A former employee of the Los Angeles Unified School District’s IT department and the proprietor of a tech company are now facing serious criminal charges. Prosecutors have labeled this case as one of the “largest” suspected money laundering operations ever seen in the district’s history.

Hong “Grace” Peng, who formerly served as a technical project manager for LAUSD, alongside Gautham Sampath, the owner of the technology company Innive, are accused of masterminding a prolonged “pay-to-play” scheme. This operation allegedly funneled over $22 million in school district contracts into Sampath’s enterprise.

“This situation is a glaring example of public trust being exploited — diverting taxpayer funds meant for students into private pockets,” stated Los Angeles County District Attorney Nathan Hochman. “This vendor, in collaboration with an LAUSD project manager, is alleged to have conducted a multi-year, multi-contract pay-to-play scheme that drained millions from our educational institutions.”

The headquarters of the Los Angeles Unified School District (LAUSD) is located in downtown Los Angeles. (Photo by Justin Sullivan/Getty Images)

Prosecutors claim that Peng was instrumental in assigning contracts related to the district’s My Integrated Student Information System (MiSiS) from 2018 to 2022.

Authorities assert that these contracts, amounting to $22 million, predominantly favored Innive.

Investigators say Sampath then funneled more than $3 million back to Peng through intermediaries.

Prosecutors say messages between the two show discussions about deleting chats, securing contracts and moving money.

Peng, a Pasadena resident, is charged with felony counts of money laundering and illegally holding a financial interest in government contracts.

Sampath, of Flower Mound, Texas, faces similar charges, along with an additional count of aiding and abetting a public official.

An arrest warrant has been issued for Peng, while Sampath faces extradition to California. Court dates have not yet been set.

Peng resigned from LAUSD in late 2022 after investigators executed search warrants at her home and workplace. 

Authorities say Sampath and his company continue to hold government contracts in California and nationwide.

If convicted, both defendants could face up to seven years in county jail.

Los Angeles County District Attorney Nathan Hochman called the case “a blatant abuse of public trust.” (Derek Shook for Fox News Digital)

“We will not tolerate public officials who sell out their responsibilities or contractors who line their pockets by gaming the system,” Hochman added. “Both will be held fully accountable.”

In a statement, LAUSD said it was aware of the charges against Peng.

“LAUSD is committed to full compliance with all applicable laws, and we expect our employees and business partners to comply with the highest standards of ethics and integrity,” the school district said in a statement. “The District will continue to cooperate fully with relevant authorities.”

Innive did not immediately respond to Fox News Digital’s request for comment.