Paterson ex-school official is indicted -- U.S. says he took bribes from crooked builders
By KATHLEEN CARROLL, STAFF WRITER, The Bergen Record, 09-22-2005, Thursday

The official who controlled repairs at Paterson's aged school buildings was indicted Wednesday on federal charges that he took cash and favors from contractors who skimmed millions from the state-subsidized district.

The arrest of James Cummings of Sparta came after more than a year of grand jury testimony and four guilty pleas in federal court in Newark from key players in a multimillion-dollar extortion ring, including his former deputy and the contractors who allegedly paid him off. Those pleas revealed a kickback scheme that provided thousands in cash to district officials, to look the other way as companies were paid in full for work they never did at schoolhouses in desperate need of repair.

The 12-count indictment charges that two contractors - Olympic Window Installers of Hawthorne and Paint Smart Contractor of Nutley - gave Cummings $50,000 in cash and $28,000 in improvements to his former residence in Andover, including a $6,000 front door. The indictment noted that Cummings, as the district's facilities director from 1998 to 2003, was responsible for hiring and paying companies for renovations.

The Paterson school system paid those companies $8 million under Cummings' watch, district documents show.

They swindled Paterson's 27,000 public school students - and taxpayers throughout New Jersey.

From 1999 to 2002, the school years spotlighted in the indictment unsealed Wednesday, Paterson schools received $755 million in state aid. That money covered 80 percent of expenses, under a Supreme Court mandate to improve low-performing urban schools. Many affluent districts get by with the state contributing 10 percent of their budgets or less.

Assistant U.S. Attorney Jeffrey Chiesa said that the investigation into district finances continues, but declined to elaborate.

"We will aggressively protect funds intended to improve our school and go wherever the trail of evidence leads when it comes to school construction corruption," said U.S. Attorney Christopher J. Christie.

If convicted, the 58-year-old Cummings faces up to 20 years in prison, and fines based on his financial gain or the district's loss. His former deputy, Louis Milone of Pompton Lakes, pleaded guilty in February to accepting bribes and is cooperating with ongoing grand jury hearings and the U.S. attorney's probe.

Cummings, who appeared before U.S. Magistrate Judge Susan D. Wigent on Wednesday with his wrists and ankles cuffed, will be arraigned within a week, Chiesa said.

He has 48 hours to post $200,000 bail, which will be secured by his Sparta home. His attorney, Jeffrey Garrigan, declined to comment on his client's behalf.

The indictment included few details. However, guilty pleas by the companies named offered some reconstruction of the events prosecutors allege.

In June, executives for Paint Smart pleaded guilty to giving an unnamed district employee more than $25,000 in cash during secret meetings in a restaurant parking lot.

In the indictment, Cummings is alleged to have received $50,000 from Paint Smart officers Jose LoGrecco of Park Ridge and Charles Paraboschi of West Paterson.

In April, Olympic Window owner Carl Babb of Elmwood Park pleaded guilty to conspiring with two district employees to defraud the district, and performing $35,000 in free home renovations to bribe a former facilities director unnamed in his plea. Prosecutors allege Cummings received $28,000 in free home renovations from Olympic.

An investigation published in The Record last year found the district had misspent as much as $50 million by paying bloated or fictitious invoices to politically connected construction firms, including Paint Smart and Olympic. The firms were retained under open-ended, no-bid contracts and paid on a "time and materials" basis, often without actually documenting the materials or labor used, The Record found.

Cummings reported to former state Superintendent Edwin Duroy.

As the top administrator in the state-run district, Duroy retained ultimate authority over all district operations.

He resigned last year after the misspending was revealed in media reports. He has not been named in any of the ongoing legal actions.

The current state-appointed superintendent, Michael Glascoe, declined to comment Wednesday and referred inquiries to a statement issued by the district's law firm.

"The district deserves, at a minimum, restitution and accountability," said attorney Douglas Brierley of Morristown.

Last year, the district filed four civil suits naming Milone and four companies, including Olympic and Paint Smart, in allegations that they looted $11.5 million in public funds by submitting fake and padded bills.

"Thank God none of our children or staff got hurt or injured as a result of greed and neglect," said Paterson Board of Education President Chauncey Brown III.

The state Department of Education seized control of the Paterson schools in 1991 under New Jersey's takeover law, citing rampant financial mismanagement and poor academic achievement. Since then, Trenton has installed a series of appointees who maintain virtually single-handed control over the school system's finances and academic programs, as a strategy to combat corruption and establish a single point of accountability.

