11-005494TTS Brevard County School Board vs. Joseph Fayed Status: Closed Recommended Order on Thursday, September 6, 2012.

Summary: Misconduct by employees who facilitated the circumvention of fair bidding that resulted in work for their close friend constitutes "just cause" for termination.

Case No. 11-5494TTS

Case No. 11-5495TTS

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BREVARD COUNTY SCHOOL BOARD,

BREVARD COUNTY SCHOOL BOARD, Petitioner, )

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Petitioner, vs. RECOMMENDED ORDER )

vs. )

WALT PETTERS, )

JOSEPH FAYED, )

Respondent. )

Respondent. )

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Pursuant to notice, the formal hearing was conducted on

May 1 through 3, 2012, before J. D. Parrish, a designated

Administrative Law Judge of the Division of Administrative

Hearings, in Viera, Florida.

APPEARANCES

For Petitioner: Joseph R. Lowicky, Esquire

Glickman, Witters and Marell, P.A.

The Centurion, Suite 1101

1601 Forum Place

West Palm Beach, Florida 33401

For Respondents: Mark S. Levine, Esquire

Levine and Stivers, LLC

245 East Virginia Street

Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

DOAH Case No. 11-5494TTS: The issue is whether Respondent,

Joseph Fayed (Fayed), committed the violations alleged, and, if

so, what penalty should be imposed.

DOAH Case No. 11-5495TTS: The issue is whether Respondent,

Walt Petters (Petters), committed the violations alleged, and,

if so, what penalty should be imposed.

PRELIMINARY STATEMENT

On October 27, 2011, the School Board of Brevard County,

Florida (Petitioner, Board, or School District), forwarded two

cases to the Division of Administrative Hearings (DOAH) for

formal proceedings. Both cases described alleged violations

committed by non-instructional personnel employed by the School

District. Both cases arose as a result of an audit of

activities and business practices of the Board’s Plant

Operations and Maintenance Department. In each of these cases,

Board personnel were identified who allegedly committed

misconduct in office, willful neglect of duties, or incompetence

in the performance of their duties. All of the alleged

violations dealt with activities of the Plant Operations and

Maintenance Department (Maintenance).

In the case of Fayed (DOAH Case No. 11-5494TTS), it is

alleged Respondent used his position as the supervisor of

Central Services to unfairly promote his friend’s painting

business by allowing the circumvention of conventional bidding

practices intended to protect the School District’s interests.

Additionally, Petitioner alleged Fayed favored his friend by

allowing use of Board equipment and fuel to the disadvantage of

other potential bidders. Finally, Petitioner alleged that Fayed

used his Board vehicle for personal business unrelated to his

School District duties.

In the case of Petters (DOAH Case No. 11-5495TTS), it is

alleged that as Director of Maintenance, Respondent used his

position to favor his friend’s painting business allowing the

circumvention of conventional bidding practices intended to

protect the School District’s interests. Further, Petitioner

maintains Respondent allowed vendors to overcharge the School

District. Petitioner argues that if Petters knew of the

improprieties he is guilty of misconduct, and, if he did not

know of the improprieties but should have, Petters is guilty of

willful neglect of duties or incompetency.

Petters and Fayed retained the same lawyer to represent

them in this cause. For economy of litigation and efficiency,

the cases were consolidated for formal hearing. The documentary

evidence and testimony presented by the parties were applicable

to both cases. In anticipation of the hearing, the parties

filed a Joint Pre-hearing Stipulation that has been used in the

preparation of this Recommended Order. The testimony and

exhibits entered are identified and designated in the Transcript

of the proceedings filed on June 4, 2012. The parties requested

two extensions of time within which to file their proposed

recommended orders. Those requests were granted. The parties

timely filed proposals on July 25, 2012. This Recommended Order

is entered to resolve all outstanding issues in the cases.

