CSU whistle-blower loses job; accused teaches on CSU SYSTEM

Justin Schwartz was fired from his job as a professor at Cal State East Bay after he blew the whistle on a coworker who was embezzling. He is photographed at the school in Hayward, Calif., Friday, March 23, 2012. less Justin Schwartz was fired from his job as a professor at Cal State East Bay after he blew the whistle on a coworker who was embezzling. He is photographed at the school in Hayward, Calif., Friday, March 23, ... more Photo: Sarah Rice, Special To The Chronicle Photo: Sarah Rice, Special To The Chronicle Image 1 of / 8 Caption Close CSU whistle-blower loses job; accused teaches on 1 / 8 Back to Gallery

Justin Schwartz, a lecturer at Cal State East Bay in 2009, told his bosses that a colleague in the recreation department was spending thousands of dollars of university money to buy himself a $4,000 bicycle, passes at a climbing gym, sailing equipment and paragliding lessons while claiming they were for classes he taught.

A campus investigation confirmed that the man had billed the school for personal expenses and that much of the equipment he had bought had mysteriously disappeared, and it found that department officials had never asked questions.

Rather than thank the whistle-blower, Cal State East Bay fired him. The colleague who appeared to have bilked the school still teaches there.

What happened next - after Schwartz sued California State University saying he was the victim of whistle-blower retaliation - is that he learned he wasn't alone. In the past three years, cash-strapped CSU has paid $9 million to settle and defend seven cases of retaliation against campus whistle-blowers.

"I figured that when I came forward, some action would happen whereby the gentleman involved would be appropriately disciplined," Schwartz said. Instead, "my identity was disclosed, I lost my job, and nothing happened to him."

The CSU chancellor's office says Schwartz was let go for budget reasons. "He was a part-time lecturer," spokesman Mike Uhlenkamp said. "There was no money for that."

Michael Shumate, the subject of the whistle-blower report, is also a part-time lecturer at the Hayward campus.

'Borderline ethical'

He readily acknowledged that his methods were "borderline ethical." To benefit students taking his outdoor recreation classes, he broke rules, bought lessons for himself and used student fees to buy himself the high-end bicycle he would let students ride, Shumate told The Chronicle. He said he did it to give them an excellent outdoor education, which would have been impossible if he hadn't found a way to reimburse himself for expenses.

"We did it the old-fashioned way," he said. "Do it first, and ask questions later."

Shumate kept his job because seniority was on his side, said Jim Cimino, the now-retired associate vice president who conducted the investigation.

"If they wanted to get rid of Mike Shumate, they would have had to go through a disciplinary process," Cimino said. "The administration's job is not to 'get justice.' Our job is to run the university."

It's an approach that may explain why CSU has had to pay out millions of dollars to settle whistle-blower retaliation claims in recent years.

Since 2008, CSU has settled seven cases, and courts dismissed or plaintiffs dropped five others, each involving employees who said they were punished for reporting abuse of public funds under California's Whistleblower Protection Act.

"The whole thing is deeply troubling if in fact there's a pattern," said Professor Josh Davis, director of the Center for Law and Ethics at the University of San Francisco. "They're losing money because they're not policing (abuses) adequately, then they have to pay for the lawsuits, and then they have to pay the whistle-blowers. What a nightmare."

Susan Westover, a CSU litigator, denied there was a pattern. She said the university does a good job of encouraging employees and students to report abuse, and of protecting the rights of those who do.

"We actually have very few (retaliation) cases" relative to the size of CSU, which has 23 campuses, Westover said. "And just because you file a whistle-blower claim doesn't mean you're right."

At Cal State East Bay, "it could be that Schwartz was legitimately laid off," said Davis of USF. "What's troubling is that they have put so little energy into trying to figure out whether the other person was systematically engaging in unlawful conduct. You'd think they'd want to know that."

Climbing buddies

The story of Schwartz and Shumate began more than a decade ago, when they became friends at a climbing gym.

One July day in 2002, they were at the Wrench Science custom bike shop in Berkeley when Shumate spoke to the owner about a $4,000 Kestrel road bike he had ordered. Shumate asked to be billed in multiple, small invoices to avoid raising red flags with campus accounting, Schwartz said.

