Detroit Shuts Down Department That Battles Waste and Corruption

by | August 17, 2015

By Ann Zaniewski

The emergency manager for Detroit Public Schools has closed the district's Office of Inspector General, a department that battled waste and corruption and helped bring in nearly $19 million to DPS over the past six years.

Darnell Earley said the district still will aggressively investigate reports of illicit activity -- only now, they'll be handled by other departments.

"We haven't eliminated the function of internal review and accountability. ... We will still have the priority and urgency to make sure that we're monitoring for and eradicating and dealing with any instances of waste, fraud or abuse," he said.

Others are concerned about how quickly pending investigations will be completed, and whether the people conducting them going forward will have the same level of authority and autonomy.

"I think it's a mistake to close it," said Wilbert Van Marsh, a former FBI agent who was DPS inspector general from July 2010 to February 2014. "(Earley) will be effectively eliminating a department that was carefully and strategically created ... which had credibility and got demonstrative results."

Earley is combining the duties of the inspector general and the auditor general under a new position of compliance analyst. The compliance office will investigate complaints, along with the district's general counsel.

He said the move was part of his efforts to streamline operations in the 47,000-student district. Earley, who became emergency manager in January, is in the midst of restructuring DPS as he tries to reduce a $238-million structural deficit.

Both the compliance office and general counsel will report directly to Earley.

It's unclear whether current Auditor General Odell Bailey will fill the new compliance job.

Robert Bobb, the district's first state-appointed manager, created the inspector general's office in March 2009 after hearing about allegations of widespread corruption and theft. By some estimates at the time, as many as 5,000 computers were being stolen annually from DPS buildings.

Bobb made the office independent and gave it sweeping powers to investigate all schools, departments, personnel and programs. It could even inspect the records of outside vendors that did business with the district.

Theft cases made up the bulk of the office's work. But it also investigated ethics violations, employee misconduct, vendor fraud, waste and criminal activity.

"We were the watchdogs," said Bernadette Kakooza, who was most recently in charge of the office as acting inspector general until being laid off June 30.

Her office, which once had a staff of eight, was down to two -- Kakooza and one other investigator -- when it closed.

She said the inspector general's strong independence and focus on objectivity was key to its success.

"Nobody could say no to the office of inspector general," Kakooza said. "If I came and asked for your records, I had access to them. ... We couldn't be controlled by any other department."

Since 2009, the DPS inspector general's office had performed about 720 investigations. It helped bring $18.9 million in monetary benefits to DPS, primarily in restitution from people who were caught stealing, Kakooza said.

It also notably cracked computer theft rings and led an effort to install tracking devices on computers.

Several other urban school districts have inspectors general, including New York, Philadelphia, Chicago and Miami.

Bobb said it remains to be seen whether the new structure will be effective. He said he generally believes investigations should be done by an inspector general, without the involvement of general counsel.

"In my experience, those (offices) are two separate roles," he said, stressing that he's not criticizing Earley's decision. "One is to defend the district in court, the other is to conduct very detailed investigations. It's a different skill set."

Kakooza said when the inspector general's office closed in June, 17 investigations were still open. Their status is unclear.

The office's caseload had dropped over time, from a high of 269 investigations in the 2010 fiscal year to 46 cases last year. Kakooza said Earley cited declining caseload as a factor in the closure. She said a drop was always expected and proves the department was working.

DPS spokeswoman Michelle Zdrodowski declined to comment on the cases. But she said the district will still have a hotline, e-mail address and an online complaint form where people can submit tips anonymously.

John Mogk, a law professor at Wayne State University who specializes in urban law and policy, said having a general counsel involved in investigations could be helpful because the counsel can provide legal expertise, but "the critical question is whether the general counsel can be independent in interpreting the facts and the law."

Gary Miron, a professor of education at Western Michigan University, said an inspector general's office offered a path of recourse for district parents and employees.

"Now that the DPS school board doesn't have any power," because the district is under an emergency manager, he said, "I would think there is maybe even more need for that."

Notable cases investigated by the inspector general

The Detroit Public Schools Office of Inspector General has initiated several cases that led to state and federal prosecutors filing criminal charges. They include:

Computer theft ring

In 2010, prosecutors charged 10 people in connection with a crime ring that stole and sold 104 laptop computers worth more than $158,000 from DPS. The defendants included Dion Sims, a Michigan State University football player. He pleaded guilty to receiving and concealing stolen property and was sentenced to probation and community service. The computers were tracked to seven states, Canada and the Middle East.

Embezzlement

An accountant and principal at Randolph Career and Technical Center, along with the accountant's son and friend, were charged in 2010 with stealing about $150,000 from the school. Prosecutors said accountant Eugenia Holimon, who faced the most charges, used some of the money to make mortgage payments on her home. She was sentenced to more than two years in prison. The district collected $151,780 in restitution.

Fraud

Another accountant, Sandra Campbell, and her daughter Domonique, a DPS teacher, were convicted in 2013 for a scheme in which orders for books and other educational materials were placed with their sham company, Definitive Concepts, but never delivered to the schools. Prosecutors said they stole more than $530,000 from the district. Sandra Campbell was sentenced to 70 months in prison. Domonique Campbell was sentenced to three years in prison.

Alleged embezzlement

The principal of Western International High School, Rudolfo Diaz, and the former head of a nonprofit agency, Cecilia Zavala, were charged in June with stealing money that was supposed to be used to serve at-risk students. Prosecutors allege Zavala used Esperanza Detroit's credit and debit cards to buy more than $100,000 worth of meals at restaurants, personal vacations at expensive hotels, jewelry and a car. Diaz is accused of receiving checks worth $10,400 from an Esperanza account and then using the money on personal expenses. They are due back in court next month.

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