Sunday, March 9, 2008

Perhaps “Rubber Stamping” should be a crime too!

When reading stories like I’ve included below, the first thought that occurs to many might be, “How does this kind of stuff happen?” Apparently that doesn't occur to reporters, though, because the stories spotlight the criminals but often fail to consider who else might be responsible – not in a criminal way – but in a negligent way.

Consider this story regarding the Chippewa Valley School District:

Macomb Daily: 3 ½ years for embezzler (03/01/08)

The executive director of support services embezzled over $2.3 million dollars from the district by inflating the cost of the materials he was responsible for purchasing.

According to the article, he did this at least 40 times, based on the 40 phony invoices found in his house. That would average $57,500 per invoice, which is a spending level that would – or should – include some approval/oversight at the school board level.

I’d bet that there were 40 instances were there was a unanimous round of seven AYE votes approving those fraudulent purchases, or the invoices. There’s a good chance that not one single question was asked before each of the 40 approvals.

School boards will typically refrain from asking probing questions about bids. They're trained to view that as “micromanaging”, which is frowned upon. Or, they're told that questioning a bid suggests a lack of trust in the administration. Their ivory tower approach tends to leave these “pesky details” to the superintendent and the administrative team, and purports to then hold them accountable.

That’s appropriate to a point, but the flaw in that approach is that it ignores or discourages the need – actually the responsibility – to engage in reasonable oversight.

Contrary to the widely held belief that it’s “rude” to question bids
, it’s instead prudent to ask questions, as this Chippewa Valley example so clearly illustrates. Sadly, there are very few questions asked at school board meetings.

What's more shocking – yet typical of boards – is that after being duped out of $2.3 million, we're left to wonder whether the Chippewa board learned it’s lesson. One local parent, sharing her efforts to ask what appear to be reasonable questions about other unusual purchases and expenses, maintains that the board and administration are stonewalling.

If the board did indeed rubber-stamp 40 fraudulent purchases, then shouldn’t they be held accountable for a dereliction of duty? And for all the tough rhetoric on “holding the superintendent accountable”, local residents report no evidence that would suggest anyone has been held accountable for anything.

The article concludes with:

Superintendent Mark Deldin addressed the court, urging the maximum punishment be imposed. He said Tague's thievery had "significantly depleted" financial resources for education and eroded public trust.

It sounds to me like Tague was not the only one responsible for eroded public trust. And restoring that trust is going to take more than moving proclamations to a judge. A more proper place to start is the school boardroom.

Deldin goes on to say, "The essence of his acts was to steal money from our children and from our community.”

What about those who were supposed to be there to protect the interests of the children and the community from that very risk? Perhaps Tague is the only criminal, but should he be the only one held accountable?

Finally, I wonder whether Tague’s sentence could go further. Wouldn't it be nice to have sentences for crimes like this include a "recovery" component? Maybe he should instead be sentenced to uncover sloppy financial practices in public schools throughout the state and given a sentence that is benchmarked to the dollars he recovers.


I've pasted below the full article in case the link doesn't work.


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PUBLISHED: Saturday, March 1, 2008
3 1/2 years for embezzler


Ex-purchaser for Chippewa Valley sent to prison, ordered to pay back $2.3 million for rigging bids


By Mitch Hotts
Macomb Daily Staff Writer


When James Tague was allowed to speak before he was sentenced in U.S. District Court Friday morning for bilking a Macomb County school district out of more than $2 million, he apologized to his family, friends and the court.

But he never extended those apologies to Chippewa Valley Schools, the Clinton Township-based district that paid him $109,000 a year to act as executive director of support services to purchase furniture and equipment.

Instead, according to federal prosecutors, he purchased the materials, boosted the price by as much as 300 percent and sold it Chippewa Valley, pocketing the profits.

"I should have known better," Tague said at his sentencing hearing.

U.S. District Judge Paul D. Borman ordered Tague to serve 42 months in a federal prison, pay $2.3 million in restitution to the school district along with a $75,000 fine and serve three years of supervised release once he gets out of prison.

The judge's sentence fell in the middle of a 37- to 46-month guideline that was part of a plea-bargain agreement reached between Tague and the U.S. Attorney's Office in Detroit.

"I don't think he'll ever think about doing it (stealing from schools) again," Borman said.

Tague, 62, of Independence Township in northern Oakland County, was charged by federal prosecutors with defrauding a federally funded program.

While employed as the purchasing agent for the 15,400-student district, he was responsible for obtaining the lowest qualified bidder for supplies, furniture and equipment.

Instead, he set up his own companies to rig the bids and charged the district markup costs that amounted to $2.3 million. In some cases, he also charged for delivery.

Defense attorney Neil Rockind disclosed a sentencing memorandum he wrote to the court had been sealed because it contained personal information about Tague, including Tague's admission that he has a problem with alcohol. The judge unsealed the document, but a copy was not immediately available.

"There can be good people with good hearts and minds with good intentions and they go wayward," Rockind said. "That's exactly what happened here."

Under the plea bargain, Tague was ordered to repay the $2.3 million and seek substance abuse counseling. He could have faced up to 10 years behind bars and a $250,000 fine if he did not agree to the plea bargain.

Tague agreed to surrender properties he owned including a condominium in Bonita Springs and an apartment in Las Vegas. In court on Friday, he turned over $100,000 from a home equity loan from a property in Fort Myers Beach, Fla.

Arlyce Tague, his wife, also agreed to surrender her interest in the property.

School officials said Tague was fired in 2006 after they received an anonymous tip about the rigged bids and they contacted the FBI. Federal agents conducted an investigation and later served a search warrant at some of Tague's Oakland County businesses where they seized 40 invoices for goods shipped to Chippewa Valley.

Agents discovered markups ranging between 12 and 300 percent with the average increase being about 46 percent, said Assistant U.S. Attorney Michael Bullatto.

"He doesn't have the right to take even one dime from this school district. Every dollar should be restored," Bullatto said.

Chippewa Valley Superintendent Mark Deldin addressed the court, urging the maximum punishment be imposed. He said Tague's thievery had "significantly depleted" financial resources for education and eroded public trust.

"The essence of his acts was to steal money from our children and from our community," Deldin said.

Tague, who left with his family and a handful of supporters, was allowed to remain free on personal bond. He is expected to report to a federal prison within 90 days.

6 comments:

Bill Milligan said...

Mike, that is scary indeed. What's even more troubling is that it took an "anonymous tip" to bring this to light...how long would have gone on otherwise?

Yikes.

Anonymous said...

Another looming large question in this story is how did he get the funds re-directed to his own company?

The fact that the embezzler set up "his own company" in order to perform the theft and then went undetected is disturbing.

Alot of folks were asleep at the wheel here.

Larry Martin said...

Easily made transparent by publishing the district checkbook online.

This is now a nationwide movement:

http://www.peytonwolcott.com/NationalSchoolDistrictHonorRoll_AskingYourDistrict.html

In Michigan:
Montrose, St. Clair County RESA, Michigan Intermediate

Anonymous said...

Someone still needs to link the "shell" company name to an individual that has their hand in the cookie jar.

It would be like digging through all the text messages in another scandal.

A persistant person can get the info now but the on-line check book for ALL government is a great idea.

Bill Milligan said...

While I don't have a problem with transparency or calls for that...I find it ironic that 501 groups are the ones leading the charge on this--groups that hide their own memberships and funding.

Things that make you go "hmm..." as the old song used to say.

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