FINDINGS OF FACT

The Parties

1. Petitioner is a district school board created by

Article IX, section 4, of the Florida Constitution. As such,

Petitioner’s authority and responsibilities extend to personnel

matters, and include the power to hire, suspend, and dismiss

Board employees.

2. At all times material to these cases, Petitioner’s

organizational structure designated Maintenance as the

department responsible for repairs and upkeep to all School

District property. Maintenance was charged to budget for and

complete repairs and improvements to hundreds of school sites

and other Board properties.

3. At all times material to these cases, Petitioner kept a

list of vendors who could be called upon by Maintenance to

complete work that could not be performed by Board personnel.

Maintenance’s system allowed it to assign work previously

approved or contemplated by the budget to a vendor and then

submit a purchase order to the Board’s purchasing department so

that the vendor would be paid at the conclusion of the work.

4. At all times material to the allegations of this

matter, Respondent Fayed was employed by the Board on an annual

contract and served as supervisor of central services in the

Maintenance Department. Fayed oversaw maintenance work

performed within his service area. It is undisputed that the

annual contract held by Fayed could be non-renewed without

cause. Therefore, at the conclusion of the 2011-2012 school

year (presuming his contract ended concurrent with the school

year), Petitioner was not obligated to retain Fayed.

5. By history, Fayed worked for Petitioner for well over

30 years, completed his DROP time, and separated from the School

District. After remaining out of the system for some period of

time, Fayed returned to work for the School District and

continued to do much of the same type of work he had done prior

to retirement.

6. At all times material to the allegations of this

matter, Respondent Petters was employed by Petitioner on an

annual contract. Petters was the director of Maintenance. His

responsibilities required him to supervise all employees within

the School District’s Maintenance Department. Fayed served

under Petters’ supervision.

7. As director of Maintenance, Petters oversaw all of the

geographical service areas for the School District. All outside

vendors who performed maintenance work for School District

properties were directly tied to Petters’ department.

The Controversy

8. Prior to August 15, 2011, Board employees raised

concerns of improprieties committed by Petters and Fayed in

connection with the performance of their duties in the Board’s

Maintenance Department. An internal investigation of the School

District’s maintenance department suggested that there were 25

separate instances of improper activity. Based upon the

investigation, Petitioner procured an independent audit to be

performed by RSM McGladrey, Inc. (McGladrey). McGladrey was

tasked to review the 25 claims, review all pertinent records of

the Maintenance Department, and present a detailed report to the

School District’s Superintendent. That report, dated

September 23, 2011, formed the basis for the charges against

Petters and Fayed.

9. The McGladrey report was attached to letters from the

Superintendent dated October 5, 2011, that advised Petters and

Fayed that their employment with the School District would be

recommended for termination at the Board’s October 11, 2011,

meeting. At that meeting, Petters and Fayed were terminated

subject to their administrative rights to contest the action.

Respondents timely sought a formal administrative hearing in

connection with the charges of misconduct, willful neglect of

duty, and/or being incompetent.

The Vendors

SMG

10. SMG Coatings, Inc. (SMG), is a painting company

operated by Tim Tillotson (Mr. Tillotson). Although,

technically owned by Mrs. Tillotson, the company’s day-to-day

field operations are directed and supervised by Mr. Tillotson.

11. At all times material to the allegations of these

cases, SMG routinely bid on contracts for the School District.

It also competed for the “primary contractor” designation.

12. Petitioner used two methods of procurement for

maintenance work to be performed by outside vendors. One

method, “primary contractor,” was for minor projects that did

not exceed $5,000.00, in value. Vendors designated as the

“primary contractor” were utilized to do these minor jobs

without additional bidding. When a job exceeded $5,000.00, all

vendors on a list of approved vendors were allowed to bid on the

project. These vendors are known as “continuing contract”

holders in this record. Vendors on the “continuing contract”

approved list were to receive notice of the job and be given an

opportunity to successfully bid the work. Although the

threshold amount was later raised, and the method of evaluating

contractors was later changed from an hourly rate to a unit

measure for the type of painting work, the underlying concerns

regarding how SMG received the Board’s work remain the same.

