West ISD - Did it cheat?

Home Social Security Texas teacher Scam Iraq

Other Issues Links Reading List About Us Support Us Contact Us Search

Did West ISD cheat the Social Security trust fund? Or its workers?

As noted elsewhere on this Web site, the Public Program Testing Organization (PPTO) informed the Social Security Office of Inspector General (OIG) that 15 Texas school districts had illegally given Social Security coverage to thousands of workers, and the resultant damages would exceed $2 billion. As a result, OIG conducted a year-long, on-site investigation, culminating in an Audit Report released in January 2007. Our allegations were confirmed.

On this page you will find the results of the OIG investigation, as they pertain to one of the districts: West Independent School District. Below that you will find some of the relevant information collected (prior to the OIG audit) with regard to West's special hiring program.

The OIG's conclusions with regard to West

On pages 5 and 6 of its Report, the OIG stated:

Questionable Employment - West required that applicants pay fees ranging from $500 to $750 to participate in its 1-day program. Whereas, all other individuals West hired did not pay fees. According to West, it determined the fee amounts based on what other school districts were charging. In addition, our audit disclosed that the number of 1-day workers West hired was generally based on the number of interested applicants rather than an actual need for their services. Finally, West stated it would not have hired the 1-day workers without collecting application fees.

In total, West collected $1,069,478 in fees from its 1,860 1-day workers. West deposited the fees into the district's general fund, which it used to pay the 1-day workers... (emphasis added).

These OIG conclusions suggest that the employment was a sham because there was no "actual need for their services," and the workers effectively financed their own wages.

Much more damning, however, were the OIG unequivocal conclusions with regard to West's lack of legal authority to provide Social Security coverage. On page 6 of its Report, OIG stated:

Lack of Authority to Grant Social Security Coverage - Although West stated it hired 1-day workers for full-time positions, we found there was no intent or expectation by either party the employment would last longer than 1 day. In fact, all 91 individuals [tested during the audit] hired under the program actually worked only 1 day. West's section 218 agreement states that part-time positions (defined as 30 hours per week or less) are excluded from Social Security coverage. Our review disclosed that each of the 91 individuals hired under West's 1-day program worked less than the required 30 hours per week (emphasis added). [Note: the "section 218 agreement" defines who can and can not be given Social Security coverage by Texas school districts.]

Thus, it was OIG's conclusion that West had no legal authority to give Social Security coverage to its (approximately) 1800 one day workers because they each worked in a position requiring less than 30 hours per week. What are the fiscal implications of West's illegal actions? According to OIG (page C-3 of Audit Report), the Social Security trust fund will lose over $202 million as a result of West's one-day hiring program.

Was West's unauthorized Social Security coverage deliberate and discrimminatory?

In early 2005 the PPTO and Joe Fried conducted an informal "audit" of West's one-day hiring program. This is the audit that led to the allegations that we presented to the OIG in October 2005. The evidence accumulated during the PPTO audit suggests that West's provision of Social Security coverage to unauthorized workers was deliberate and discriminatory. This assessment is based on the following evidence:

In March, 2004, Joe Fried anonymously telephoned the West business office, ostensibly to get a one-day job that would qualify him for the GPO loophole. He was told by an office worker (Amy Podsednik) that, for a fee of $650, he could work on any single day of his choosing (doing light custodial work), and would be given Social Security coverage. He was also told that all employees in Defendant’s special employment program worked from 8:00 AM to 3:00 PM (i.e., 6.5 hours, after deducting one-half hour for lunch).

Several weeks later (using a pseudonym) Fried e-mailed West's business manager, Peggy Kissinger, and inquired about getting real part-time nonprofessional employment (not simply a job that would qualify him for the GPO loophole). He was told (in an e-mail message linked to this Web page):

We pay SS on paraprofessionals. That includes maintenance, grounds, food service, secretarys and aides. We only pay on positions that work OVER 30 hours per week” (sic)

This crucial e-mail message indicates that, in all likelihood, West knew of the part-time employment restriction, that West’s established definition of “part-time” was 30 hours or less per week, and that the definition applied to all paraprofessional positions, including maintenance workers. Coupled with the information obtained via telephone (see above), it reveals that West had a double standard for extending Social Security coverage to its nonprofessional staff - an easy standard for the retiring teachers posing as nonprofessionals and a tough standard for the real nonprofessionals (i.e., the low income workers who did the nonprofessional chores each day).

However, there was still no definitive proof that West was giving Social Security coverage to those who were not qualified for it because an employee could work part-time hours and still qualify for Social Security if he worked his part-time hours within a full-time position (e.g., as a substitute for a full-time custodian). This uncertainty was resolved after Fried received a critical admission from West's business manager. In response to one of our questions, Peggy Kissinger stated: “No participant served as a substitute for a West I.S.D employee. Tasks were performed as they materialized.” This statement is crucial because it establishes that West's one-day employees worked part-time hours, and in part-time positions. They were not substitutes for full-time workers.

