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DPS vendor scam keeps it all in the family

Sherry Washington seems to have expensive tastes -- which DPS has allegedly paid for.
Sherry Washington seems to have expensive tastes -- which DPS has allegedly paid for.
Photo courtesy of tellusdetroit.com.

Family planning is alive and well in the Detroit Public Schools.

In what WDIV’s Rod Meloni so eloquently described as a “crackdown of the Family and Friends Program in the City of Detroit,” Wednesday’s indictment of four individuals and several former DPS vendors reveals details of a picture that has been emerging for years.

A federal grand jury indicted Stephen Hill, former chief of risk management at Detroit Public Schools, charging him and three others with eight counts of crimes involving bribery, fraud, extortion and money laundering of more than $3 million, according to U.S. Attorney Barbara McQuade.

Also charged in the 15-page indictment, unsealed Wednesday, are Hill’s onetime assistant, Christina Polk-Osumah, 59, as well as Detroit businesswoman Sherry Washington, 53, and her sister, Dr. Gwendolyn Washington, 66, of Southfield. The Washingtons are accused for their roles as partners in Associates for Learning, a vendor hired -- minus a bidding process -- to administer a health awareness program for the school district, but which district officials claim performed little work while receiving more than $3 million in payments.

Hill and Polk-Osumah appeared in federal court Wednesday. Polk-Osumah was arraigned; Hill's arraignment will be conducted Friday. If found guilty, they each face up to 20 years in prison.

Allegations against Hill, the Washingtons and various vendors were reported last month by examiner.com, including accusations included in the district’s pending civil lawsuit that Hill, 58, and Polk-Osumah diverted more than $57 million in improper wire transfers to a dozen vendors, including the Washingtons’ Associates for Learning.

The indictment alleges crimes committed in 2005 and 2006, and names Hill and Polk-Osumah as the architects of a scam in which Hill set up a separate computer system and secret offices outside the district to conceal a scheme to wire millions of dollars to vendors who were close business associates or personal friends and family members of Hill or Polk-Osumah.

Sherry Washington owns the Sherry Washington Gallery on Library St. in Detroit, which also was the address of Associates for Learning. Gwendolyn Washington, M.D., is a primary care physician with an office on Northwestern Hwy. in Southfield.

According to documents in a Wayne County Circuit Court lawsuit brought by DPS -- still pending -- Associates for Learning received $3.3 million to “educate and motivate” school district employees on the benefits of healthy living.

Associates for Spending
The company's bank account routinely was debited for expenses ranging from such pedestrian purchases as gas, groceries, car washes, shoe repairs, dry cleaning, manicures and pedicures, to more luxurious items -- $1,733 at Louis Vuitton in Troy, more than $16,000 in the Caymans for unidentified travelers, and $1,609 at a duty-free shop in Windsor.

The company also spent thousands more at Marshall Field's and Nordstrom, jewelry stores and restaurants, including $1,256 at Seldom Blues in Detroit. It picked up the tab for iTunes downloads and spent money at a BMW dealership, Comerica Park and Circuit City. It also withdrew cash at casinos.

While DPS contends Hill received kickbacks of up to $30,000 from the firm, which was to have district employees participate in a health assessment survey, the federal indictment accuses Hill of receiving $157,000 in kickbacks from the Washingtons’ Associates for Learning group. Fewer than 150 employees took advantage of the wellness program.

This isn’t the first time, however, that Washington has been linked to shady dealings with Detroit Public Schools. She and her gallery came under suspicion in 2007 when the district spent $1.6 million on artwork provided by Washington.

Most of the spending took place under former school chief Kenneth Burnley, who told reporters at the time that he couldn’t recall approving the contracts. The Sherry Washington Gallery of Detroit, by the way, is the same gallery from which the Cobo Center made a controversial purchase of more than $500,000 in artwork in 2004.

The 2007 purchases of $1.6 that slipped Burley’s mind were divvied up, apparently placed in new schools built with bond money in the 1990s, district spokesman Lekan Oguntoyinbo told The Detroit News at the time.

Washington's Detroit office also was raided by the FBI in 2007, in addition to an office run by her and her partners. Phone calls to Associates for Learning revealed a disconnected number. Messages left at Dr. Gwendolyn Washington’s office were not returned.

The federal investigation into the DPS risk management department is continuing.

"Stealing funds from a public school in these times is particularly egregious, as it threatens to rob our children of their futures and ultimately compounds future crime problems,” McQuade said in a statement.

McQuade credited the FBI, the Internal Revenue Service, the Wayne County Prosecutor's Office, and the cooperation of DPS officials in helping to "weed out corruption" in the school district, according to the Detroit Free Press.

Robert Bobb, the district's emergency financial manager, said in a statement that the DPS hopes the indictments "send a message that the level of corruption that has been allowed to flourish in Detroit Public Schools in the past will no longer be tolerated. We will continue to work quickly and aggressively to root out corruption wherever we find it."

DPS suit triggered investigation
DPS is suing Hill and a dozen vendors in an attempt to recoup money. Among those named are Detroit businessman Lawrence Long and his company, Long Insurance Services, the Washingtons and their partners in Associates for Learning, and two large insurance and risk management companies.