What it means

You paid for it. From 1999 to 2002, state taxpayers poured $755 million into Paterson schools. During that time, construction companies bribed school officials and charged millions for incomplete or non-existent work.

James Cummings was the district's facilities director, and federal prosecutors say he took some of the bribes. His deputy has pleaded guilty to accepting bribes and is cooperating with an investigation.

E-mail: carroll@northjersey.com

Another scandal behind a $6,000 door
Friday, September 23, 2005
EDITORIAL BY THE HERALD NEWS

LINK

Former Paterson Mayor Martin G. Barnes got a pool with a grotto. James Cummings, former facilities director for Paterson schools, allegedly got a $6,000 front door - and a lot of cash.

Cummings is the latest embarrassment to the city of Paterson. On Wednesday, he was indicted on federal charges of accepting cash and favors from contractors. The 12-count indictment states that two contractors - Olympic Window Installers of Hawthorne and Paint Smart Contractors of Nutley - gave Cummings $50,000 in cash and $28,000 in home improvements.

In exchange for the alleged kickbacks, the two companies defrauded the district for work never performed or left undone. If convicted, Cummings could face up to 20 years in prison.

U.S. Attorney Christopher J. Christie said the investigation is ongoing. It is unclear where that may lead. Former executives for Paint Smart and Olympic Window already have pleaded guilty to defrauding the district of paid services. Their cooperation undoubtedly has helped prosecutors work through the slimy food chain of corruption that has led to as much as $50 million of misspent state money in the Paterson district. That scandal led to the removal of state-appointed Paterson schools superintendent, Edwin Duroy, to whom Cummings reported.

No charges have been filed against Duroy, nor have there been allegations of criminal misconduct on his behalf. But Patersonians should hold Christie to his word. If other officials knew what was going on - or worse, directly profited from schemes to defraud the school district - they belong behind bars.

After the announcement of Cummings' indictment, Chauncey Brown III, president of the Paterson Board of Education, said, "Thank God none of our children or staff got hurt or injured as a result of the greed and neglect."

Brown is correct that no student was physically harmed during a fire in a school building that lacked a certificate of occupancy. Students did not have to witness what would happen when sprinklers hidden under drop-ceiling tiles failed to stop a fire or if students followed fire exit signs toward a bricked up wall and perished.

However, students and staff were most definitely hurt. Deplorable schools hurt children. The state Schools Construction Corp. is out of money after building approximately half of the schools mandated by the Abbott court rulings. The SCC bungled administration of the money; the Legislature failed to set appropriate oversight mechanisms or budget enough money. Corrupt contractors, vendors and administrators were all too happy to take advantage of the situation.

Students were hurt.

The majority of teachers in Paterson are educating children. They are doing their best in difficult environments. The majority of school administrators work hard for a paycheck that does not include a new front door as a bonus. Their reputations are tarnished when crooked school officials are leeches sucking out taxpayers' money.

Staff was hurt.

Ironically, the Paterson school district has spent more than a decade under the flabby thumb of Trenton because it was incapable of managing itself. The result of state control is deplorable. Whether Cummings is convicted, the guilty pleas by ex-officials of Paint Smart and Olympic Window are proof that taxpayers of New Jersey were bilked and the students of Paterson once again were victimized by corrupt officials.

The district is fighting to receive financial restitution. Last year, it filed four civil lawsuits against four companies, including Paint Smart and Olympic Window, alleging they siphoned $11.5 million in taxpayer funding by submitting bogus bills. Even if the money is recouped, students cannot be compensated for the time they spent inside substandard schools.

Somehow a $6,000 front door doesn't sound like a fair tradeoff.


UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY UNITED STATES: Olympic Window installers

State Control of Schools has Failed To help Paterson, New Jersey Children; Why Not Choice Instead?

Paterson schools got little for $50M
By KATHLEEN CARROLL, HERALD NEWS , Thursday, May 27, 2004

PATERSON SCHOOLS:
BURNING THROUGH MILLIONS
Wednesday, May 26, 2004
Cronyism lives, analysis shows

THE MAJOR PLAYERS

The Paterson school district, crunched for space and flush with state cash, spent millions in questionable construction deals while students crowd into century-old schoolhouses.

