The Palm Beach County School Board’s inspector general formed a nonprofit business without board approval in 2014, prompting an outside agency to warn last month that the move may have violated his contract.

Inspector General Lung Chiu’s contract prohibits him from paid consulting work or operating businesses that interfere with his duties as inspector general, which include overseeing audits and other investigations of the public schools.

Investigators with the Pinellas County inspector general’s office — which probed an allegation about Chiu’s business holdings on the school board’s behalf — concluded last month that Chiu should have obtained prior approval from the school board’s chairman before forming the nonprofit corporation.

The corporation that Chiu formed, International Cultural Arts and Exchange Foundation, was intended to “promote the exchanges of cultures and arts for different persons from different countries.”

In an interview, Chiu, who as inspector general earns a $174,000 annual base salary, said that he created the nonprofit on his wife’s behalf and removed himself as the company’s president soon afterward. He said the company earned no revenue and was intended only as a vehicle for acquiring and distributing used books.

“My wife was going to do it to distribute these free books to kids,” he said. “I didn’t think. I put my name as the president.”

“There was no bad intent on my part,” he added.

The Pinellas County investigation found that Chiu was replaced as the organization's president in corporate records three months after its creation.

The investigation examined Chiu’s ownership stakes in other private businesses, including a tree farm and property holding companies, but concluded that since he was not a director of any of those corporations there was no evidence his financial stake amounted to a contract violation.

Chiu’s private business dealings have raised questions before. In 2000, a subordinate alleged that Chiu and another subordinate were operating a tree farm from their school district offices during work hours.

A district investigation failed to corroborate that claim, but in 2001 Chiu was reprimanded for having an undisclosed business relationship with a subordinate.

The Pinellas County inspector general recommended that the school board ensure that its disclosure requirements are understood and followed.

“Involvement in certain outside business activities could place him in a situation of conflict of interest,” the agency wrote. “Obtaining prior approval mitigates the risk for both (Chiu) and the (school district).”

The school board inspector general’s office has an arrangement with Pinellas County’s inspector general in which each agency investigates allegations that arise about high-level officials in the other agency to avoid conflicts of interest.

 amarra@pbpost.com

@AMarraPBPost