SUSD attorney: CFO actions violated state law, board policy

The Scottsdale Unified School District Governing Board held a special meeting to accept Chief Financial Officer Laura Smith’s resignation and to hear attorney Susan Segal’s findings on an internal review on the CFO. (photo by Melissa Fittro)

An attorney for the Scottsdale Unified School District told district officials Tuesday night that an internal review has revealed its former chief financial officer’s ties to a local financial firm posed a conflict of interest and in her opinion were in violation of Arizona law.

Attorney Susan Segal shared her findings during a special meeting held Jan. 30. The findings were a result of an internal review looking into the actions of Laura Smith, who held the title of chief financial officer for SUSD for less than one year.

The CFO’s conflict of interest arose following the district entering into a monetary agreement with Professional Group Public Consulting, Inc. — also known as PGPC — of which Ms. Smith is named president and director.

Ms. Smith arrived at SUSD in early 2017. According to the internal review conducted by Ms. Segal, the school district has paid thousands of dollars to the financial firm since Ms. Smith joined the district.

The Scottsdale Unified School District Governing Board called a special meeting 4 p.m. Tuesday at Mohave District Annex, 8500 E. Jackrabbit Road to discuss the matter.

Ms. Smith resigned on Friday, Jan. 26. She had been put on administrative leave two days prior pending the ongoing investigation.

The Governing Board accepted Ms. Smith’s resignation with a 5-0 vote before entering into executive session to discuss legal action.

A screen shot of Susan Segal presenting to the SUSD Governing Board.

There are four shareholders in PGPC, including Ms. Smith and her sister, Caroline Brackley.

Although Ms. Smith signed conflict of interest forms when she joined SUSD, she failed to fully disclose her own and Ms. Brackley’s relationship to the company, and did not refrain from district involvement with PGPC, Ms. Segal said.

Ms. Segal stated, that in her legal opinion Ms. Smith is in violation of ARS 38-503, which states in part:

  • Any public officer or employee of a public agency who has, or whose relative has, a substantial interest in any contract, sale, purchase or service to such public agency shall make known that interest in the official records of such public agency and shall refrain from voting upon or otherwise participating in any manner as an officer or employee in such contract, sale or purchase.
  • Any public officer or employee who has, or whose relative has, a substantial interest in any decision of a public agency shall make known such interest in the official records of such public agency and shall refrain from participating in any manner as an officer or employee in such decision.

Two conflict of interest documents were signed by Ms. Smith — one in February 2017 and the other in May 2017. In her role as CFO for the district, Ms. Smith allegedly signed off on a number of documents that increased approved purchase order amounts for the contracted firm, PGPC.

Ms. Segal, a partner with Gust Rosenfeld, was retained by the district in 2017 to review Ms. Smith, and review Brian Robichaux, then-president of Hunt & Caraway Architects, a firm contracted to assist with the district’s $229 million bond renovations on eight elementary schools.

The Arizona Attorney General’s Office in November confirmed it was looking into bid practices of Scottsdale Unified School District. That same month, a 1998 felony charge for theft involving Mr. Robichaux also came to light.

Ms. Segal’s review of Mr. Robichaux was presented in late December. She found no wrongdoing by the school district in the procurement of Hunt & Caraway, she said.

PGPC was hired by former Scottsdale Unified School District CFO, Daniel O’Brien, Ms. Segal said. Following the retirement of the district director of procurement, no one in the district had experience with a form of procurement known as Construction Manager at Risk.

Mohave District Annex is at 8500 E. Jackrabbit Road in Scottsdale. (photo by Melissa Fittro)

One legal opinion

At nearly 7 p.m. Tuesday, Jan. 30, the Governing Board, Superintendent Dr. Denise Birdwell and legal representatives exited their executive session and Ms. Segal publicly presented her findings on the former financial officer’s alleged conflict of interest.

She expects to deliver a full report to the board within five days, she said.

According to Ms. Segal, when Ms. Smith began working as the district CFO on Feb. 15, 2017, she was a shareholder, director and president of PGPC.

“In an interview conducted on Jan. 18, 2018, Ms. Smith said she could not remember the exact ownership in PGPC as of May 31, 2017, but she estimated it to be 15-20 percent,” Ms. Segal explained to the governing board and reporters.

Ms. Smith wouldn’t allow herself to be recorded for the interview, Ms. Segal said.