When Schwartz questioned his friend about using university funds to buy himself a bike, "he told me that if he did not spend his entire budget every year, he faced the risk of having his budget reduced in subsequent years," Schwartz later wrote to campus officials. He also told them that Shumate showed him camping, climbing and kayaking equipment at his home and bragged about getting them courtesy of Cal State East Bay.

Schwartz, who began teaching recreation coursesat Cal State East Bay in 2003, soon grew uncomfortable. "I felt that I was covering for him," he said.

Schwartz first approached Melany Spielman, the department chairwoman, in May 2006. In several conversations with Spielman, he accused Shumate of numerous abuses, including keeping a secret storage locker of personal equipment purchased with university funds; charging the campus for two expert-level land sailers - a kind of sailboat on wheels that costs $2,000 - from the company where Shumate moonlighted as a sales rep; and using public funds to work out at the Touchstone Climbing Gyms in Berkeley and Concord.

But Spielman always said the same thing: She could take no action without proof.

Then Schwartz began teaching Outdoor Living Skills, also taught by Shumate at a different time. Schwartz asked him for an inventory of available camping gear, which he believed Shumate had stashed in various places. Shumate stonewalled, and Schwartz returned to the department chairwoman.

She imposed a deadline for Shumate to provide the inventory. But as the deadline approached, Shumate announced a break-in at the storage locker and said everything had been stolen. He filed a police report on Jan. 6, 2007.

Schwartz went to look and was surprised to find it unlocked and still containing "a significant amount" of equipment, he told Spielman. She still wanted proof. More than two years would pass before Schwartz figured out how to get it.

He returned to Wrench Science in 2009 and got copies of the six old invoices for the bike Shumate bought in 2002. They totaled $4,076.74. On May 19, Schwartz attached them to an official whistle-blower report, listed his allegations and sent them to Cimino, who ran the campus' human resources department.

By December, Schwartz was out of a job.

Investigation launched

But his whistle-blower report had triggered an investigation, and on March 22, 2010, Cimino sent a four-page memo upstairs. It said that Shumate had been reimbursed $2,700 for three personal lessons from Advanced Paragliding, though he had reported they were for his students.

Cimino also found that while shopping at Wrench Science, Shumate bought parts for road bikes, not the mountain bikes his students used. Noting that Shumate had been reimbursed $1,529 for a bike frame and $132 for a seat post, Cimino wrote: "Many of the individual parts cost nearly as much as an entire mountain bike."

And he found that Shumate had double-billed the university and its foundation for the same expenses on two occasions, receiving more than $2,000 in reimbursements.

"Several thousand dollars of expenses reimbursed to Mr. Shumate cannot be reconciled or supported by the documentation he provided," Cimino wrote. "They appear to have been for Mr. Shumate's personal gain."

In all, Cimino identified 26 questionable payouts between July 2002 and December 2008. Shumate couldn't prove they were legitimate because, the instructor said, much of the equipment had been stolen. He filed five police reports from 2005 to 2009.

Cimino called that a reasonable explanation. His memo chastised the department for failing to inform management about the repeated thefts, and for lax approval procedures for reimbursements.

Campus officials declined to comment.

Cimino said he understands Schwartz's outrage, but "he lives in a fantasy world. This is the way the world works."

He compared Shumate's use of public money for personal paragliding lessons to a CSU official going to a "professional conference."

"It's pretty clear that students were never going paragliding. The insurance would have been insane," he said. "But was it within the realm of him to go out and explore it? Yeah."

CSU never ordered Shumate to pay the money back.

"I didn't do anything wrong," Shumate told The Chronicle. He said his methods allowed students to go sailing, kayaking, orienteering and more, all for a $50 fee.

"The only way they could do that was the way I used my resources," he said, adding that CSU, scraping for every dollar, would never have paid for such expensive equipment through normal channels. "I'd bill, use my connections, my tools."

Did he double-bill?

"All the time," he said. "You'd have to do it. There was no way I could've done what I did without billing. It's to help students get what they want."

The days of geocaching or kayaking classes at Cal State East Bay are gone now, and Shumate said he's mystified as to why his popular courses were halted. He now teaches three Introduction to Recreation classes - all online.

"It's a major disservice to students," he said.

Schwartz, the whistle-blower, is still looking for work. His case against CSU goes to trial this summer.

Click here to read about the whistle-blower cases that have cost CSU millions: http://sfg.ly/WZpQiN