13. At all times material to these cases, SMG was a

“primary contractor” on the approved “continuing contract”

vendor list.

14. The allegations of these cases aver SMG received

preferential treatment not afforded other vendors doing business

with the School District.

Sena-Tech

15. Sena-Tech, LLC (Sena-Tech), is an electrical

contractor that first became authorized to do School District

work during 2008. Steve Terry (Mr. Terry) is the president of

Sena-Tech.

16. The allegations of these cases aver Sena-Tech received

preferential treatment not afforded other electrical vendors

doing business with the School District.

The Relationships

17. Petters and Fayed are long-term employees of the

School District, who have forged friendships with each other and

with vendors doing business with the Board.

18. Specific to these cases are the friendships between

Petters, Mr. Tillotson, and Mr. Terry. It is undisputed that at

all times relevant to the allegations of these cases, Petters

and Mr. Tillotson ate lunch together many times a month.

Petters vacationed with Mr. Tillotson on one or more occasions.

Petters and Mr. Tillotson made no effort to hide their close

friendship.

19. Similarly, Fayed is friends with Mr. Tillotson.

Although they are not as close as Petters and Tillotson, it is

undisputed that Fayed also lunched with Mr. Tillotson on a

regular basis. Given his work history, Fayed is familiar with

painting contractors doing business in the school district.

There is no evidence that Fayed made any effort to encourage

other painting vendors to compete with SMG for the Board’s

business.

20. Fayed has also known Steve Terry for years. Mr. Terry

has been to Fayed’s home in the past and considers Fayed a

friend. Petters and Mr. Terry are also well known to one

another. Mr. Terry has joined Fayed and Petters for lunch.

21. Neither Fayed nor Petters acknowledged that forging

friendships with vendors doing business with the School District

gave the appearance of impropriety to persons looking at the

situation from outside of the Maintenance Department.

The Jobs

Sena-Tech

22. Prior to 2008, Sena-Tech did not have standing as a

“continuing contractor” or vendor approved to do work for the

School District.

23. Nevertheless, Sena-Tech received jobs and was paid for

work done prior to its inclusion on the list. Purchase Orders

(POs) were approved by Petters for payment to Sena-Tech in

connection with nine specific jobs. Petters was required to

sign-off on jobs and to submit POs so that the vendor would be

paid.

24. A purchase order is the written document formalizing

the transaction between the Board and the vendor. In this case,

all POs were initiated by Maintenance and paid by Petitioner’s

Purchasing Department.

25. The weight of the credible evidence confirms that nine

jobs given to Sena-Tech prior to 2008 were electrical in nature

and should have gone to a contractor on the approved list or, if

not technically “electrical” due to the voltage of the work,

should have been given to a vendor that successfully bid the

jobs. In either instance without competent supporting

documentation, Sena-Tech would not have automatically received

the work.

26. There is inadequate evidence that the work performed

by Sena-Tech resulted in a higher cost to the Board, however,

because the process, by which work should have been distributed

to vendors, was circumvented in connection with the nine Sena-

Tech POs approved by Petters.

27. There is no evidence that Petters personally

benefitted from the work given to Sena-Tech.

28. There is insufficient evidence to establish that Fayed

was personally involved in the disputed Sena-Tech POs, or that

he participated in the selection of that company for the

disputed work.

29. There is no evidence that Fayed personally benefitted

from the work given to Sena-Tech.

SMG

30. The weight of the credible evidence established that

SMG circumvented the Board’s bidding process by submitting false

information. SMG obtained work based upon unrealistically low

hourly rates. To calculate the labor cost for a job required a

simple formula: hourly rate multiplied by the number of hours

to complete the job. Theoretically, all vendors would take the

same amount of time to complete a job. Because the hourly rate

would be multiplied by the number of hours the job required, the

job labor cost would be correct. In these cases, that did not

happen.

