DALLAS State and federal investigations of the Beaumont Independent School District in Texas led Moody’s Investors Service to warn of a possible downgrade on the district’s $405 million of general obligation debt Tuesday.
“Moody’s believes that the currently pending investigations could result in fiscal and legal ramifications for the district, exerting a downward pressure on the rating,” said analyst Karolina Norris. “Moody’s will continue to monitor the investigations and will assess the magnitude of any impact on the district’s creditworthiness.”
Moody’s rates the district Aa2 underlying but provides a triple-A rating on bond issues backed by the state’s Permanent School Fund.
The Federal Bureau of Investigation is specifically investigating allegations of a “bogus account and diverted district funds,” according to Beaumont ISD spokeswoman Nakisha Myles.
The district’s director of finance Devin McCraney and Comptroller Sharika Allison were placed on administrative leave after the FBI raided their homes and the district headquarters on Nov. 8, officials said.
Superintendent Timothy Chargois released a statement that agents had also come to his home but only to inform him about the investigation.
“Authorities in no way considered me complicit in this matter,” Chargois said. “I am not a target of this investigation.”
Serving nearly 20,000 students in a major port and petrochemical producing region on Texas’ Gulf Coast, the Beaumont ISD has been tangled in lawsuits over plans to change the school board’s representation and use of bond proceeds.
The district is “fully solvent” and “financial transactions will proceed in accordance with all rules and regulations in a routine manner,” Chargois said in a Nov. 8 statement.
“Let me put rumors to rest of any criminal charges or takeover of Beaumont ISD by any state agency,” Chargois said. “So far only two known suspects who are district employees are being investigated.”
The Texas Education Agency is also investigating the district on academic and financial fronts.
An August report from the Legislative Budget Board requested by the TEA called the Beaumont ISD “dysfunctional and divisive.”
Divisions in the district are so severe that board elections could not be held in November.
In 2007, voters approved a $388.6 million bond package that included $47 million for a sports complex named for then-superintendent Carrol A. “Butch” Thomas. Thomas was the highest paid superintendent in Texas with an annual salary of $347,834.
In February 2011, State Rep. Allan R. Ritter and Sen. Tommy Williams filed bills to prevent school districts from building hotels after Thomas proposed an 8,000-seat event center with a hotel, an idea that was later shelved.
Standard & Poor’s last rated the district AA-minus with a stable outlook in 2011. Fitch Ratings affirmed its AA rating and stable outlook Jan. 25. S&P and Fitch also apply triple-A ratings for the PSF bond wrap.