A Los Angeles Unified School District IT employee allegedly told the CEO she was funneling millions to him, claiming she had "broken all the law" for him, according to incriminating text messages now at the center of a $39 million fraud case that has rocked the nation's second-largest school district.
Hong "Grace" Peng is charged with two felonies: money laundering and having a financial interest in a contract made in an official capacity. Gautham Sampath, CEO of Texas technology company Innive, faces four felony counts, including money laundering and aiding and abetting a government official to have a financial interest in a contract. Both face seven years in state prison if convicted.
LA County District Attorney Nathan Hochman says Peng conspired with Sampath in a pay-to-play scheme where Peng fed more than $22 million in contracts to Sampath's company from 2018 to 2022. Sampath then routed and laundered more than $3 million in kickbacks back to Peng through various intermediaries, Hochman alleges. In total, Innive received over $39 million in payments from LAUSD between 2017 and 2023.
A text chain between Peng and Sampath, reported by the New York Post, reads less like a conversation between a public employee and a vendor and more like a heist script written by people who forgot to whisper.
Sampath opened the bidding, so to speak, with a question that prosecutors say reveals the scheme's scope:
"What r the other opportunities in LAUSD. That we can exploit."
Peng was happy to oblige. In a text later in 2018, she laid out the strategy with remarkable candor:
"Let's grab these money first.. Its already in the pocket. Low hanging fruits… let's get these money… It'll be good for us."
By June 2018, the scheme was apparently humming along. Peng described her method for inflating the take:
"I have a way to get those money. Can load them up more work, then charge more hours."
She also reminded Sampath exactly who was making all of this possible. When Sampath asked why Innive was "lucky," Peng did not mince words:
"Because you have me… I broke all law for you already lol."
The "lol" is doing a lot of work in that sentence.
What makes these messages particularly damaging is not just the admissions. It is the awareness of wrongdoing paired with the refusal to stop. As early as February 18, 2018, Sampath texted Peng with instructions to destroy evidence:
"Delete all watsup chats… if anyone sees the text about these internal things it will be a prb."
Evidently, they did not delete all the chats.
Sampath also discussed setting up shell companies to launder the kickbacks. He told Peng they would need "at least 3-4 companies "to take out the money, adding that "close to a million will be transferred to you," but that it would be "easy to track unless we are very careful." Peng, for her part, floated the idea of creating companies in Hong Kong, China, or Singapore to further distance the funds from scrutiny.
Meanwhile, Peng signed a contract integrity certification, a document meant to confirm that no conflicts of interest existed. Her response on the form: "No."
The charges land at a moment when LAUSD can least afford another scandal. Superintendent Alberto M. Carvalho was relieved of his post following an FBI raid last month. The details surrounding that raid remain sparse, but the timing paints a picture of an institution where oversight was either absent or actively circumvented at multiple levels.
This is a school district. The $39 million that flowed to Innive was public money, taxpayer dollars earmarked for educating children in Los Angeles. Every inflated invoice, every fabricated work hour, every laundered kickback was money that did not go toward classrooms, teachers, or students. The people who suffer most when a public institution is looted from the inside are always the people it was supposed to serve.
The broader question conservatives have raised about massive public school bureaucracies finds fresh evidence here. LAUSD is not a small operation. It is a sprawling, multi-billion-dollar enterprise. And yet a single IT employee allegedly steered $22 million in contracts to one company over four years without triggering a single alarm. Sampath's firm collected $39 million over six years. The scheme, according to prosecutors, involved:
None of this was subtle. These were people texting each other about "exploiting" opportunities and "grabbing" money that was "already in the pocket." If the system cannot catch theft this brazen, it raises serious questions about what else is slipping through.
This is what happens when institutions grow so large and so insulated from accountability that the people inside them stop believing anyone is watching. Peng and Sampath allegedly operated for years, cycling tens of millions through a scheme they discussed openly on their phones. The district's internal controls either failed or did not exist in any meaningful form.
Conservatives have long argued that simply pouring more money into public education without structural accountability produces waste, not results. LAUSD just handed them $39 million worth of proof.
The children of Los Angeles deserved better. They got "lol."
