Lupe Nunez, a vice principal for two years at one of two charter schools formerly operated by the Mexican American Community Service Agency (MACSA)  school, says she’s not sure if Xavier Campos was involved in the disappearance of funds from the teachers’ retirement accounts, “but you kind of wonder.”

The question weighs on the minds of many teachers who worked for below-market wages at charter schools in Gilroy and San Jose, operated by MACSA, as executives raided $1 million from their pension accounts to pay other expenses, according to the Santa Clara County District Attorney’s office. Last week, the District Attorney’s Office indicted former MACSA CEO Olivia Soza-Mendiola and former CFO Benjamin Tan, but not the third member of the managerial troika: Campos. “Mere knowledge of criminal activity is not enough,” District Attorney Jeff Rosen said during a press conference.

While school employees lost their jobs and retirement contributions, Campos was elected to public office as San Jose’s District 5 councilmember. He worked at the nonprofit for two decades and served as MACSA’s chief operating officer (COO) when the illegal diversion came to light in early 2009.

Nunez contributed $230 from each paycheck to her retirement account, about $5,000 overall, and expected MACSA to match the amount. She remembers going to meetings, where Soza-Mendiola would give various explanations for the retirement account funding shortfalls.

“They were kind of beating around the bush, saying that because of the economy we are going to have to use your funds,” Nunez says. “So they kind of muddled it up.”

The financials were so muddled, in fact, that it took the DA’s office more than three years to complete its investigation. Michael Sterner, the case’s lead investigator, had his own suspicions about Campos in the report he wrote to support the charges against against Soza-Mendiola and Tan. Sterner commented that board meeting notes in 2004 and 2007—meetings that Campos almost assuredly attended—showed widespread awareness of the illegal diversion of retirement payments.

“The board meetings indicate that Mr. Campos took a lead role in the effort to sell real property owned by MACSA in part to satisfy past due pension obligations,” Sterner wrote. “Thus, Mr. Campos was almost certainly aware that MACSA had failed to make at least some pension payments.”

Nunez recalls that Campos “said he knew nothing about what was going on” with the pension funds. “He was always very vague.” After she was let go in March of 2009, “when they were running short on funds,” Nunez checked her pension balances and saw her money wasn’t there. A few months later, Campos offered Nunez a job managing his campaign for a San Jose City Council seat. She says she accepted the position not out of loyalty to Campos, but because she needed the work.

So did Campos, who conveniently forgot during his 2010 campaign to note in his League of Women’s Voters profile that he worked with MACSA for two decades.

Nunez wonders how Campos could not have known about the pension money diversion. “I cannot fathom how an operations officer cannot know where the funds are,” she says. “If he didn’t know… wow! If he did know, shame on him.”

Broken Trust

Gordon Smith grew up in downtown San Jose’s Naglee Park neighborhood. When his baby girl arrived five years ago, he moved four blocks to the other side of Coyote Creek to a neighborhood of small wooden homes that were part of East San Jose before it was annexed to San Jose in 1911.

“I want to give my daughter the same kind of upbringing I had,” he says.

The 35-year-old UC Santa Cruz grad says he’s worked as a substitute teacher in 50 different schools, teaching all subjects and all grades. He says he took a position with MACSA’s San Jose charter school, Academia Calmecac, even though it was “paying well under market,” in part because it had a pension plan that matched employee’s 8 percent of paycheck contributions. “You basically got 16 percent,” Smith says. “That was one of the big plus points of working for MACSA.”

Smith worked there four years, from 2005 to 2009. During that time, he directed about $4,000 a year from his paycheck to his retirement fund, and MACSA deducted the funds from his paycheck. With matching funds, it should reached been around $30,000, he estimates. A colleague from a sister school in Gilroy called and told him, “‘It’s really worth checking.’ I checked it. It was very low. It was way behind.”

According to the DA’s charges against Soza-Mendiola and Tan, MACSA stopped making nearly all employer payments to its pension plan provider (VALIC) in early 2004, began skipping payments to the provider for employee pension contributions in 2007 and stopped all payments completely in January 2008.

“We didn’t want to believe anything bad was happening,” Smith says, “and we didn’t want to risk our jobs by asking questions.”

He remembers the series of meetings when management tried to explain the shortfalls. “At first they said, ‘We don’t know what you are talking about. We were a little behind. Maybe some payments weren’t processed.’ We kept getting a variety of stories. The stories kept getting worse and worse. They’d never cop to anything other than what had been proven,” Smith recalls.

“I said to myself, ‘I don’t trust them, I’m out of here.’”

The DA’s decision to charge only two people for the wide-spread theft seems to have less to do with what people knew, but whether they had direct control over the expenditure of funds and how they handled their own pay deductions. Soza-Mendiola, who signed the checks, twice was awarded raises in 2007 and 2008, while contract employee Tan, who decided which checks went out, negotiated a contract that gave him higher pay instead of a pension.

Soza-Mendiola was the first MACSA employee to stop making bi-weekly payments into her own pension fund in mid-2007, suggestion she know the money was vanishing. That was almost a full year before Campos, whose contributions were small, and others opted out of the phantom retirement system.

Campos contributed $100 per pay period for a full year after Soza-Mendiola halted her payroll deductions, losing about $2,500 of his own money. His decision to continue making contributions to the pension fund—when he likely knew they were worthless—seems to have kept him out of the DA’s crosshairs. Was Campos dumb to lose the money or smart to avoid prosecution — or just not paying attention?

Sterner couldn’t say for certain in his report, because like Soza-Mendiola and Tan, Campos refused to give an account to investigators. (He also declined comment for this story.)

But while Campos continues to enjoy support from labor groups and District 5 voters loyal to his sister Nora, who preceded him in office before moving on to the California State Assembly, others say the councilmember is using his support bases as a shield.

Miguel Baldoni Olivencia, a former MACSA employee who now teaches in China, says Campos and others treated the nonprofit as a slush fund for development projects while using MACSA’s heritage to buffer criticism.

“The big picture is that Xavier Campos (and people like him) are using race baiting to stay in control of poor Mexicans and immigrants and make themselves rich in the process and steal money from the public trough in the process,” Olivencia wrote in a message.

Examples that Olivencia noted are MACSA’s affordable-housing projects, which are mainly funded by grants and public money. In 2001, MACSA’s board created the Ketzal Community Development Corporation. The people in charge of oversight for both organizations were one in the same. Within six years, MACSA transferred more than $800,000 to Ketzal to build Las Mariposas, a development that helps low-income, first-time homebuyers.

Former MACSA auditor Joe Chaidez—who along with Tan and Soza-Mendiola are defendants in a civil suit filed by MACSA last year—noted in 2008, three years after Las Mariposas was finished, that nearly $600,000 in Ketzal debt should be wiped off the books as uncollectable. (See page 18.)

How the money was lost so quickly by a MACSA-controlled entity has yet to be explained.