Welfare Warfare

A Bill Is Born

In 1995 the Texas Legislature passed House Bill 1863 -- a manifesto for privatizing and consolidating welfare and employment services in Texas. HB1863 was heralded as a millennial move towards restructuring social service programs under one "super agency" -- the Texas Workforce Commission. As such, the TWC oversees 28 local workforce development boards across the state -- including the CAWD board in Austin -- which in turn hire private companies to manage "one-stop job centers." Here, unemployed workers and their families can receive employment and welfare assistance through various state and federal programs, such as the Jobs Training Partnership Act, or Aid to Families with Dependent Children. In Austin, the local offices of SER (the Spanish verb, "to be") -- a national organization formed 30 years ago by the League of United Latin American Citizens and the American GI Forum -- obtained the contract in November 1997 to manage two job placement centers. Once SER's operations were in place, welfare reform advocates across the nation turned their attention to Texas, where one of the most innovative reform programs to date was being put to the test.

Meanwhile on the political stump, Bush heralded Texas' welfare reforms in many of his campaign ads, pointing to self-sufficiency and accountability as integral elements to the success of the programs. "If we discover evidence of welfare fraud," one Bush advertisement proclaimed, "you're out." Less than a year later, the company hired to help eradicate fraud was out, too.

While focus on the accountability and honesty of welfare recipients has dominated discussions of welfare reform, it now seems that the system itself needs analysis. And with allegations, counter-allegations, and contract upheaval happening here in the state capital -- where the groundbreaking legislation was born -- a timelier topic of discussion seems to be: What measures are in place to ensure accountability on the part of private companies hired to run state programs? State labor leaders argue that the system is doomed to failure because private companies aren't accountable to taxpayers. Proponents of the new system argue that private companies can run state programs more efficiently for less money -- and less cost to taxpayers.

As it is, the 1995 legislation is a fairly complex law that's difficult for the public -- both inside and outside of the system -- to understand. "It's symptomatic of a larger issue -- that we don't support workers," said University of Texas' Chris King, a research scientist with the Center for the Study of Human Resources, who helped craft the legislation. King was referring to former SER employees whose allegations against their employer went ignored for several months until they threatened to file suit. If more people knew how the system was set up, King said, then the ramifications of the recent situation would be apparent and the former employees would have had better avenues in which to register their complaints. Even with its quirks, however, King believes the legislation can work effectively once the snags are corrected. "So what you get," he said, "is better performance over time."

Contract Canceled

With an autumn sun on the horizon and a stout northwest wind blowing across the parking lot, about 30 people gathered Oct. 22 for a meeting of the Capital Area Workforce Development Board. Nearly three hours after the meeting began, the board voted overwhelmingly to end its contract with Austin's SER Jobs for Progress. Among the reasons for yanking the contract, said board member Sandy Dochen, were mismanagement, breach of contract, and "questions and concerns regarding former employees." Board chair Nora Comstock said CAWD will open the bidding process again with hopes of having a new contractor in place by February. Because SER "voluntarily" withdrew from the contract -- an option CAWD gave the company after voting for its ouster -- it is eligible to rebid on the contract. In the meantime, CAWD staff will pick up where SER left off.

The board's move to cancel the SER contract came after three months of complaints and allegations from former SER employees -- claims of intimidation tactics and orders to change client files at a time when SER was up for renewal of its contract for the fiscal year beginning July 1, 1998. "We feel vindicated," said Sylvia Mouer, one of 15 former SER employees who have been trying since early July to draw attention to the matter. "We're just glad it's over. Really, they [SER officials] brought all this on themselves."

Allegations of file tampering and management hostility began to surface in July when employees approached members of the workforce development board and the SER board -- both direct overseers of program operations. "I'm glad the board finally saw what was happening," said Grace Matamoros-Poore, who says she was wrongfully terminated from her SER job after she reported the fraud allegations to the TWC.

Investigation Continues

Though SER's contract has been canceled, serious questions remain unanswered in the aftermath of accusations and counter-accusations. While many agree -- including people on all sides of the current SER situation -- that the concept of HB 1863 is an improvement over the old system, the recent occurrences at SER -- and the way the situation was handled -- leave room for much more improvement, such as closer monitoring of the companies managing the state programs, and special consideration of a company's progress in times of low unemployment, which would eliminate pressure to maintain a high client base in order to retain funding. Also, said King, the UT researcher who helped draft the legislation, protective measures need to be in place for employees who report concerns of wrongdoing within the company.

