Soda Jerks

Robert Liva, a hard-working hustler in the soda and snack machine business -- legendary or notorious, depending whom you ask -- was on a mission last November when he walked into the San Antonio warehouse of BMS Vending. Liva was then under contract with BMS as a marketing agent, and he'd come to talk to BMS owner Bernard Burkhardt, who controls a sizable portion of the vending business at public school districts across the Rio Grande Valley. The two had something to chortle over that day -- an article in the Austin American-Statesman that said the Austin Independent School District was changing the way it handled its schools' vending machine contracts. In recent years, Burkhardt had lost a lot of AISD accounts to a hated competitor, but Liva and Burkhardt had fixed him.

Less than a month earlier, Liva had tape-recorded Chiquita Watt, then principal of Kealing Jr. High, as she asked him for free football tickets and coffee mugs in exchange for maintaining the BMS vending contract at Kealing. Among other revealing moments, Watt told Liva that a competitor -- the one who had already taken much of BMS' business at AISD -- had "dropped some little carrots" on her in order to win the Kealing account.

Liva took his tape to the AISD police, and subsequently, AISD announced that it would negotiate a district-wide contract for snack machine service, rather than let principals make those arrangements for their individual campuses. AISD investigators, meanwhile, subpoenaed bank records and found possible evidence of vendors paying improper gratuities to other school officials. Because of the apparent size and complexity of the case, AISD soon turned it over to the Travis County district attorney's office, which won't discuss the ongoing investigation.

In March, Watt -- who did not return phone calls requesting comment for this article -- was removed from her post (as was the director of the school's magnet program), although the announced reason had nothing to do with her dealings with BMS. In announcing the move, Superintendent of Schools Pat Forgione said only that after "an extensive review of the year" and a survey of the teaching faculty, he had come to the "inevitable conclusion that a change in leadership at Kealing is absolutely necessary." Presumably, the district is still waiting for the results of the DA's investigation.

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'I Feed Him Bullshit'

So Robert Liva has already gotten at least one person in hot water, but he's hardly finished yet.

As Liva recounts later, at their November meeting Burkhardt was gleeful that AISD was putting out a district-wide bid, because the man who's been taking Burkhardt's AISD accounts -- a former partner whom Burkhardt has sued twice, unsuccessfully, for stealing business -- will soon be finished at AISD. Burkhardt's also gratified to see an AISD official publicly embarrassed. He's got a beef with the district, which three years earlier had ordered him to remove his soda machines from its premises when it signed an exclusive contract with the local Coca-Cola distributor. AISD also rebuffed an offer Burkhardt made to become the district's sole snack vendor. With all those chips on Burkhardt's shoulders, it isn't hard to get him talking, Liva says later, about how he calculates commissions owed to schools and other public institutions from the sales in his machines. On that day in November, Liva says, Burkhardt told him that he had saved several thousand dollars by under-reporting commissions due the San Marcos Gary Job Corps Center. In fact, Burkhardt bragged, he routinely knocks as much as 50% off the commissions he owes to the establishments where he does business -- he says they never know the difference. (Burkhardt confirms most of this history -- although he says what he tells Liva about his own business practices is concocted for Liva's benefit. He denies any wrongdoing regarding commissions, and says he paid Gary Job Corps all the money it was due.)

Liva can reconstruct his chat with Burkhardt so well, it turns out, because he was taping that conversation as well, using an expensive digital device that fits inside his shirt pocket. A few days later, on what Liva says was a service call in Burkhardt's Expedition, Liva taped him again. This time, Burkhardt talks about how he transfers taxable sales income from machines at commercial sites to his school accounts, where the sales are tax-free. Liva was soon on his way to the state comptrollers' office to share his latest tapes. The agency initiated an audit (still ongoing) of BMS finances, checking them against school records. Burkhardt says he knows nothing about any comptroller's audit of his records.

Why is Liva taping Burkhardt? He's still miffed that Burkhardt never paid him commissions Liva thinks he's owed for new accounts he brought to BMS. And he's got a line on a new vending operation starting in Dallas, one where he hopes to become a part owner. Screw the S.O.B.s, figures Liva -- he's not working for these people any more. As in his letter of complaint to AISD, Liva insists that his intention is to expose wrongdoing, whether or not it means he will lose business as a result.

"Here this lady is, Dr. Watt, trying to shake me down for $2,500 [the cost of the football tickets and mugs], and she's not the first person that's shaken me down. ... And here's Bernie sitting over here saying, 'Okay, now I've got 'em. ... I'm going to sue the AISD.' So I'm thinking to myself, 'Well, you S.O.B. You think you're so much better than she is, [but] you've been defrauding the school district all along, and not only have you been defrauding them," says Liva, "you've been defrauding me."

