Steller: Financial interests entangle Sunnyside board

2013-10-09T00:00:00Z 2013-10-09T10:13:53Z Steller: Financial interests entangle Sunnyside boardTim Steller Arizona Daily Star Arizona Daily Star
October 09, 2013 12:00 am  • 

If Sunnyside Unified School District will not admit to a corruption problem, perhaps it will cop to having boundary issues.

That much seems clear after the latest, strangest turn in the district’s attempt to move forward under its controversial superintendent, Manuel Isquierdo.

As my colleague Jamar Younger reported Tuesday, district spokeswoman Mary Veres sent an email out to Sunnyside’s employees Oct. 1 announcing a meeting for those interested in a new employee benefit, called LegalShield. It’s a sort of insurance plan, under which you pay a monthly fee and in return get access to legal service when needed.

Good enough so far.

What the invitation to this “district-sponsored” program did not say is that LegalShield is a multilevel marketing program sold by Governing Board member Bobby Garcia. A February letter from the district’s lawyer to finance director Hector Encinas says, “As you have explained the facts below, Mr. Garcia receives some kind of financial benefit as a result of LegalShield’s individual customer relationships with the district’s employees.”

On Tuesday night, Sunnyside attorney John Richardson clarified that, as initially envisioned, Garcia would have received a commission from the LegalShield memberships sold to Sunnyside employees under the arrangement. But between the February exchange of emails and the October implementation of a new automatic-deduction method for paying for the product, Garcia passed off the contract to a Phoenix-based seller.

For me, this is troubling in and of itself: The district was willing to promote sales of a product, complete with automatic deduction from paychecks, that would have benefited a board member with commissions on every sale.

But there is also the question of the program’s multilevel marketing. As in other such programs, sales associates not only sell memberships but also work to recruit new salespeople.

Some multilevel marketing organizations pay associates simply for reeling in new recruits, but LegalShield doesn’t do this, or at least wasn’t doing this as of three years ago, the last time the company was required to do an SEC filing, before being bought by a private equity company. In that filing, LegalShield, operating under its previous name, Pre-paid Legal Services, explained its multilevel marketing program this way:

“When a Membership is sold, commissions are paid to the associate making the sale, and to other associates (on average, eight others at December 31, 2010, 2009 and 2008) who are in the line of associates who directly or indirectly recruited the selling associate.”

However, this filing showed that during 2010, the last year for which public sales information is available, the vast majority of sales associates did not sell any memberships. For example, in the last quarter of 2010, only 24,854 of 412,707 sales associates sold any memberships at all.

So when Callie Prinke, who is the Phoenix rep selling LegalShield at Sunnyside, sells to the district’s employees, she is also recruiting possible new LegalShield associates, whose sales she can benefit from. But based on that 2010 track record, there’s a likelihood that anyone who buys the $149 starter kit will not make many, if any sales.

I phoned Prinke on Tuesday, and she told me “there’s no connection there at all” between her and Garcia.

But the bigger question for Sunnyside is why the district would wander into such dangerous territory in the first place. This is the district, after all, that paid Isquierdo $75,000 per year for sales of a graduation program that did not sell. It’s also the district that grappled for an hour Tuesday night with discussions of nepotism. So it has a recent, unfortunate history of entangling the financial interests of district leaders with district finances.

Worse, though, it is not as if LegalShield is a benefit that districts are wishing for but lacking. Quite the opposite. I spoke Tuesday with people at Amphitheater, Tucson Unified, Flowing Wells and Catalina Foothills school districts. None of them offers a similar legal services insurance plan.

But that’s not for lack of opportunity. At Amphi, salespeople offering this and similar plans frequently call on the district asking to be allowed to sell their programs to district employees, spokeswoman Mindy Blake said. It’s kind of like the pharmaceutical salespeople you sometimes see around doctors’ offices.

The big attraction is to get on the employers’ list of automatic deductions. That way, employees can buy the plan without thinking about it.

That the district would throw its weight behind this plan and its benefits to one board member is troubling enough. Worse, though, was board members’ self-congratulation Tuesday night at their handling of the situation, with member Eva Dong commenting that “everything was 100 percent aboveboard.”

Maybe they just don’t get it.

Contact columnist Tim Steller at tsteller@azstarnet.com or 807-8427. On Twitter: @senyorreporter

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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