It is a lack of clarity about the legislation that helped predicate the current situation at SER, said Sylvia Mouer, one employee who resigned under duress a week after five other employees were fired on July 8. "These people have gotten screwed and it really makes me angry what was done to them because they were trying to do the right thing," Mouer said. And while Matamoros-Poore, one of the SER employees who says she was fired for reporting her concerns, hopes to return to her former job under new management, the financial burdens caused by the unexpected loss of employment are insurmountable. "These lives have been permanently changed for the worse," said Cheryl Kirby, an Austin labor attorney who represents many of the former SER workers. "They [CAWD and SER boards] were told so long ago what's been going on."

The SER Era

In July 1997, the CAWD Board called for bids to run the operations of two job training centers for unemployed workers in Austin. The board received three proposals -- one from Lockheed Martin, one from SER, and one from The Strickland Group Inc., a company formed by employees of the Private Industry Council (PIC), who had been running some of the programs for the state for 14 or 15 years. "We'd been working these programs for years and years," said Mary Holder, who was a member of the Strickland Group and worked for SER as a Jobs Training Partnership Act manager until July 8. "We thought, why couldn't we run the programs?" But the CAWD board decided that the Strickland reps had an unfair advantage because they had already worked on state programs. The board ended up throwing out the proposals and starting over, and the second round of bids produced only two proposals, from Lockheed and SER. In November 1997, four months into the fiscal year, SER took over operating the state programs in Austin.

As part of the contract, SER hired Safar Gerabagi as the director of the workforce centers. Gerabagi felt some changes had to be made so that the Austin operations would run more smoothly and effectively. He canceled magazine subscriptions to save money and consolidated the participant eligibility assessment into a one-day process. "I wanted a client to be able to come in at 8am and ... by 4pm you'd be able to tell them whether ... they're eligible or not," said Gerabagi, who is no longer employed by SER in the wake of CAWD's action last month. "I'm more performance-oriented. I want to know how fast we can get from point A to point B."

Planners hired by the workforce development board take federal and state mandated performance numbers to devise a plan that prescribes the number of clients each program must serve to retain its contract, explained James Valma, SER's program operations manager who, like Gerabagi, lost his job as a result of the allegations. If program standards are not met three years in a row, he said, there are actions -- such as repealing the contract, or government monitoring. In this past fiscal year, the numbers took on a supreme importance, said Gerabagi, because for the past two years PIC -- the group that previously handled the state programs -- had failed to meet the goals. Because SER secured the contract four months after the fiscal year began, it came into the operations under the same tax monies that PIC had been using to run the programs. Thus, the need to perform at a higher standard was highlighted. Had SER not met the numbers for the year it is doubtful they would have been awarded the money again in July for fiscal 1998.

Allegations Laid Out

By all accounts it has been a busy 1998 at the SER offices in the SouthCliff office building on South I-35. Besides adjusting to new management and the pressure to improve performance standards, the offices were also charged with switching to the new statewide computer system, Texas Workforce Information System -- or TWIST -- from an older reporting system, Client Management System (CMS), by June 8. The switch meant many hours spent in the Management Information Systems (MIS) department where employees had to manually transfer the client files over to the new computer system. It was during this timeframe that Grace Matamoros-Poore and her colleagues, Christina Vasquez and Dalana Smith, say they were instructed to alter client files.

Smith, who had worked for PIC for 31*2 years as a front desk receptionist before SER took over, had just taken a new position as an MIS clerk and was still in the process of training when, she says, Valma asked her to change participant information. He "had me get files out of the terminated room. It was unusual that he had me getting those files," she explained in an August interview at the southeast Austin home of another former employee. "Then what was more unusual was that he had me changing them." In total, Smith says, she changed about 12 files by changing termination reasons.

Termination distinctions are extremely important because they translate into performance ratings, explained Mary Holder, a former program manager. For example, a client who completed a General Education Development program and received a job through a SER-managed program yields SER a higher performance number than if the same client had only received a job.

Valma denies that he ever asked anyone, including Smith, to change files. As a manager, Valma explained, there are four levels of employees between him and MIS. "Why would I go through all this [management levels] to ask a clerk to change files?" And Gerabagi said Smith's layoff was indeed due to budgetary reasons, and that the day after her layoff, he figured out a way to pay her salary. SER offered Smith her job back, Gerabagi said, "but she didn't want it."