Hill reportedly was given a $40,000 farewell party when he left DPS in 2005. Hill also has acknowledged in the lawsuit that Polk-Osumah gave him two cars worth nearly $90,000. DPS says companies run by her relatives were among the vendors that received money through the district’s risk management office. Polk-Osumah now is accused of extortion relating to an alleged $20,000 birthday party she threw for her mother, in addition to another retirement party she gave her mother (who, ironically, retired from the DPS).

Officials in Cook County, Ill., shortly after allegations arose last month about Hill’s involvement in the scheme, announced that Hill had been offered a job as the county’s director of risk management. The county rescinded the offer after a Google search turned up the Free Press story. A county spokesman said the county had conducted a criminal background search on Hill, but had not checked into civil lawsuits and had not called DPS to check Hill’s performance in Detroit, according to the Free Press.

Long's firm allegedly received roughly $25 million in wire transfers, most of it, $15 million to $17 million, for insurance premiums. The district claims the rest was for work that was "woefully inadequate" and contends that Long also paid Hill a $115,000 kickback.

The FBI has been investigating the alleged fraud scheme since at least 2007, according to federal court records.

Randall Phillips, a Bingham Farms lawyer who represents Long Insurance and Lawrence Long, told the Free Press last month that Hill was paid for consulting work and not as a kickback. He also said the allegations against Long and his company are false and they will be "vindicated when the case is brought to trial."

Hill performed risk management work for DPS in the mid-1990s and returned in 2001, when the DPS created a separate risk management department and appointed Hill director.

His office at district headquarters in the Fisher Building had fewer than five employees, handling mostly worker's compensation claims and DPS insurance policies.

Hill quickly created two other offices, one next door to Long's insurance office and a second inside the offices of a second vendor, according to the lawsuit. Hill eventually hired 25 contract workers from Long's insurance office.

Delores Brown was in charge of the cash management office, and told DPS lawyers that she thought the payments were proper because they’d been authorized by a department supervisor. Her boss, then-DPS chief financial officer Dori Freelain, approved any deals Brown questioned.

Of course, no Detroit political tussle would be complete without the requisite sexual component. Freelain, who also was Hill's boss, and Hill had a sexual relationship at one point, Hill said in his deposition.

Hill left DPS, took jobs with vendors
In 2005, Hill left DPS to take a series of jobs with vendors who had benefited from his district contracts.

Court records show that in October 2005, Hill became an executive vice president at Gallagher & Co. in St. Clair Shores, one of the vendors that received millions in wire transfers from Hill. Hill received a $200,000 salary with a $350-a-month car allowance.

While working for Gallagher, Hill received $115,000 by Long Insurance to author a 15-page report on school security for then-Detroit Mayor Kwame Kilpatrick. DPS depicts the payment as a kickback for the lucrative contracts to Long's firm, which Long's lawyer disputes.

By May 2006, Hill left Gallagher to become a senior vice president at Marsh & McLennan in Detroit, again making $200,000 a year.

While at Marsh, the company loaned Hill to DPS as an unpaid consultant, and he resumed running the risk management department. The arrangement constituted a conflict of interest, DPS attorneys now claim. Hill left Marsh in June 2007 during the DPS investigation of risk management

Polk-Osumah remained with the district until October 2006, when she was discharged, according to lawsuit records. She was given office space by New Bridge Multimedia Inc., which Hill had hired by the DPS to do IT work. From her New Bridge office, Polk-Osumah had access to the school district's risk management database and continued to perform risk management duties, the suit claims.

New Bridge also subcontracted with companies connected to Polk-Osumah's relatives, with Polk-Osumah authoring the language of the bills, the suit contends. In addition, at various points in their relationship, Polk-Osumah bought Hill expensive gifts, lawsuit records show. Hill admitted in a deposition that in July 2005, when both were at DPS, Polk-Osumah bought Hill a 2005 Ford Mustang GT convertible, costing $47,000. Six months later, after Hill was at Gallagher, she bought her former boss a $40,000 Dodge Durango.

Asked at his September 2009 deposition why Polk-Osumah would lavish such gifts on him, Hill said, "I've asked that question myself many times. She was very supportive and wished to provide me with that token." He testified -- surprise! -- that he also had an affair at one point with Polk-Osumah.

Hill traded in the cars for a lease on a $112,000 Cadillac XLR. The Mustang and Durango obviously held little sentimental value.

Bobb called the continuing corruption syndrome in Detroit a case of DPS employees using the city as their own personal ATM.

Time to stop the withdrawals.

Comments

  • jackie 4 years ago

    I hope these are not washington sisters from Dwyer School on the north end that I grew up with. They were such a good family.

  • 2through 3 years ago

    It's a shame, when the children of Detroit were lacking the basics such as toilet paper and books, these criminals were robbing the store blind. Life in prison would be adequate punishment for all involved since one can't measure the damaged bestowed upon the children and reputation of the City of Detroit for decades to come.

  • Anonymous 3 years ago

    Be careful when you make such comments you dont know this people at all