City of San Antonio, Texas A Report Detailing the Theft of Public and Grant Funds by Corrupt Employees/Vendors San Antonio, Texas

A REPORT CONCERNING THE THEFT OF PUBLIC AND GRANT FUNDS

ENTITY:

THE CITY OF SAN ANTONIO

ITSD - (INFORMATION TECHNOLOGY SERVICES DEPARTMENT)

Chief Information Officer Richard Varn

IT Director Hugh Miller

LOCATION: SAN ANTONIO, TEXAS

FACT: A CITY IT MANAGER AND A CITY VENDOR CONSPIRED TO DEFRAUD THE GOVERNMENT VIA THE SUBMISSION AND APPROVAL OF KNOWN FRAUDULENT WORK AND TIME RECORD INVOICES

IMPACT: THE ILLEGAL SCHEME MAY HAVE PILFERED APPROXIMATELY $170,000 TO $200,000 FROM CITY COFFERS AND STATE/FEDERAL GRANTS OVER A FOUR (4) YEAR TIME FRAME. THIS AND OTHER FRAUDULENT ACTS IMPACTED TELECOMMUNICATIONS SERVICES AND E911 SUPPORT FOR THE SEVENTH LARGEST CITY IN OUR NATION. EVERY CITY DEPARTMENT WITH A TELEPHONE BUDGET AND EVERY AGENCY WHO AWARDED THE CITY A GRANT SINCE 1982 WITH PROVISIONS FOR TELECOMMUNICATIONS SUPPORT WAS TARGETED BY THESE CRIMINAL CONSPIRACIES.

This is one of many reports that will be submitted detailing the numerous illegal schemes devised by corrupt city employees/officials to embezzle public and grant funds over the past decades. Rather than take appropriate action concerning the criminal activity City, State and Federal officials have conspired to hide the fraud and theft of our money. It appears that too many high level government and law enforcement officials are involved in the cover-up to open up this can of worms as once a single crime is investigated the decades of criminal activity and ongoing five-year cover-up will be exposed.

Citizens Against Public Corruption, Waste, Fraud and Abuse 9650 Limestone Pond

San Antonio, TX 78254

OVERVIEW

Criminal activity and numerous violations of law have directly impacted Municipal, State and Federal funds and the services that the funding was designed by law to support. This illegal activity impacted municipal funds set aside by law as department telecommunications budget items and state/federal grants that contained provisions to support telecommunications services awarded to the City of San Antonio, Texas since 1982 from any state or federal agency. Rather then follow the law, perform an audit, alert law enforcement and grantors of the fraud, prosecute the crimes and recover the pilfered funds City officials, employees, attorneys and law enforcement officials have conspired to hide the fraud and theft of public/grant funds and to hinder any recovery of our tax dollars. They have submitted known fraudulent audits and statements to grantors and other entities to cover up the long term fraud while they pretend to be diligently adhering to regulations and legal requirements. Their lies form a never-ending circle as they lie to hide previous lies that hid the fraud. In spite of the conspiracy to cover up decades of criminal activity and theft of public/grant funds they have been provided access to millions of dollars in additional funds that have been placed in harms way.

Corrupt City employees conspired since 1982 to illegally manipulate an internal billing account the monthly telephone variable billing account- to gain unauthorized access to tens of millions of public and grant dollars. These funds were expended not for their intended purposes - but in a manner of the corrupt employees and their cronies choosing. Funding was diverted from telecommunications budgets created by law and grant contracts to pay for anything they wished. Fraudulent audits, reports, statements, etc. were published listing the expenditures as payment for monthly Centrex telephone invoices received by the City from a local telephone provider but were in reality for the most part used for anything but the telephone support outlined in City Administrative Directive 6.12 created in 1982. Corrupt City personnel who conspired to defraud our government and our citizens remain in positions of responsibility and are still provided access to our tax dollars, fiscal records and billing systems thus putting our money at great risk.

Many illegal schemes have been created over the past three decades to gain access to our tax dollars. One such scheme revolved around a conspiracy between a City IT Manager and a long time City vendor to submit and approve known fraudulent time record invoices over a four year time frame. The fraud and theft of public and grant funds may have pilfered almost $200,000 from public coffers. City personnel have conspired to hide the fraud, protect the conspirators and hinder recovery of our money.

Information concerning numerous schemes to defraud our citizens will be presented along with proof of the violations of law. This report will focus on a single scheme to defraud our government via fraudulent time report invoice submissions and approval of the known fake invoices. Other reports will follow.

SUMMARY

1. INTRODUCTION - A City IT Manager and a long-time city vendor engaged in a conspiracy to falsify the invoices and billing records submitted to the Government of the United States, the State of Texas, the City of San Antonio, Texas and others via numerous Avaya contracts including the Texas Department of Information Resources Avaya contract signed in December 2004.

II. CHRONOLOGY OF THE SCHEME - On or about April 2002 a City vendor and City IT Manager conspired to defraud the City, the State and the Federal government. The scheme continued until at least 2005. The ensuing cover-up of the criminal activity is ongoing.

III. METHODOLOGY EMPLOYED TO GAIN ILLEGAL ACCESS TO PUBLIC/GRANT FUNDS - The scheme to defraud the government centered on the corrupt IT Managers ability to gain access to millions of dollars a year behind the backs of City Council, auditors, grantors, citizens, etc. The Telephone Variable Billing Account created by City Administrative Directive 6.12 was clandestinely and illegally used to pilfer tens of millions of dollars from public and grant telecommunications budgets from every city department and every grant awarded the City of San Antonio, Texas since 1982.

