandminorityownedbusinessesinitiativewasanintegralpartoftheDistrictsvisionfor
theBondProgram.ParsonsincorporatedthisprogramandteamedwithWare&Associatesas
itscommunityoutreachpartner.GeneralContractorsunderstoodtheywererequiredtopartner
with minority owned businesses in order to be awarded Bond Program contracts. Instead of
utilizinglocalminorityownedcontractors,thegeneralcontractorshiredminoritybrokerswho
receivedasignificantportionofthe$388.6millioninconstructioncontracts.Thesebrokersin
turngenerallyhirednonminoritysubcontractorstoperformmuchifnotmostofthework.

6. TheProgramManagementAgreementexecutedbetweenParsonsandtheDistrictenumerated
a number of functions over which Parsons had Prime responsibility. Among those were
Bidding, evaluations and negotiations; Cost verification/estimating; and Development of
contracts/RFPs.WedetailedParsonsfailuresinachievingthesecovenants.

7. Parsons promoted its IMPACT management program, setting out specific performance
parametersandbenefitstotheDistrict.ParsonsstatedIMPACTwouldmanagelargevolumesof
documents and information, making it readily available to all interested parties. Parsons also
promisedtomaintaincurrentaccountingstatusinformationandavoidduplicationenteringthis
information. Of the 29 distinct categories of required information for 46 unique projects
managed by Parsons, only 30% of the categories appeared to have all the documentation
uploaded. In addition, 46% of the categories had no documentation at all. Those outside of
ParsonsfoundIMPACTdifficulttouse,oftendownofofflineandnotprovidinguseful,currentor
accurateinformation.IMPACTfailedtoprovidethebenefitspromisedbyParsons.

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Recommendations

1. EachofthesixcasesreferredtotheTaskForcecontainspotentialcivilrecoveryclaims.We
previously recommended the Managers consult with legal counsel about sending demand
lettersorpursuinglitigationorotherlegalremediesseekingrecovery.

2. Followup with the Task Force in order to seek recovery through any fines or penalties
arisingoutofprosecutionofwrongdoing.

3. Implement and monitor proper accounting policies and procedure for any future Bond
Programs.

4. Segregateallbondfundsreceivedinseparatebankaccountsandpayallbondexpenditures
directly from those accounts. There should be no comingling of bond funds into general
fundbankaccounts.

5. Performbankaccountreconciliationsonaquarterlyormonthlybasis.

6. Ensure Board approval of the construction managers GMP prior to the start of any
construction.

7. Hold project managers accountable to track all bond expenditures and provide frequent
financialinformationbacktotheDistrictforfinancialreportingpurposes.

8. Hold project managers accountable for proper maintenance and retention of all bond
documentation

9. Take action to terminate project managers who are not performing in accordance with
Districtpoliciesortheprojectmanagementagreement

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