District officials burned through at least $50 million from 1999 to 2002. Under open-ended contracts, half a dozen construction companies were paid by the hour to renovate rented buildings or crumbling schools slated for demolition. There are few detailed records of how the work was assigned or whether projects were ever completed.

Taxpayers throughout New Jersey paid for the spending spree: Paterson schools received $755 million in state funding from 1999 to 2002 - covering 80 percent of their total school expenses. Many affluent districts in North Jersey get by with the state covering 10 percent of their expenses, or less.

"It was a systemic and pervasive breakdown of internal controls," said Michael Azzara, the district's assistant superintendent of operations since 2002, when he was brought in by the state. "All of the things that were put in place to prevent this and to make sure it didn't happen weren't followed. ... Ø It took a lot of people to allow this to happen."

Under district protocols, the facilities department director assigned the work, and his deputy approved invoices and submitted the bills for payment. The superintendent and Board of Education approved paying the bills. The business administrator and his employees cut the checks.

Schools Superintendent Edwin Duroy said the district's reliance on open-ended contracts and rented space was necessary to cope with aging school buildings and an enrollment boom from 24,000 to 27,000 students. Since he was appointed in 1997, the district has gained 190 new classrooms.

"We needed to take action, and that's precisely what I did," he said in an interview Wednesday. "People can criticize, say certain things didn't work out well, but being able to bring on the number of classrooms that we did says something."

The district's ballooning construction bills in early 2003 prompted the state Department of Education to order a comprehensive audit and alert the state Attorney General's Office to "pervasive inefficiencies."

"We are trying to dig as deeply as we can into issues around facilities management in Paterson," said Gordon MacInnes, assistant commissioner of education at the Department of Education. "The evidence we've got from the facilities department, which is more in depth than what we've got in other areas, is an indicator of a systemwide problem."

He noted that the Education Department forwarded documents from Paterson's facilities department to the attorney general.

"If people have done things at best questionable and at worst criminal, we're going to make changes," MacInnes said. "We have said the pattern is too strong here and needs to be investigated by the people responsible for enforcement of criminal code."

Federal agents and state investigators have seized documents and interviewed district employees, said two employees and one board member, who spoke on condition of anonymity. Investigators and spokesmen from both agencies declined to comment.

Earlier this month, as part of an ongoing investigation by the attorney general, a contractor was sentenced to five years in prison for wage violations in Paterson and two other districts.

A review by reporters of hundreds of district invoices, contracts, bids, school board voting records, audits, and campaign finance records, as well as interviews with state and district employees, revealed:

*The Department of Education, which controls the district under the state takeover law through Duroy, considered the superintendent's stewardship over finances a "consuming problem" by early 2003. But the department failed to curtail or remove his authority until March 2004, six months after an October 2003 audit found the district misspent $20 million. At the time, state officials declined to criticize his performance.

*In his seven years as the state-appointed superintendent in Paterson, Duroy has leased 22 buildings throughout the city. Currently, 20 agreements cost the district $3.3 million annually. In addition, the leases require the district to pay for all repairs, renovations, and taxes. None of the lease agreements includes an exit clause.

*The district has spent tens of millions of dollars renovating the rented buildings. Because of incomplete records, no precise figure is available. However, reviews of two contractors' bills show that in some years, the district paid more to renovate buildings than to rent them.

*Invoices show that virtually all construction work contracted by the Paterson Public Schools from 1999 to 2002 was paid for by "time and materials" agreements, standing deals to pay fixed hourly wages and materials fees. Even after the contracts expired, the district continued assigning work and paying the companies. Asked to calculate the total cost, Azzara estimated it at $50 million.

*There are no records showing how or why private contractors were assigned certain jobs. One contractor, Paint Smart of Nutley, earned $461,465 painting School 20 and School 29. Both buildings are slated for demolition under the district's long-range facilities plan.

*The private contractors' work assignment included routine building upgrades like installing dropped ceilings and hanging doors. Meanwhile, the district employed a full-time construction and maintenance crew, which included licensed plumbers, painters, and electricians. The department's current payroll of 55 workers costs $2.5 million a year.

*In separate pitches to the local Board of Education and state officials, Duroy and district counsel Kevin Hanly cited radically different costs for a planned 30-year lease of the downtown Fabian theater and office complex. According to a May 2002 memo, the price is $52 million, not $43 million as Duroy has publicly stated.

