Thursday, May 5, 2011 | Records obtained by PBS SoCal indicate that for nearly a decade high school and college coaches throughout Orange County received kickbacks from a local sports apparel and equipment company that did business with area school districts.

Between 2000 and 2008, the Laguna Hills-based Lapes Athletic Team Sales (LATS) put as much as $700,000 in taxpayer money into secret slush funds, some of which was given directly to coaches, according to records uncovered by Teresa and Geoff Sando, an Irvine couple who took over the now defunct company.

The Sandos say the records show coaches from 29 schools in Orange County received kickbacks, including those from Irvine High School, El Toro High School to Saddleback College. However, they said coaches from Capistrano Unified received the most money from the company.

Coaches at Capo Valley High School, Niguel High School, Dana Hills High School, Tesoro High School and San Clemente High School were all involved, according to the Sandos.

Several school districts have launched investigations into the allegations. The Orange County Sheriff’s Department completed one investigation into the claims the Sandos had against Lapes, but Orange County District Attorney Tony Rackauckas declined to prosecute.

A Sheriff’s spokesperson said he department could potentially launch another investigation that focuses specifically on the alleged slush funds.

The Sandos began as investors in LATS, but said they took the company over after the previous owner, Bill Lapes, defaulted on several hundred thousand dollars in loans the couple had given the company.

The couple said they first found evidence of the slush funds when they were cleaning out boxes of records from a back room at the company’s offices in 2008.

“We discovered in a back room files that just had the words ‘slush’ written on them,” said Geoff Sando, who was the company’s part-time accountant before taking it over. “At the time we didn’t really know what that meant.”

The Sandos investigated further and found documents kept by the company that showed different amounts for the actual price of the merchandise and the amounts they billed the school.

The coaches and the company would split the difference in the amounts, with the checks to the coaches always under $600 so the company would not be required to issue a 10-99 tax form to the recipients, the Sandos claim.

“In total, I found about $700 thousand dollars in slush money,” said Teresa Sando. “To me that’s not small change at all.”

The Sandos sued Lapes in 2009 in an attempt to recoup some of their investment losses. Lapes refused to comment on the allegations when confronted by PBS SoCal at his home in Rancho Mirage. He said he “didn’t remember anything”about the checks and that he lost all of his money in the business.

Bill Mitchell, a business transaction attorney in San Juan Capistrano, reviewed some of the documents uncovered by the Sandos.

“In this case the coaches are not in a lawful position to receive a commission on the purchase and sale of athletic equipment by the school district,” Mitchell said. “So it’s not a sales commission, it’s not a promotion, it is a classic slush fund kickback.”

The Sandos say San Clemente High football coach Eric Patton was one of the largest beneficiaries of the slush fund. They found cancelled checks written out to Patton, his family and his assistant coaches totaling nearly $10,000.

Patton refused to comment when contacted by PBS SoCal. But he admitted to the slush fund during a 2009 deposition in the civil case filed by the Sandos against Lapes.

Here is a transcript of that deposition:

SANDO’S ATTORNEY: “And how did it come about that those payments were made to those people — in those amounts — who gave the direction for that?”
PATTON: “Bill [Lapes] asked me who should get the money and I told him that those were the people that should receive those checks.”
SANDO’S ATTORNEY: “Are these — again — part of the slush fund that you’ve described?”
PATTON: “Yes.”
SANDO’S ATTORNEY: “When these coaches received money from Lapes Athletic Team Sales — was any report given to the school?”
SANDO’S ATTORNEY: “Was any report given to C-I-F.
SANDO’S ATTORNEY: “Was any report given to anyone.”

Coaches at Capistrano Valley High, most notably former head football coach Chi Chi Biehn, were also large recipients, according to the Sandos’ records.

The documents show Capistrano High personnel, including Biehn, other former football coaches and an equipment manager at the school spent $82,000 through the “Capo Valley High” slush account.

The Sando’s have found other records that indicate this same Capo account actually dates back to 1993 — putting the total amount of slush at nearly $160,000.

Teresa Sando said the records show the coaches, over the years, used a small portion of this account to pay for things like fishing trips, Christmas gifts and sports apparel for themselves.

Biehn did not return repeated calls for comment.

Sheriff’s Spokesperson Jim Amormino confirmed that the department launched an investigation in 2009 into the case between the Sandos and Lapes, but said the department did not look specifically into the case regarding the coaches, the school districts and the slush fund.

“There may be some potential wrongdoing in this case,” Amormino said. “Of course we’d have to look at it and determine that, we would conduct another thorough investigation and at the end of the investigation I could definitely tell you, yes or no.”

While Teresa Sando said some districts dismissed her claims, Capistrano Unified Superintendent Joseph Farley took her charges seriously.

District officials refused to be interviewed by PBS SoCal, but did release a statement.

“We are aware of the allegations and intend to respect the integrity of our investigative process while protecting the confidentiality of our staff,” read the statement. “Please be assured that allegations of this nature are thoroughly investigated and appropriate action is taken when warranted.”

The Saddleback Unified School District and Saddleback Community College have now their own investigations into how coaches spent money intended for their athletic programs, according to the Sandos.

PBS SoCal intern Nick Gerda contributed to this story.

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