News 8 Investigates: Possible overcharging in DISD's HVAC department

Possible overcharging in HVAC department

A WFAA investigation has raised concerns that hundreds of thousands of taxpayer dollars are possibly being squandered in the district's heating and cooling division, or HVAC department.

This comes after Dallas Independent School District officials were presented recently with an internal audit of its purchasing department practices. That review found “a lack of structure, experience and knowledge” of the purchasing process and a “lack of resources dedicated to contract management.”

WFAA’s investigation centers on a vendor called Spaeth Machine Shop, a DISD contractor for more than a decade, hired to do service and repairs. They're a small, family-owned company, based in Irving.

Public records show that from 2013 to 2016, payments to them from DISD doubled, from $2.3 million to $4.6 million.

The spike began in 2015, which is the year that DISD hired HVAC manager Toby Smith. Smith’s previous employer – Spaeth Machine Shop.

Spaeth representatives declined an on-camera interview, but in a two-page written statement denied any wrongdoing.

“Our 119-year-old family business has served DISD for more than 35 years,” the statement reads. “We are an approved vendor who receives requests from the district to bid on projects. Because Spaeth is a small, family-owned company, we are able to provide low cost bids on DISD contracts, which has caused grousing and complaints from our larger competitors.

The statement continues: “Toby Smith was recruited by the DISD and left our firm in May 2015. Neither Mr. Smith nor anyone else at the DISD has a financial interest in Spaeth receiving school district business.”

According to DISD records, on his first week, Smith signed off on a job at Kennedy-Curry Middle School. He hired his old employer Spaeth to replace four compressors. The job cost about $4,100. Spaeth, in their written statement, says it was warranty work.

We showed the records to Randy Bellomy of Bellomy Heating and Air. Bellomy is an industry expert with 38 years experience who currently sits on the boards of two trade organizations.

He snapped on the 36 hours of overtime labor, which he called a “red flag.” He said the job could be completed in 16 hours by two people.

“DISD projects often require overtime because to ensure children’s safety,” Spaeth’s statement reads. On jobs that require it, “Spaeth cannot work with a crane when schools are open.”

We showed Bellomy other invoices from Spaeth, signed off on by Smith, such as one from earlier this year at Pinkston High School. Spaeth charged $42,000 to install three small AC units, for which the district was charged, according public documents, 124 hours of labor.

“So we are way too many hours to install it, and way too many hours to maintain them,” Bellomy told WFAA.

At WFAA’s request, Bellomy looked at more than a dozen invoices. He says he found potential overcharges on every one. But we didn't just take his word for it.

“This isn't competitive from any level,” said Lance Taylor of Taylormade Heating and Air in McKinney. “This is crazy expensive.”

We showed Taylor the same Spaeth invoices we showed Bellomy. Taylor flagged a purchase and installation of a rooftop AC unit at Rusk Middle School. Spaeth charged DISD taxpayers $27,000.

“One unit should be $12,000 total installed and they got it here for $27,000, so it's over twice as much – just a lot of mark-up.”

On another invoice, Spaeth charges DISD $3,500 in “shop sales.”

We asked our experts what that means.

“I have no clue what that shop sales could be,” Taylor said. “That just really doesn't make sense.”

Spaeth did not address the shop sales charges.

Neither Taylor nor Bellomy does business with DISD and neither had seen the invoices before we engaged them. We obtained the invoices from DISD through the Public Information Act.

We also asked about this: In February of last year, records show that Toby Smith requested Spaeth provide DISD with 84 so-called “spot coolers,” or portable air conditioning units.

DISD paid $3,500 each, costing taxpayers nearly $300,000.

"That's just an incredible mark up,” Taylor told WFAA after we showed him the bill. “DISD could have purchased these directly from Airrex. They didn't have to get them through this vendor.”

Records indicate Speath acted only as a middle man in the transaction, buying 84 cooling units manufactured by Airrex then turning around and selling them to DISD. But Taylor contacted Airrex and learned they would sell him the same unit, not for $3,500 each but $2,200 each.

If true, then that's a $1,500 mark up, times 84 units is about $126,000 taxpayers may have over-paid.

“The DISD asked Spaeth to assist with an ‘urgent’ purchase requisition for heat pump units,” Spaeth’s spokesman said in the written statement. “The urgent nature of the project required Spaeth to obtain the heat pumps on an expedited basis with limited time to find the lowest priced supplier.”

Both Taylor and Bellomy identified what they say are inflated billings of two to three times what they would have charged DISD for the same work. That means, over the years, Spaeth’s overcharges could run into the hundreds of thousands of dollars.

“Much of Spaeth’s work for the DISD involves unique and particularized circumstances and property conditions,” Spaeth’s spokesman said in the statement. “It would be irresponsible to have someone evaluate Spaeth’s work who does not have extensive experience in this highly complex and technical arena and who is not tied financially to a competitor seeking work from the DISD.”

“Our competitors have a financial interest in making misleading and false claims to try to knock Spaeth Machine out of the bidding process,” Spaeth said in their statement to WFAA. “Fewer bidders means less competition, which results in higher prices for the DISD and taxpayers.”

Last week, we shared the concerns with four top DISD officials. Since that time, DISD has suspended HVAC manager Toby Smith with pay, pending further investigation. He has not responded to our requests for comment.

DISD Superintendent Michael Hinojosa has made it clear that he will not tolerate any wrongdoing.

"We need to be responsible for our taxpayer dollars and we take this matter very seriously and we appreciate this information being brought to our attention,” Hinojosa told WFAA. “We have high expectations of our vendors and the people we do business with and we expect for things to be handled appropriately.”

Email: investigates@wfaa.com

© 2017 WFAA-TV


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