Key Points:

• Consultant claims pro-charter school sentiment led to improper criminal charges

• Complaint alleges state’s dismissal of charges with prejudice show no crime  

• New lawsuit alleges malicious prosecution, reputational damages 

A consultant who faced criminal charges for constructing two public schools using private dollars claims favoritism for charter schools among elected officials led to malicious prosecution, a smeared reputation and tens of millions in damages. 

Steven Nielsen and a string of his affiliated businesses sued the state, the current and former attorneys general, the auditor general and the Maricopa County Attorney’s Office after the court dismissed felony charges for fraud and conspiracy with prejudice.

“It’s sad. It ruined Steve Nielsen’s reputation. It destroyed his business,” David Black, Nielsen’s attorney, said. “He’s a brilliant man who made it possible to fund public schools in a time when there was no tax basis to do so, and for a variety of improper reasons, he was pursued.” 

Before wading into the consulting business, Nielsen worked for both the city of Tempe and Arizona State University in real estate and development, garnering expertise in utilizing private funds to finance public projects with tax exempt bonds. 

He set out with his business partner, Gary Aller, to found Education Facilities Development Services, a consulting firm focused on arranging public-private partnership funding for local governments. 

In 2012, Higley Unified School District approached Nielsen to develop a funding model to build two new middle schools, as the district experienced growing student counts and neared its bond limit.  

Nielsen and Aller established a model utilizing a lease-purchase agreement. The district then issued a request for proposals and ultimately awarded the contract to Nielsen’s company. 

The schools opened but Nielsen, Aller and Higley’s administration faced a fair share of scrutiny in the aftermath. 

The complaint claims that the zeal for charter schools led to the investigation, law change and eventual prosecution of Nielsen and his associates as the public.private partnership funding model would undermine or threaten the growth of charters in the state. 

Black described the successful construction of the Higley Unified School District as a “poke in the eye to the pro-charter school faction of state government,” and noted the “pro-charter school legislature” took no issue with allowing charters to pursue adding new schools to districts lacking funds but in need of new facilities. 

“The State and the County wanted to make an example of Nielsen and Aller to score political points and to undermine the use of “PPP” funding to build public schools as an alternative to charter schools,” Black wrote. 

The complaint notes vocal opposition by then-Sen. Andy Biggs, Auditor General Lindsey Perry and Attorney General Mark Brnovich initially stirred the investigation.

Biggs raised his concern about the funding arrangement with Brnovich, who then looped in the auditor general. The auditor general and attorney general launched an investigation. Meanwhile, the Legislature changed Arizona law and procurement code to prevent similar public-private partnerships from taking shape in the future.

In 2021, the auditor general released a final report alleging procurement fraud through improper communications prior to the bidding process, including the preparation of the request for proposal and the concealment of facts, as well as the signing of false documents. 

Brovnich then indicted Nielsen, Aller, and Superintendent Denise Birdwell, claiming EFDS, Aller and Nielsen had a competitive advantage by participating in the pre-bid process in violation of procurement rules under Arizona Administrative Code. 

Nielsen and Aller both faced felony charges for conspiracy, fraudulent schemes and artifices and fraudulent schemes and practices. Birdwell was charged with the same offenses, as well as procurement fraud, violation of duties of a custodian of public monies, conflict of interest and false return.  

The trial court remanded the first indictment after finding the state had improperly prosecuted under an amended procurement code as opposed to those in play when Nielsen worked with the district. 

The state secured a second indictment on grounds that Nielsen prepared specifications for the request for proposal. Nielsen moved to dismiss the case with prejudice, as neither he nor EFDS was tasked with preparing specifications in any capacity. 

In March, a new prosecutor at the Attorney General’s Office was assigned to the case. And the state then followed with its own motion for dismissal, though it asked for dismissal without prejudice. After oral argument, the trial court later dismissed all the charges against Nielsen with prejudice, which means it is permanently dismissed and cannot be brought back to court. 

“They basically kept trying to fit a square peg into a round hole, Black said. “They would not let it go until a fresh set of eyes took a look at it and agreed that nothing improper happened.” 

In the aftermath, Nielsen claimed his reputation deteriorated, lost existing and prospective contracts and suffered severe emotional distress. The notice of claim estimates Nielsen’s claimed damages amount to $79.7 million.

He filed a lawsuit on May 6 claiming malicious prosecution, abuse of process, violation of civil rights, interference with contract or business expectation, intentional infliction of emotional distress, defamation and false light invasion of privacy.

The Attorney General’s Office and the Maricopa County Attorneys Office declined to comment. The auditor general’s general counsel did not respond to a request for comment, nor did former Attorney General Brnovich.