Missing out on millions: The law and the loophole raising concern for Nevada businesses and CCSD

LAS VEGAS, Nev. (FOX5) - When the Clark County School District makes a purchase of more than $50,000, under Nevada law, multiple bids from vendors should be reviewed and considered. There is one caveat, however: a legal loophole that a school board trustee said is being relied on the majority of the time. Now, a Nevada business leader is concerned that local businesses like his are losing out on their chance at multimillion-dollar contracts.

You may remember last summer, when the Clark County School District bought several hundred disinfecting UVC tower devices to improve indoor air quality so they could safely reopen schools. $7.5 million in federal pandemic funds went towards the Arc towers for each school, which were serviced under contract by Utah-based brand R-Zero. The Arcs promise to disinfect an empty classroom in just seven minutes without any harmful chemicals. CCSD said they would be used daily in bathrooms and nurses’ offices.

But after former facilities chief Jeff Wagner, the district leader behind this multimillion-dollar purchase, resigned from the district and became a representative of the brand, questions were raised.

“It definitely set off my spidey senses. Like, wait, what?” You know, is this-- did I get duped?” said Danielle Ford, Trustee of District F, CCSD Board. “Was there some sort of deal here? Or did this company just see this employee do such a good job in his role that they wanted to hire him?”

Jarrid Mendelson, a Las Vegas man who founded UVC Disinfect Custom Solutions during the pandemic, said he went through the process to become a vendor at CCSD, but that they were not considered before the purchase went through.

“Even if they, just, one school-- and just gave us the chance to use the products in one school, and make it a test case-- they would see the dramatic difference,” said Mendelson.

In May of 2021, then-Chief of Facilities, Jeff Wagner, says he met and befriended R-Zero’s then-President and Cofounder Eli Harris. We know this from Wagner’s post on R-Zero’s blog, published soon after he started working for R-Zero in January 2022. In it, Wagner writes, “I met Eli [R-Zero Cofounder and President] in May of 2021 and immediately formed a friendship with him. He was adamant that I needed to join the company...”

In May, Wagner was still serving as the facilities chief at CCSD.

According to Nevada Revised Statute 281A.400, “a public officer or employee shall not seek or accept any gift, service, favor, employment, engagement, emolument or economic opportunity which would tend improperly to influence a reasonable person in the public officer’s or employee’s position.”

“Those are the laws that we have within our state, and they need to be followed, no matter who you are,” said State Superintendent of Public Instruction Jhone Ebert, when we asked her about this policy.

CCSD’s own policy goes further, writing, “No employee shall, under penalty of law, receive unlawful compensation, commission, or personal profit in the course of performing district duties.”

On May 20th, Wagner forwarded Harris CCSD’s custom breakdown of evaluations of their schools’ needs, according to public records.

Days later, Harris forwarded Wagner an internal company email. In it, Harris wrote, “confidential,” and “just for fun,” and boasts about “poaching” another one of his top company executives from a government agency. “We’re doing some pretty neat work,” Harris wrote to Wagner.

That same day, Wagner paid for the first Arc tower to pilot: nearly $25,000. This is around the time when Wagner and Harris met with the district to discuss the service.

By June 10, public record emails show that Wagner gave R-Zero feedback on their pitch to the district. Harris said to Wagner, “Let us know if you need any air cover along the way. We’re all on standby for you. Game time!”

It is important to note, as a general rule, Nevada state law requires an open bidding process so that the district can prevent any companies from monopolizing the district’s funds. This law is also designed to encourage the best price on services for your tax dollars.

“To give everybody a fair shot at acquiring those contracts,” Ford added. “To make sure that the wealth is being spread evenly.”

For that reason, on July 15, 2021, Wagner’s coworker raised the issue. Steve Staggs, CCSD’s Assistant Director of Purchasing and Warehousing wrote to Wagner, “multimillion-dollar no-bid contracts raise many questions. From competing vendors, the media, the public, etc. It would be hard to justify a sole source.”