Ms. Segal noted the conflict of interest law defines a substantial interest as more than 3 percent.

“A copy of a tax filing she later gave me at my request after the interview shows that her interest in PGPC in 2016, the year before, was 17.72 percent,” she said.

According to Ms. Segal, Ms. Smith says she notified PGPC of her desire to sell her interest back to the company on May 1, 2017, and the sale occurred May 31, 2017.

A February 2017 conflict of interest statement signed by Laura Smith.

“Although she provided evidence subsequently that she wanted to sell her stock, she has not provided evidence that the stock was actually sold or how much of her stock was sold — even though I’ve asked on several occasions and I’ve asked Caroline Brackley, who is the managing director of that company,” Ms. Segal said.

As of Jan. 30, Ms. Smith was still listed as a director, officer and principal shareholder of PGPC according to the Arizona Corporation Commission.

A Feb. 24, 2017, conflict of interest disclosure signed by Ms. Smith does not comply with the letter of the law, Ms. Segal states, because it does not fully disclose her substantial interest in transactions between the school district and the financial company.

“It is also deficient because it does not fully disclose the substantial interest of her sister, Caroline Brackley, in any transaction between the district and PGPC or of any district decision relating to that interest.”

Documents obtained by the Independent show that Ms. Smith only listed herself when prompted to list herself — or close relatives — who have a substantial interest in the contract, sale, purchase or service to the district. The document doesn’t show any mention of PGPC.

A May 2017 conflict of interest disclosure signed by Laura Smith.

On May 3, 2017, Ms. Smith signed a conflict of interest disclosure memo, where she identified herself as part owner of PGPC, documents show.

The memo states that PGPC provides consulting services to the district from time to time.

“In May of 2017, Ms. Smith signed another conflict of interest form. In that she failed to disclose a substantial interest of her sister Caroline Brackley,” Ms. Segal said.

“In my opinion, for that reason, that disclosure was also inadequate and did not meet the letter of the law. Neither the district general counsel nor the district superintendent knew that Ms. Brackley was Ms. Smith’s sister.”

In all, Ms. Smith signed off on five change order requests that increased the amounts of underlying purchase orders to PGPC, Ms. Segal said, noting that all were in connection to the consulting services for the CMAR request for proposals for upcoming elementary school rebuilds.

The total of the five change orders amounted to $16,072.40.

There were other pay orders for PGPC, which were signed by other district employees, Ms. Segal noted.

“In her interview Ms. Smith said she inadvertently signed these change orders because it did not provide the vendor up in the top form,” Ms. Segal said.

Ms. Segal says she called upon an expert witness — an unidentified person who Ms. Segal described as a retired CFO from the Mesa Unified School District —who believes the actions of Ms. Smith were inappropriate.

“His opinion, which he has rendered, is that it was inappropriate for Ms. Smith to sign these change orders without knowing who they are being issued to, and she should not have signed any change order without knowing which vendor was the subject of the purchase order and change order,” Ms. Segal explained.

In addition to those five change orders that changed the amount of purchase orders, there were six purchase orders to PGPC that showed to be approved by Ms. Smith with a computer generated signature.

There are other purchase orders that show to be approved by other members of the purchasing department, in which those employees said they knew Ms. Smith had a conflict of interest with the company.

“But they also said they wouldn’t know about those unless someone called them to their attention,” Ms. Segal noted.

The amount of the six POs to PGPC totaled $43,766.35.

Ms. Segal says her legal opinion is that Ms. Smith violated ARS section 38-503, and board policy GBEAA. She explained:

  • She did not fully disclose her substantial interest in the Feb. 24, 2017 disclosure;
  • She never fully disclosed the substantial interest of her sister, Caroline Brackley, in any transaction;
  • She did not refrain from participating in any manner of such transactions or decisions because she approved purchase orders to PGPC, she signed change order requests and she participated in finding out the costs of PGPC to consult on the CMAR procurement.

All open purchase orders with PGPC have been closed at the direction of Dr. Birdwell as of Jan. 24, Ms. Segal said.

“Ms. Smith was told on several occasions by Dr. Birdwell that she should take herself out of all authorizations and decisions pertaining to PGPC,” Ms. Segal said in closing her presentation. “She assured Dr. Birdwell that she was doing just that.”

Documents have been forwarded to the Arizona Attorney General, Ms. Segal said.

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

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