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Sex, scams and scandals: Another day in Detroit politics

What do you call a Detroit public employee who:

A. is not under investigation?
B. is not under indictment?
C. is not incarcerated?
D. is not awaiting sentencing? Or,
E. is not a convicted felon?

You call him (or her) an applicant!

If your head is spinning over the most recent revelations involving the Detroit Public Schools (the Stephen Hill scam) and former Kwame Kilpatrick Chief of Staff Christine Beatty (the recipient of $100,000 from the ubiquitous Kilpatrick Civic Fund), well, your sleaze-o-meter may simply need a tune-up.

And no wonder. Trying to keep up with the unending public displays of fiscal defilement in the Motor City is not a task for the faint of heart.

Let’s quickly dispatch with the Beatty affair. She pleaded guilty to two felony charges in the text message scandal but refused to cooperate with prosecutors investigating Kilpatrick. Beatty then incorporated her own firm, Maiyen Consulting, on Jan. 28, 2008 -- reportedly within hours of resigning from her $142,813-a-year position.

In a story on Thursday, the Detroit Free Press reported that a federal tax report filed by the Kilpatrick Civic Fund indicates that the fund paid “at least” $100,000 to Maiyen Consulting as a "publication and print consultant." No exact amount was listed.

Well, Beatty did perform work on an annual report for the Fund. Maybe she did a REALLY good job.

Considering that the Kilpatrick name is involved -- the non-profit Kilpatrick Civic Fund (Civic?) is administered by the former mayor’s sister, Ayanna Kilpatrick -- the element of surprise is missing despite the attendant stench.

"Certainly, the transaction appears suspicious given the timing of it, but that doesn't mean it's illegitimate," Wayne State University law professor Peter Henning told the Free Press regarding the money paid to Beatty's firm. "Whether it's a questionable payment or not, by dotting the I's and crossing the T's, it would be very difficult trying to pierce through that absent someone saying it was a hush money payment. As long as it's documented properly, that strengthens the claim that it's a legitimate transaction. It's suspicious, but it's just timing."

Well, there you go. This allegation merely red-lines the stencho-meter (for now); it’s only suspicious. Of course, neither Ayanna Kilpatrick nor other Civic Fund officials would return calls or e-mails (neither to examiner.com nor to the Free Press). That’s another constant among Detroit’s reprobate -- er, ruling -- elite. They seem quite capable of dialing a phone or sending an e-mail when demanding to be paid their loot or when texting sweet nothings to subordinates, but they become suddenly techno-phobic when a straight answer is demanded of them by the public.

Beatty, who moved to Georgia, reportedly has been struggling financially since her fall from grace. Others within the current Detroit power structure find nothing untoward about the entire affair.

Detroit City Councilman Kwame Kenyatta said the payment to the consulting firm sounded like "something that was done to help a sister out."

He then laughed, according to the Free Press, when told that Beatty’s company was listed at her mother's address, and that the firm name -- Maiyen -- appeared to be a combination of her daughters' first names.

"They found a way to continue to support her without it coming from the city and not out of (Kilpatrick's) pocket," Kenyatta said.

Oh, well. Perhaps $100,000 is a laughing matter in Detroit politics. It’s not $57 million, after all.

The usual suspects
Speaking of $57 million scams, the most perfidious aspect of the one cooked up by former DPS director of risk management Stephen Hill is the relationship between Hill and Associates for Learning, a wellness company connected to downtown gallery owner Sherry Washington and her business partners. According to documents in a Wayne County Circuit Court lawsuit brought by DPS, Associates for Learning received $3.3 million to “educate and motivate” school district employees on the benefits of healthy living. The FBI is now investigating.

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. Fewer than 150 did so.

No “wellness” or “education and motivation,” it seems. Just $3.3 million for a survey of 150 people. Hmm. That’s $22,000 per survey. Hope those were REAL good answers.

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. Does that sound familiar? 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. Calls and e-mails by examiner staff on Monday to Washington’s Library Street gallery were not returned.