IV. CITY OFFICIALS/AUDITORS/INVESTIGATORS WERE ALERTED TO THE FRAUD - City officials, auditors, employees were made aware of some aspects of the theft by deception on or about August 2005 but conspired to take immediate steps to conceal the criminal activity.

V. CITY PERSONNEL CONSPIRED TO COVER UP THE FRAUD AND THEFT OF FUNDS - Rather than follow the law, City officials turned a blind eye to the criminal activity, negligently failed to supervise their employees, breached their fiduciary duty and conspired to hide the theft of public and grant funds.

VI. SENIOR HIGH PROFILE PERSONS ARE INVOLVED IN THE FRAUD AND COVER-UP

VII. NO REASONABLE EXPLANATIONS FOR THE FRAUD OR COVER-UP - There are no reasonable explanations for the fraud and theft of public and grant funds. It goes without saying that there is no reasonable interpretation of the Avaya or DIR contract that would permit IG Communications to bill the City of San Antonio and state/federal grantors hidden costs disguised to seek reimbursement for the money.

VIII. RETALIATION - Numerous city employees (more than six) have conspired to cover up the criminal activity and to retaliate against the Telecommunications Manager for making reports of wrongdoing.

IX. STATUTE OF LIMITATIONS - The numerous crimes committed have varying statutes of limitations. Most have a five (5) year limitation while USC 18 1031 (Major fraud against the United States) provides that the crimes can be prosecuted up to seven (7) years after the offense is committed. Other laws extend the statute of limitations to ten (10) years. Concealment via fraud may toll the limitations.

X. STATUTES APPLICABLE TO SPECIFIC AGENCIES/ACTIVITIES COME INTO PLAY - The crimes committed in this report may be prosecuted under several statutes.

XI. CONCLUSION - While officials, employees, attorneys, law enforcement personnel, etc. conspire to hide this illegal scheme and other criminal activity inside the City of San Antonio, Texas that impacts funding and services designed to support our citizens the flow of additional money into City coffers continues at an ever increasing pace. Investigators at the City, State and Federal level must look past the fake compliance audits, fraudulent statements and dishonest public declarations designed to make it appear as if City personnel are following the law, are attacking fraud and are protecting our money. They must prosecute the crimes, recover our money and demand that persons entrusted with our tax dollars follow the law, publish accurate audits/reports, spend funding only as mandated by law, attack fraud/theft, adhere to anti-retaliation regulations and perform their duties as guardians of our money and gatekeepers to our City, State and Federal government coffers. If the City of San Antonio can spend hundreds of thousands of dollars a year millions over the past years -to pay participants, outside legal support, court costs, etc. in support of a criminal conspiracy to hide the long term fraud/theft the City should not be allowed to petition for additional state and federal grants/assistance. Funding should be halted until a time when they agree to follow the law.

XII. THE U.S. CODE

- A list of Federal Statutes that may or not have been violated are listed

XIII. APPENDIX

I. INTRODUCTION

A City IT Manager and a long-time city vendor engaged in a conspiracy to falsify the invoices and billing records submitted to the Government of the United States, the State of Texas, the City of San Antonio, Texas and others via numerous Avaya contracts including the Texas Department of Information Resources Avaya contract from December 2004 to the time the criminal activity was discovered.

They conspired to use various billing systems including the Citys telephone variable billing account, the Avaya contract billing account and the State of Texas DIR billing account to inflate the number of hours worked on telecommunications support including grant funded projects/orders/service requests and to alter the invoices and billing records upon which the payments were based. They engaged in this illegal conduct to fraudulently obtain what is estimated at $170,000-$190,000 during an approximate time frame of 2002-2005.

A City IT Manager and a City vendor conspired to defraud the City, the State and the Federal government when they agreed to intentionally submit and approve false and fraudulent time sheets/invoices that reflected inflated work hours. The City IT Manager knowingly, willfully and feloniously approved the bogus time record submissions. The vendor received compensation for work not performed via theft from several sources including programs receiving federal funds. This scheme of aggravated theft of public funds by deception violated additional laws including but not limited to mail/ wire fraud. Numerous City employees engaged in a scheme to conceal material facts and conspired to conceal the theft of the funds. They engaged in organized criminal activity, published fraudulent audits/reports, retaliated against a whistleblower, presented perjured testimony and breached their fiduciary duty by doing much more than just turning a blind eye to the criminal activity when they actively conspired to conceal the crimes and conspired to block any attempts to expose the fraud and recover the pilfered funds. They became accessories after the fact and co-conspirators via their illegal actions. Numerous violations of law that may apply are described in a section marked XI The U S Code.

II. CHRONOLOGY OF THE SCHEME

On or about April 2002 a City vendor and City IT Manager conspired to defraud the City, the State and the Federal government. They devised a scheme where the vendor would knowingly and willfully submit false time records for at least three (3) of her employees and the IT Manager would knowingly and feloniously approve the bogus submissions. In an email of April 5, 2002 the vendor provides a written summary of a prior conversation with the City IT Manager. The email provides details concerning the scheme to fraudulently receive payment based on over-inflated hours. The email describes the scheme to add 3.5 hours per week (at $65/hr) for each of three (3) employees for the entire month resulting in a fraudulent submission of forty-two (42) hours not worked. The email details past charges for hours not worked - $2730 - that had been submitted along with a total cost -$3852.40 - after a mark-up by the company the vendor worked for was added. The City IT Manager on April 16, 2002 replies to the April 5 email with the comment Dividing this up works for me when he approves the scheme to obtain money by fraud.