31. Instead, SMG inflated the number of hours for the job

and thereby assured itself a payment greater than its hourly

rate would have afforded had the rate been applied to the actual

hours worked for the job. In some instances, SMG billed the job

at a higher hourly rate than its contract allowed. According to

Fayed and Petters, so long as the bottom line (the ultimate cost

to the School District) was reasonable, the process was adequate

and had long been in place. Fayed and Petters did not

acknowledge that the method used by SMG might have resulted in a

higher cost to the Board. Based upon their professional

experience in the Maintenance Department, both Respondents

claimed that the amounts charged by SMG and paid for by

Petitioner were appropriate.

32. In truth, the process was not appropriate because

vendors who bid actual (as opposed to illusory) hourly rates did

not have the opportunity to obtain jobs. Vendors who bid the

hourly rates that would be applied to the real hours of work

could not compete with SMG’s unrealistically low rate. SMG was

assured of “primary contractor” status without meaningful

competition so long as its hourly rate was less than its

competitors. At all times material to these cases, SMG was the

preferred painting vendor.

33. Fayed and Petters knew the system was flawed. In

fact, Petters claimed that he told superiors that the system

should be changed. When the threshold amount of jobs was

increased from $5,000.00, to $20,000.00, the hourly rate method

was still used. More important, neither Petters nor Fayed

required SMG to bill only its actual hours for a job.

34. There are a number of ways to track time on a given

painting job. Outside vendors could be required to sign in and

out at a job location. A site supervisor could verify the daily

hours worked at a given location. No reasonable effort to

verify the actual hours spent on a job was used when it came to

SMG. Petters and Fayed knew or should have known that the hours

submitted by SMG were false.

35. Whether the Board could have or should have paid less

for the SMG jobs is unknown. Another vendor working fewer hours

at a higher rate might have cost the School District the same

amount. Because the hours billed by SMG were false, it is

impossible to calculate what the jobs should have cost. For the

jobs that SMG billed a higher hourly rate than their contract

allowed, it would be possible for the Board to calculate an

overpayment.

36. At the heart of this matter is the indifference

displayed by Fayed and Petters to hold SMG accountable for the

actual hours worked. The dispute might have been avoided if SMG

had either bid fair hourly rates or billed actual hours worked.

SMG did neither. Petters knew what was going on and did not

intervene to stop the fiction.

37. Recapping Board payments made to SMG, pursuant to the

2004-2005 paint contract, shows that of the $772,467.13, spent

for painting jobs, only $8,200.00, went to a vendor other than

SMG. Of the projects that exceeded $5,000.00, $276,614.68 went

to SMG without meaningful bids from other vendors on the

approved list. All approved paint vendors were entitled to

submit proposals for the projects that exceeded $5,000.00. Of

the ten projects that met the $5,000.00 threshold, a competing

vendor was able to submit a proposal on only three of the jobs.

38. When the threshold was raised to $20,000.00 in 2008,

SMG’s competition had fewer opportunities to obtain work from

the School District. As the primary vendor (again using a false

hourly rate), SMG was able to capture more jobs because the

Maintenance Department did not have to offer work to another

vendor unless the amount exceeded $20,000.00. Fayed and Petters

supported the higher threshold and Fayed lobbied for its

approval.

39. Board payments made during the 2008 paint contract

requested by the Maintenance Department totaled $1,246,184.37.

The entire amount went to SMG. Whether the Board could have

obtained the work for a lesser amount is unknown.

40. A review of the 2008 paint jobs established that no

bids were obtained for work that exceeded the $20,000.00

threshold. No serious effort was made to secure outside bids or

vendors to compete against SMG. Had Petters or Fayed brought

the lack of competition to the Board’s attention (or to any

supervisor in the school system), it is unknown whether SMG

would have obtained the volume of work it was paid for during

this time.

