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9486 in the collection
Suit: Detroit Public Schools had little oversight
Here are two items about Stephen Hill in the news just two years ago:
- STEPHEN HILL, the executive director of the Office of Risk Management for Detroit Public Schools, has been named "Risk Manager of the Year" by the PUBLIC RISK MANAGEMENT ASSOCIATION
Hill oversees the risk management needs for the largest employer in the city of Detroit and the 10th-largest school district in the country. Hill is credited with saving the district millions of dollars since he joined in 2001.
--Best Review, Jan. 2006
- Head of his class: whoever said men can't multitask never met Stephen A. Hill. With myriad responsibilities as a public risk manager, he has made the juggling act of running a major urban school system look easy.
--Risk & Insurance, Dec, 2006
NOTE: Stephen Hill hails from Texas.
by Doug Guthrie and Jennifer Mrozowski
DETROIT -- Operating for years with little oversight within the bureaucracy of Detroit Public Schools, a department manager created his "own country" where he set up an impenetrable computer system and sidestepped accounting policies to issue more than $45 million in unauthorized contracts, according to a lawsuit filed by the school district.
The lawsuit, filed Friday in Wayne Circuit Court, alleges that few or no services were delivered for the contracts and that Stephen Hill, the former director of the district's Risk Management Office, took kickbacks from friends, local insurance companies and education consultants.
The allegations stem from Hill's management from 2001 to 2007 of the Risk Management Office, which oversees the district's insurance, liability and workers compensation needs. The civil action names 13 individuals and business entities.
Working with his chief assistant, Christina Polk-Osumah, who also is a defendant in the lawsuit, Hill is alleged to have set up three offices, two of them secret to top district officials. At the same time, the lawsuit alleges, Hill nearly tripled his department's staff of 10 by allegedly illegally contracting for workers with Long Insurance Services, an agency run by a friend.
Lawrence Long, CEO of Long Insurance Services, was reached Tuesday while playing golf. His firm has in the past served as an insurance broker to the district. The lawsuit alleges that over a two-year period Long received about $14 million from Hill's office.
"I'm precluded from making any comment because there is an investigation still going on," Long said. "In due time, in a short time, I will make a comment."
Hill and Polk-Osumah couldn't be reached for comment.
The district began its investigation of the allegations last summer, providing a 113-page report to the FBI.
No criminal charges have been filed. The U.S. Attorney's office didn't return a call for comment on the federal investigation. A local investigation also is ongoing, said Maria Miller, spokeswoman for the Wayne County prosecutor's office.
Alleged mistake went unnoticed
It was not immediately clear how the allegations in the lawsuit were able to unfold without the oversight of anyone in the district.
John Porter, former Detroit Public Schools superintendent who served on an advisory board after a 1999 state takeover of the district, said the advisory board did not audit the district's budget and would have been unlikely to uncover such allegations.
"If anyone should've found a mistake like that, it should've been in the school district," he said. "Second, it should've been the auditors. The auditors review the budget in detail over some months. That was not our role."
Bertram Marks, attorney for William Coleman III, who became interim CEO of the district in 2005, said Coleman discovered the problems in the risk management department and reported the findings to law enforcement. Coleman served as superintendent until he was fired in March 2007.
"Coleman ... did the prudent thing by bringing in an outside investigative firm," Marks said. "Once he received the results, he immediately reported the results to the board and contacted law enforcement.
"He was critical to that investigation and he was rushed out the door .... He should not be vilified; he should be praised," Marks said of Coleman, who later filed a whistle-blower lawsuit.
Coleman recently pleaded guilty to a misdemeanor in an unrelated case for attempting to influence a grand jury.
Ken Burnley, who was superintendent from 2000-05 and had broad responsibility for the district's finances, could not be reached for comment.
Joyce Hayes-Giles, vice president for the school board, said if the allegations are true, the fraud occurred because "there was a lack of controls. There was no oversight. It's just amazing that it was done that way. There were no purchase orders and nothing to trace what (they) were doing."
Hayes-Giles said the district now has more controls in place because such transactions require purchase orders and board approval.
'There are so many lies in here'
Contractors implicated in the scheme, according to the lawsuit, include Bond, White, Washington & Washington Inc., a Detroit concern that runs numerous specialty consulting businesses. It is alleged that through its subsidiary Associates for Learning (A4L) and in partnership with a Wisconsin company called eCare Solutions, Hill arranged a $150,000 contract for a voluntary wellness program aimed at the district's 3,000 employees.
