Trust in school official: At what cost? | October 31, 2012 | Almanac | Almanac Online |


Cover Story - October 31, 2012

Trust in school official: At what cost?

Two school boards trusted Tim Hanretty to manage costly projects with little oversight. Their trust cost the schools money — and much more

by Barbara Wood

Why would a man who is trusted, admired and looked up to by his community betray them?

That question is now being asked by many in that community — apparently, even by the parents of Tim Hanretty, 55, the former Portola Valley School District superintendent and former Woodside Elementary School chief business official who was sentenced to two years in prison on Oct. 22 after pleading no contest to six felony charges of embezzlement and misappropriating public funds in both school districts.

"It is a complete mystery to me that Tim did what he did. It is so completely unlike him," wrote his father, James Hanretty, who also said that "Tim was a near-perfect son growing up."

James Hanretty's letter is part of a half-inch-thick stack of documents given to Judge Mark Forcum to help him pass judgment in the case. The documents don't answer the "why" question — but they do provide some clues to the answer.

In addition to details from the District Attorney's Office investigation and probation interviews, the "Probation Officers Report and Recommendations" contains an eight-page statement by Mr. Hanretty, letters from those affected by the crimes and from Mr. Hanretty's supporters, and a detailed list of the money each district wants as restitution.

The school districts' losses, however, go far beyond the monetary.

"This was a completely serious thing," says Scott Parker, president of the Portola Valley School District's governing board. '"It almost tore this community apart in numerous ways."

After the Portola Valley district asked for and accepted Mr. Hanretty's resignation, but before the embezzlement was uncovered, many in the community questioned the decision. "People were concerned, they were worried, they were confused," Mr. Parker says.

"I don't think that was inappropriate," he says of the reaction. "This was a painful experience."

What happened in this case is easier to know than why it happened, at least as far as the actions Mr. Hanretty has admitted to.

Altered document

In 2007, Mr. Hanretty, managing a $12 million project to update the facilities at Woodside Elementary School, was authorized to borrow an additional $632,000 to renovate two athletic fields at the school.

"The resolution that the board approved for a $600,000 loan was altered to reflect a $2.6 million loan," he said in his statement. "I take full responsibility for altering these documents."

Later, he said, "I also presented financial reports about the construction project that did not reflect the cost overruns or the acquisition of the additional $2 million in funding."

When the project was completed, on time and, apparently, on budget, he was given a $5,000 bonus — a bonus district officials say he did not know he might receive.

The investigation found no evidence that Mr. Hanretty spent any of the $2 million on himself. "A forensic audit was conducted and the report revealed that all the money was spent on the schools," the probation report states.

The district figures the unapproved loan cost, however, including accountant and legal fees spent uncovering it, is more than $3.6 million. Taxpayers will be repaying the loan, which was supposed to have a 10-year term, for 21 years. Exactly how much Mr. Hanretty will be directed to repay the district will be determined by the judge in a conference on Nov. 15.

The district is also trying to cut its losses by negotiating new terms for the loan and seeking a payment from its insurance company, according to Superintendent Beth Polito.

Stolen funds

In Portola Valley, a few years after the Woodside project was completed, Mr. Hanretty was promoted in 2010 from assistant superintendent to superintendent of the school district, while continuing as its chief business officer.

Overseeing a project to install solar panels at the school with the help of a $1.5 million federal grant, Mr. Hanretty submitted invoices that were actually for work done on his home in the Skylonda neighborhood of unincorporated Woodside, and paid for out of solar project funds.

"It was my intention to repay (the misappropriated $100,926) to the school district by the end of my three-year contract," Mr. Hanretty wrote.

He did not, and now Mr. Hanretty has been ordered by Judge Forcum to pay the district $181,750 in restitution. The amount includes not only the money spent on Mr. Hanretty's home, but the district's costs for the investigation.

Conflicting stories

Why did Mr. Hanretty commit the crimes he has admitted to? His statement says that as the Woodside School renovation project was under way, costs escalated, as did demands to complete the renovations quickly.

"I was under immense pressure from all involved to not only complete the project before school opened, but to cover additional expenses that were not anticipated," he wrote

"I became nervous that there would not be enough money to complete the project. I projected that an additional $2 million would be needed."

His statement claims that money committed to the project by the Woodside School Foundation then fell through. "It also became clear as the project was under way, that the Foundation would not be able to meet its $1.2 million funding commitment," he wrote.

However, people who worked on the renovation with Mr. Hanretty deny that. Stephanie Ashworth, at the time a foundation board member serving as assistant treasurer, says the foundation had early on pledged up to $1.2 million as a contingency fund should costs of the project go beyond the $12 million bond amount.

"There was never a conversation that said we were no longer willing to do this," she said. The money was in the foundation's endowment fund, she said — available if it had been requested.

Instead, the board and others involved in overseeing the project were consistently told by Mr. Hanretty there were no schedule or money problems, Ms. Ashworth said.

Bettina Pike, who was president of the Woodside board at the time and is still a board member, agreed. "We were being presented with the perfect scenario of on time, on budget," she said.

Since funds weren't needed for the bond project, the foundation agreed to pay to renovate two school fields, Ms. Ashworth said. And when Mr. Hanretty pointed out that the district could borrow the money for the fields at a lower interest rate than the foundation was getting on its investments, the foundation agreed to instead repay the loan over its 10-year life to save money.

'Frustrated and angry'

In Portola Valley, Mr. Hanretty's motivations appear much different.

Mr. Hanretty said in his statement that when he was promoted to superintendent from assistant superintendent in 2010, he did not ask for "the usual $15,000 to $25,000 compensation increase that would accompany this type of promotion." Instead, he said, he asked for a $100,000 "housing assistance" loan — to be repaid over three years, with interest.

"The $100,000 was needed to complete a significant home renovation project at my home," he wrote.However, the loan was not approved as part of his contract.

"Frustrated and angry that I did not receive the $100,000 loan, yet desperate for the money to complete my home renovation project, I charged down the path of true criminal activity," Mr. Hanretty wrote.

Portola Valley board president Scott Parker said that while he can't discuss what happened in closed session around Mr. Hanretty's contract," he "was shocked to hear" that Mr. Hanretty was unhappy about not getting the loan. "That wasn't ever clear to us ,that he was upset about that," he said.

Mr. Parker said Mr. Hanretty left behind a financial mess for the district that extends far beyond the money embezzled for the home-remodeling project.

This spring, for example, the district discovered that an additional $400,000 from the solar fund had been used to make purchases not allowed under the grant. The misappropriation meant that the entire $1.5 million grant could have been subject to immediate repayment if the district had not at once found another way to cover the purchases.

Mr. Hanretty also misused a fund the district had set up, with seed money from Bill and Jean Lane, to help district employees pay housing expenses. He also vastly underestimated employee benefit costs in the budget.

Until the Woodside investigation prompted Mr. Hanretty's resignation and the Portola Valley district investigation, "we actually didn't know we were in financial trouble," Mr. Parker said. "Basically he was cooking the books."

The district was in such bad financial shape that it was in danger of going into receivership and being taken over by the state, even before the $101,000 loss was discovered.

Today, however, with support from the community and the Portola Valley Schools Foundation, the district is back on track, Mr. Parker said.

And how did Mr. Hanretty's home remodeling project turn out? Despite the fact that Mr. Hanretty said a total of $225,000 was spent renovating his home, he also claimed at his sentencing: "The house I share with my partner is upside-down financially."

Although Mr. Hanretty was sentenced to two years in prison, Deputy District Attorney Kimberly Perrotti noted that he will almost certainly be out in only one year, as prisoners routinely get one day of "credit" for each day served.