Taos Schools audit accuses former facilities director, family of $244K kickback scheme

TAOS — Taos Municipal Schools District released a forensic audit report on Friday accusing a former department director of funneling hundreds of thousands of dollars in district contracts and subcontracts into a company he owned while employed with the school system.

The 417-page report places former facilities and maintenance director Robert Valencia and his wife, Christine Valencia, who worked as an assistant finance director and chief procurement officer for Taos Schools, at the center of the alleged kickback scheme.

The audit concluded that from Jan. 1, 2017, through Oct. 13, 2022, Robert Valencia received $244,124 in “personal and family financial compensation” by directing numerous contracts and subcontracts to All Around Fence Co. LLC, a local fencing company he owns in Taos.

During a brief phone interview on Saturday, Robert Valencia denied the allegations and called the audit a “witch hunt.” He reserved further comment until he could speak with an attorney.

Valencia, who is also a former Taos High School wrestling coach, is accused of circumventing the district’s required public bidding process to funnel contracts to All Around Fence or indirectly through subcontracting with other local businesses.

His wife is suspected of then processing All Around Fence’s paperwork through the district’s financial department, where she helped to hide the conflict of interest by tampering with “W-9s, business filings and workers’ compensation records,” according to the audit.

“Rather than bid for work directly for the district, the vendor, (All Around Fence), often received payment indirectly as a subcontractor through vendors such as Phoenix Mechanical and La Tierra Landscaping,” the report reads.

The Valencias denied ownership of the business after the district first became aware of a potential conflict of interest in 2022 “following a series of escalating concerns regarding potential financial misconduct, procurement irregularities, and unethical behavior within Taos Municipal Schools,” the audit states.

The audit claims they instead told district administrators that the business was owned by their sons, stating they were only listed on paperwork for All Around Fence because they had provided a loan to operate it.

The audit asserts that a “Jr.” was added to a signature for “Robert Valencia” on a W-9 for All Around Fence after the couple were first questioned by the district.

Digital forensic evidence also found that the Valencias’ positions within the district granted them a “significant degree of autonomy and professional judgement,” the audit states. That freedom allegedly allowed them to coordinate sales quotes, job sites, material deliveries and billing for All Around fence using their district email accounts and phones.

“The use of taxpayer-funded resources to operate a private business not only violated TMS policy, but it also triggered concerns about co-mingled records, conflicts of interest, personal gain and damaged public trust,” the audit states.

A total of $188,200 of the total sum quoted in the report was paid through subcontracts, while the remainder was paid directly to All Around Fence, according to the report.

According to the audit, the district initially became aware of a potential connection between the Valencias and All Around Fence in July 2022, when Taos High School’s principal at the time sent an email to then-Taos Schools Superintendent Lillian Torrez, who retired that August and was named a Taos News Citizen of the Year that fall.

After Torrez’s successor, Valerie Trujillo, discovered the email, she reported it to the district, but Torrez “did not indicate in her communications whether she was previously aware of this connection,” the report found.

The audit further alleged that Torrez “violated the NM Governmental Conduct Act by soliciting the sale of her vehicles at staff meetings.”

The report also makes reference to multiple whistleblowers who raised concerns about a potential conflict of interest to the district, including a former employee and two local business owners who were concerned the district’s bidding process was noncompetitive.

The report was redacted, in part, to protect the identities of whistleblowers who came forward to the district anonymously because they feared reprisal.

“Violence and retaliation were a concern of many employees,” the audit reads. “It was reported to us that witnesses of abuse and other allegations would not come forward due to these fears. Specific instances of alleged violence and retaliation such as (such as [redacted], shootings, verbal threats, warning shots, [redacted]) were reported to us.”

Two Taos Schools diesel mechanics fired in February 2022 filed Whistleblower Protection Act lawsuits that spring in 8th Judicial District Court. Both former employees claimed they had been retaliated against after reporting “double-dipping” in the district, including “facts supporting a good faith belief that public funds are being misused.”

District Judge Emilio Chavez filed a summary judgement in the district’s favor in one of the cases and dismissed the other with prejudice.

The district placed the Valencias and then-finance director and chief procurement officer Brenda Halder on leave in October 2022, according to the audit.

District administrators then contacted the New Mexico Office of the State Auditor and the New Mexico Department of Public Safety, which spent several days at Taos Schools’ administration building in the town of Taos. The board also replaced locks and keys in the building that month.

Two months later, the district voted to authorize the audit through Jaramillo Accounting, an independent accounting firm based in Albuquerque.

The Valencias’ daughter-in-law, a federal programs financial specialist with the district, disclosed in a staff conflict of interest form in December 2022 that her husband and two brothers-in-law were part owners of All Around Fence. She resigned a month later. According to the audit report, she deleted numerous files from her computer before her last day.

The audit’s findings could result in criminal charges related to the following allegations listed in the report:

• Diversion of publicly funded assets for personal and family gain.
• Unreported conflict of interest.
• Use of district resources (time/salaries, computers, phone, emails, personnel, vehicle) to operate two employees’ private family business.
• Evasion of collection and submittal of taxes through cash sales.
• Systematic circumvention of the New Mexico Procurement Code through clandestine subcontracting.
• Incorrect leave payouts to a former employee.
• Use of district systems and assets for noneducational, sexual and possible illegal personal activities.
• Gaps in internal control over financial and compliance matters and a lack of oversight at the district that permitted the activities to continue for years.

The Office of the State Auditor may refer the case to the State Ethics Commission, the Department of Public Safety and the district attorney for potential criminal charges for violations of the Tax Fraud Act, New Mexico Procurement Code, New Mexico Governmental Conduct Act and the Public School Finance Act.