Liva also passed his tapes, along with a formal complaint against AISD, to local reporters, although the media has thus far addressed his charges only circumspectly. (For brief additional excerpts of Liva's tapes, see "Purging and Courting," p.26.)

Not all his subjects are alarmed by Liva's curious electronic habit. Recently, a Chronicle reporter called Burkhardt to ask about the conversations with him that Liva had recorded. Burkhardt showed no signs of discomfort. "Oh, yeah, I know how he operates," he says of Liva. "He is always taping, and I feed him a lot of bullshit. ... You can always tell when he's got his recorder on. When he's wearing a jacket and it's 80 degrees, it is not so hard to tell that." But Mr. Burkhardt, the reporter asks, aren't you asking for a lot of trouble by feeding Liva comments that you cheat public entities out of commissions?

"If he feels that he wants to tape me, I can tell him anything I want, as long as I can prove it isn't true," Burkhardt replies.

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The Man in the White Hat?

Welcome to the bizarre world of vending machine marketing. Dropping coins for Cokes and candy bars, most people don't give a second thought about the companies who own and operate vending machines, but it can be a cutthroat business. Vendors are always jostling each other to get their machines out into heavy traffic, and schools can be prime locations for junk-food sales. But finding a competitive edge isn't easy. A bag of potato chips is the same bag of chips no matter whose machine it comes from, so vendors hustle to keep machines better-stocked, or say they can clean the gum out of the coin slots faster than the next guy. To get schools' business, sometimes they'll agree to sell their wares for lower prices or pay higher commissions.

For the right contract, the reward can be considerable. No one at AISD knows precisely how much money vending machines earn on district campuses, but AISD financial director Larry Throm estimates that the contract the district signed with the Austin Coca-Cola Bottling Company -- for which the bottler pays an annual base amount over $330,000 -- will generate as much as a million dollars per year for the district, over 10 years. In theory, those revenues help buy band uniforms or computers or supplies -- but could it be that hucksters have been skimming off many of those quarters and dollar bills and buying off administrators on the side?

Liva, 40, has been earning a livelihood from the vending machine business for most of his adult life, and says it's a "cesspool" of corruption. He claims he's on a personal mission to clean up the industry and make certain that schools and other public entities receive their fair share of commissions. Liva says he's also working to make certain that the commissions, as well as any perks those businesses grant to keep the schools' business, flow directly to the kids. The business is so unaccountable, Liva claims, that delivery drivers can rip off schools (and distributors) by dumping soft drinks they purchase themselves into machines and then skimming the returns. If the schools seldom or never check the machines' meters (now standard issue on newer machines, distributors say) to see how much money has flowed through them, Liva explains, they can't know how much business is being done in their hallways, and how much commission they're truly due.

But just who is this guy who's been sidling up to people with his tape recorder, purporting to wear the white hat on behalf of our public schools?

If Liva seems an unlikely crusader for justice, at first glance he also might not strike people as much of a salesman. He doesn't wear a tie, he has a soft lisp that takes the fizz out of words like "staff," and the tips of his fingers are stained with greasy dirt from servicing machines. But when it comes to landing vending accounts, Liva's no dummy. In fact, he has a reputation as one of the cagiest sharks in the business, whose nerve at stealing accounts has earned him a lot of enemies. According to distributors who spoke to the Chronicle, Liva has made a living as a freelance salesman by landing accounts for vendors, then turning around the next year and winning them over for competitors. One distributor, who says Liva can hardly find anyone to do business with in San Antonio anymore, finds it ironic that Liva is selling himself as a champion of integrity. "He's part of the reason [the business] enjoys the reputation that it does," says the source. "If you shake hands with him, you'll want to count your fingers after."

People in the vending business, which is still predominantly controlled by small companies, aren't always the "sharpest knife in the drawer," continues the distributor, and Liva takes advantage of that, saddling them with commitments they can't keep to win accounts. "He doesn't own and operate the equipment, he doesn't make the investment," says the vendor. "He just causes people havoc."

Asked about these allegations, Liva claims to operate cleanly, if ruthlessly. In fact, he points out -- brandishing the offer he made AISD last fall on behalf of BMS Vending, which requires that principals check vending machines' meters -- he encourages schools to hold vendors strictly accountable for commissions. Since helping set up a new vending machine service in Dallas last year, Liva says, he's landed an account with the Texas Commission for the Blind, where he claims his company is reporting $3,000 more in monthly gross sales than the previous vendor. The commission's administrator for the contract confirms that working with Liva has been a welcome change -- Liva walks him through all the transactions and personally confirms the commissions.

