TiZA trustee dumps Designs for Learning over conflict of interest

The bankruptcy trustee for TiZA has pulled a contract worth an estimated $35,000 from a local education firm for failing to disclose a conflict of interest.

TiZA trustee John Hedback discovered last fall that the state of Minnesota might owe the bankruptcy estate over a million dollars. To reclaim that money, Hedback first needs to perform a specialized audit of the school's finances. Before he can perform that audit, however, Hedback needs to hire a firm with experience using "Smart Finance," the accounting software TiZA used, to do audit prep work.

Hedback settled on Designs for Learning, a local education firm, last February despite its longstanding ties to TiZA: Designs employs Asad Zaman, TiZA's former executive director, as a consultant. The firm also did consulting work for TiZA before the school filed for bankruptcy. Designs for Learning President Pamela Meade assured Hedback that Zaman wouldn't be involved with the audit, according to court documents.

In a statement filed with the bankruptcy court February 8, Meade wrote:

Asad Zaman consults with Designs for Learning
Asad Zaman consults with Designs for Learning

"I do not have any connections to the debtor, creditors, or other party in interest, their respective attorneys and accountants, the United States Trustee, or any person employed in the Offices of the United States Trustee" except the aforementioned relationship with Zaman and the previous work for TiZA.

That assurance was enough for Hedback, who offered Designs for Learning the contract. Last week, however, Hedback revealed in a court filing that he would not be using Designs for Learning after all.

"Trustee previously attempted to retain Designs for Learning Services as a consulting firm to this audit preparation work but learned that Designs for Learning Services had a conflict of interest which had not previously been disclosed," Hedback declared in a filing April 2. "Trustee believes it was inappropriate to retain that firm under the circumstances."

In a written statement, Pamela Meade denies that there was "any actual conflict of interest" but writes that she "respects" the trustee's decision:

Designs for Learning recently became aware that the Bankruptcy Trustee in the TiZA bankruptcy proceeding decided, after initially requesting that our company provide audit preparation support, that he would withdraw his request for approval of this engagement to the Court.

Designs for Learning denies that there was any actual conflict of interest which necessitated this decision and denies that it knowingly failed to disclose any conflict of interest, but respects the Bankruptcy Trustee's conclusion to exercise his discretion not to proceed with the engagement.

It is not the practice of Designs for Learning to identify specific companies that it works with. Designs for Learning had performed some work for the entity in question in the past, but performed no work for the entity in 2012 and had no specific plans for future work. At the time the Bankruptcy Trustee requested to engage Designs for Learning up through the time that the engagement was proposed to the Bankruptcy Court for approval, Designs for Learning had, to the best of its knowledge, no information indicating that the entity in question was a creditor of TiZA in the bankruptcy proceeding or that the TiZA bankruptcy estate had any potential claims against the entity.

Designs for Learning learned from the Bankruptcy Trustee on March 6, 2012 that there are likely to be claims between the TiZA bankruptcy estate and the entity in question and that he therefore had questions about whether to proceed with the engagement. The Bankruptcy Trustee decided not to proceed with the engagement of Designs for Learning after that point. Designs for Learning has at all times communicated honestly regarding the proposed engagement.

The contract will instead go to the Central Minnesota Educational Research & Development Corporation, which will be paid $65 per hour, plus a $12,000 retainer.

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