It appears that West knew it was breaking the rules

Additional evidence shows that West was fully aware of its Social Security Agreement restrictions. Joe Fried obtained a memo written by Peggy Kissinger, West’s business manager, on August 20, 2003. It states, in part:

The Social Security agreement [i.e., the “Section 218 agreement] that the West ISD has on auxiliary employees that work more than 30 hours a week requires a full 7.65 percent withholding matched by the District in the amount of 7.65 percent for a total payment on each employee that works over 30 hours a week of 15.30 percent each month. This is for Social Security and Medicare.

Those auxiliary employees who work 30 hours or less each week pay no Social Security of 6.20 percent, but they do pay 1.45 percent for Medicare if they are employed after April 1, 1986.

This memo shows that the business manager, Peggy Kissinger, who is a Certified Public Accountant, was well-aware of the District’s "Social Security Agreement," and she knew that the agreement excluded part-time positions from Social Security coverage. In addition, it confirms that West defined a “part-time position” as one requiring employment of “30 hours or less each week.” And, finally, the date of the memo (August 20, 2003) shows that all of this was known to the business manager at the very same time Defendant was giving hundreds of auxiliary workers (“custodians”) Social Security coverage for just 6.5 hours of work.

More evidence was received from the Texas State Social Security Administrator, Carolyn Fry. Joe Fried obtained a photo static duplicate of the state-local agreement, which defines who can, and can not, be given Social Security coverage by West. In the left-side margin, next to item 4b, there is a hand-written notation defining part-time as “30 hrs wk or less.” (See link below.)

Clearly, West’s definition of part-time position was a job that entailed 30 hours or less of work per week. However, is it possible that West thought each worker would work longer than a single day? No. We obtained a copy of the standard letter, used by West to orient new one-day workers. It states:

In response to your request, this packet is being mailed to you in order for you to work your final day in the Texas Teacher Retirement System… (underline added).

This is important evidence because it clearly shows that there was no expectation that the employment would last more than one day.

Thus, the evidence establishes that West did not give Social Security coverage to its regular nonprofessional employees working 30 hours or less per week, yet it gave Social Security coverage to people in the special employment program working just 6.5 hours - if they paid a hefty fee. In addition, the people working in West’s special employment program were performing “tasks” as they “materialized," and were not substituting in full-time positions. And, there was no expectation that the employment would last more than 6 or 7 hours. Effectively, West made over a million dollars by selling Social Security coverage. As a result, the Social Security trust fund will payout over $200 million to ineligible beneficiaries. (That is the OIG estimate.)

Blatant discrimination?
As noted, West's actions will cause the Social Security trust fund to lose hundreds of millions of dollars. However, the most disturbing aspect of its one-day work program is, in our opinion, its discriminatory nature. The retiring professionals, serving (or posing) as custodians, received Social Security coverage after just 6.5 hours of work. Whereas, many of West's real nonprofessional workers will never get Social Security coverage, even after years of work, because they didn't work "OVER 30 hours per week." Many of these real nonprofessional workers may believe that they qualify for Social Security benefits, but when they reach retirement age and try to apply, they will be turned away.

There is additional evidence that supports this opinion. Using the Public Information Act of Texas, we obtained work time sheets (for the period February 1, 2005 – April 30, 2005) for some of West’s permanent, part-time paraprofessionals (i.e., those who were not getting Social Security coverage). These employees were not in West’s special loophole program, and did not pay the special “processing fees.” The time sheets show that these employees worked up to 30 hours in a week, and up to 8 hours in a day. However, none of these employees received Social Security coverage. (I.e., West paid no FICA on their behalf.)

In 2006 the OIG audited West as a direct consequence of my allegations. Subsequently, West began to provide Social Security coverage to substantially all of its workers - part-time and otherwise. However, it is not clear that these changes were made retroactively. Therefore, many of West's regular nonprofessional workers may have large gaps in their Social Security coverage, and may not be eligible for benefits upon retirement.

IMPORTANT: People who worked for West ISD as cooks, clerks, custodians, paraprofessionals, grounds people, etc. may have been victimized by discriminatory employment practices. If these people were denied Social Security coverage by West prior to 2006, they may want to ask West to justify that lack of coverage in light of its provision of Social Security coverage to hundreds of one-day "jani-teachers."

Public Program Testing Organization

©2003, 2004, 2005, 2006, 2007, 2008 Date last modified October 15, 2008

©2003, 2004, 2005, 2006, 2007, 2008
Date last modified October 15, 2008