The lawsuit claims the program reached far fewer employees than promised yet payments to A4L grew to $3.3 million. The suit also alleges Hill received a kickback of up to $30,000.
One of the company's founders is Sherry Washington, well known for her membership on numerous institutional boards including the Detroit Institute of Arts Friends of African and African American Art Auxiliary, and as president of the Detroit Public Library Commission. Washington also operates an art gallery in downtown Detroit. Washington's partners are listed in the lawsuit as Sally Jo Bond, Marilyn White, and her sister, Dr. Gwendolyn Washington.
Sherry Washington maintained her innocence on Tuesday.
"I have done nothing wrong. It's my company they are alleging. We have done nothing wrong," she said. "People need to do a better job managing their lives and stop trying to castigate others. I do think it's a frivolous lawsuit... We are all totally innocent."
The lawsuit claims that the principals of BWW&W and Hill are friends or business associates. Washington said she has never been friends with Hill.
"I may have seen him 10 times in the last 20 years," she said. "That's why I'm saying there are so many lies in here."
Gavin Quinnies, president of eCare Solutions, Inc. in Thiensville, Wis., said: "I don't know why we were named. We've done nothing wrong."
Quinnies said his company has all the documentation for services provided and added that his company has "no special relationship with any other person or entity other than the school district." Other companies named in the lawsuit could not be reached or declined comment.
Suit claims wire transfer system
Under Hill, the lawsuit alleges, the Risk Management Office created its own computer network separate from the school district's and maintained offsite backup computers that were not accessible or even known by other district officials. This system was maintained by New Bridge Multimedia Inc., a defendant in the lawsuit.
A phone number associated with New Bridge Multimedia Inc. in Detroit is disconnected. A person answering the phone for the firm in Warren took a reporter's information and said he would pass it to "them."
The district contends that Hill manipulated a shortcut created in the 1990s within the school district's accounting process to expedite insurance and workers compensation claim payments to staffers. The lawsuit says Hill authored a memo that allowed him to use the wire transfer system to bypass the district's purchasing department oversight and directly issue contracts and payments through the cash disbursements department. The lawsuit claims Hill hid the transactions through changes he made in departmental invoicing systems.
During his career with Detroit schools, Hill gained a respected reputation. In 2005, the Public Risk Management Association (PRIMA) named him Risk Manager of the Year.
"Stephen Hill is someone others in the industry can look up to and emulate," said Marshall Davies, who was PRIMA's interim director at the time.
Detroit News Staff Writer Jim Lynch contributed to this report.
The defendants
Stephen Hill: From 2001-07 ran Risk Management, which allegedly maintained separate computer systems and records to conceal payments to several vendors that may not have delivered promised goods or services.
Christina Polk-Osumah: Hill's second-in-command, she is accused of facilitating an alleged scheme to pay Hill's cronies.
Lawrence Long: CEO of Long Insurance Services. A "longtime friend" of Hill, according to the suit
Long Insurance Services: Detroit-based insurance broker that contracted with DPS in various capacities, including as an insurance broker.
Bond, White, Washington & Washington Inc.: Detroit-based firm that did business as Associates for Learning (A4L), an education consulting firm. The group submitted a proposal to Hill and/or Risk Management to offer a "voluntary wellness program" to DPS employees. Principals are Hill's "friends or business associate," suit alleges.
Sherry Washington: Co-founder of BWW&W and operates an art gallery in Detroit.
Marilyn White: Co-founder of BWW&W. Lawsuit says principals of BWW&W are Hill's "friends or business associates."
ECare Solutions Inc: A wellness program affiliated with BWW&W.
Dr. Gwendolyn Washington: Southfield physician, Sherry Washington's sister, and partner in BWW&W and A4L.
Sally Bond: Partner in BWW&W and A4L.
New Bridge Multimedia Inc: Eastpointe firm that performed IT services for Risk Management. The system they set up was inaccessible to DPS officials and its general IT department, the suit alleges.
Spectrum Financial Group: Financial planning and insurance firm that Hill ran while owner Robin Dysart was battling cancer. Lawsuit calls Dysart a personal friend of Hill. Spectrum shared an address with a Risk Management office the district says it was unaware existed.
Arthur J. Gallagher & Co: Ill.-based insurance broker where Hill worked in 2005 and 2006.
Source: Detroit Pubic Schools and Wayne County Circuit Court records
— Doug Guthrie and Jennifer Mrozowski
Detroit News
2008-06-02
http://www.detnews.com/apps/pbcs.dll/article?AID=/20080702/SCHOOLS/807020349
INDEX OF OUTRAGES
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