The latest development in the scandal-ridden history of New Jersey’s beleaguered Schools Development Authority came this week with the release of three critical investigative reports, followed by a flurry of firings. This leaves the agency in an ongoing state of uncertainty, while funding for new construction has run out and schools across the state continue to age and, in many cases, decay.
Gov. Phil Murphy’s administration on Tuesdayfrom the SDA after an independent review found most of them were improperly hired by Lizette Delgado Polanco, the agency’s former CEO.
The SDA — whose job it is to oversee construction and renovation in 31 of the state’s poorest school districts and funding of renovations in many others — has been the subject of, particularly over Delgado Polanco’s hiring and firing practices since she took over the agency in August 2018; it emerged that she oversaw a rapid reorganization that eliminated many SDA workers and brought in well-connected individuals with questionable qualifications. The Office of the Attorney General called for an investigation of the SDA after an anonymous complaint that alleged the new administration was engaging in “unethical and improper hiring practices, retaliation and breaches of policies, procedures and conflict of interest rules.”
But one of the three reports released yesterday by the state gives a measure of exoneration to Delgado Polanco regarding the firings carried out under her watch. While she does not come out of the reports unscathed, one found the embattled former CEO was “not the driving force behind [the terminations] and did not demand them as part of a concerted effort to replace terminated employees with friends or colleagues.” Employees had been shortlisted for firings instead by a new key figure in the scandal: Former-human resources director Maribell Osnayo-Lytle.
However, the fault for skirting traditional hiring policies in favor of those with agency connections should, as one report noted, fall on the shoulders of Delgado Polanco. Of the 30 people fired this week, 27 had been hired by the former CEO. As of yesterday, none of those hired during her tenure remains on staff at the SDA. Delgado Polanco resigned in the aftermath of the criticism, and Manuel Da Silva has been acting as Interim CEO of the agency.
Of the three reports, one was compiled by the law firm DeCotiis, FitzPatrick, Cole & Giblin, LLP, which investigated allegations of personnel file tampering; Carmagnola & Ritardi, LLC investigated the SDA’s 2018 reorganization and controversial hiring practices; and the SDA’s own audit committee released its review of the agency’s personnel and hiring practices.
The first report stemmed from an internal complaint regarding improper handling of personnel paperwork. However, investigators “failed to turn up any hard or compelling evidence of ‘file tampering’ within the [Human Resources] department of the SDA,” according to the DeCotiis, FitzPatrick, Cole & Giblin report, putting that issue to rest for now.
The second report was more damning. “Nearly every new hire was directly or indirectly connected personally or professionally to Ms. Delgado Polanco when hired,” and “connected new hires benefitted from favorable treatment regarding their titles and/or salaries,” said the Carmagnola & Ritardi report.
In one of the more colorful examples, that report outlined what was termed by some in the SDA a “Dead Wood List” that targeted certain employees for replacement in the early days of Delgado Polanco’s tenure. The report includes many details of those replacements who had direct ties to the new director.
The third report, by the SDA’s audit committee, meanwhile found several paperwork issues that may have contributed to the controversy, including an out-of-date employee handbook, no final standard operating procedure documents for the hiring process, and improper procedures for the job postings themselves.
Murphy yesterday issued a low-key response to the reports, backing the investigations’ findings and promising reforms, albeit without any details — leaving many questions about what happens next.
“When allegations of impropriety were first raised about personnel actions at the SDA, my administration took swift action to investigate these matters in a fair and appropriate manner through the retention of outside counsel,” Murphy said in a statement. “The findings of these three reports will help guide SDA leadership in recommitting to the organization’s core mission: providing underprivileged students with safe, high-quality learning environments.”
The Office of the Attorney General enlisted Carmagnola & Ritardi to investigate the 2018 reorganization and hiring practices at the SDA in January. Attorneys interviewed 47 witnesses — some, more than once — for a total of 54 interviews over the course of approximately four months. They also examined internal and external documents, policies, news reports, and other relevant paperwork. The more they investigated, the more complaints and concerns they unearthed.
This report concluded that almost every new hire was connected in some way to Delgado Polanco and that many had benefited from favorable treatment. Certain positions were created to accommodate people Delgado Polanco wanted to hire, the report said, and some of the new hires were not qualified for their positions.
The Carmagnola & Ritardi report zeroes in on the “Dead Wood List.” Sometime in July or August 2018, it found, then-human resources director Maribell Osnayo-Lytle compiled a list of employees who “had a history of either performance or disciplinary issues.” That list came to be known internally as the “Dead Wood List.” Osnayo-Lytle was subsequently fired by Delgado Polanco in November.
The "Dead Wood List” was later used as a “starting point” for termination decisions that occurred in the controversial September 2018 firings which first brought Delgado Polanco under scrutiny.
The investigators also noted that “Ms. Osnayo-Lytle had been formulating this list for some time before Delgado Polanco took over as CEO. Agency executives were given the opportunity to revise the list and remove some employees thus saving them from termination but ultimately, the investigators found all terminations, changes to the organizational structure, and hirings “were all done without Board approval.”
“Ms. Delgado Polanco was the ultimate authority and decision-maker relating to the terminations,” the report said.
The report also noted that “…there was no plan presented or implemented which related to the reorganization which took place.” And “Vice Presidents and Department Directors were not asked to submit an analysis of their department or for recommended changes.”
The Carmagnola & Ritardi report also calls into question nearly all of Delgado Polanco’s personnel actions since 2018: “What was unclear throughout the investigative process was why there was such an extensive reorganization of the organization when the SDA appeared to be fulfilling its mission of building schools on time and within budget.”
Concluding that the embattled former CEO did not demand the firings made under her watch “as part of a concerted effort to replace terminated employees with friends or colleagues,” the investigators also noted that “most individuals familiar with the performance of the employees who were terminated, including the various complainants, indicated that the terminations were appropriate either for performance reasons or redundancies.”
Several interviewees told investigators that many of the terminations that occurred in September 2018 were “a long time coming,” and blamed the previous CEO Charlie McKenna’s “no-fire policy” for keeping employees well past their prime.
As of this week, the SDA is now down another 30 employees and has run out of money all while schools across New Jersey.
Senate President Steve Sweeney has been calling for the authority to be abolished entirely, but it’s unclear where the state will go from here. At the very least, SDA officials have said it will begin to adopt the recommendations outlined by its own internal audit — updating HR documents and nepotism policies, and creating action plans for dealing with these issues in the future.
In the meantime, what remains of the SDA is likely to undergo serious renovation.
“The SDA has a track record of success delivering quality schools throughout New Jersey so it’s important that we take time for self-reflection and demonstrate a willingness to improve,” said SDA board chairman Rob Nixon in a statement. “I therefore fully support Interim CEO Da Silva’s restructuring plan to implement the recommendations of our internal audit and the finding of the independent legal counsel.”