The arraignment of a former Orange County school district official who is accused of embezzling millions, from August 2016 to July 2023, was a shock to Debbie Peterson even though she is a governmental fraud expert.

Jorge Armando Contreras, 52, of Yorba Linda allegedly siphoned more than $14 million from the District over a seven-year period and used it to buy luxury items, a $1 million Yorba Linda residence and cosmetic treatments from a dermatologist.

“I was most surprised by the amount he is alleged to have stolen,” said Debbie Peterson, former mayor of Grover Beach in San Luis Obispo. “In the last few months of his tenure at the district, he was averaging almost $370,000 a month in addition to his substantial salary.”

Peterson is the author of The Happiest Corruption: Sleaze, Lies, & Suicide in a California Beach Town and CITY COUNCIL 101 – Insider’s Guide for New Councilmembers.

“The bad news is at the local government level, we simply do not have the checks and balances that we do at the federal level where the legislative, executive, and judicial branches balance power and accountability,” she said.

Funds Allegedly Embezzled Were Intended for Disadvantaged Students

Magnolia School District hired Contreras in 2006 to manage the district’s fiscal operations from preschool to 6th grade in Anaheim and Stanton. About 81% of the students are socio-economically disadvantaged.

“It’s distressing to see children deprived of the funds provided for their benefit and all the more heinous that someone would steal from children,” Peterson told OrangeCountyLawyers.com. “These funds are often provided to supplement nutritional school meal programs, including breakfast, after-school programs, and other special programs and electronics.”

The complaint includes photos of Contreras conducting transactions at ATM machines. Contreras is charged with a felony that’s punishable by up to 10 years in federal prison.

The sentence is light, according to Peterson.

“It seems that 10 years isn’t nearly enough because the children who lost the benefit that his alleged theft took from them cannot get it back,” she said.

Contreras allegedly improperly authorized payments to himself from district funds, which derived from more than 250 district checks that were deposited into Contreras’ personal bank account.

The affidavit against Contreras alleges that the checks ranged from some $11,000 to $95,000 and listed fictitious persons as the payee.

“Payments made from Contreras’ Wells Fargo Account included over $1.9 million dollars paid to American Express, $325,000 withdrawn from ATMs, and over $130,000 transferred to his partner who Contreras recently married in August 2023,” FBI Special Agent Timothy Bamford stated in the charging documents.

The luxury items Contreras purchased included a $127,000 BMW SUV and he is accused of altering bank statements submitted as part of the loan application process for his Yorba Linda home to hide funds he had embezzled from the school district.

“The good news is that although we’re hearing the bad news, the fact is, that someone at the bank reported it, the federal justice system has been very quick to respond, and the District suspended him without pay,” Peterson added. “At the board level, a brief course in understanding financials, the fiduciary responsibilities of board members, and spotting red flags would go a long way as would an operations audit of the district to put strong checks and balances in place within the school district’s financial division.”

*Surveillance photo was obtained from public court records linked above which shows Jorge Armando Contreras making a deposit for $89,150 at a Wells Fargo ATM in Brea.

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