But as aforementioned, there is one workaround, and it is something Staggs informs Wagner of in this email writing, “Does the firm you want to pilot for air purification have any other government contracts, or perhaps a contract with a national purchasing cooperative? If so, we can meet our competitive requirements without doing a bid or RFP.”

Wagner then forwards Stagg’s question to Harris at R-Zero and asks him whether he has that.

Harris reassures him and said they do, from North Carolina, so they’re able to lawfully circumvent a bidding process. “Yes. Standby… absolutely have paths forward,” Harris wrote.

This legal workaround to a bidding process troubles Ford.

“It’s baffling that it’s not illegal. But it’s-- but it’s not. It’s, in my opinion, unethical,” said Ford.

She said it has been relied on frequently.

“Top of mind, I would say about 80% of the money that comes through the CCSD is not competitively bid,” said Ford.

Also on July 15, Wagner arranged an opportunity at a schools summit by the Altru Institute in Washington D.C., so that he and Harris can make a public presentation to industry attendees about the Arc towers and what they are doing to make schools safer.

On July 22, Staggs prepared a purchasing recommendation that cites “Justification for Purchase” as an “applicable statute that permits utilizing another government agency’s bid.” It references the state of North Carolina.

On July 26, Staggs informed R-Zero that he believes the facilities team’s recommendation will need “superintendent direction,” since they’re making the purchase “prior to board approval.”

Aug. 5th, trustees were briefed in a closed session on the R-Zero purchase.

“I supported the item at the time. And, but, there weren’t any conflicts of interest that I saw,” said Ford.

Ford said trustees could have pulled it aside for questioning at this briefing, but added that in her experience, her requests routinely get voted down.

“Honestly, there’s so many times that I have requested to pull something, just for discussion, to ask on the record, ‘Why did we choose this company?’ Or, ‘Why was this exempt from collective bargaining and the trustees?’ The majority for a vote, vote me down even being able to ask that question,” said Ford.

A week later, at a public board meeting, the purchase is on the consent agenda, listed with several other purchases. At that point, trustees don’t have a line item veto, as the vote on the consent calendar is an all-or-nothing proposition; they do not have the individual powers to vote certain things down.

“We’re expected to just be button pushers, rubber stamps, push it through. Don’t ask questions, take the picture, go to the events,” said Ford.

Nobody is questioning whether R-Zero’s product is effective or if the money was well-spent.

In that board meeting, the big purchase of about 370 arc towers officially goes through: $7.5 million dollars to the Utah-based vendor from the ESSER fund through the CARES Act.

On August 19, a week after, Wagner forwarded Harris contact information for leaders in 77 other urban school districts, and also recommended that R-Zero attend another high-profile schools summit, Council of the Great City Schools.

“Here is a link to a members district directory,” Wagner wrote. “You may want to consider attending the fall conference.”

Days later, on Aug. 25, media is invited to check out the rollout. FOX5′s story airs, featuring comments from Wagner: “I’ve been saying this throughout the entire pandemic: there is no silver bullet that’s going to make the buildings 100% safe. This is one tool in our layered strategy for virus mitigation.’”

Most people after seeing our report likely thought, ‘Okay, great,’ or did not think much of it. But for Mendelson, he said seeing this on the news was a shock.

“It was pretty devastating,” said Mendelson.

A multimillion-dollar deal slipped through his fingers.

“Unfortunately, we didn’t get any consideration for our product, even though we were supposed to be in the system, and should have been contacted for that. So there was no bidding process, as far as we knew,” said Mendelson.

The Vegas native sells a tower product similar to R-Zero’s Arc.

“My sister’s a teacher, my mom’s a retired teacher, my dad’s a retired principal... All at CCSD,” said Mendelson. “I grew up in Las Vegas... just as a local with a solution, it seemed like it’d be a great fit for the school district.”