*While private contractors were paid to renovate rented buildings, traditional schoolhouses in Paterson were neglected. In 2003, district officials sent 13,000 children to school buildings with outstanding safety and fire code violations, including faulty sprinkler systems and missing fire exits.

'A lot of breakdowns'

According to the state's public bidding law, school districts are required to advertise projects that will cost more than $17,500 and ask companies to apply for the job with a sealed proposal, or bid. Once the agency opens the envelopes, the company with the lowest price, whose project proposal and abilities fit the assignment, is awarded the contract. The public school contracts law requires detailed project specifications, including the number of workdays or the planned date of completion for bids on non-emergency work. The practice is intended to encourage competition and eliminate favoritism, ensuring that taxpayers get the most for their money.

From 1999 to 2002, the Paterson school district didn't always pay the lowest price.

The district hired a handful of construction companies under elastic "time and materials" contracts, usually reserved for emergency repairs. The contracts were standing agreements to pay contractors by the hour, not by the assignment. So the companies would calculate bills based on the number of employees involved, how long they worked, and the cost of their supplies.

"x'Time and materials' allows the district to move forward in an expeditious manner," said Duroy. "You don't go out to bid for every little job. You only bid once a year."

But there's no evidence that anyone checked the contractors' math or declared an emergency.

"There were a lot of breakdowns and places where it should have or could have been detected, and it wasn't," said Azzara.

Paint Smart, the contractor who pleaded guilty in January to wage violations, admitted it overcharged Paterson and two other districts by $1.5 million by overstating its employees' wages. Earlier this month, the company's vice president was sentenced to five years in prison and fined $250,000. Paint Smart is now included on New Jersey's black list for public contracts. It had been barred from public contracts in New York for five years for wage violations; that period has now expired.

Another Paterson contractor, Olympic Window Installers of Hawthorne, is barred in New York for willfully failing to pay prevailing wages, according to the New York State Department of Labor. The company billed the Paterson Public Schools about $5 million from 1999 to 2002.

The contracts for Paint Smart and Olympic, and half a dozen other contractors, did not include budget caps. Instead, contractors signed agreements that guaranteed at least $75,000 in work that year.

The district's facilities invoices show how well the contracts served the contractors.

For its work on just one rented building, the former Spectrachem factory on Sheridan Avenue, Paint Smart was paid $261,000. The school district uses the building for its facilities and food services offices, and as warehouse space.

Not one of Paint Smart's invoices lists the number of employees on the job, the hours worked, or the amount of materials used. For example, a bill from Sept. 18, 2000, for $38,225 reads, "Final painting of food warehouse rooms at the Sheridan Avenue warehouse."

As with all of Paint Smart's invoices, the bill was paid in full.

Other contractors were paid to do work they apparently never finished. Students at School 4 still contend with missing sinks and toilets that do not flush, even though the district paid Olympic $59,452 to repair the restrooms in October 2002.

"Hindsight is 20/20," said Duroy. "You look at it and you see you need to be more careful. But I think ('time and materials') still has merit."

Overpaying vendors

The district's habit of using "time and materials" bids began in 1995, when officials hired Educational Data Services to coordinate a cooperative purchasing agreement.

EDS, of Saddle Brook, would negotiate discounted prices for time and materials contracts from private vendors. By joining the collective, the district was supposed to save money by hiring contractors at discounted rates. Currently, 350 school districts in the tri-state area, including 200 in New Jersey, have contracts with EDS, according to Chairman Gilbert Wohl.

But the Paterson district didn't always take advantage of EDS' services, according to internal audits in 1998 and 2003. Internal auditors found that the district had overpaid vendors and EDS because of poor management and faulty paperwork. Auditors criticized the district for overpaying construction bills and for paying $38,000 to EDS for purchasing a software program that was never installed.

Although EDS provided lower "time and materials" maintenance rates for the district, there's no evidence that officials knew about or took advantage of the price breaks.

"We analyze, select a low bidder as specified, type up a report to let them know who the low bidder is, and submit it," said Wohl, the EDS chairman. "Whether they use that or not, we have no idea one way or another. They decide whether they want to use it or not."

District records indicate that district business and facilities officials paid the companies without logic or question. For example, in 2002 Paint Smart was the low bidder in EDS' cooperative purchasing network, based on its proposal for services paid by the square foot. But the Paterson district apparently never received notification of the deal with EDS or issued a contract with Paint Smart. That year, the company was paid $804,680 on a time-and-materials basis, not by the square foot.