ChristinaVasquez, who also worked in MIS as a program specialist, said that she was given similar instructions as Smith, but that she had been told to change files starting as early as February. In early April, Vasquez became very ill and was out of work for two months. Her absence created a hole in the MIS staff at a critical time, and Vasquez was grateful to have kept her job. In her absence, Matamoros-Poore, who had formerly worked in MIS, picked up the extra slack. "When I got back to work I went to Grace's office to say thank you for doing so much," said Vasquez. "Then Grace closed the door and told me what had been going on while I was gone. I advised her that she should seek legal counsel to see where she stood in all this," Vasquez said. Fear about what they had done kept the employees from talking to each other, many former employees said. They were afraid that if they came forward they would lose their jobs. But when Matamoros-Poore began talking to Vasquez, they say, they began to strongly suspect wrongdoing. "We started talking, realizing why this was going on," said Vasquez. "We started making copies and running [computer] reports." Vasquez said she thought early on that the changes were being made to boost performance ratings. "You see, we are very performance driven," she said. "These numbers had to be met to get the contract for the next year."

Between June 30 and July 7, five employees were terminated or laid off, which made Vasquez and other employees nervous. But on July 8, at an all-staff meeting, Gerabagi announced some good news: SER's contract had been renewed. "We were told that we were all receiving a 5% raise and that there weren't going to be any more layoffs," explained Vasquez. But that same afternoon, Vasquez, and four others in turn, were called into meetings with Valma and Gerabagi where they were terminated and given 30 minutes to vacate the building. "I was only told that I don't fit into the organization anymore, and we're all at-will employees." Scared and upset, Vasquez left SER.

Later, at an Oct. 12 meeting of the SER board, attorney Kirby questioned the contradiction between what was said at the SER staff meeting, and what was actually done that day, and cited it as part of a pattern of unfair labor practices she hoped the board would address. But Gerabagi sternly denied he'd ever made any such comments. "No ma'am," he said. "I never said that."

Matamoros-Poore was also fired July 8. When she pressed for a reason, she said, she was told simply that SER no longer needed her services. She too was given 30 minutes to leave the building. "After 61/2 years, I had barely 10 minutes to get out," she said, patting her eyes as they brimmed with tears. "They threw me out in record time. I was humiliated. I hate going back to that day." Like the others, Matamoros-Poore claims that Valma ordered her to change client files. She said she put off doing any of the changes until she consulted her immediate supervisor, Jim Moore. "I told him I knew it was wrong to do -- and what was I going to do about it?" Moore remembers the day vividly. "Grace came into my office in tears," he said. "She told me that Valma was intimidating her and she was very afraid of losing her job, which we all were at that point because things were so tense." Moore said he thought about it, and realized they had a couple of options. One was to go to Gerabagi with the information, but "we felt that if we did that we could say goodbye to our jobs." So Moore advised Matamoros-Poore to "go ahead and do it, but make sure you keep a paper trail."

And so she did. She ran reports from the computer system which showed the date, time, and actions she took. She also inserted a penned note onto the bottom of the hard copy file sheets for the clients she was told to alter. She dated each entry for the fifth of June and signed off with her initials. On Friday, July 3, she called the TWC's fraud hotline and left a message with "an overview of what was going on, what I had done," she said. She left them her name and home phone number. She included her work number, but asked them not to call her there because she was afraid of someone finding out. TWC investigator Lee Schnell returned her call, she says, and she told him the names and social security numbers of the clients whose files she'd changed. TWC media relations spokesman Bashear confirmed that a call did come into the hotline from SER on the third of July. "A call was made with allegations of impropriety with regard to SER," he said, though he declined to name the caller, due to the hotline's promise of confidentiality.

Employees Speak

Grace Matamoros Poore

Grace Matamoros Poore

photograph by John Anderson

While the former employees are satisfied that CAWD took action against SER, their satisfaction is tempered by a lack of closure on the situation. For one thing, there is the fact that many of the former employees say they were wrongfully terminated because of what they knew. Coincidentally or not, at least five employees lost their jobs with SER shortly after their fraud allegations began making waves with board members and the TWC. "Where does an employee go?" asked Mouer. "We've been stonewalled every step of the way."

Ironically, SER's termination eliminates part of a strong cause of action to help the employees get their jobs back with back pay, said attorney Kirby. Indeed, the issue of how best to right the situation took up most of the development board's 21/2-hour closed session Oct. 22 with the board's San Antonio-based lawyer, Rochelle Limler. And while Limler says she will not discuss the reasons the board asked her to advise them during a closed session, labor lawyer Kirby thinks she has a pretty good idea. Just two weeks before, Kirby had told the SER board of her intent to file an unfair labor practices suit in behalf of the former SER workers. Subsequently, the CAWD board voted to oust SER -- just four days before Kirby said she would file. Kirby believes the "sudden" actions of the board members were an attempt to remove themselves from any possible liability. "They were shown to be wrong ... come hell or high water they're not doing these employees right," said Kirby. "Not only have they gotten rid of SER, but they're now making all the hiring and firing decisions. They could've done this before, but they chose not to because it wasn't in the paper yet."

