U.S. News

Thirteen Detroit school principals charged in kickback scheme

DETROIT (Reuters) - Federal officials on Tuesday charged 13 current and former Detroit Public School (DPS) principals with engaging in a long-running kickback scheme in which prosecutors said they submitted fraudulent invoices to a vendor in exchange for prepaid gift cards, cash and checks that totaled more than $900,000.

Downtown Detroit is seen from a vacant lot, looking south along Woodward Avenue. REUTERS/ Rebecca Cook

The charges come a month after Michigan Governor Rick Snyder named 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.

Along with the 13 principals, Norman Shy, owner of Allstate Sales and an approved school supply vendor for the school district, was charged in U.S. District Court in Detroit in connection with the alleged scheme.

Beginning in 2002 and continuing until January 2015, the scheme involved business with DPS worth about $2.7 million, according to the U.S. Attorney’s Office in Detroit, which worked with the Federal Bureau of Investigation and the Internal Revenue Service on the two-year investigation.

The principals and Shy were all charged with conspiracy to commit bribery under a federal program. The school district received grants, contracts and other forms of assistance under federal programs.

Shy, 74, and one principal were also charged with federal income tax evasion, officials said.

All of the defendants face up to five years in prison and fines of up to $250,000 if convicted on the bribery charge, officials said.

Most of the lawyers for the principals and Shy either declined to comment or could not be reached.

Kim Stout, attorney for Josette Buendia, one of the principals, said her client worked hard to raise test scores at her elementary school and spent her own money to help the school. Attorney Tom Cranmer said his client, Tanya Bowman, a former principal who is among those charged, has cooperated with the government.

Doraid Elder, the attorney for another principal charged, Stanley Johnson, said he had not seen any evidence against his client. Johnson had donated his own money to buy things for the school district, he said.

“To say that my client would take $84,000 in kickbacks, we don’t know anything at this point as far as method of payment,” Elder said. “It’s up to government to say, ‘Hey Mr. Stanley, here is the evidence.’”

U.S. Attorney Barbara McQuade said the investigation was ongoing.

“The actions of these individuals are reprehensible and represent a breach of the public trust,” said Steven Rhodes, the judge appointed to run DPS last month.

DPS has suspended all purchasing by individual schools and will review all vendor contracts, he added.

Reporting by Serena Maria Daniels; Writing by Ben Klayman; Editing by Tom Brown and Leslie Adler