Critic of Rancho Santiago $8M insurance ‘slush fund’ stripped of committee role
A Rancho Santiago Community College District trustee seeking to investigate how a third-party vendor quietly held insurance rebates that accrued to $8 million in an off-the-books account has been removed from an audit committee he’s chaired for two decades.
Phil Yarbrough, a 28-year veteran of the board and chair of a fiscal and audit review committee tasked with examining the district’s financial accounts, said he was stripped of his chairmanship duties earlier this month.
“My efforts to investigate the misappropriation of public funds within our district and to seek clarification from staff have consistently been obstructed, leading to retaliation against me,” he said of the move in an Oct. 14 Board of Trustees meeting.
Yarbrough, in an interview Wednesday, refuted the reason offered for his dismissal — that he violated the Brown Act by calling a closed session committee meeting to inform a district audit team, among other things, of the $8-million risk management fund held by risk pool operator the Alliance of Schools for Cooperative Insurance Programs (ASCIP).
Board members only learned of the money, held by ASCIP since before 2009, in June and immediately demanded a full remittance via check. District records indicate administrators spent at least $3.6 million from the fund in at least 13 transactions made between 2012 and 2020.
Yarbrough said auditors preparing for Rancho Santiago CCD’s upcoming annual audit needed to know about the $8 million and where it came from.
“I was just doing my due diligence and doing what I’ve done for decades on that committee,” he said. “A ‘slush fund’ is something that’s kept off the books and outside the awareness of people, and the spending is unknown. So this fits the definition of a slush fund because the board never knew about it and [administrators] have been spending money out of it.”
Trustee Zeke Hernandez joined Yarbrough in calling for an independent audit of the risk management fund. That would mean tracking deposits made by ASCIP and withdrawals made by administrators, including John Didion and Peter Hardash, two retired cabinet members with deep ties to the insurance agency that continue to this day.
“If we don’t clear this mess up, people are going to come back to the board and say, ‘You’re responsible because you’ve had that issue before you and you’re not doing anything about it,’” Hernandez said of an audit at the Oct. 14 meeting.
But despite requests to agendize a discussion, Board President Sal Tinajero had not taken action — until this week. On Monday, trustees will vote whether to submit a request for proposals for a forensic audit of the fund.
It’s unclear how an investigation into funds held by ASCIP, a Cerritos-based public joint powers authority, might be conducted by one of its 134 member districts. But Tinajero said he’s open to exploring the matter.
“I’m going to be calling for an independent audit of ASCIP,” he said Thursday. “Personally, I don’t think there’s anything there. [But] I do think everyone on the Board of Trustees wants to ensure everything is being done correctly.”
Tinajero rejected Yarbrough’s claim of being retaliated against for speaking out against the fund and administrators who may have known about its existence, saying the trustee was removed from the audit committee for convening an illegal meeting and then failing to apologize, as he’d promised.
“I have been working with this guy since July. He has refused to say he violated the Brown Act,” he said, saying an ad-hoc committee is being formed to determine further sanctions against the trustee.
Like his colleagues, Tinajero only learned of the risk management fund this summer. Exactly who in the district knew about it, and authorized the $3.6 million in withdrawals from the account, is unclear.
Chancellor Marvin Martinez said at last week’s meeting the fund was established in 2012 or 2013 and has been around for a long time.
“It’s been going through audits year after year after year,” he said. “And throughout all those years, Trustee Yarbrough was the chair of that committee.”
However, unlike other funds, audited annually and reviewed by the fiscal and audit committee, the account is held off the district’s books by ASCIP and audited collectively with multiple other districts’ pooled insurance rebates.
Barry Resnick — a local resident and former Rancho Santiago faculty union president who’s requested numerous records regarding ASCIP and the risk management fund — said Martinez was made aware of the account when he came to the district in 2019, after meeting with (then-retired) Didion and Fritz Heirich, chief executive of the joint powers authority.
“He told me Didion and Heirich told him ASCIP was holding money for the district,” he said Wednesday. “And based on public records, on the day he was hired, there was $771,127 in that account. When you have three-quarters of a million laying around being held by a vendor off site, you ask questions.”
Martinez has declined to clarify how and when he learned of the interest-bearing account. But district spokesman Chi-Chung Keung did acknowledge by email Friday “funds held with ASCIP on our behalf would be subject to their audit process.”
Despite his removal from the district’s audit committee, Yarbrough said he’s going to do everything in his power to see that the fund undergoes a thorough accounting.
“I’m going to find out where the money came from and where it went, and I’m going to see whose fingerprints have been all over this,” he said.
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