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Shake Yer Money Maker: New East Side schools superintendent digs deeper into financial practices.

Public Eye

Both of Me

Eye has learned that the East Side Union High School District continues to investigate itself for financial dirt. The question is, So what? So far, reports of wily public-ed money-handling behaviors haven't appeared to detract much from Assembly-seat coveter Joe Coto's reputation or campaign. Evidence disclosed in an audit a few months ago suggested that Teflon Joe helped business buddies skirt public contract rules in favor of a less formal, back-scratching style ("Seeing Red," July 17, "Juice for Joe," Aug. 14). The response from the local politicos? Don't be so hard on Joe. People like Coto, who's almost universally described as "a nice guy." ... Just two weeks ago, an endorsement meeting on the Coto vs. opponent Kathy Chavez Napoli race to replace Manny Diaz featured the excitement of public figures interrupting each other. Ultimately, the Democratic Forum of Silicon Valley--Assessor Larry Stone's answer to the Republican Lincoln Club--wound up handing Coto its hearty approval, and $7,000. Nevertheless, the popular former superintendent of the East Side Union High School District remains a key protagonist in new Superintendent Esperanza Zendejas' efforts to tidy up district finances. Zendejas tells Eye that she ordered an internal review of the Ernesto Galarza Institute. The institute, a nonprofit booster group for Latino kids, sells its social worker and support services to the East Side District. It has leveraged six-figure payouts from the district over the years. The Aug. 9, 2001, consent calendar, for instance, records the district's board approving an $85,800 contract with the institute, as requested by Coto. The funny thing is that Coto also is listed as the CEO of the Ernesto Galarza Institute in the Articles of Incorporation paperwork originally filed with the secretary of state in 1991, while Coto was superintendent. "This is not just an external organization that is separate from the district," says Zendejas, "and that's why we have to be cautious and concerned." She tells Eye that the reasons for the review are confidential and declines to say whether Coto earned a paycheck from the East Side School District vendor. She does mention that she cut the district's check for Ernesto Galarza approximately in half in September. She expects preliminary results of the review to hit the district board's desk in January. Meanwhile, Ramon Martinez, secretary of the Galarza Institute and director of the East Side Union High District's Safe Schools, Healthy Students Initiative, says no one's getting paid by the nonprofit, besides the social workers it sends into the schools. He said that last year the Institute received a total of $135,000. Coto formed the Institute to avoid red tape, Martinez says. Basically, it was an answer to Prop. 13's dicing up of social services in schools. He plays down the significance of the district's review of Galarza as a new superintendent getting to know how things work.

Nowhere Man

Eye reported a few months ago that City Council Chameleon David Cortese was attempting a balancing act to align himself with San Jose's heavy-lifting labor contingency while trying not to alienate business ("Middle Man," Aug. 28). News update: Cortese needs a net. "He's telling business people he's with them--and labor people he's with them," notes one wag. "I think he thinks he's trying to be the compromiser. People think he's being dishonest." He's not going to claim labor's support in his likely bid for mayor in 2006. Labor's best friend Cindy Chavez (the South Bay Labor Council's former political director) is obviously leagues ahead on that front. Cortese has always seemed a bit cagey when it comes to categorical lock stepping. During Cortese's 2000 bid for City Council, criticism emerged that he'd be a shill for developers. But Cortese ultimately scored the sole endorsements of both the South Bay Labor Council and the Chamber of Commerce. He ended up voting with the labor fans to approve the controversial labor package tacked onto the downtown CIM project last December. In August of this year, Cortese stepped out in front to stump for labor's Community Benefits Initiative (which bargains for power over Redevelopment Agency contracts), after already giving Chamber members the impression that he was in their camp. "From the Chamber standpoint, there have been some disappointments," says Chamber board chair Mike Fox Jr., who spent two hours chatting with Cortese about his concerns last week. Fox says Cortese has been calling around to Chamber members for a some months now trying to reach out to them. Cortese's efforts to play both sides, however, have worn on the testy section of the business community's patience. One insider suggests that Cortese's plan is a smart one in theory but dumb in execution. He has somewhat of a business base, so, he's trying to expand into the workers-advocacy sector for breadth. But his commerce cred may not be solid enough to withstand perceived betrayal. Especially not with fiscal conservative Chuck Reed and Republican Pat Dando lurking behind the mayoral starting gun. Meanwhile, an informed guess about who the South Bay Labor Council would support for mayor doesn't rhyme with "more hazy."

Holy Libel

Michelangelo Delfino and Mary Day were finally told to pay up. Indeed, a San Jose appeals court ruled on Nov. 13 that the two avid Internet message board visitors owed their former employers and co-workers $775,000 for what the court affirmed were "libelous" Internet postings. (After Delfino was fired from the Palo Alto-based Varian Associates more than four years ago, he and Day posted 25,000 disparaging and often obscene messages about the company. The two lost a contentious jury trial but were able to save face for a time when their appeal was accepted.) Of even more consequence, the appeals court decision now (unless, of course, the decision is reversed in a higher court) sets a clear precedent in California to argue that defamatory speech on the Internet should be tried as libel and not slander. Delfino and Day had argued that their case should have been tried under a slander theory, which is more difficult to prove because it requires proof of damages. Their argument hinged on the legal principle that, in California, slander is defined as communications that are "orally uttered, and also communications by radio or any mechanical or other means"--this is also understood to include television. Instead, the court weighed the written aspect of Delfino and Day's communications more than the mechanical and transient aspects. And so, libel, defined as "fixed representation to the eye," was the verdict. Consequently, the targets of Delfino and Day's postings did not have to show that they lost money in order to claim victory. ... Meanwhile, Delfino and Day are still in relatively good spirits, primarily for two reasons: One, the appeals court effectively defanged an injunction against the two that prohibited them from further Internet speech. (Now, the two claim they can continue to post as they wish). Two, Delfino and Day have no money. This means that Varian cannot collect. (Ha!) Bottom line: Varian gets zilch from Delfino and Day. "They won nothing," scoffs Delfino, who hopes an outside organization will help him take his case to the Supremes. "They spend upwards of $7 million dollars, and they got nothing. They tried to shut us up. We wouldn't shut up. And, if our intent is to post, we're going to continue to do that."

Dizzy Spell

Eye shares more in common with the new governator than previously assumed. We both are at a loss when describing Chamber of Commerce boss Jim Cunneen. ... Eye good-naturedly ribbed Mr. Arnold Schwarzenegger last week for mangling the local business cheerleader's name during a speech at a Chamber event. One clever reader pointed out that Eye managed to misspell Cunneen, using only two of the three required "n"s. Accordingly, we'll be happy to add yet a fourth "n" in the future, if it makes up for the pain we've caused.

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From the November 27-December 3, 2003 issue of Metro, Silicon Valley's Weekly Newspaper.

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