On shaky ground - Page 2

Did City College use its foundation to launder public funds for political purposes?

"As the chancellor and CEO of this college, I take responsibility for these missteps."

But despite the breadth of the internal investigation, which filled 232 pages and detailed the history of the hastily organized 2005 bond election, its scope never reached the foundation's political activities.

Now it appears that after the Chronicle published stories last April exposing the misdirected funds from 2005, the foundation's board of directors asked for a special audit to ensure that all its financial transactions between 2005 and 2007 were free from any association with public funds the board wasn't aware of.

The foundation at that time hired a lawyer, Peter Bagatelos, who told the Guardian that the board didn't know $38,670 was transferred to the foundation's bank account on the day of the November 2006 statewide election, when voters were asked for $10.4 billion in bond money to support California's public schools.

"It was never done with their consent or knowledge or participation," Bagatelos said.

During the same two-year period covered by the audit, the foundation made cash donations to other political action committees (PACs) totaling $110,000, including $75,000 that went toward City College's $246.3 million local bond election in 2005.

Those transactions appear to be legal because the foundation is a 501(c)3 nonprofit that technically operates separately from the school and can promote political causes that benefit community colleges within certain parameters, according to a coalition lobbyist. Each of those contributions were approved and properly documented by the foundation's board, unlike the transactions from early November 2006.

Goldstein also said that the foundation's board was not happy about the discovery and that the directors returned the money last April, just as the Chronicle's stories were breaking. He said the remaining $10,000 was legally acquired from yet another nonprofit controlled by the college and through a private vendor, but the foundation's board elected to return that money as well on the advice of legal counsel "to avoid any appearance of impropriety."

"Any funds that the college is entitled to cannot and should not be transferred to the foundation," Goldstein told us. "The particular item that you're asking about was absolutely a mistake. It should not have been transferred. It was found internally, corrected, and the funds were distributed to a variety of student organizations."

The Community College Facility Coalition, which received the $35,000 donation, was formed by a small group of school presidents in the spring of 1993 and today includes 52 districts across California. Its "issues committee" was created expressly for financing statewide bond campaigns.

The political action committee's state election filings show that the foundation's contribution was actually made on the same day City College transferred the $38,670 to the foundation's bank account, rather than a day earlier as the audit states.

City College has aggressively sought such state money — nearly $200 million since 1998 — to match funds raised through local bonds from San Francisco taxpayers to help with its ongoing capital projects like a new gymnasium, a performing arts center, and campuses in the Mission and Chinatown.

The $35,000 contribution was among the largest made to the coalition's PAC leading up to the election, and Paul Holmes, a lobbyist for the coalition, said only 10 to 12 schools use their foundations to support ballot measures each year. Rarely does it receive a donation of more than $20,000, he said.

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