Duroy signed a six-month contract with EDS for $43,375 in July 2002; there is no record that the Board of Education ever voted on the assignment. When asked Monday if the matter came to a public vote, Duroy said he did not remember.

After district officials questioned some of the bills submitted by EDS consultant Bob Davis, the company and district ended the agreement in November 2002.

EDS "merited inspection and in my opinion was part of the problem," said MacInnes. "The way [time and materials agreements] got set up and have been administered and advice given by EDS has been a part of the review."

EDS officials could not be reached for further comment Wednesday.

Renovation costs vs. rent

After decades of neglect, many of the city's schools are dying. Buildings still lined with sealed asbestos depend on ancient boilers to keep students warm. Decades-old wiring hangs from low classroom ceilings. Teachers keep books and papers in strategic safe spots, because roofs and windows leak in stormy weather.

In 1960, a study of Paterson schools called for eight buildings to be replaced. None of them ever were. Now those buildings are more than 100 years old and serve 2,700 students. Nineteen more buildings are more than 50 years old.

Compounding the problems, too many students crowd into the buildings year after year.

A statewide school construction program is intended to eventually create enough classrooms for all of Paterson's students. Two school buildings are under construction; two more should break ground this year.

Meantime, the district pays $3.3 million a year, or $282,000 every month, to rent 20 buildings throughout the city. Students attend class in former temples, textile mills, and office buildings.

"We have limited ability to purchase buildings. We don't have the funds," said Duroy. He noted that two dozen teacher-led high school academies, all founded since 1999, have also driven the need for more alternative space.

"Part of the attractiveness of the program was to see if we could locate sites outside of larger settings," he said.

In the past, the district has purchased new land and buildings through "lease-purchase" agreements, or short-term loan packages with some state funding assistance. However, the so-called Abbott districts - 30 New Jersey districts under the control of the state Department of Education - are no longer allowed to enter into long-term lease-purchase agreements, following the start of the state's $8 billion school construction effort, administered by the New Jersey Schools Construction Corp., Duroy said.

A 1999 audit of the Paterson schools by the state's independent auditor, Richard L. Fair, criticized the district's leases. He attributed the practice to "the district's inability or reluctance to obtain the funding needed to buy these buildings."

At the time, the Paterson school system rented five buildings. Fair estimated that by buying the sites, the district would have saved $320,000 annually.

The lease program has nearly quadrupled since then. In 2002-03 alone, the district signed new rental agreements on seven buildings.

"On leases, because they are long-term and frequently involve a lot of money, we're interested," said MacInnes, noting that many urban school districts rent space. "Leases can be a source of patronage, if you will, so it's something you ought to pay attention to."

Each of the district's leases is "triple net," meaning the tenant must pay rent, all taxes, and maintenance for the properties. That agreement is not itself illegal, or even uncommon. Many school districts renovate rented buildings at their own expense, because they are liable for students' physical safety and must adhere to particular standards for school buildings.

But in Paterson, renovating the buildings sometimes costs more than the annual rent. In 2000-01, the district spent twice as much to renovate the Spectrachem building as to rent it. Officials paid seven companies $618,645 for renovations, and paid the landlord $303,360 in rent.

In all, the building's owner, the Spectrachem Corp. of Lodi, has received a new roof, floors, windows and doors, and a fresh coat of paint - $953,130 in free upgrades, courtesy of the Paterson Public Schools.

Although the initial agreement allowed the district to buy the site for $1.4 million, it never did. Instead, Duroy signed another five-year lease in 2001 for a total cost of $1.5 million.

Duroy said the district didn't have the money to purchase buildings, but was able to spend on renovations, because they were at multiple sites, benefiting more students.

From 1999 to 2002, the district spent $4.1 million to rent three other buildings, and paid a single contractor $1.3 million to renovate the sites. Olympic billed for basic upgrades at the Main Street Mall, a retail complex used by two high school programs; the former Don Bosco parochial school; and an Ellison Street office building.

In spring 2003, the Department of Education's Office of State-Operated School Districts began to urgently inspect the district's leasing and renovations programs, said the former director, Ben Rarick.

"My concern was piqued when my auditors began to question the appropriateness of some of the bills concerning the renovation of these [rented] and other facilities," he said in an e-mail interview.

Rarick, now a project coordinator at the University of Washington, said he ordered an internal audit of eight private companies doing business in Paterson, including Paint Smart and Olympic.

