San Ysidro Superintendent Illegally Cashed Out Life Insurance Policy

Mario A. Cortez | La Prensa San Diego

By Eduardo Rueda / Investigative Reporter

San Ysidro School District’s former Superintendent cashed out the value of a life insurance policy last year without the approval of the school board.

Julio Fonseca, who served as Superintendent from July 2015 until he abruptly resigned last month after a sexual harassment claim was filed against him by a female District employee, cashed out $106,000 in payments allegedly in exchange for a life insurance policy granted to him in his employment contract.

Fonseca’s original employment contract with the District, approved in June 2015, included a base salary of $185,000, a $600 monthly expense allowance, $7,500 for moving expenses, $10,000 for relocation costs, 24 vacation days per year, 24 sick or personal days off per year, full health insurance benefits for him and his family, and a “District-paid term life policy in a benefit amount of $100,000.”

In a second amendment to his employment contract approved by the Board in March 2016, Fonseca’s pay was jumped to $200,096 and the life insurance was raised to a “benefit amount of $125,000.” Additional language was added to provide that the “Superintendent may elect to forgo term life insurance and instead deposit monthly into a deferred compensation account the amount District allocated for the monthly term life insurance premium.”

At the Board’s monthly meeting in December 2016, a third amendment to Fonseca’s employment contract was taken up by the Board. During the meeting, Fonseca described the issue as a clarification of the language in his contract.

“So now we just want to make sure that the Board was 100 percent clear in what the offer was,” Fonseca said during the meeting. “So that when we move forward and we have discussions with the County Board, Business Services, Superintendent, or Assistant Superintendent, that there is no question or denial of what your intention was and our acceptance of the offer was.”

The language in the third amendment did not mention the life insurance policy at all. The amendment dealt only with health insurance benefits, and options the Superintendent could chose to reimburse him for a gap in medical insurance coverage.

As the Board discussed the issues, Fonseca pointed out that his contract was questioned by the County Office of Education, and that the County sought clarification from the Board to better understand the benefits, yet he made no specific mention of cashing out any money in exchange for the life insurance policy.

Board President Rosaleah Pallasigue said she recalled the negotiations of the employment contract amendment back in March 2016.

“I do specifically recall us, on a couple items, one as it relates to Dr. Fonseca’s life insurance, and I think we up’ed that,” Pallasigue said. “Yeah, let’s sweeten the pot, I think that was kind of the spirit we were in.”

The Board discussion was driven by Pallasigue and she seemed frustrated that the issue was even up for clarification.

“This was already ratified and, like, why is it even coming up,” Pallasigue said. “And frankly, to me, it’s a waste of time,” Pallasigue added emphatically. “If I were in [Fonseca’s] position, I would be offended if anybody looked at my employment agreement after the fact and tried to renege on something that they gave me.”

The discussion focused mainly on the health insurance benefits in the proposed amendment, but no one clarified that the language about the term life insurance could lead to Fonseca cashing out money instead of the insurance policy.

“We’re here to do a job,” Fonseca said during the meeting, “and when these kinds of things keep coming back to us as some type of a devious intent to rob the District, I think that is not only hurtful to us, and the mission we’re trying to carry out here, but it’s also disrespectful to the Board,” Fonseca added. “For full clarity, I’m hopeful that this issue goes to bed forever.”

Toward the end of the discussion, then-Deputy Superintendent Arturo Macias explained Fonseca had already received a payout for the life insurance benefit. He said the County’s Asst. Superintendent Lora Duzyk had questioned the cash out, and that she asked for clarification from the Board to make sure it was consistent with their intent in the employment agreement.

Macias stated the life insurance benefit in the original employment contract could “be used as a tax annuity or it can be used as a life insurance,” and detailed discussions he had with the County Office of Education staff member that handles retirement plans.

The language in Fonseca’a agreement only refers to a term life policy, or a monthly amount equal to the monthly premium of the policy deposited into a deferred compensation plan.

“I suggest that we don’t waste more time in terms of this discussion,” Board Member Antonio Martinez said during the discussion. “Frankly I find it, like Ms. Pallasigue said, it’s a waste of my time, a waste of our time,” Martinez added as the Board moved quickly past the insurance issue.

Toward the end of the discussion, Board President Pallasigue said she met with Macias earlier that day and asked him to explain it to her “like I’m a five year old” and she said she understood the contract was created to incentivize Fonseca to stay with the District.

Board member Marcos Diaz, who holds a state license to sell life insurance policies, didn’t question the discussion of the life insurance benefit.

In the end, the Board voted unanimously to approve the third amendment to Fonseca’s contract with the health insurance benefit language, but no mention of the life insurance issue. No action was taken specifically addressing the use of the life insurance benefit or a cash out option that would have provided clarity to the County Office of Education as to the ability for Fonseca to cash it out.

According to, term life insurance “provides coverage at a fixed rate of payments for a limited period of time” or term, and, if the “insured dies during the term, the death benefit will be paid to the beneficiary.” The benefit value is the amount paid out if the covered person dies, not a cash-out value of the policy.

Online quotes for $125,000 term life policies for a male of Fonseca’s age range in cost from $14.00 to $21.00 per month.

In Fonseca’s case, the maximum amount the District would have paid in monthly premium payments during the entire term of this contract would have been a total of $756.00. Had the District purchased a term life policy, the benefit value of $125,000 would only have been paid out if Fonseca had died during the policy term.

As detailed in an Oct. 19 story by inewsource, a San Diego-based online news outlet, Fonseca received $1,069,037 during 26 months of employment at the District, including the $106,000 in place of the life insurance policy. Fonseca requested and received two payments of $53,000 each, which was the maximum annual amount the IRS allowed into a 401(a) plan in 2016.

Fonseca resigned during a closed-door meeting of the Board on September 2nd. That meeting was called after a female employee filed a sexual harassment claim against Fonseca. The employee, Alexis Rodriguez, had been dating Fonseca while they both worked for the District.

At the Sept. 2 meeting, the Board voted unanimously to accept Fonseca’s resignation, but also agreed to pay him 18 months of salary and benefits.

Just two weeks later, local taxpayer watchdog group San Diegans for Open Government sued the District, Fonseca, and Board members to force the return of the nearly $400,000 paid to Fonseca, claiming the payment was not allowable in his contract.

After Fonseca’s departure, Macias was appointed by the Board to serve as Interim Superintendent. The Board has not made a decision as to a permanent replacement for Fonseca.

1 Comment on "San Ysidro Superintendent Illegally Cashed Out Life Insurance Policy"

  1. Roberto Peña | October 27, 2017 at 12:09 pm |

    Not again!! How many times will that same district board give away our taxpayer money. Every time they have new leaders they all end up the same. The board is incompetent. How can Ms. Pallasigue and Mr. Martinez act like it’s a bother to review the staff’s pay and benefits? Throw them all out!!

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