This illegal scheme resulted in the submission of illegal charges of about $4000 a month for at least a four (4) year time frame. In an email of August 2005 the IT Manager admits that I had thought that they had eliminated the charge in and in an email of the same date the vendor admits that IG charges rent to house them at 7400 Blanco Road proving that the scheme was in full force in the second half of 2005. Closer examination may show that at least two (2) fraudulent invoices were submitted each month for each of the three (3) employees proving that at least six (6) fraudulent invoices were submitted every month since April 2002. It appears that the plan outlined in the April 2002 email was followed through at least 2005 and may have resulted in the theft of approximately $170,000- $190,000 or more from city and grant resources set aside by law for telecommunications support.

The fraudulent invoices with extra hours added were submitted by the subcontractor- I G Communications to Avaya who marked up the costs before forwarding the invoices to the City for payment. The IT Manager indicated with a hand-written VAR notation on the invoice summary sheet received by the City from Avaya that the total cost of the fraudulent invoice was to be included in the monthly telephone variable charge applied to every city telephone city and grant funded alike. The cost of the fraudulent invoice (including payment for the fake hours) was divided equally between all the city phones including grant funded phones. Funding was transferred by the Finance Department from city department and state/federal grant telephone budgets to reimburse the IT Department for payment of the telephone bills (and anything else that was illegally thrown into the pot and falsely identified as a Centrex telephone cost). The IT Department obtained adequate funding to pay the monthly telephone Centrex bills (see AD 6.12) but had been provided access via the illegal manipulation of the billing account to an unlimited pile of money via the non-telephone, non-grant related bills that were clandestinely and illegally included in the monthly charges. City departments and grants were pilfered of tens of millions of dollars over the past three decades when funding set aside by law for telephone support was used for other than its intended purpose and at times to fuel illegal schemes such as this one concocted by IG Communications and the IT Manager.

The conspiracy made Avaya and the Texas Department of Information Resources accessories as they processed the fraudulent time report invoices, added markups and administrative fees based upon the false information and received funds based on the fraudulent submissions. Both parties were contacted over the past four (4) years concerning the criminal activity but refused to take any action.

III. METHODOLOGY EMPLOYED TO GAIN ILLEGAL ACCESS TO PUBLIC/GRANT FUNDS

The scheme to defraud the government centered on the corrupt IT Managers ability to gain access to millions of dollars a year behind the backs of City Council, auditors, grantors, citizens, etc. The Telephone Variable Billing Account created by City Administrative Directive 6.12 was clandestinely and illegally used to pilfer tens of millions of dollars from public and grant telecommunications budgets from every city department and every grant awarded the City of San Antonio, Texas since 1982. Authorized fund transfers totaling much less than approximately $2 million annually to pay for Centrex telephone service were clandestinely and illegally inflated by much more than $ 3 million a year in unauthorized/fraudulent charges swelling the telephone account to an annual cost to grantors and citizens of over $5.2 MILLION.

If a grant or department had a telecommunications budget it was drained of funding via fraudulent monthly bills totaling well over $ 3 MILLION a year for decades. A few hundred thousand dollars of illegal payments were lost in the maze of illegal transfers totaling in the tens of millions of dollars over the years. His illegal manipulation of a monthly telephone billing account commonly referred to as the Variable provided him with the funds to use as he wished as if he was given a blank check to run his department. Internal City documents describe this slush fund he created as a bottomless pit of money. The billing account that over the years grew to $ 5.2 million was fraudulently described in audits, billing statements, etc. as Telephone Centrex costs when in fact the funding was used for whatever the IT Manager and his cronies wished to use it for. The funding never ran out and had no limits set via city ordinance. Corrupt IT Managers ran the Information Technology - Communications Department like a private fiefdom or family-owned business rather than as a publicly funded municipal division of the City of San Antonio. They and their friends operated under the radar for decades with no accountability or overview by City Council, auditors, regulators, grantors, etc. They operated outside of the law as if there were no annual budgets, Administrative Directives, City Charter provisions, City ordinances, State Local Government Codes, State Uniform Grant management Regulations, Federal OMB regulations, State/Federal penal Codes, etc. The corrupt IT Manager and his accomplices altered invoices, caused to be created false and fraudulent statements in the books and records of the City, concealed the true and accurate disposition of department and grant resources and used funding set aside by city ordinance and state/federal grants as he wished and not for their intended purposes. His illegal slush fund created as is described by an internal city document a means for ITSD (Citys Information Technology Services Department) to balance its own books internally. The slush fund was used to tap a bottomless pit of money totaling in the millions of dollars. The internal contract billing process is compromised to the extent that departments were billed for an untold amount of goods and services from which their department received no benefit. State/Federal grants administered by every city department were billed for goods and services from which they received no benefit as well due to the fact that this illegal scheme plundered city department telephone budgets and grant telephone budgets alike. Records show that grant funded and city funded phones were treated in an identical manner and no distinction was made to treat grant funded telephones with any special handling. The variable charge was quoted in estimates and was recorded on work orders for all phones including grant funded phones. The variable charge was applied to all phones including grant funded phones on a monthly basis. Records show that neither the City nor any state/federal agency can produce the required indirect cost rate approval form that allows grant funds to be used to pay for such expenses such as the monthly variable charge applied to every city phone including grant funded phones. The facts surrounding the illegal manipulation of the monthly Telephone Variable Account over the past three decades will be exposed in detail in a separate report.