But CAWD board chair Comstock says that while the timing may seem opportune, the contract cancelation came on the heels of months of information flowing to the board. "I really hated it that it appeared reactive," she said. "We were trying to be fair and just." All but two of the 18 members present at the board meeting agreed that their decision to call for the resignation of SER by 2:30pm the next afternoon -- lest their contract be yanked at 5pm -- was the right course of action. But Glenn Scott -- one of two labor representatives on the board -- is still not convinced that the decision reflects a just resolution. "It was a difference in tactics on how we should approach the situation," said Scott. "We would not have known what was going on unless these employees stuck their necks out and got fired for it." Scott said he favored a 30-day grace period in which the SER board would have a chance to clean up its act. "We were not doing what we could've done to let them [the former employees] try and get their jobs back," Scott said. But even with SER out, there is still a chance the former employees will get their old jobs back, says Kirby. "When we talked to their [workforce development board] attorney, she made no promises, but she said they'd do them right," Kirby said. But Kirby also admits that she has little faith right now that the board will handle the situation appropriately.

And getting their jobs back, or at least getting compensated for lost wages, is what many of the ex-SER employees want most, especially since their terminations were a result of retaliation for communicating with one another -- and anyone else they could get to listen -- about what was going on inside SER, says Kirby. The retaliation factor is a key element to the unfair labor practices suit Kirby had planned to file against the SER board had they not tried to fix the situation. Under the unfair labor practices act, it is illegal for an employer to retaliate against employees who "come together in mutual support," said Kirby. While the law usually applies to unions, Kirby said she feels the situation at SER clearly violates the act. "Here they got together, started talking because they had been asked to do things and were unsure about what was going on." At any rate, the lawsuit Kirby had planned to file is on hold pending a decision from the workforce development board on what will become of the former employees. "Out of common decency put them back to work," Kirby insists. "Pay the ones who don't want their jobs back back pay, and let's move on down the road."

So What Does It All Mean?

All told, there have been 10 terminations, one layoff, and 20 resignations, out of a staff of about 61 employees at SER. Gerabagi, interviewed before his own firing, says that certain employee terminations, such as Matamoros-Poore's and Vasquez's, were inevitable due to restructuring, and had nothing to do with files they said they were instructed to change. And he insists that he was never told by anyone that another manager -- Valma in this case -- was instructing employees to change files. "How am I supposed to know, if they don't come to me?" he asked. "How am I supposed to know that this one employee out of about 70 employees does something wrong?" Gerabagi and Valma believe that the "disgruntled employees" wish to see SER fail. "They are complaining because SER was the little kid on the block, a community-based organization," said Gerabagi. "We sweep the floors if need be." The change from state-run to private-run programs was a huge shift, said Gerabagi, that the former employees couldn't or wouldn't handle. "Before, it was a very lax system," said Gerabagi. "The system has been a socially driven system ... [HB] 1863 is trying to change that mindset. Most of the staff we inherited are social-service minded, because they want to say, 'Oh, poor you ... how long do you want to stay on welfare?' What we wanted to do was set some goals. It was a big paradigm shift from a social service to a business-driven mentality."

It was this business mentality, said Valma, that the inherited employees resented. Valma says he shared Gerabagi's desire to change the way things were running, and he adds that it was this shared "vision" that made other employees resent him. "I liked the direction he [Gerabagi] was going in," said Valma. "But there was a negative current running through, even to the point where some of the people making these allegations were saying, 'Hey, I'll sabotage this. I don't have to do this; I can make this program fail."

And so, four months after the workers' initial contact with the SER board, the workforce development board, and the TWC, very little has been resolved. None of the former employees have gotten their jobs back, and new casualties, like Gerabagi and Valma, also litter the road to welfare reform. King, the UT researcher, thinks the restructuring and consolidation intentions of HB1863 are in keeping with the current national trend to try to achieve more accountability. "Part of this is that you never had a full system of accountability before." And so things go awry, such as the alleged fraud and the questions of employee protection. King calls these the growing pains of consolidation. "TWC and the Legislature need to be watching these things," he said. "These guys [workforce development board] are doing a heck of a job considering the chaos of TWC putting themselves together [enacting the legislation] with very little help from the state."

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