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Probe of Contract in Jersey City Referred to Attorney General

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An investigation into a contract involving the state-run Jersey City, N.J., schools has uncovered alleged irregularities that Commissioner of Education Leo Klagholz has referred to the state attorney general for further inquiry.

The allegations represent the first blemish on Jersey City since the state used its pioneering academic-bankruptcy law in 1989 to remove the local board and appoint top administrators to run the district.

"I was shocked at what the investigation uncovered,'' Mr. Klagholz said in releasing the findings last month. "The actions of some Jersey City employees are egregious violations of the public trust.''

Faith Sarafin, a spokeswoman for the state commissioner, said the departmental investigation yielded no evidence of criminal activity. But because there are many unanswered questions, she added, the matter was turned over to the attorney general, who could conduct a criminal probe.

The investigation centered on a contract between the district and Child Study Team Associates Inc. to provide special-education services this school year.

In November 1993, Victor Demming, then the acting Jersey City superintendent, signed a $420,000 contract with the Bloomfield, N.J., consulting firm.

Shortly after the firm began providing services in January, district personnel started complaining about scheduling problems with C.S.T.A. doctors, the quality of medical reports, and billing practices, the report said. On March 29, Mr. Demming canceled the contract.

The alleged irregularities uncovered by the investigation included the submission of two $125,000 payments before any services were rendered; the processing of unauthorized contracts and purchase orders with "unauthentic'' signatures; and the alteration and destruction of documents.

Mr. Demming, who resumed his previous position as assistant superintendent for business, could not be reached for comment last week.

Jeffrey Graber, the executive assistant to the current state-appointed superintendent, Elena J. Scambio, said Ms. Scambio was pleased that the actions had been made public and was cooperating fully with the state.

At the time the contract was negotiated and signed, Ms. Scambio was serving as an assistant state commissioner of education.--KAREN DIEGMUELLER

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