IV. CITY OFFICIALS/AUDITORS/INVESTIGATORS WERE ALERTED TO THE FRAUD

City officials, auditors, employees were made aware of some aspects of the theft by deception on or about August 2005 but conspired almost immediately to conceal the criminal activity. City Contract Services employee Orlando Martinez found it impossible to reconcile invoices submitted by IG Communications with actual work records. The IT Manager was not forthright or open during his participation in the internal audit/review and did not disclose the scheme to defraud the government. The Citys new Telecom Manager contacted the vendor, ascertained that extra hours had been added to the invoices since at least 2002 and turned over this information to Mr. Martinez during a private meeting. The Telecommunications Manager informed Contract Services personnel and other City officials that he had been threatened to keep quiet and had been instructed to provide auditors with inaccurate information. The new Telecommunications Manager made it appear that he was obeying these instructions but was actually privately meeting with auditors in an effort to expose numerous illegal schemes that had drained telecom funding for decades. The Telecom Manager met with several long time City employees and followed their advice to report the illegal activity and threats to the Office of Municipal Integrity. A complaint was written by Municipal Integrity investigator Steve Harrison and signed by the Telecommunications Manager on August 31, 2005.

V. CITY PERSONNEL CONSPIRED TO COVER UP THE FRAUD AND THEFT OF FUNDS

Rather than follow the law, City officials turned a blind eye to the criminal activity, negligently failed to supervise their employees, breached their fiduciary duty and conspired to hide the theft of public and grant funds. They committed additional crimes when they aided and abetted the persons at the center of the fraudulent scheme, tampered with government records, defrauded our citizens of honest services, engaged in a scheme to conceal material facts, etc. After reviewing all the evidence one must conclude that numerous city employees (more than six) had rendered substantial assistance to the original conspirators by delaying any independent review of the audit and Municipal Integrity investigation. Their illegal actions delayed for years release of documents describing and detailing the criminal conspiracy and the exposure of the crime.

City officials/employees failed to disclose the theft of public/grant funds to grantors and to law enforcement agencies as is required by law. The concept of voluntary self-disclosure is premised on a recognition that the Government alone cannot protect the integrity of federally funded programs. Grantees must be willing to police themselves, correct underlying problems and work with the Government to resolve these matters. If a provider identifies an ongoing violation, it should immediately contact the OIG prior to continuing any internal review or investigation. Disclosure at this point in such circumstances avoids compromising any subsequent review or investigation. If a provider fails to work in good faith with the OIG to resolve the disclosed matter, that lack of cooperation will be considered an aggravating factor and may provide the basis for the OIG to decide to aggressively pursue the matter as if the provider had not chosen the route of voluntary disclosure. A lack of cooperation could therefore result in criminal prosecution and possibly the exclusion from participation in all programs. The facts show that the City acted in bad faith, refused to disclose numerous violations including the theft of almost $200,000 and hid the crimes.

Contract Services Manager Deborah Segovia and others published a known fraudulent audit/review to cover up the criminal violations. She was informed of the fraudulent time record submissions but made a conscious effort to mischaracterize the theft. Her fraudulent report states: IG Communications was charging ITSD a rental fee of $183 a month per consultant (2.5 FTEs). Her deliberate misstatement of the facts describes the impact of the theft to be about $457.50 a month rather than a more accurate amount of $3852.40 plus DIR admin charges for the 2005 time frame almost nine (9) times her fake figure. She fails to mention that the fraud had been occurring during the five year period since at least 2002. She had an obligation to report the theft as a falsification of time records, taking pay for hours not worked, obtaining money via fraud, theft by deception, fictitious/fraudulent claims, aggravated theft, etc. when the fraudulent time report submissions were revealed. City Contract Services employee Orlando Martinez never discovered an entry in any document listing rental fees as the fraudulent invoices describe the charges as Switch Administration Services for telephone translations or simply stated work performed by an IG employee on telephone equipment (charged by the hour). Services and rental fees are not synonymous. He never reported that IG Communications was charging rental fees as there is not a single mention of rental fees in any of the invoices submitted by IG Communications or invoices presented to the City for payment by Avaya. There is no mention of subcontractor rental fees that can be legally billed by subcontractors that can be found in the Avaya contract. Rental fees were never discussed with Avaya/DIR personnel at the time that questions concerning the non-approved trip charges were discussed. The supposed use of the pilfered funds to pay for rental fees was exposed by the conspirators only after the fraud concerning the submission of fraudulent time records ( as was discussed in the April 2002 email) was discovered. Orlando Martinez uncovered the fact that the hours being billed the City and the hours actually worked did not match. This is the fact that he reported to Contract Services Manager Deborah Segovia and others. This is the fact that should have been published in the audit/review. Payment of rental fees may or may not have been a byproduct of the theft via fraudulent time record submission and approval and was not a fact that Orlando Martinez uncovered during the audit/review. The rental fee excuse was just that an excuse to steal money via the violation of numerous laws. It appears that no effort was ever made by IG Communications or the IT Manager to petition City Council, Avaya, the State Department of Information Resources (DIR) or any other entity to amend the existing contract, approve a contract including a legal means to charge rental fees or to increase the hourly rate for work performed to cover any additional costs in any year since 2002. IG Communications was a subcontractor to Avaya who held contracts with the City. The IT Manager and IG Communications were bound by these contracts and could not legally alter the terms of the legal agreements or put in place a secret and illegal side bet to make extra money for hours not worked. The vendor and IT Manager simply conspired to submit and approve known fraudulent time record invoices that resulted in the theft of approximately $170,000-$200,000 from City department and state/federal grant telecommunications budgets. IG Communications was NOT charging rental fees but was in fact submitting known fraudulent time records and the IT Manager was approving the known fake invoices. This fact was deliberately omitted from City IT Fiscal Manager Deborah Segovias report. Her deliberate omission was one of the first steps undertaken by the City to hide the fraud.