By the time the report was published internally in October 2003, auditors found $20 million in questionable time and materials contracts from 1999 to 2002. The report included a paid invoice for repairs to a Mahwah firetruck, and approved purchase orders for identical classroom clocks that cost $46.60 one month and $365 the next.

"Following up on the complaints and the audit findings coming out of the facilities office was probably the single most consuming issue I dealt with during the spring and summer of 2003," Rarick said. "Those audits were ongoing, and as we dug deeper the problems looked progressively more serious. At a certain point, I became concerned about possible criminality and I proceeded to refer the matters to [the Division of] Criminal Justice."

Duroy said the district had made strides in improving its facilities and business operations. Most key facilities employees, and a former assistant business administrator, have resigned or been fired, he noted. The district has hired in-house construction experts, expanding the two-person department to about six engineers and construction managers.

A leaky lease

Another type of lease agreement caused 150 students to attend class in the auditorium at John F. Kennedy High School until last month.

In May 2002, the district signed an agreement to lease 12,500 square feet of the former Boris Kroll textile mill from the Alpert Group, a Fort Lee developer. Unlike the district's other agreements, this lease stipulates that the developer must renovate the site. Once the construction is complete and inspectors issue a certificate of occupancy, the school system must begin to pay $26,000 per month in rent.

Two high-school programs were scheduled to move into the building in September. But the developer was at least eight months late - nearly an entire academic year. Because the lease contract didn't set a deadline for the renovations, the district was in a holding pattern, locked into the agreement no matter when it actually began.

"There was not necessarily a timeline, and that was a problem," Duroy said.

The agreement, like virtually all of the district's leases, was negotiated by the Hanly & Ryglicki law firm. A review of the law firm's bills to the Paterson school system from 1999 to 2002 shows near-daily phone calls between district lawyers and prospective landlords.

Those records include at least a dozen phone calls between Hanly and developer Joseph Alpert, as well as calls between Hanly and Alpert's attorney, Thomas Wall. The Hanly & Ryglicki firm claimed it had recused itself from the Boris Kroll lease, because it had represented Alpert in the past. The legal agreement was written by the law firm of Giblin & Giblin.

Alpert's lawyer, Wall, has offices at the same Edgewater address as the now-dissolved Hanly & Ryglicki firm. The three lawyers are former partners in the Shulman, Hanly, Ryglicki, Lindsley & Wall firm.

In the late 1990s, Alpert needed permission to develop the mill, and Hanly & Ryglicki handled its application to the city's zoning board. In 1999, Alpert obtained permission to build apartments in the mill, and received a $1 million 15-year mortgage at 1 percent interest from the state Department of Community Affairs. The City of Paterson chipped in $600,000 in federal funding; Jose "Joey" Torres, then a councilman, wrote the resolution authorizing the funds.

The district placed Hanly on administrative leave at full pay in March. He did not return telephone messages seeking comment.

Revival at what price?

The formerly grand Fabian Theater is a depressing eyesore, covered in plywood and padlocks. Just two blocks from City Hall and down the street from the Board of Education offices, the Fabian is a black hole in the center of downtown.

Rebuilding the school district's headquarters at a revived Fabian could boost the neighborhood's spirit. But the cost of that revival is not clear.

In public comments, Duroy has said a 30-year lease will cost $43 million. He reiterated that price on Monday.

But the agreement may cost $52 million, according to a memo by Hanly to the Department of Education, which has not yet approved the deal.

When told that the memo cited $52 million, Duroy said, "This is something we're looking at very, very closely at this time."

The proposed Fabian lease needs to be reviewed again, and the district should explore alternative sites, said MacInnes. He said the Department of Education would oversee that.

"Anytime you are talking about long-term investments of tax dollars, then I think we should be involved," MacInnes said.

Hanly's pitch demands a closer look. In a letter to the state, he overestimated the current cost of administrative space and underestimated the projected cost of office space in the Fabian.

Hanly wrote that the district currently spends $1.25 million annually for rented offices and parking spaces at various locations. But the real cost is $969,000.

Hanly's estimate included $280,720 in non-applicable costs: the school district's annual $99,000 catering bill, and $181,720 to rent classroom space - not offices - at 137 Ellison St.

Then, Hanly wrote that the Fabian costs $9.55 per square foot to rent. But in a presentation to the Board of Education, Fabian developer W&C Properties estimated the rental rate at $14.91 per square foot.