Washington's Detroit office also was raided by the FBI in 2007, in addition to an office run by her and her partners. An Internet search for Associates for Learning revealed nothing but an address (the same as Washington’s art gallery) and a disconnected phone number.

Hill honored by his peers -- really
Also intriguing is the fact that Hill was honored in 2005, when the Public Risk Management Association (PRIMA) and Trident Insurance Services LLC named him Public Risk Manager of the Year. The following year-- after leaving the DPS -- he was featured in a cloying hagiography by Risk & Insurance Magazine. The Dec. 1, 2006 online tribute was penned by Mindy W. Toran, a veteran business and insurance writer whose online library of articles seems to have stalled in October 2007.

Perhaps her portrait of Hill and the subsequent revelations that he wasn’t actually a fiscal guru contributed to Toran’s lack of subsequent articles. She introduced Hill as a risk manager who “has made the juggling act of running a major urban school system look easy.”

Sure. Fifty-seven million dollars can make any job go a bit more smoothly.

Toran’s soaring platitudes of Hill read like a cruel, oxymoronic epitaph just waiting to be written.

"The deputy city administrator job (in Flint, Mich.) actually gave me some political clout and provided me with invaluable experience in executive municipal management and local politics," Hill told Toran.

Well, Detroit certainly thanks Flint for Hill’s tutoring.

Toran went on to describe Hill’s cunning in saving money for his employers at DPS.

“Hill's success in keeping costs in check has carried over to DPS,” Toran wrote. “He has reduced the cost of workers' compensation claims from more than $40 million to just $8.7 million. . .”

Gee, that’s more than $31 million in savings. Wonder where that went?

Toran also described the ingenious, non-DPS-based computer system that Hill and his cohorts implemented.

“’DPS risk management developed a centralized database to track claims, loss reports, property valuations, floor plans, policies and procedures, and site-based operation descriptions,’ Toran quoted Hill. ‘We now manage all of our risks based on the information in that database.’”

That would be the same database Hill created rather than using the district's information technology department. Hill created his own computer system, which he then used to hide improper financial transactions, the suit alleges. Hill was able to circumvent the district's purchasing rules to approve more than $57 million in spending for unauthorized contracts through wire transfers.

Emergency Financial Manager Robert Bobb said in a statement that the Hill case is another example of how "DPS has been a place where people use the district as their personal banker and where there has been a cesspool of corruption, and in cases such as this one, both national corporations and local individuals took advantage of Detroit Public Schools."

The gory details
Other sordid details amount to an all-too- tiresome Detroit corruption scandal. Hill received luxury vehicles and other kickbacks, the suit claims, and some vendors who benefited were friends or associates of Hill's or relatives of Christina Polk-Osumah, Hill's assistant.

When Hill left the district in September 2005, it’s alleged he received a send-off bash -- attended by 200 of his closest friends and consisting of Chilean sea bass, tenderloin, shrimp, champagne and liquor -- that cost the DPS $40,000, according to the suit.

The suit was filed in Wayne County Circuit Court names in June 2008 and names Hill; Polk-Osumah; two international insurance companies; Detroit insurance executive Lawrence Long and his firm, Long Insurance Services, and Washington and three partners, among others. The suit seeks to recoup the district's money.

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 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.

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 which 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. Also, 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.

As the suit winds down and the FBI investigation heats up, Hill may want to re-read the Toran’s Risk & Insurance tome. It may be the final chapter in his eulogy.

"’Stephen Hill is someone others in the industry can look up to and emulate,’ Toran quoted Marshall Davies, PRIMA's former interim executive director. ‘He has demonstrated his role as a leader in the public risk arena, and came out on top of the criteria collectively used to identify the Public Risk Manager of the Year.’"

We should all hope that Mr. Davies and his PRIMA group are a bit more astute in predicting actual industry numbers and trends. Then again, $57 million is lot to look up to.

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