Municipal Integrity Manager Virginia Quinn and investigator Steve Harrison published a fraudulent investigative report and closed the investigation on October 10, 2005 with the notation lack of evidence/unfounded. In a conference call the same day Quinn informed the Telecommunications Manager that no wrongdoing was found. IT Director Hugh Miller began issuing fraudulent and defamatory statements from the day the Municipal Integrity complaint was filed in an effort to hide the criminal activity and defer blame to the new Telecom Manager. City Attorney Deborah Kleins false testimony to the courts continues today. Access to the audit and MI report was denied and FOIA requests in November 2005 were illegally denied when the City Attorney stated that the investigation/audit was ongoing when in fact the investigation had been closed on October 10, 2005 and audit findings had been published as early as Sept. 1, 2005. Once he reported the wrongdoing the Telecommunications Manager was deliberately segregated from meetings, billing records, etc. and employees were directed not to speak with him concerning any inquiries he made. Key-card access to IT building rooms was denied for security reasons. A copy of the audit and report was obtained several years later via a lawsuit. The report falsely states No laws or written rules were violated in the administration of the telephone variable because there never were any. The report reveals that the Office of Municipal Integrity was aware of the billing problems when the report states Contract Services recent audit of ITSD showed significant billing problems and summarizes the true extent of the findings with: The motivation to assure careful internal contract billing processes is compromised by the ability to tap a BOTTOMLESS PIT OF MONEY via the variable(s) and at the end of the day pass the costs along to City departments.. In her 2009 courtroom testimony Virginia Quinn admits that she never looked into any grants but admitted there could be a problem with grants being billed for services they didnt receive. She admitted that she meant to say in her report that I couldnt see there were any rules or regulations that were INTENTIONALLY violated. (as if employees could accidentally commit crimes for decades). She went on to admit that personal gain never came up during the investigation but that anything is possible (the Citys version of a dont ask dont tell policy). The 2005 Municipal Integrity investigation intake statements by numerous long-term city employees provide a glimpse into the decades of grant fraud, theft of public/grant funds, falsification of government documents and other criminal activity. Municipal Integrity prematurely terminated an investigation and wrote a fake report to cover up the crimes and members of the department presented false testimony under oath in court. Details will follow in a separate report.

City Attorney Deborah Klein and others presented a Fraud upon the Court in an effort to hide the violations of law. They suborned perjury from numerous City witnesses. Chief Information Officer Richard Varn, IT Director Hugh Miller and IT Fiscal Manager Deborah Segovia presented the critical lies to the Court while other city witnesses presented false testimony to support these false statements that were at the core of the Citys efforts to defraud the Court. Varn, Miller, Segovia, Klein and others presented false testimony to the court making it appear that no violations of law had occurred and that the Whistleblower was terminated for reasons unrelated to his reports of wrongdoing. CIO Varn admitted in his 2007 deposition that he didnt recognize the term variable and knew little of City budget practices but in court under oath in 2009 became an expert when he provided the false testimony that in 2005 he had investigated the variable, contacted Washington D.C., and found nothing illegal. He lied under oath to cover up the theft of public and grant funds and other crimes. Virginia Quinn and Steve Harrison provided false testimony under oath in court when they continued to broadcast the lie that there were no laws or rules regulating the variable and that no laws or rules were violated. Numerous City employees/ attorneys/ officials conspired to lie, hide the fraud/theft and assist the persons who stole upwards of $200,000 to avoid prosecution. They conspired to hinder the recovery of the pilfered funds. Details will follow in a separate report.

VI. SENIOR HIGH PROFILE PERSONS ARE INVOLVED IN THE FRAUD AND COVER-UP

Members of the San Antonio police department refused to open an investigation into reports of criminal activity in 2005. In 2009 police reports were filed detailing the criminal activity and ongoing cover-up including the aggravated perjury/subornation of perjury by Varn, Miller, Segovia, Klein and others with the creation of SAPD case # 9.0471467 and BCSD case # 2009-081395. Both cases were closed with no action. Proof of the criminal activity was hand delivered to City Hall and Council members in June 2009 but all evidence was confiscated by Chief McAnus and City Attorney Bernard according to statements from Council staff. Council staff canceled scheduled meetings and refused to speak about the criminal activity on orders from City Attorney Bernard. Bernard and McAnus then issued a criminal trespass warning letter barring entry into City Hall, City Council meetings and other City sites and had the letter delivered to the former Telecommunications Managers home. The City refuses to reply to any letters or phone calls, set up a hearing, provide any reason for the warning, provide a time limit for the warning, review the police reports, etc. Due process be damned. A separate report will provide details concerning the criminal and unconstitutional actions taken by City, County/ and State officials/employees to hide the grant fraud, theft of public/grant funds and other criminal activity.

VII. NO REASONABLE EXPLANATIONS FOR THE FRAUD OR COVER-UP

There are no reasonable explanations for the fraud and theft of public and grant funds. It goes without saying that there is no reasonable interpretation of the Avaya or DIR contract that would permit IG Communications to bill the City of San Antonio and state/federal grantors hidden costs disguised to seek reimbursement for the money. Likewise, there is no reasonable interpretation of the contract that would enable I G Communications to bill several employees time to the contract when that employee did not work the hours being reported. Similarly, it is not reasonable for the IT Manager to approve the known fraudulent invoices. Most alarming is the fact that they conspired to increase several employees hours without the employees knowledge, then billed these hours to the project. These fraudulent activities and the resulting cover-up highlight IG Communications, the IT Manager and others knowledge that these acts were illegal.