Liva says he's successful at getting accounts not by tempting administrators with personal goodies, but because he's got the persistence to do 500 sales calls, and do them well, to get one paying contract. When people ask him for personal favors, Liva says, he makes it clear that he doesn't work that way -- that kind of business stinks, he says, because ultimately kids are the victims. Vendors who bribe principals, he says, are probably going to cheat the schools out of commissions to get back the money. Liva estimates that about half of the vending machine companies he knows aren't above resorting to fraud, bribery, or both. He admits, however, that it's unusual for principals to ask for personal favors as directly as Watt allegedly did.

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Courting the Principal

As he recounts in his formal complaint to AISD (which he says he made on his own initiative, and not at the direction of BMS), Liva says he first heard indirectly that Watt had received gifts from a competing vending company, Best Pak Vending. He phoned the delivery driver who serviced the BMS machines at Kealing to confirm the information (recording the conversation). On that tape, the delivery driver says Watt has approached him asking when she's going to get a massage, and requested tickets to the UT-A&M football game. Liva says he called Watt to ask about her requests, and on the tape Liva says is of that conversation, Watt says, "You know, you guys are supposed to be courting me to keep this account. Isn't that how these things are supposed to work?"

On the tape Liva provided to the Chronicle (which he says was recorded three days after the phone call, in an Oct. 23 meeting in Watt's office), Watt mentions a trip to a massage therapist paid for by Ty Wells, the owner of Best Pak. Watt says she has thus far refused Wells the Kealing account, but she lets Liva know she's keeping her options open. "At the end of this year, when it's time for contract talks again, at least I can look at the services that I personally ... received [from Wells], against the services that you're offering," she tells Liva. In addition to tickets for the UT game on Thanksgiving, Watt says, she would also like tickets to the UT game coming up that weekend, just so she can compare the two.

Liva reminds Watt that BMS Vending has already provided a refrigerator for the teacher's lounge, a $500 signing bonus, and has offered to host a chess tournament for the students that includes demonstrations by a master player. Watt is not enthusiastic. "You know what?" she says, "I don't have a problem with the chess tournament. ... But I do like the frilly stuff. I mean, like I would like to order some cups ... just something, you know?" Watt then asks if Liva can supply her with 200 cups stenciled with the Kealing logo and hornet that she can give Kealing staff as Christmas gifts.

"In her whole conversation, she at no time ever negotiated anything at all for the kids," Liva says. More typically, he says, administrators make it clear that they expect vending companies to contribute to school fundraisers. That's fine, says Liva, but who's keeping track of where that money goes? Until AISD recently changed its policy for negotiating vending contracts, principals themselves were responsible for administering vending commissions, and District Financial Officer Larry Throm says there are no central records to confirm where revenues from vending machine commissions have been deposited.

Others in the business describe vending contractors not as conniving con artists looking to freeload on unwary schools, but as mostly small business folks working long hours to stay afloat. Many in the business, from Waco to San Antonio, know all about Liva's taped conversation with Watt, but they say that situation resulted from a personal blood feud between Burkhardt and Wells, and is not standard business practice. (Indeed, Liva's complaint to AISD makes it clear he suspects his competitors are offering illegal or improper gratuities in return for contracts.) Floyd Taylor, who's sold machines for nearly 30 years and now represents distributor H.A. Franz in Waco, says school accounts are not so lucrative that vendors typically resort to bribes and cheating to get them. Commissions reduce profit, the machines get vandalized, and principals sometimes turn machines off to enforce discipline, says Taylor. Still, he said, if a vendor wants an account bad enough, it might be hard to resist dropping a few perks, or fudging a little on how much commission he can realistically pay. In the case at AISD, says Taylor, personal grudges made the competition a lot more heated.

"These are not the normal vending people. They are really high-strung people," Taylor says of Liva, Burkhardt, and Wells. "I don't think there's that much corruption. I think there's just a big war between Burkhardt and Wells. They're just trying to hurt each other."

Courthouse records show that Burkhardt and Wells were partners in a company called Pro Pak Vending for only a few months in 1997 before Wells chose to dissolve the partnership. Burkhardt immediately filed suit, alleging that Wells was trying to steal business from his company, BMS. That suit earned Burkhardt sole control of Pro Pak. Then in 1998, Burkhardt sued Wells again when Wells' new company, Best Pak, replaced BMS as the snack vendor at Austin's LBJ High School. Burkhardt claimed that Wells had a contractual agreement not to compete for his accounts. The suit was settled out of court. Best Pak Vending went on to take over more than a dozen campuses from Burkhardt, including middle schools Dobie and Bedichek, which had recently signed five-year contracts with BMS. Burkhardt now holds just two accounts within AISD. He won't talk about the lawsuits, saying "I just want to forget that mess," and Wells refused any comment, saying he wants nothing to do with this article, except to insist he's done nothing wrong in his dealings with AISD schools.