The interior of the building, which will be fully outfitted office space, is 100,000 square feet. The other 82,122 square feet is a planned 199-car parking garage. To arrive at the $9.55 rate, Hanly included the parking spaces in the building's total area.

The district could pay $9.55 per square foot downtown for 100,000 square feet - if it also promised to rent the parking garage at the same rate. In the developer's pitch, the parking garage would cost $3.02 per square foot.

Board members were not privy to the new numbers.

In 2002, the Board of Education approved a $43.7 million agreement, believing the district would spend $1.46 million a year for the next three decades.

If the deal is approved, the board will find it really voted to pay $1.73 million a year for the next 30 years. That's an extra $8 million that won't be spent on classroom supplies or teachers.

THE MAJOR PLAYERS

About one-tenth of Paterson Mayor Jose "Joey" Torres' campaign war chest of $263,660 has come from companies that do business with the Paterson school district's facilities and legal departments.

After making relatively modest donations totaling $24,400 over the past five years, a dozen companies have earned $11.7 million in Paterson district contracts - not including a pending $52 million rental deal for the Fabian theater, owned by campaign donor W & C Properties of Paterson.

Torres has also collected donations from eight companies with $24 million in contracts for state-funded school construction in Paterson, administered by the New Jersey Schools Construction Corp. Assemblywoman Nellie Pou, D-Paterson, a Torres supporter, has also received political donations from district vendors and employees. Both candidates are supported by prominent Latino and Democratic organizations, and by prominent construction and law firms.

LAW FIRMS

Lawyers and former partners Kevin Hanly and Joseph Ryglicki have long contributed to politicians' war chests in Paterson. In addition to donating thousands of dollars to former Paterson Mayor Martin G. Barnes, the lawyers served as his campaign fundraisers in 1997 and 1998. Ryglicki, of North Bergen, was named in a 2001 complaint against Barnes by the New Jersey Election Law Enforcement Commission, for giving one of 12 donations that was more than the legal limit. The lawyers and their employees have contributed $1,250 to Torres, $500 to Pou, $10,775 to the Hudson County Democratic Political Action Fund and $6,000 to the Hoboken United slate of Mayor Dave Roberts and three City Council candidates. Their former Edgewater firm, Hanly & Ryglicki, was the school district's counsel from 1997 to 2003, earning $236,000 in the final year of the agreement. The firm dissolved in July 2003; Hanly, of Wyckoff, was one of two in-house district counsels, earning $96,000 annually, until he was placed on administrative leave in February. One of Hanly's duties was assigning work to outside firms, including Ryglicki, who billed $105,000 in the first eight months of the arrangement.

Paul Giblin, an attorney with Giblin & Giblin in Oradell, has contributed $3,000 to Torres. Giblin & Giblin provides legal services in litigation and workers compensation cases and has billed the district $133,000 since Torres' election in 2002.

The law firm of Murray, Murray & Corrigan of Little Silver, also known as The Murray Law Firm or Murray & Murray, has contributed $1,000 to Torres and $500 to Pou. The firm, which has extensive political connections in Hudson County and has donated tens of thousands to campaigns there, has billed the Paterson district $152,000 to handle labor relations since July 2002.

Employees from Bastarrika, Guzman & Soto of Paterson, and their relatives, have donated $4,250 to Torres. The firm, which handles workers compensation and some litigation, has earned $23,289 in the Paterson schools in the past 18 months. Ines Guzman, wife of partner Nestor Guzman Jr., is a guidance counselor in the Paterson school earning $45,000 a year.

SCHOOL FACILITIES

Medina Consultants, a civil engineering firm, and sister company Robinson Aerial Surveys, have donated $5,800 to Torres; $500 to Pou and $3,000 to Gov. James E McGreevey's inaugural fund. In July 2002, Medina was given a $45,000 contract to perform "site feasibility" studies on nine potential school sites.

Epic Management Inc. of Piscataway in 2001 donated $2,000 to Hoboken United and $500 to Pou.

Perry Belfiori, a former Hoboken Board of Education member and friend of Duroy, was an Epic employee until the company was folded into Jacobs Construction, which manages all SCC construction projects in Paterson. In Paterson, although auditors were only able to locate files for two construction management assignments, the district paid the company $3.1 million for 17 projects. Belfiori, who served on the Hoboken Board of Education when Duroy was superintendent, is a former food services manager for the district. He was a paid employee of the Hoboken United 2001 campaign.

