Feds: DPS principal used stolen money on casino, cruise

Jennifer Chambers
The Detroit News

Claims by a Detroit Public School principal that money she stole from the district in a $2.7 million scheme was spent on students are false and also irrelevant, federal prosecutors said in court filings on Monday.

Former DPS principal Clara Smith admitted to a federal judge in April that she took $194,000 in bribes and kickbacks from a school supplies vendor from 2010 to 2014.

At her court hearing before U.S. District Judge Victoria Roberts, Smith said some of the money and gift cards she accepted from vendor Norman Shy were given to DPS children or used to decorate the school and pay for school trips to Chicago and Washington, D.C.

On Monday, prosecutors filed a sentencing memo in Smith’s case saying financial records obtained by the U.S. Attorney’s Office in Detroit prove that Smith used illegal money to make purchases at Art Van Furniture, El-Mar Furs, Delta Air Lines, Royal Caribbean Cruises, several restaurants, Caesar’s Hotel and Casino in Las Vegas and other personal expenditures.

In addition, Smith disguised the nature of the kickback payments by having Shy issue personal checks to Smith’s husband and daughter and to businesses or stores to pay for personal items she had purchased, prosecutors said. Smith also requested Shy to write checks to credit card companies to pay her personal credit card bills, which Shy did, prosecutors said.

“Even if Smith was accepting fraudulent kickbacks and using the illegal proceeds to help her school, her alleged charity was only made possible by fraud committed against taxpayers and the Detroit Public School System,” Assistant U.S. Attorney J. Michael Buckley wrote in the memo.

“Smith’s attempt to downplay the seriousness of her corrupt acts by claiming she accepted and spent kickbacks on her students ignores the fact that her so-called charitable acts were being directly funded by the crime for which she now stands convicted,” Buckley said.

Because Smith helped prosecutors in their investigation of DPS, the government on Monday also filed a motion for lighter sentencing, recommending a sentence between 37 to 46 months.

When Smith pleaded guilty to conspiracy to commit federal program bribery, a five-year felony with fines of up to $250,000, prosecutors had said she faced between 46 and 57 months in prison under the terms of her plea deal.

Federal prosecutors allege the scheme, which started in 2002 and ran through January 2015, was hatched by Shy, 74, of Franklin, who billed DPS for $5 million school supplies but delivered less than promised.

In return for the business, Shy allegedly paid bribes and gave kickbacks to 12 former and current DPS principals and one assistant superintendent in the form of cash and gift cards totaling $908,518.

Shy allegedly kept a ledger to record how much he owed Smith and other defendants in the case. Smith kept a ledger to show how much money Shy owed her in kickback payments.

The FBI has been investigating DPS for the last two years after a tip from state auditors led them to an unrelated corruption case at the Education Achievement Authority, the state-created reform district that includes DPS’ lowest-performing schools.

Smith retired from the district effective April 1. She will be sentenced Sept. 14.

Four other DPS principals were offered lighter sentences on Monday after cooperating with prosecutors. They are:

■Clara Flowers, a former DPS assistant superintendent, faces 46 to 57 months in prison on charges of conspiracy to commit federal program bribery and income tax evasion when sentenced on Sept. 6. She had faced 57 to 71 months.

Ronald Alexander, former principal of Spain Elementary, faces 19 to 24 months in prison on a charge of conspiracy to commit federal program bribery when sentenced Sept, 8. He had faced 24 to 30 months.

James Hearn, former principal of Marcus Garvey Academy, faces 11 to 14 months on a charge of conspiracy to commit federal program bribery when sentenced Sept. 15. He had faced 18 to 24 months.

Beverly Campbell, former principal at Rosa Parks School and Greenfield Union Elementary-Middle School, faces 24 to 30 months on a charge of conspiracy to commit federal program bribery when sentenced Sept. 19. She had faced 30 to 37 months.