Los Angeles Unified School District (LAUSD) is grappling with yet another financial scandal, this time involving allegations of a $22 million money-laundering scheme orchestrated through inflated contracts with a Texas-based technology company. The alleged scheme, which took place between 2018 and 2022, centers around Hong “Grace” Peng, a former LAUSD information technology employee, and Gautham Sampath, owner of Innive, a tech firm specializing in student information systems. The case highlights vulnerabilities in the district’s contracting processes and raises questions about oversight of taxpayer funds intended for public education. This incident involving financial crimes in education comes as LAUSD similarly navigates an FBI investigation into Superintendent Alberto Carvalho, further unsettling the nation’s second-largest school district.
According to Los Angeles County prosecutors, Peng allegedly used her position within LAUSD to ensure that more than $22 million in contracts were awarded to Sampath’s company, Innive. Prosecutors claim that Sampath then funneled over $3 million of those funds back to Peng. The alleged scheme involved manipulating requests for proposals (RFPs) and exploiting Peng’s position on selection committees, as revealed in text messages presented by Los Angeles County District Attorney Nathan Hochman. The charges against Peng and Sampath include one felony count each of money laundering and having a financial interest in a contract, with Sampath facing an additional charge of aiding and abetting a public official.
Alleged Text Messages Reveal Scheme
The District Attorney’s office shared excerpts of text message exchanges between Peng and Sampath that allegedly detail their plan. In June 2018, Sampath reportedly texted Peng, asking, “What r the other opportunities in Lausd. That People can exploit. Any other area.” Peng allegedly responded, “You imply all the RFPs,” and later added, “You’re so lucky. I’m on the selection committee.” These messages, according to prosecutors, demonstrate a clear intent to defraud the district. Further texts suggest a discussion of methods to conceal the flow of money, including creating multiple shell companies to obscure the transactions. Peng allegedly expressed concern about scrutiny, stating, “We necessitate to come up with lot of companies… At least 3-4 to grab out the money… Easy to track unless we are careful in how we do it.” Sampath then allegedly suggested establishing companies in Hong Kong, Singapore, or China.
LAUSD Response and Internal Investigation
LAUSD officials stated they became aware of a potential conflict of interest in April 2022 when a supervisor raised concerns. The district’s Office of the Inspector General was immediately notified, and the District Attorney’s office was subsequently involved. Peng resigned from her position later that year after a search warrant was served at her home and workplace. In a statement released on Thursday, LAUSD affirmed its commitment to full compliance with all laws and its expectation that employees and business partners adhere to “the highest standards of ethics and integrity.” The district pledged continued cooperation with relevant authorities.
Contracts Focused on Student Information System
The contracts at the center of the alleged scheme primarily involved LAUSD’s My Integrated Student Information System (MISIS), a critical platform used to manage student records, enrollment, attendance, grades, and schedules. The alleged manipulation of these contracts raises concerns about the security and integrity of sensitive student data. It’s unclear at this time whether the alleged scheme compromised student information, but the District Attorney’s office has not ruled out further investigation into that possibility.
Separate Investigation Involving Superintendent Carvalho
This latest scandal unfolds as LAUSD also addresses an ongoing FBI investigation involving Superintendent Alberto Carvalho. As reported by the Los Angeles Times, Carvalho was placed on paid leave in February after the FBI raided his home and office in connection with an investigation into an artificial intelligence chatbot company previously contracted with the district. The chatbot company is accused of fraud, and Carvalho has denied any wrongdoing, requesting to be reinstated to his position. He recently broke his silence on the matter, maintaining his innocence. However, prosecutors have emphasized that the Peng and Sampath scheme largely predates Carvalho’s tenure, which began in February 2022.
Arrest warrants have been issued for both Peng and Sampath, with an extradition warrant also issued for Sampath. Their arraignment dates have not yet been set. If convicted on all charges, both individuals face up to seven years in county jail. The District Attorney’s office emphasized that this case represents a “blatant abuse of public trust” and a deliberate effort to siphon funds intended for students into personal accounts. The next step in the legal process will be the arraignment of Peng and Sampath, where they will be formally presented with the charges against them and enter a plea.
This case serves as a stark reminder of the importance of robust oversight and accountability in public institutions. LAUSD officials have stated their commitment to strengthening internal controls to prevent similar incidents in the future. The outcome of this case will likely have significant implications for the district’s contracting procedures and its efforts to restore public trust.
If you or someone you know has information related to this case, please contact the Los Angeles County District Attorney’s Office.
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