The City, the IT Manager, the vendor, etc. are precluded from ascertaining a defense that IG Communications is entitled to the funds. In the case of United States v. Gole, 158 F.3d 166, 167-69 (2d Cir. 1998) (holding that in fraud prosecution, defendant was precluded from presenting testimony that he was entitled to money obtained by submitting false reports to pension board. The Court stated: If Goles theory of self-help were the law, anyone who believed that he was legally entitled to benefits from a pension plan, or an insurance policy, or a government program, but who was concerned that he or she might nevertheless be denied such benefits, would be given carte blanche simply to lie to obtain those benefits. Such a course of action would often be much easier than pursuing legal remedies through civil actions in court, and would guarantee success as long as the misrepresentation remained undiscovered. We will not encourage people to lie to obtain benefits rather than pursue their rights in civil actions. Such controversies may be resolved by civil suit or settlement, but cannot be won by using lies and deception. Similar rulings were handed down in the case of States v. Hausmann, 345 F.3d 952, 957 (7th Cir. 2003), cert. denied, 124 S. Ct. 2412 (2004) (holding that criminal liability for mail fraud was not negated by the fact that the individuals defrauded received the same net benefit they would have received absent any scheme). The court ruled : [T]he defense of good faith is not available to a defendant who deliberately makes a representation that he knew to be false, even if the defendant reasonably believed that the was legally entitled to the money he was seeking to obtain by such a false representation.

In the case of United States v. Vitillo, Crim. No. 03-555, 2005 U.S. Dist. LEXIS 7558 the court states that fraudulent billing based upon phony reports of hours worked cannot be considered bona fide wages, fees, or compensation in the usual course of business and thus cannot be exempted from 666s coverage. see also United States v. Urlacher, 979 F.2d 935, 938 (2d Cir. 1992) (holding that 666(c) did not exempt from coverage the intentional misapplication of funds, even for legitimate purposes); United States v. Abney, Crim. No. 3-97-260, 1998 WL 246636, at *2 (N.D. Tex. Jan. 5, 1998) (holding that 666(c) did not apply where defendants altered time sheets to receive payment for overtime hours that were never worked); United States v. Stout, Nos. Civ. A. 93- 2289, Cr. 89-317, 1994 WL 90025, at *5 (E.D. Pa. Mar. 21, 1994) (holding that 666(c) exception did not apply to defendant who had created ghost employees and sought reimbursement for their employment). As with the improper practices in Edgar, any reasonable person would understand that the funds involved in the payment of these fraudulent invoices and bills cannot be construed as lawful payments or bona fide salary, wages, fees, or other compensation paid . . . in the usual course of business.

VIII. RETALIATION

Numerous city employees (more than six) have conspired to cover up the criminal activity and to retaliate against the Telecommunications Manager for making reports of wrongdoing. They were aware of serious violations of law including the theft of public/grant funds and took no action to prosecute the crime or recover the stolen funds and instead conspired to defame the whistleblower in an effort to discredit his reports, publish fake audits/reports to deceive grantors/auditors/ etc. and to lie under oath both in written depositions/affidavits and in a court of law.

The law states: Misprision of a felony is the offense of failure to inform government authorities of a felony that a person knows about. A person commits the crime of misprision of a felony if that person: Knows of a federal crime that the person has witnessed or that has come to the person's attention, or failed to prevent or Fails to report it to a federal judge or other federal official

City employees knew of the criminal activity and took action to cover it up thus committing additional crimes that they now attempt to keep secret.

Numerous (more than six) city employees knew of the theft of public and grant funds and conspired to hide the crime and to defame the Telecommunications Manager in an effort to discredit his reports of wrongdoing. They conspired to either threaten the Telecom Manager or hide the acts of workplace violence and threatening phone calls to his home. They conspired to illegally interfere with his lawful employment and livelihood. They conspired to present a fraud on the court in an effort to hide the criminal activity and to discredit the Telecommunications Manager and his reports of violations of law. They conspired to commit the crimes of aggravated perjury and subornation of perjury and to obstruct justice in an effort to conceal the criminal activity. They violated City, State and Federal statutes prohibiting retaliation for reporting fraud, theft, misuse, abuse, etc. of public and grant funds.

IX. STATUTE OF LIMITATIONS - tolling due to the fraudulent concealment of the crimes

The numerous crimes committed have varying statutes of limitations. Most have a five (5) year limitation while USC 18 1031 (Major fraud against the United States) provides that the crimes can be prosecuted up to seven (7) years after the offense is committed. Other laws extend the statute of limitations to ten (10) years.

RICO, Aiding and Abetting and Conspiracy statutes extend the statute of limitations in some cases. The element of participation requires the government to show some active participation or encouragement, or some affirmative act designed to further the crime. Several persons conspired to submit and approve known fraudulent time report invoices when they stole upwards of $200,000 from the city and grantors. Several City employees ( more than six) participated in the fraud when they conspired to publish fraudulent reports, audits, reviews, depositions, affidavits and other documents to hide the theft of public and grant funds and to hinder any recovery of the funds. The City Attorney in 2005 illegally denied FOIA requests for access to the fraudulent audit and MI report, refused to follow a ruling by the Texas Attorney General and did not release the information until years later s part of a lawsuit discovery process. City employees/officials provided false testimony under oath in a court of law, closed official police cases with no action, issued a criminal trespass warning letter and confiscated proof of the crimes in a conspiracy to defraud our government.

City employees conspired to deny access to the truth and fraudulently concealed the criminal activity. The courts state : [The] doctrine of fraudulent concealment is based on a theory of estoppel, and provides that the defendant may not invoke the statute of limitations, if through fraud or concealment, he causes the plaintiff to relax his vigilance or deviate from his right of inquiry into the facts. Hoppe v. SmithKline Beecham Corp., 437 F. Supp. 2d 331, 336 n.4 (E.D. Pa. 2006) (quoting Fine v. Checcio (Pa. 2005).

