In wake of scandal, Scottsdale Schools eye formal conflict of interest rules

Scottsdale Unified School District Governing Board (Photo by Arianna Grainey)

The conflict of interest requirements for employees of Scottsdale Unified School District is getting a substantial revision, as its leaders and legal team conducted a first read to the policy as recommended by the Arizona Auditor General.

Gust Rosenfeld Attorney Susan Segal pointed to recent Auditor General and Heinfeld Meech  audit reports outlining changes needed to the district’s conflict of interest process following a former employee who was indicted on 11 felony charges surrounding allegations of conflict of interest.

Susan Segal (Independent Newsmedia/Arianna Grainey)

On June 26, a Scottsdale Unified School District Governing Board meeting included Ms. Segal presenting changes to the school board’s conflict of interest policy and requirements.

Ms. Segal pointed out areas of the former policy which she described as confusing, and didn’t spell out what employees were obliged to disclose.

Ms. Segal says four events happened that led to a new policy being drafted:

  • Incidents occurring resulting in the indictment of a former employee;
  • Reports by the Arizona Auditor General, SUSD report and Ms. Segal’s report pointing out problems;
  • House Bill 2663 causing changes to conflict of interesting policy for school districts;
  • Recommendations of Auditor General need to be implemented.

“Bottom line is we don’t believe there is enough training or enough explanation for your employees as to what is a conflict of interest, what is a substantial interest and what they need to disclose,” Ms. Segal said.

“Not only did you not train, but you didn’t require employees to rethink it at the beginning of each year.”

Ms. Segal says the new policy requires employees to state if they have a conflict of interest, or if they have no conflict of interest, annually; in addition to providing more explanations and definitions of what is considered a conflict. More training on the topic will be done as well, Ms. Segal says.

“The concept will be that every employee upon hiring will go through a mandatory training,” she said. “You have historically not had that. You just had in your hire documents whether there’s disclosure of outside employment. That’s not the same thing so we need to educate on that.”

Ms. Segal says at the recommendation of the auditor, employees will have to state that they have no conflict. The documents will be dually housed with human resources and with the legal department, Ms. Segal says, and both departments are responsible.

“You can’t pass the buck, both of you have the responsibility to check,” she said.

“The incident that I investigated, it didn’t in any way shape or form describe the conflict. It doesn’t say who, how come, why or where.”

In May, the school district’s former Chief Financial Officer was indicted on 11 felony charges, including two counts of fraudulent schemes and practices and eight counts of conflict of interest.

While employed as Scottsdale Unified School District’s CFO, Laura Smith is accused of approving purchase orders and change orders for Professional Group Public Consulting, Inc., also known as PGPC. Both Ms. Smith and her sister had ownership interest in PGPC, according to the Arizona Attorney General’s office.

She served as CFO for less than one year, and resigned from SUSD on Jan. 26, amid the outcome of an ongoing internal investigation.
The conduct is alleged to have taken place between February and October 2017.

Special Agents with the Arizona Attorney General’s Office and the Office of the Auditor General investigated the case, while Assistant Attorneys General Joseph Waters and Mary Harriss are prosecuting the case.

The Governing Board is expected to conduct its second read on the policy change later this summer before voting to approve implementation.

Acknowledging the bevy of issues over the past year, ranging from the conflict of interest issues to releasing its superintendent, Governing Board President Kim Hartmann and Vice President Barbara Perleberg made statements thanking their constituents.

“I want to acknowledge it’s been a challenging year,” Ms. Hartmann said. “Leaders, classified staff, through the process stayed focus on what our true mission is here in the district. It’s well recognized and appreciated, so thank you.”

Ms. Perleberg echoed Ms. Hartmann’s sentiments.

“Seventeen-eighteen has been one for the record books, but we survived it all and I know we are stronger and getting stronger each day for it,” she said.

Northeast Valley News Editor Melissa Rosequist can be e-mailed at or can be followed on Twitter at

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