Tri-Tech Environmental, Inc. of Dover contributed $1,200 to Barnes in March 2002. The company earned $833,000 in contracts with the Paterson district, including an assignment to create the district's long-range facilities plan, upon which all future SCC-funded construction and school renovations are based.

George Meadows, a Paterson architect, contributed $500 to Torres in April 2002. Since July 2002, he has earned $173,00 as the school district's in-house architect.

Evans Architect of Paterson has donated $500 to Torres. The firm is the architect of record for the district and earned $65,000 since the 2002 election.

El Taller Collaborativo of Paterson has donated $1,000 to Torres and earned $38,000 in architectural contracts for the district.

Eight contractors approved to work for the SCC contributed another $10,420 to Torres. They were: Comerro Coppa Architects of Totowa; Railroad Construction Co. of Paterson; Delric Construction Co. of North Haledon; A&A Industrial Piping of Totowa; Imperial Construction of Elizabeth; Louis R. Slaby Engineering Consultants of Morris Plains; Bovis Lend Lease of New York City and JCA Associates of Moorestown. JCA was banned from working with the SCC after admitting it made illegal campaign contributions. In the past two years, these contractors have earned at least $24 million in SCC-funded jobs in Paterson.

REAL ESTATE

The Nicholas Real Estate Agency of Clifton, owned by Nicholas and Angelica Tselepis of Wyckoff, in 2003 donated $500 to Torres, $500 to Pou and $1,500 to board member Joseph Atallo. The agency lists the Spectrachem building rented by the district. It has not earned a commission on the district's lease agreement, but would once the building is sold, according to Nicholas Tselepis. Although the district lobbied the SCC to purchase the building, the SCC passed on the site after environmental testing.

John H. Hovey of Wyckoff donated $500 to Torres. Hovey, who owns several properties and real estate companies in Paterson, rents 11-27 16th Ave. to the district for $36,383 per month. The SCC is considering the district's request to purchase the building.

Carmine and Helen Cifaldi of Sarasota, Fla., donated $200 to Torres' Paterson City Council campaign in 1984. The Cifaldis owns 137 Ellison St. The district has spent at least $900,000 on renovations on the building, which it rents for $24,356 per month.

W & C Properties of Paterson, owned by developer Phil Rabinowitz, has donated $1,500 to Torres. The company, which also donated money to Barnes, owns the Fabian and adjacent Alexander Hamilton Hotel. The district has a pending 30-year rental agreement for the Fabian for $52 million.

DISTRICT EMPLOYEES

Idida Rodriguez of Paterson has contributed nearly $5,000 to Torres and Pou. She is Pou's former chief of staff and Torres' 2002 mayoral campaign manager.

Her consulting firm, IRODZ Associates, in 2001-02 had a $45,000 contract with Paterson schools to increase minority representation in construction work. In 2003, IRODZ was given a three-year, $1.5 million contract by the SCC to increase minority representation, and Rodriguez was hired by the Paterson district as coordinator of a minorities in construction trades program, earning $39,000 a year.

Her brother, Obed Rodriguez, is the district's construction manager. Shortly before he was hired in August 2000, his job was advertised as "salary not to exceed $35,000." Three weeks later, Rodriguez was hired at $40,000. In 2001-02, he earned $41,960. In 2002-03, he was given a title boost to Head of Construction and Maintenance and $15,000 was added to his salary. Currently, he earns $61,000.

Idida Rodriguez's sister, Gisela Adorno, was a paid employee of the 2002 Torres campaign. On May 14, 2002, the day Torres was elected, she was hired as a bilingual teacher at School 15, earning $40,400.

A woman who shares Rodriguez's Paterson address, Hilda Diaz, was a paid employee of the 2002 Torres campaign. She was hired as a food services field manager, earning $52,000, in October 2001.

Anna DeMolli, of Little Falls, donated $300 to Pou in 1999. She is the district's head of early childhood instruction, in charge of Paterson's $38 million Abbott preschool program, and earns $130,000 annually.

HEALTHCARE

BeneCard Services of Lawrenceville, founded by former Republican Senatorial candidate Douglas Forrester, has donated $1,500 to Torres. The company handles prescription insurance coverage for school employees, for which it charged $7.4 million in 2002-03.

- Kathleen Carroll