ARE 'CONSULTANTS' FLOUTING THE LAW?

Byline: Beth Barrett Staff Writer

Despite laws barring consultants from working as regular employees, the Los Angeles Unified School District has filled key oversight positions with highly paid contract workers in a desperate attempt to salvage its flagging school building and other programs, the Daily News has learned.

The practice has prompted LAUSD Inspector General Don Mullinax to launch a preliminary inquiry into whether the consultants are doing work that permanent employees should have been doing, exposing the district to potential federal sanctions and fines.

Mullinax declined to discuss the specifics.

``The allegations that my office has received regarding this practice are being treated as a serious matter,'' Mullinax said.

Superintendent Roy Romer said he has no evidence the district has done anything illegal, and dismissed possible Internal Revenue Service violations as ``technical.''

``If we've got a legal problem, we'll cure it,'' Romer said, saying the consultants were hired as an emergency measure to meet a school construction crisis.

``I'll call Bill Clinton and tell him we'll pay our taxes, don't get after us. But we've got to get these buildings built for our kids,'' said Romer, former head of the Democratic National Committee.

Eight of the district's 18 senior managers were hired as consultants in the past year, the majority by former interim Superintendent Ramon Cortines. Most have since been reclassified as district officials.

Romer, however, has retained interim chief facilities executive Robert Buxbaum under a $37,500-per-month personal services contract, though he has a district office, supervises more than 1,100 LAUSD employees and has a clerical staff.

Buxbaum, with Romer's approval, has continued to employ several other consultants with special skills, though they, too, have district offices and supervisorial responsibilities. Romer said the consultants are key to the district getting some $300 million in state school construction money.

Buxbaum, who stands to earn more than $400,000 a year, could not be reached for comment Monday. District spokeswoman Stephanie Brady, in a statement, said Buxbaum has saved the district millions in efficiencies.

``In short: he has earned his money,'' she said.

It is unclear whether the district sought legal advice before using the consultants to shoulder the district's building program.

Howard Friedman, the LAUSD's outside counsel, said he was not consulted in advance, but that consultants should not be used as full-time employees in violation of the tax code.

``If that's the case, then there's a problem that needs to be corrected,'' said Friedman, an attorney with Lozano Smith.

Board member Caprice Young said any illegal use of consultants needs to be halted even as school construction is continued.

``It seems there should be a way to handle the accounting appropriately and legally, while not shrugging off the important mission of solving the facilities crisis,'' Young said.

Courts generally have held that consultants cannot keep regular hours, have a permanent office or otherwise behave like full-time employees to guard against districts skirting payment of IRS payroll taxes, said San Francisco Deputy City Attorney David Campos, who is working on similar allegations raised against the San Francisco Unified School District in a recent state audit.

The consultants are responsible for paying the IRS themselves.

``You can have someone who is a consultant on paper, but it's a violation if they really are acting like an employee,'' Campos said.

With school districts flagrantly hiring consultants and not paying payroll taxes, the IRS several years ago tightened up its code section, said Joel Montero, chief operations officer for California's Fiscal Crisis and Management Assistance Team, which audited consultants in San Francisco.

``Basically, if it looks like an employee, it's probably an employee and not a consultant,'' he said.

Buxbaum in February identified himself as a consultant in paperwork required by the district to defend itself against the IRS. He said the district did not provide him with ``material or support services.''

Buxbaum currently has a district office, oversees hundreds of LAUSD employees and has clerical support.

Another contract worker, Marvin L. Taff, was identified on the August organizational chart as part of the School Building Planning Design Team. The chart notes he is a consultant, and his contract shows he is being paid $60 an hour, without benefits.

Taff said he has a district office, as well as a home office, and also supervises a few district workers in a design unit.

He said he anticipates being on the job another year or so, but doesn't want to convert to a full-time district position because he's retired. Romer said Taff's talents can't be duplicated within the LAUSD.

Most of the consultants were hired early this year as the district collapsed in the face of a managerial crisis brought about by former Superintendent Ruben Zacarias and top managers' fumbling of the Belmont Learning Center's environmental problems and the overall school construction program.

Most of the consultants have since been placed in senior management positions without having to compete for them.