After Years of Dysfunction, Can 4Cs Weather Another Crisis?

While mismanagement costs nonprofits lucrative grants and public trust, it’s easy to forget that there’s also human toll. At the Community Child Care Council of Santa Clara County—a nearly half-century-old subsidized child care nonprofit funded by $40 million a year in taxpayer money—it deprives needy families safety-net services.

And for the people who work at the agency, which has recently come under investigation for alleged fraud, it undermines their ability to access vital benefits.

Carina Fernandez thought the card would cover it.

But after four swipes on the debit terminal, the 24-year-old receptionist realized that she’d have to pay out of pocket for treatment after a 25mph car crash early last year left her bruised and whiplashed.

A month ago, the same card for her employer-owned Kaiser health reimbursement account left her in a lurch yet again. When the magnetic strip reader repeatedly declined the work-sponsored payment, she forked over her own cash to settle the $50 copay for seeing her doctor about a severe case of food poisoning.

Several of her coworkers reported similar problems with their PrimePay debit cards.

When local health officials advised people to stock up on prescriptions to prepare for the region-wide quarantine in early March, one employee at the childcare organization known as 4Cs or the 4C Council said her PrimePay card was declined.

That same week, according to internal correspondence, still more colleagues reported similar issues. One wrote an email saying she’d have to cancel critical appointments unless the cards worked because she otherwise couldn’t afford the out-of-pocket costs.

The 4Cs healthcare trust was overdrawn. Again.

Newly unearthed records show that the same nonprofit that has been bombarded by a slew of audits and lawsuits over the past few years for mismanaging pensions and government grants has also struggled to maintain its medical plan since at least 2015.

Bank statements and email threads between 4Cs, PrimePay and the third-party broker Mindful Insurance Solutions reveal a years-long pattern failing to keep up with healthcare costs, leaving its 80-or-so employees without coverage and unlawfully putting taxpayers on the hook for thousands of dollars in penalties.

Kaiser threatened to terminate the health plan entirely in early December unless 4Cs resolved the issue. In an email to FBI agent-turned-4Cs Executive Director Joe Manarang just five days before Kaiser’s deadline, Mindful Insurance CEO Bill Donaldson acknowledged that “this should have been communicated in a different way.”

“Your trust account that manages the HRA [health reimbursement agreement] funding has continuously been overdrawn and funding for this was a priority,” Donaldson wrote in the Nov. 26 notice. He added: “This is at a crisis point as I have been mentioning, that Kaiser controls this, not Mindful. We can’t make Kaiser continue your contract.”

Donaldson says the crisis has since been averted. Manarang and 4Cs board president Ben Menor, he adds, have done “an amazing job” turning the organization around since the last executive director, Alfredo Villaseñor left in 2017 amid multiple audits and a bitter dispute with his unionized workforce.

Employees tell a different story. And in a trove of hundreds of documents obtained exclusively by San Jose Inside, a high-ranking supervisor accuses Menor and Manarang—close friends, each with a checkered financial past—of using the pandemic-related slowdown as a cover for financial misdeeds and cronyism.

Senior Director of Operations and Personnel Management Trevor Jackman leveled the explosive allegations in complaints to local prosecutors and state regulators, prompting two parallel probes that are now underway.

Though the California Department of Education (CDE) in 2018 placed 4Cs on conditional funding status for spending public money on unauthorized uses such as legal fees to former S.F Mayor Willie Brown and Millstein & Associates instead of providing child care to thousands of needy families, Jackman says Menor and Manarang are at it again.

In documents submitted to state officials, Jackman claims 4Cs spent nearly $240,000 on legal fees with grant money earmarked for child care services. And they spent an additional several thousand dollars on video marketing to counteract negative publicity associated with their own mismanagement.

When reached Monday about the charges, which have already been brought to the CDE and Santa Clara County District Attorney’s Office, Manarang cut the call short without answering any questions. Menor has yet to respond to requests for comment.

But through interviews and hundreds of pages of emails and leaked documents, San Jose Inside was able to piece together a picture of an agency caught in a death spiral and two friends at the helm determined to squeeze what’s left out of it.

Manarang—who earns roughly $150,000 a year to run the organization—didn’t show up to the 4C Council’s North San Jose headquarters for more than seven months, according to payroll records shared with San Jose Inside. That changed as soon as he suspended Jackman by way of a terse March 19 phone call, replacing him with an interim fiscal manager named Linh Pham. Employees say Manarang returned to work right after that, talking about having been away to take care of business in the Philippines.