Like Liva, neither Burkhardt nor Wells enjoy spotless reputations in the vending machine business. Burkhardt, says a distributor who does business with him, is quick to blame others and slow to pay debts when revenues head south. BMS Vending is not the tightest ship, he says, and Wells, reputed to be a hard worker, if not exactly a saint, probably could have won the AISD accounts on sheer hustle. Still, says another distributor, Wells may have competed so hard for the business that he lost his perspective. In his complaint to AISD, Liva accuses Wells of providing Watt with "extravagant gratuities such as manicures, full body massages, and a weekend in San Antonio."

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He Said, He Said

There's also a question whether Liva's real motivation for starting his tape-recording campaign is to get back at Burkhardt (with whom he's had turbulent relations for years) while earning free publicity for his own new vending business. Liva says that he has no vendetta against anyone, and that he walked away from a contract with Burkhardt worth more than a half million dollars because he wanted to tell his story about how schools are getting ripped off. He says he hasn't been capturing anything with his recorder that wasn't already everyday conversation. "It seems pretty easy that I could drag that information out of these people," says Liva. "The reason I could ... is because they gave me that same information over and over and over again. ... All I had to do was bring up the topic."

But there's almost no way to tell who's telling the truth in this contentious situation: Burkhardt says that Liva wasn't producing enough accounts to be worth the monthly stipend he was paying and he let him go with a severance package. Yeah, says Liva, but the severance wasn't worth nearly what he should have been paid in the contract. There seems no end to the charges and counter-charges.

In fact, the dispute between the two men seems to be broadening. By the time this story is published, Liva will have testified as a witness against Burkhardt in an unrelated lawsuit, brought by a landowner whose property abuts Burkhardt's 450-acre ranch near Uvalde. That landowner, Jerry Yochum, president of a manufacturing group in Wisconsin, says Burkhardt has been denying him access to his new home by refusing to acknowledge an easement Yochum says he owns on a driveway that crosses Burkhardt's property. Burkhardt has been placing padlocks on the gates to his driveway, Yochum says, and one time when he confronted Burkhardt about it, and Burkhardt blew up at him, Liva just happened to be standing nearby.

Yochum says Liva approached him about a year later and offered to tape conversations with Burkhardt. Liva says he recorded Burkhardt saying that's he's been trying to force Yochum to sell his land to him cheaply so he can run his exotic animals on it.

Burkhardt offers no comment.

Yochum, for one, will vouch for Liva's character. He says Liva didn't ask him for any compensation for gathering evidence against Burkhardt. "I think Liva has a fairly highly defined standard of right and wrong," says Yochum. "He strikes me as a pretty straight shooter that really doesn't like what's going on in the vending business. ... I think he has a problem with people who don't do things in an ethical way."

For his part, Burkhardt spoke no ill of Liva to the Chronicle, even though Liva has twice managed to land him in legal trouble, except to say that he doesn't approve of Liva's propensity for tape recording.

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Wheels Within Wheels

In the meantime, AISD has signed an exclusive contract with Accent Food Services of Austin to provide snack machines on AISD campuses. So presumably, the district has extricated itself from the maneuvers and counter-maneuvers of Burkhardt, Wells, and Liva for the foreseeable future. Liva himself says the district couldn't have picked a more reputable vendor. But will several AISD administrators' careers be upended as part of the aftermath? AISD police confirm that their initial investigation into possible bribery in the district turned up more suspects than they could handle themselves. According to the state criminal code, public servants commit a felony if they accept cash in exchange for approving contracts, or a misdemeanor if they accept gifts from persons who have an interest in securing contracts from public institutions they oversee.

As for Liva, prospects are better than ever. A few years back, he says, he befriended an apparently poor young day laborer at a dormitory where he was setting up a vending account. Inexplicably, the boy's father turned out to be an affluent businessman in Dallas who had made some money in uniform rentals. Liva got the young man, Henry Carr, a job with BMS Vending.

As Liva tells the story, he was having a beer one night with Carr, who mentioned that his father might be interested in investing in the vending business. In a heartbeat, without saying a word to Carr, Liva says, he was in the elder Carr's Dallas office offering to help set Henry up in the business. The result is a new company, bankrolled by the elder Carr, which Liva hopes to co-own when the initial debts are paid down. Liva's home and family are in San Antonio, but he has the use of the Carr home while he looks after business in Dallas.

There isn't a trick Liva can't turn, it seems. The question is, are his allegations against Watt -- and by implication other school officials and vendors -- his most sophisticated ploy yet? Time, and perhaps a Travis County grand jury, may tell.