Hotel Stays, Flights and a $400 Bottle of Wine

When San Diego County Office of Education employees flew to Boston to learn more about a company they were considering doing business with, they didn’t need to worry about the bill.

The company paid for their flight to Boston. It also paid for their hotel stay. And when one of the employees, Dan Puplava, picked out a bottle of wine from Napa Valley over dinner, he wasn’t really sure who paid, but believes it was either the company or its marketing company. He thought the bottle cost $400.

“Here the bottle of wine would be, like, 150 bucks,” Puplava later testified. “Out there it was outrageous.”

Puplava manages a program that helps school district and charter school employees invest for their retirements. Four years ago, he and supervisor Diane Crosier made the visit to Aviva, a company they were weighing whether to do business with, to learn more about its investment products.

It wasn’t their only trip. Between 2006 and 2008, the employees repeatedly took trips to visit companies the program worked with or was considering working with, paid for by those same companies.

Crosier is supposed to publicly report gifts she gets from companies or people related to her work. Yet the trips aren’t listed on her economic disclosure reports. Ethicists say the free trips are also problematic because workers could be improperly swayed by gifts from companies they negotiate with.

“It smells bad,” said Jessica Levinson, director of political reform for the Center for Governmental Studies in Los Angeles. “They’re clearly trying to influence them.”

The County Office argues that the free trips did not compromise its integrity and helped spare resources. Trips to visit companies are indeed common among other investment programs run by government agencies, a way to keep up with vendors and the services they offer. But several other government programs surveyed by voiceofsandiego.org don’t let companies pick up the tab.

“We don’t want to be beholden to anyone,” San Diego County Treasurer-Tax Collector Dan McAllister said. His office runs a similar program for county employees and pays for its own trips to see vendors. “We will turn down offers like that because we never want to leave the impression that there is a conflict.”

Boston wasn’t their only destination. They took several other trips on the tab of companies they were visiting: In Philadelphia, Crosier and Puplava met with Lincoln Financial, a company they were considering to manage their brokers. In Ohio they stopped in to see both Meeder Financial, which helps school employees manage their money, and Nationwide, their investment platform.

In Dallas they visited Life Insurance of the Southwest, a company that provided a special kind of investment plan for the program. In Utah they visited the company that administers the program, National Benefit Services. And they repeatedly visited Aviva’s marketing company in Santa Barbara.

After Crosier and Puplava took their trip to Boston, a committee that they advise agreed to make Aviva products available to school employees in the program. But another company they visited, Lincoln, was not ultimately chosen. Other companies were already working with them when the trips happened.

Under California law, public employees are allowed to accept gifts. But some workers in influential positions must publicly report what they get, from whom and how much it is worth.

California also sets dollar limits on gifts to public employees, which bar them from taking more than $420 worth of gifts from each source each year. The rules are supposed to reduce the sway of money in government and allow the public to keep an eye on how public officials could be influenced.

In response to questions from voiceofsandiego.org, the County Office wrote in an email that it believed Crosier had followed the gift rules. But despite repeated questions, it would not specifically explain why the trips could be legally left off the forms. In an email, Crosier said only that the trips were not included “due to discussion with legal counsel.”

There are some exceptions to the gift rules. For instance, gifts that are given to a public agency and passed on to an employee, rather than given directly to them, don’t need to be reported by employees if the agency reports them publicly and meets other specific requirements.

But when VOSD asked for records that would show if the trips were given to the agency rather than the employee, it didn’t provide any. Instead, the County Office argued that in the past, it just wasn’t required to report gifts given to the agency. Despite repeated questions, the agency gave no further explanation of why it wouldn’t have to report those gifts.

Until recently, the County Office had allowed influential employees to avoid reporting gifts at all. It only started reporting gifts after VOSD brought the problem to the attention of the state Fair Political Practices Commission.

While Crosier must file the forms, the County Office has not required Puplava to disclose his gifts or other economic interests. Local agencies decide which workers need to report, based on state guidelines that say they must include employees who influence, make or help to make governmental decisions.

Some agencies also set their own, stricter rules on gifts. New rules adopted by the County Office last year say that employees must not accept gifts that “could in any way influence, or appear to influence, official decisions” to favor any person or group the office deals with. But those rules weren’t in effect when Puplava and Crosier took the trips.

The investment program that Puplava manages is offered by a consortium of dozens of school districts and charter schools, which have joined together to get employee benefits at a lower cost. That pact, known as the Fringe Benefits Consortium, is run by the County Office of Education. The program has more than $210 million in assets and more than 6,500 participants.

The program says it offers a less expensive investment option to public school teachers. Attorney Dan Shinoff, who fielded questions on behalf of Crosier and Puplava, said the agency had hired good, honest people.

“It’s unfair to demonize people who have otherwise done great things,” Shinoff said in an interview earlier this year. “Public employees have saved millions because of their efforts.”

But ethicists said the problem isn’t whether Puplava and Crosier are good people. Taking the gifts could open Crosier and Puplava up to improper influence that public employees should try to avoid, they said.

Crosier and Puplava advise the committees that decide which companies get contracts with the program or what investments it can offer to employees.

Shinoff said they don’t give their opinion on companies. But La Mesa-Spring Valley School District Superintendent Brian Marshall, who sits on the executive committee, said that when vendors are up for approval, Crosier typically makes a recommendation to the committee.

When the Fair Political Practices Commission considered changing some of its rules on free travel for elected officials two years ago, their attorneys wrote that if a trip was truly necessary, “arguably the government should pay for it as official travel.”

That is what San Diego County does. It pays for trips to visit companies on county business. (San Diego County is a separate entity from the County Office of Education.)

VOSD surveyed six other investment programs from Orange County to New York City and all six said they would pay for travel when exploring a new company to do business with. Four of the six would also pay for trips to visit existing vendors as well.

The gift issue is only one of several recent troubles at the County Office of Education, exposed by recent lawsuits by former advisers and a former employee.

For instance, Shinoff and another attorney from his firm have helped screen potential employees who later oversaw work done by outside attorneys, including those in Shinoff’s firm. Legal and ethics experts cautioned that the practice was fraught with the risk that employees would feel they owed loyalty to those attorneys.

Another office employee advises her boss on retaining attorneys for personnel cases, which routinely leads to work for her husband’s law firm.

The San Diego Union-Tribune has also explored whether Puplava was improperly pursuing his side business while managing the investment program.

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The gifts came to light because the program is tangled in a lawsuit. Nearly two years ago, the consortium run by the County Office of Education sued a group of investment advisers it had terminated, accusing them of stealing trade secrets and other violations.

The advisers sued back, claiming the consortium had baselessly fired them.

After the Union-Tribune story on Puplava came out, County Office of Education employees Dan Puplava and Diane Crosier filed a defamation suit against one of the advisers, Barry Allred, and a former consultant, Scott Dauenhauer. Crosier claimed the two had given false information to a Union-Tribune reporter “to enact an unethical revenge.”

Crosier’s suit also argued that private emails between Allred and Dauenhauer were defamatory, including claims that did not appear in the newspaper. In one of those e-mails, Allred said Crosier and Puplava had accepted paid trips to Boston, Colorado, Utah, Ohio and Santa Barbara.

Attorneys for Allred and Dauenhauer declined comment for this article or didn’t respond to phone calls by deadline. In their court filings, they attempted to counter the defamation claims by arguing that the emails about the trips were factual, quoting Puplava’s testimony about his Boston trip.

Please contact Emily Alpert directly at emily.alpert@voiceofsandiego.org and follow her on Twitter: twitter.com/emilyschoolsyou.