Courts have maintained that defendants knew or should have known that their representations were false and fraudulent and that others would justifiably rely upon said statements. In the case at hand others did in fact rely on the false statements of the corrupt city employees who knew that their reports/statements were false and took no action to recover the funds stolen via the illegal fake time report invoice scheme perpetrated by the IT Manager and IG Communications.

The criminal activity has been ongoing. Over the past years City employees, attorneys and officials have time and again taken actions to hide the criminal activity, hinder the exposure and prosecution of the conspirators and blocked the recovery of the stolen funds. In January 2010 Councilperson John Clamp was provided with an email from the City Attorney instructing him to ignore reports of criminal activity that were hand delivered to his office. In February 2009 numerous City employees and attorneys provided false testimony under oath in court to hide the criminal activity and theft. On July 1, 2009 a criminal trespass warning was issued and all proof of the criminal activity was confiscated from City Hall and Council. In 2009 two separate police reports (San Antonio Police Department and Bexar County Sheriffs Department) were closed with no action. On February 14, 2008 IT Fiscal manager Deborah Segovia signed a notarized affidavit falsely stating that no violations of law were found during her review. City Council members, City Managers, Mayors, etc. were provided information concerning the numerous violations of law, the retaliation and the denial of civil rights but looked away and continued to support the conspirators with city resources, city staff and taxpayer funding (a FOIA reply lists approximately $75,000 being spent to obtain outside legal assistance and other aid to present the fraud upon the court). City Attorney Deborah Klein has spent the past four years presenting false testimony to the court concerning the theft of our money while taxpayers pay her salary (In 2010 she continues to lie to the courts at the appeals level).

The statute of limitations may be expanded via other laws especially 18 USC 3287 - Wartime suspension of limitations and RICO laws. The court has ruled that concealment via fraud of a pattern of criminal activity may toll the statute of limitations: Thus, assuming the plaintiff exercises reasonable diligence, the statute of limitations will be tolled (even if the plaintiff is aware of its injury but is unaware that the injury is the result of a pattern of racketeering activity) if the defendant engaged in some affirmative act to conceal the existence of the scheme to defraud. In the context of civil RICO claims based on schemes to defraud, seldom is a scheme to defraud committed in an open and notorious manner. To be effective, schemes to defraud must generally be concealed from the victim, so the doctrine of fraudulent concealment frequently postpones the statute of limitations under such circumstances. If a plaintiff intends to rely on fraudulent concealment to toll the running of the statute of limitations, the plaintiff must plead the fraudulent concealment with particularity. Dummar v. Lummis, 2008 WL 4183338, *6 (10th Cir. 2008) City employees (more than six) conspired to form an association in fact enterprise to defraud the government and taxpayers and made an effort to hide the criminal activity, prevent prosecution of the crimes and block recovery of our money. They engaged in, concealed and benefited from a pattern of criminal activity. The statute of limitations should not begin to run until the pattern of criminal activity came to light when the City was forced to release documents outlining the criminal activity and the fraudulent audits and reports that were published to hide the pattern of criminal activity or the date of the last overt act by City officials.

X.

STATUTES APPLICABLE TO SPECIFIC AGENCIES/ACTIVITIES COME INTO PLAY

The crimes committed in this report may be prosecuted under several statutes. The theft of public and grant funds pilfered money from numerous sources both inside the City and from numerous state/federal grants. Statutes dealing with Healthcare, Housing and Urban Development, Education, Interstate Commerce, Telecommunications, Homeland Security, Highways, Defense, etc. may apply as funding from sources associated with these areas was impacted due to the fraud/theft. Any state or federal grant that was awarded the City since 1982 that contained provisions for telecommunications support is suspect.

Statutes dealing with the theft of honest services should apply. Numerous city employees conspired to steal our money and hide the theft from us while they used our money to pay their salaries and to finance the cover-up they concocted. They used the official power of their offices and the color of the law (tax payer supported entities) to hinder the prosecution of the crimes and to block the recovery of our stolen property.

XI.

CONCLUSION

While officials, employees, attorneys, law enforcement personnel, etc. conspire to hide this and other criminal activity inside the City of San Antonio, Texas that impacted funding and services designed to support our citizens the flow of additional money into City coffers continues at an ever increasing pace. Investigators at the City, State and Federal level must look past the fake compliance audits, fraudulent statements and dishonest public declarations designed to make it appear as if City personnel are following the law, are attacking fraud and are protecting our money. Investigators must expose the criminal activity, the fraud, the lies and the conspiracy to steal our money and cover up the crimes. Access to additional funding must be restricted until a time when honest personnel are put in positions of responsibility to ensure our money is safe while guilty parties are prosecuted for their crimes and our money is recovered.

Additional reports of other criminal schemes designed to defraud our citizens that require investigation and prosecution will follow.

XII. THE U.S. CODE

A list of Federal Statutes that may or not have been violated are listed. Violations concerning mail/wire fraud (details of scheme emailed, invoices mailed/transmitted across state lines Ca, Ok), fraud against the US, conspiracy, misprision of a felony, fraudulent claims, theft of public funds, tampering with a witness, retaliation, obstruction, perjury, subornation, aiding and abetting, accessory after the fact, financial crimes enterprise, color of the law, RICO, theft of honest services, etc. may apply.