The Other Claims

41. SMG was allowed to use Board equipment and fuel

without cost. It is unknown whether other vendors could have

saved these expenses when presenting their bids for School

District work. Arguably, Petters and Fayed would have let other

successful vendors use Petitioner’s equipment and fuel. As SMG

secured the work, the question cannot be resolved.

42. Petitioner’s policy allows personnel to use School

District transportation when their work duties require travel to

more than one work-site. Fayed’s duties required travel to job

sites throughout the central area. Vehicles provided for

official business may not be used for personal activities. The

weight of the credible evidence established that Fayed used his

School District vehicle to attend to personal matters such as

doctor visits, stops at his personal residence, and a trip to

Patrick Air Force base. See Policy 8651.

43. Petitioner’s ethics policy is designed to create a

culture of honesty and integrity. See Policy 4210. Fayed and

Petters ignored the reality that their close friendship with a

vendor caused the honesty and integrity of the Maintenance

Department to be brought into question. Petters defiantly

insisted that SMG retain “primary contractor” status when

another company prevailed on the 2010 paint contract.

CONCLUSIONS OF LAW

44. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of these

proceedings. §§ 120.57(1) and 1012.22, Fla. Stat. (2011).

45. Section 1012.22, Florida Statutes, authorizes a school

board to suspend and/or terminate the employment of school

district personnel.

46. Section 1012.27, Florida Statutes, authorizes the

school district’s superintendent to recommend discipline against

non-instructional personnel of the School District. In this

instance, the recommendation and action of the Board is to

terminate Respondents’ employment effective October 11, 2011.

47. Section 1001.32, Florida Statutes, authorizes district

school boards to operate, control, and supervise all free public

schools in their respective districts and to exercise any power

except as expressly prohibited by the State Constitution or

general law.

48. In this matter, notices of the specific charges were

provided to Respondents prior to the Board’s action of

October 11, 2011. In this instance, it is concluded that the

Superintendent’s letters dated October 5, 2012, together with

the attached McGladrey report, although not set forth in a

technical, formal manner, were sufficient to describe the

conduct complained of and the violations resulting from that

conduct. Respondents had ample and sufficient notice of the

underlying claims.

49. Petitioner must establish by a preponderance of the

evidence that just cause exists to terminate Respondents’

employment. See McNeill v. Pinellas Cnty. Sch. Bd. , 678 So. 2d

476 (Fla. 2d DCA 1996).

50. In this matter, Petitioner bears the burden of proof

to establish that Respondents engaged in conduct constituting

misconduct, neglect of duty, and/or incompetence. If so, the

Board has just cause to terminate the employment.

51. The preponderance of the evidence standard requires

proof by the greater weight of the evidence, or evidence that

“more likely than not” tends to prove a certain proposition.

See Gross v. Lyons , 763 So. 2d 276 (Fla. 2000). Thus, the

resolution of these cases requires answers to these questions:

is it more likely than not that Respondents acted as alleged,

and, if so, do those acts constitute misconduct, neglect of

duty, and/or incompetence? If so, the Board has just cause to

terminate Respondents’ employment.

52. Florida has a long-standing tradition of seeking fair

and open competition. Competition in the procurement of goods

and services for the public is a basic tenet of fairness.

Competition reduces the appearance of favoritism or bias and

inspires public confidence that public funds are being expended

for a public purpose at a fairly determined price. See

§ 287.001, Fla. Stat.

53. In this matter, Petitioner also has a long-standing

requirement that competitive bidding define the procurement of

supplies, materials, equipment, and services, such as those at

issue. Avoiding the appearance of favoritism or bias must stand

as the cornerstone of the bidding process.

54. Based upon their actions in securing payments to SMG

and Sena-Tech, Fayed and Petters undermined public confidence in

the bidding process. Fayed and Petters authorized payments

based upon inflated hours. Petters authorized payment to Sena-

Tech before that company was on the approved vendor list. Since

the work was done for the Maintenance Department, they are the

only persons who could have stopped the payments and required

accurate accounting of the hours worked or a verification that

payment could be made to Sena-Tech. Instead, POs were approved

and their friends were paid. To attempt to blame the Purchasing

Department for making the payments (based upon the POs

submitted) belies the fact that only Fayed and Petters could

have known the hours were inflated.

