DPS inspector’s report reveals more theft, fraud cases

Christine Ferretti
The Detroit News

Detroit — A new wave of alleged theft and fraud cases in the Detroit Public Schools Community District was detailed Wednesday in a report for the district, which is already at the center of a federal probe of a kickback scandal involving more than a dozen employees and a vendor.

The cases, outlined in an eight-page report from the district’s Office of Inspector General, include an unreported payroll error that overpaid an employee more than $50,000, fraudulent teaching credentials, and missing equipment and money.

In the report, Inspector General Bernadette Kakooza notes that a June 2014 tip over fraudulent procurement practices ultimately led to the federal kickback scandal investigation in which 12 former DPS employees were convicted, along with district vendor Norman Shy.

She also lists other 2014 investigations, including a probe that uncovered a human resources error that overpaid an employee by more than $50,000 in a one-year period. The staffer, who failed to disclose the overpayment and improperly retained the money, was later made to repay it, the report notes.

Separately, another investigation into payroll fraud was initiated this February on claims that an hourly employee was falsifying payroll records and claiming an “inordinate amount of overtime.” The investigation revealed the employee had improperly claimed $59,000 for 153 hours of falsified overtime over five years.

The employee was provided a password by a supervisor to access the district’s payroll system. The supervisor, however, claimed to be unaware of the fraudulent overtime claimed. The employee was later terminated, the report says.

Another 2014 investigation tracked $2,500 collected for a field trip that was bagged for pickup and deposit by an armored car that went missing from a school. Investigators found that a signature indicating the deposit was picked up had been forged.

The matter was referred to the Wayne County Prosecutor’s Office for prosecution. An administrative hearing was held for the employee and the resolution is pending, the report notes.

Among the other investigative highlights:

• The removal of a district principal following claims in 2014 that the administrator had approved the operation of a food store in a district building that violated DPS’ fundraising guidelines and cash management policies. There was no evidence provided for accountability of sales proceeds; nor was there any evidence the proceeds were used to benefit the students, as required, Kakooza wrote.

• A 2015 investigation revealed a district employee had claimed and received about $14,000 in unemployment compensation while partially on an approved Family and Medical Leave of absence. The employee also received $49,000 in earnings from the district during the same period.

• The report also makes mention of the joint FBI and inspector general probe involving Carolyn Starkey-Darden, a former DPS administrator and vendor, who pleaded guilty in June for her role in a $1.275 million scheme in which tutorial services were never provided to students.

The report comes after the office was reinstated in April by Emergency Manager Steven Rhodes, who took office in March. Effective July 1, the OIG was restructured to include two primary functions: investigations and internal audits, officials said.

“The Office of the Inspector General (OIG) is a critical element for the new District and our commitment to zero tolerance for wrongdoing and misconduct by any individual or organization affiliated with this District,” Rhodes said in a statement released Wednesday. “The OIG will serve an active role as the District’s watchdog to protect our resources, employees, children and families.”

When pressed for additional details, district spokeswoman Chrystal Wilson said Wednesday the reports are intended to provide an overview of some cases the office has handled in any given year.

“We do not provide specifics, nor do we mention names of the involved individuals,” Wilson wrote in an email. “Some of these cases are pending adjudication as well. And we do not comment on any pending investigations whether it be internal or external.”

The office was initially established in March 2009, but eliminated at the end of June 2015 by then-Emergency Manager Darnell Earley.

Former DPS school supply vendor Norman Shy and 12 DPS officials are to be sentenced next month after taking plea deals in connection with the FBI investigation into public corruption at the district this spring. One principal refused a deal and is taking her case to trial.

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 in school supplies but delivered less than what was promised.

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

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.

In that case, EAA principal Kenyetta Wilbourn Snapp, as well as an EAA contractor and an EAA vendor, all pleaded guilty after being charged in a kickback scheme.

Snapp took school money to enrich herself using EAA contractors. She was sentenced to 12 months and one day in prison.

For the 2017 fiscal year, Kakooza’s report says the office will distribute fraud prevention and awareness posters districtwide, conduct information sessions with employees as well as conduct risk assessments and compliance reviews.

Shawn Lewis contributed.