Fourteen people face federal charges for defrauding the Detroit Public Schools in an alleged bribery-and-kickback scheme.
Those charged include 12 current and former principals, one district administrator, and a school supplies vendor.
The scheme involved the principals falsifying invoices, and the vendor, Norman Shy, kicking back a cut of his proceeds to them.
Altogether, the fraud amounted to $2.7 million, says Detroit U.S. Attorney Barbara McQuade.
“The invoices were frequently inflated, so that the Detroit Public Schools overpaid for the supplies that it received,” McQuade said.
McQuade said investigators discovered the alleged scheme as part of an investigation stemming from an audit of the state-run Education Achievement Authority. That investigation has already netted two guilty pleas in a similar fraud case.
That case also raised “red flags” about invoicing practices at DPS, which is where the EAA schools were pulled from in 2012. McQuade said investigators “learned about Norman Shy” during that investigation, which she characterized as “ongoing.”
“Any time we learn about conduct as egregious as this, it causes us to want to make sure that we’ve turned over every stone,” she said.
Though Shy has been a DPS contractor since 2002, investigators say the bulk of the alleged corruption outlined in these charges has taken place in recent years.
McQuade declined to draw any larger conclusions about a lack of oversight at DPS, which is under its fifth state-appointed emergency manager since 2009.
That newest emergency manager, Judge Steven Rhodes, said in a statement that the district has “suspended” business with Shy, and placed the accused DPS employees on unpaid administrative leave.
“I cannot overstate the outrage that I feel about the conduct that these DPS employees engaged in that led to these charges,” Rhodes said.
Rhodes said the district would also immediately implement a number of “checks and balances” to safeguard against corruption. That includes suspending all school-based purchases “until further notice,” and a review of all school-based vendor contracts.
Ida Short, a member of Detroit’s current (largely powerless) elected school board, said school principals should never have been allowed to and process these kinds of deals.
“We would ordinarily not have principals approving this level of contracts. It’s too much money, it’s too easy for people to get greedy, as you see,” said Short.
Acknowledging that the district has had problems with employees stealing for years, Short said the difference here is the lack of internal controls at the district level under emergency management.
“That’s the problem here. We have no oversight,” Short said.