55. In hindsight, there is no way to determine whether

Petitioner obtained the lowest price available for the work that

was performed. Competition was not fostered by Petters or

Fayed.

56. At all times material to this cause, "misconduct in

office" was defined as:

. . . a violation of the Code of Ethics of

the Education Profession as adopted in Rule

6B-1.001, F.A.C., and the Principles of

Professional Conduct for the Education

Profession in Florida as adopted in Rule 6B-

1.006, F.A.C., which is so serious as to

impair the individual’s effectiveness in the

school system.

57. As referenced in the foregoing code provisions, a

school district employee must strive to achieve and sustain the

highest degree of ethical conduct, must maintain honesty in all

professional dealings, and must not submit fraudulent

information on any document in connection with professional

activities.

58. As to Respondent Fayed, the greater weight of the

credible evidence established that Fayed used his School

District vehicle while on Petitioner’s clock for personal

convenience and transportation, and that Fayed approved POs for

work performed by SMG that had inflated hours. Accordingly,

Fayed is guilty of misconduct in office. Such misconduct

constitutes just cause for termination.

59. As to Respondent Petters, the greater weight of the

credible evidence established that Petters approved POs for SMG

that had inflated hours, and approved payments to Sena-Tech

before that company was on the approved vendor list. Petters

failed to take action when he knew that the approval of SMG as

the “primary vendor” was based upon a false and misleading

hourly rate. Petters failed to take action when he knew or

should have known that SMG routinely submitted claims for

payment that included inflated hours. Finally, Petters failed

to require competition and bids from vendors who could have

challenged SMG for painting jobs. Based upon the foregoing,

Petters is guilty of misconduct in office. The gravity of such

misconduct constitutes just cause for termination.

60. In reviewing this matter, conflicting statements have

been reviewed in a manner most favorable to Respondents.

Findings have not been made that would have suggested Fayed

falsified his time records or facilitated a subordinate to do

so. At the end of the day, the basic problem was Petters’ and

Fayed’s indifference to the public interest in securing fair,

realistic, and competitive bids for the work they authorized.

No issue was made as to whether the work was necessary. No

issue was made as to whether the work was performed in a

satisfactory manner. The bottom line is, because Petters and

Fayed perpetuated a system they knew was flawed, the public will

never know if it paid too much for the work performed. Public

trust and confidence in employees who controlled approval of

work was broken.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that Petitioner enter Final Orders as

follows:

1. As to DOAH Case No. 11-5494TTS, finding there is just

cause to terminate the employment of Joseph Fayed effective

October 11, 2011.

2. As to DOAH Case No. 11-5495TTS, finding there is just

cause to terminate the employment of Walt Petters effective

October 11, 2011.

DONE AND ENTERED this 6th day of September, 2012, in

Tallahassee, Leon County, Florida.

S

J. D. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 6th day of September, 2012.

COPIES FURNISHED :

Joseph R. Lowicky, Esquire

Glickman, Witters and Marrell, P.A.

The Centurion, Suite 1101

1601 Forum Place

West Palm Beach, Florida 33401

Mark S. Levine, Esquire

Levine and Stivers, LLC

245 East Virginia Street

Tallahassee, Florida 32301

Dr. Brian Binggeli, Superintendent

Brevard County School Board

2700 Judge Fran Jamieson Way

Viera, Florida 32940-6601

Lois Tepper, Interim General Counsel

Department of Education

Turlington Building, Suite 1244

325 West Gaines Street

Tallahassee, Florida 32399-0400

Pam Stewart, Interim Commissioner

Department of Education

Turlington Building, Suite 1514

325 West Gaines Street

Tallahassee, Florida 32399-0400

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.