U.S. News

Businessman in Detroit Public Schools kickback scheme pleads guilty

(Reuters) - A businessman at the center of a years-long kickback scandal involving more than 12 Detroit Public Schools principals pleaded guilty on Wednesday to federal bribery and tax evasion charges and was ordered to pay back $2.7 million to the cash-strapped district.

Norman Shy, owner of Allstate Sales and an approved school supply vendor, faces five to seven years in prison under the terms of a plea deal entered in U.S. District Court in Detroit, according to court documents.

The U.S. Attorney’s Office did not immediately respond to a request for comment, nor did an attorney representing Shy.

Shy and 13 current and former Detroit principals were charged in late March with engaging in the bribery and kickback scheme lasting from 2002 to January 2015.

Prosecutors said the school officials submitted fraudulent invoices to Shy in exchange for prepaid gift cards, cash and checks that totaled more than $900,000.

Former principal Clara Smith was the first of the 13 principals to enter a plea in the case when she admitted guilt in late April. The status of the other cases was not immediately known.

In all, Shy obtained more than $2.7 million from Detroit public schools for goods he never delivered, court documents said.

Shy, 74, pleaded guilty to felony charges of conspiracy to commit bribery under a federal program, and income tax evasion, according to his plea agreement.

He has to pay $2.7 million in restitution to Detroit Public Schools and $51,667 to the U.S. Internal Revenue Service under the terms of a deal struck with prosecutors in which he agreed to help them build their case in exchange for leniency.

The Detroit News reported that Shy confirmed for a federal judge at a hearing on Wednesday that the 13 current and former principals charged in the case participated in his scheme. The newspaper also quoted him as telling a federal prosecutor: “There may have been others. I don’t recall.”

In February, Michigan Governor Rick Snyder appointed the federal judge who oversaw Detroit’s historic bankruptcy case to tackle the financial problems of Detroit’s schools, which are drowning under $3.5 billion of debt.

Reporting by Eric M. Johnson in Seattle; Editing by Sharon Bernstein and Peter Cooney