“He was gone for so long that we weren’t even sure if he worked there anymore,” says one veteran staffer, who asked to withhold her name for fear of reprisal.

“I like to tell people that he was incognito,” another quipped.

In the weeks that followed Jackman’s departure, sources inside the office say Manarang and Menor hired a friend from his Rotary Club to handle HR and have gone about handing off assets and shredding reams of documents.

Though federal policy aims to prevent agency board members from getting involved in day-to-day operations, Menor has worked hand-in-hand with Manarang, according to staffers. Instead of focusing on fundraising for the organization—which relies almost exclusively on government grants—the 10-year board president busies himself with personnel matters and internal affairs. He even keeps his own office at the 4Cs HQ.

Considering his storied ethical lapses and a clear recommendation last year from HR consultant Dharma Rebecca that 4Cs send him packing, Menor’s staying power in the nonprofit sphere is nothing short of remarkable.

In the mid-aughts, an audit by the city of San Jose determined that Menor misspent $219,000 in taxpayer money meant to serve low-income seniors. Instead, the then-director of the Northside Community Center used the funds to help his parents, pay himself bonuses and bankroll pet projects unrelated to the purpose of grants.

Luckily for Menor, he dodged criminal charges in exchange for paying $50,000 in restitution. Unluckily for the friend he borrowed from to make financial amends, Menor paid the court but allegedly never settled his personal debt.

Now, many among the rank-and-file at the long-embattled 4C Council fear that Menor will run yet another nonprofit into the ground.

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected]. Follow her on Twitter at @jennwadsworth. Or, click here to sign up for text updates about what she’s working on.

21 Comments

  1. Menor misspends $290k and gets off with repaying only $50k. AND he used the organization’s $240k to defend himself? He needs to be charged and part of any plea deal must be that he can never work at a non profit again.. This guy has been mismanaging for a very long time. Why hasn’t he done prison time?

    • John, I am just going to answer your last question: in Santa Clara County the privileged and those with connections to them hardly do any prison time. That consequence is reserved for the low SES criminals. This is DA Jeff Rosen application of criminal law. Jeff Rosen, and other politicians in the county depend on local non-profits for campaign contributions, votes, and PR matters!

  2. Jennifer, Thank you and Metro for this reportage. Hope you’ll continue to pursue with an added focus: who and what public agencies failed and continue to fail us?

    Apparently Sam Liccardo and SJ council for OKing $50K to settle $219K in misspent funds. Tough to imagine taxpayers couldn’t get a better deal than $0.23 / dollar.

    Jeff Rosen for failing to prosecute? County exec Jeff Smith and Board of Supervisors for dithering or dereliction? Ditto for Govs. Brown and Newsom?

    Crooks will be crooks. Of greatest concern is that our system appears to be failing us with no reform in sight. And of course, what else is concealed from public knowledge and accountability?

  3. Any organization or company that allows friends to manage are open to big fraud, theft, and overall disaster. Sadly, this is the Santa Clara County current culture. This is the county where you can see parents and children working together within the same county department and office. Dual relationships are unethical and at times illegal too. Who in the county oversees these delicate relationships and problems? Maladaptive behavior with no consequence is highly likely to repeat and increase in lapse and severity.

  4. Menor should never have been hired to work ina nonprofit. He is a dishonest. Look what he did to the Northside Community Center. Why in hell was he hired again?

  5. I too had several instances where our health insurance payment provider did not work. Human resources/management and the provider would deny the payment card had issues and just force you to give up or communicate in circles.
    Ben Menor and Joe Manarang operate like crooks. Management rewards nepotism and does not act transparently.
    The families and employees deserve justice. The taxpayers and state deserve to see crooks punished and public funds used appropriately.
    Thank you for the continued reporting of the ongoing fraud and mismanagement of 4Cs.

  6. They belong in jail if they are stealing public funds. The alleged conduct erodes public confidence in the system to weed out those who violate their fiduciary duties to the under privileged people they are supposed to serve. Hiding behind the pandemic is insidious and disingenuous. If the DA will not prosecute, call the Feds in!

  7. Shame what’s even more shameful is that 4c’s were allowed to carry on their contract after audit findings of scrupulous practices

  8. The DA is where the buck stops. Why would he fail to prosecute this, unless ALL the money was repaid?

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