18 USC: 3, 4, 225, 241, 242, 286, 287, 371, 641, 643, 648, 653, 665, 666, 669, 1001, 1002, 1012, 1018, 020, 1031, 1035, 1040, 1341, 1343, 1347, 1349, 1512, 1513, 1518, 1621, 1622, 1623, 1951, 1952, 1957, 1961, 1962, 1963, 1968, 2071, 2073, 2314, 2315, 2323, 3282, 3287 and 3293

42 USC: 1985 and 1986

Texas Code contains identical or very similar information

XIII. APPENDIX

1. Emails of April 2002 where illegal scheme to defraud our citizens is discussed and agreed upon

2. Email of August 2005 where IT Manager and vendor confirm that the scheme has been ongoing

3. Sample fraudulent invoice submitted for payment by IG Communications - Description Switch Administration Services for telephone translations

NO MENTION OF ANY RENTAL FEE All charges are listed as services performed by the translations specialist doing the work

The amount charged is derived directly from time sheets submitted by the specialist BUT extra hours for work not performed are added on every invoice submitted for three (3) IG Communications employees as was discussed in the emails of April 2002

(Irvine, California interstate )

4. Sample time report showing that accurate recordkeeping was kept by Telecommunications Manager BEFORE the extra hours for time not worked was added by the IG Communications owner and then forwarded to Avaya who processed the fraudulent invoices, added a mark-up and forwarded a bill to the City for payment. The IT Manager approved the known fraudulent invoices for payment and the IT Director signed off on the invoices thus instructing Finance to transfer the funds

5. Emails of August where Telecommunications Manager discusses fraudulent invoices BEFORE Contract Services Manager Deborah Segovia joined other corrupt City employees in an effort to hide the fraud and theft of public and grant funds via the submission and approval of fake time report invoices

6. Handwritten notes of Contract Services auditor Orlando Martinez Given the cold shoulder- Why cant we review documents? without any support forced Jose is the one forcing him doing PC repair?

7. Copy of 2005/6 ITSD Contract Compliance Review face sheet and page 2 where rental fee is discussed

8. August 2005 email- DIR/ Avaya contract no mention of rental fees but Contract Manager Gilbert states that expenses must be pre-approved in writing. Rental Fees are never discussed another dont ask- dont tell ploy by corrupt employees to hide the fraud/theft current DIR web site info sheet attached

9. Email of Sept 1, 2005 from IT Director Miller to MI Manager Quinn the cover-up begins Lets lie and blame the new Telecommunications Manager for decades of fraud Lies, Lies and more lies

10. February 14, 2008 fraudulent affidavit of IT Fiscal Manager Deborah Segovia no violations of law

11. Nov. 2005 email of Municipal Integrity Manager Quinn lack of evidence/unfounded HOWEVER

12. Excerpt from Municipal Integrity Final Report of October 2005 millions of dollars long term conflicts bill them to the variable as Mr. Medina directed should have been charged to individual departments variable got very high cut in half-charging individual departments for services previously charged to the variable , uncomfortable with aspects of the variable, ITSD was the most difficult no strict accountability kept changing their revenue projections to such an extent that he didnt have much confidence in their numbers tighten up the unregulated billing process- none were followed

13. Administrative Directive 6.12 variable base charges outlined monthly telephone costs only

14. ITSD Services Price List detailing a $35 minimum monthly surcharge for every City telephone

15. Avaya invoice of April 2005 submitted for payment and signed by IT Director Hugh Miller and IT Manager Jose Medina (Telecom manager initials invoice after work orders his group processes are reviewed for accuracy) fraudulent invoices are listed and Medinas hand-written VAR notation is evident directing billing clerks to submit the fraudulent invoice amounts for payment as part of the monthly variable surcharge on every City and grant funded phone. The Finance Dept. then transferred funding from City Dept. and Grant telecommunications budgets to reimburse ITSD.

(Oklahoma City, OK interstate)

16. Diagram depicting eight (8) steps accomplished to facilitate the payment of the monthly Centrex bills legally and in compliance with AD 6.12, other City regulations and State/federal grant rules/regulations

17. Diagram depicting seventeen (17) steps used to illegally siphon tens of millions of dollars from City and Grant telecommunications budgets since 1982 (steps at the bottom of the page are just a sampling of illegal transactions used by corrupt IT Managers and their cronies to gain access to tens of millions of dollars )

18. Attorney General Letter City Attorneys Office illegally denies FOIA access to the fraudulent audit and Municipal Integrity report of Oct. 2005 falsely stating that both are open/ongoing the cover-up continues

19. Police reports filed in June 2009 closed with no action letters/phone calls are ignored

20. Criminal Trespass Warning Letter of July 1, 2009 no explanation, no hearing, no time limit, etc. Telecommunications Managers photo (ironically his February 2005 Employee of the Month picture) is displayed along with the warning in City public buildings including Police Headquarters for all to see.

21. Listing of Federal cases concerning the submission of known fraudulent time records that have been prosecuted in recent times. Several schemes are identical to the San Antonio conspiracy being explained in this report

22. La Joya ISD payroll theft scheme District Administrators for the school district notified state and federal officials of the theft as is required by law. San Antonio Administrators lie and cover up the crimes.

23. Sherman, Texas - health care fraud Identical scheme to the San Antonio fiasco whereas one person submits known fraudulent time report records and a co-conspirator approves the false invoices for payment

24. Florida crimes CFO embezzled funds by submitting known false time records for work not performed HUD Inspector General Donohue states Public corruptionunderminessocial stability.

25. Indiana conspiracy Conspiracy to submit false statements for payment Aiding and abetting

26. Oklahoma City, OK Embezzlement and failing to report, helped cover up, failure to disclose

Additional documentation, audio recordings, emails, sworn statements, MI intake reports, depositions, courtroom transcripts, names of witnesses, etc. are available upon request