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Did West ISD cheat the Social Security trust fund? Or its workers?
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As noted elsewhere on this Web site, the Public Program Testing Organization (PPTO) and I 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 I 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.
Link to Audit Report of the Office of Inspector General
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Was West's unauthorized Social Security coverage deliberate and discrimminatory?
In early 2005 the PPTO and I 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. I base my assessment on the following evidence:
In March, 2004, I
anonymously telephoned the West business office, ostensibly to get a one-day job that would qualify me for the GPO loophole. I
was told by an office worker (Amy Podsednik) that, for a fee of $650, I could work on any single day of my choosing (doing
light custodial work), and would be given Social Security coverage. I 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) I e-mailed West's business
manager, Peggy Kissinger, and inquired about getting real part-time
nonprofessional employment (not simply a job that would qualify me for the GPO loophole). I 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).
Link to email from Peggy Kissinger
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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 I received a critical admission
from West's business manager. In response to one of my 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. I 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. I obtained a photostatic 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.)
Link to West's section 218 agreement
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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. I 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 my 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, I 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."
Link to additional warning information .
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Intelligence recognizes what happened. Genius recognizes what will happen. - Poet John Ciardi
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