So Mendelson reached out to Wagner to find out why there wasn’t a bidding process. On Aug. 27, Mendelson emailed Wagner saying, “We went through the whole process with my company to be in the vendor system for CCSD... to my knowledge, there was no bidding process for the UVC tower acquisition. I’m sure you can understand my frustration seeing the news on TV for such a sizable contract, knowing we were not considered for the opportunity.”

Mendelson told FOX5, “If we were in the situation where we were in a bidding war, we would have done everything we could to be as competitive as possible.”

Wagner wrote back to Mendelson, saying, “To my knowledge, no one within the facility services unit was provided your product information for review. We have reviewed dozens of UVC products over the last 18 months and found many of them not to be the right fit for applications here at CCSD.”

Soon after, Wagner had Mendelson come to his office so he could present his product., even though the sale with R-Zero already went through.

“It was a straightforward kind of, you know, ‘Thank you.’ There was no-- there was no indication in one way or the other, no response about our stuff being great or not being great. He asked a couple of questions and kind of had a poker face about it,” said Mendelson. “And then we never heard anything again.”

He said Wagner did not mention that they had been exempt from a bidding process because of that North Carolina contract that R-Zero had landed after open bidding.

On Sept. 9, R-Zero’s Harris asked Wagner to put in a good word for them with Clarence Carson, then facilities chief of the third largest school district in the US: Chicago. Wagner agreed to email Chicago’s chief, but only to let them know he is a resource if they have any questions about R-Zero.

Dec. 15, when FOX5 asked for a record of Wagner’s December 15 resignation letter, we were denied by a document control specialist who said it was confidential because it is “part of the employment personnel file,” and is protected by Nevada law.

Three weeks later, on Jan. 5, 2022, R-Zero announced that Wagner had joined their team as General Manager of Education.

Over the course of several months, FOX5 tried to get in touch with Wagner through R-Zero to hear what he had to say but was unsuccessful.

The only response we received was from R-Zero’s Vice President of Communications David Irwin. When we presented him with our reporting, he responded, “We pride ourselves on operating with the highest business ethics and integrity... We are proud of our partnership with the Clark County School District, which began when they and schools nationwide needed immediate help with solutions to minimize the incidence of SARS-CoV-2. Since then, our technology continues to make a difference in school buildings, helping protect the health and well-being of students, faculty and staff in Nevada and across the country.”

According to Wagner’s LinkedIn, he worked full-time for the company for five months as a general manager, but according to R-Zero, later became an advisor with them.

“Mr. Wagner currently serves as an advisor with R-Zero as we continue to work to provide solutions to school districts, hospitals, offices, retirement communities, restaurants and many industries nationwide,” said Irwin.

We also reached out to Harris several times but did not hear back.

This summer, on June 22, FOX5 went straight to the top and shared our reporting with the education department’s head honcho.

“That needs to go to the AG’s office,” said Jhone Ebert, Nevada Superintendent of Public Instruction. “That would not fall under the purview of the State Board of Education.”

About five weeks later, in August, we asked CCSD Superintendent Dr. Jesus Jara about the circumstances of the R-Zero purchase

“I have full confidence that we didn’t violate any law, so I think that’s misguided,” said Jara.

One thing is for sure: for Mendelson, losing out on his chance at a multimillion-dollar contract still packs a sting.

“To get overlooked for something like that, it’s, it’s a pretty big deal,” said Mendelson.

But, despite it all, he is reminded of why he got into the business, to begin with: to protect southern Nevadans from a deadly virus.

“Coming from a family of teachers and educators, we knew this was something that would be great for the schools,” said Mendelson. “We’re still here! We have great products.. I would love the chance to be considered if there’s another round of things being done to improve the health of the classrooms in the school district. I know our products are stand-up.”

FOX5 will continue looking into why a state law exists permitting the district to circumvent a bidding process by utilizing another government agency’s bid.

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