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Saturday, April 09, 2011

Update on Pottergate

I attended an event on Thursday by a group called First Thursday which is a black community group that supports its community businesses and groups.  Their speaker was King County Prosecutor Dan Satterberg.  I attended because it was advertised that he would speak about Pottergate.

I had hoped that some of the vendors named in both the Board investigation and audit would be there but no, unfortunately, it was under-attended.   I would have liked to ask them some questions.  (However, there had been 3 of them on the speakers list for the Board meeting but they were waitlisted and did not speak.  They all had put down Small Business Works as their topic.  That would have been interesting.  One other speaker on the list did state that the district needs to do more to include black-owned businesses in their outreach.)

Initially, Mr. Satterberg was speaking on the John T. Williams shooting (the Native American woodcarver gunned down by a SPD officer). 

The update on Pottergate is that Mr. Satterberg stated the following information:
  • The Board came to him in December and asked for help.  A SPD detective was assigned to the case.
  • They have subpoenaed hundreds of records from banks in an effort to see exactly where money went*.  After the meeting, one of Mr. Satterberg's aides told me that banks aren't exactly quick on these kinds of requests and that the forensic audit would be tedious.
  • Mr. Satterberg stated he thought they might have some answers in 6 months.
Before I asked my question, I pointed out to the audience that members of the Board knew there was an issue before December and I asked that they keep that in mind for the elections in November.

 I asked him to explain how he would make the case between an issue that belongs in civil court versus in the criminal courts.  Meaning, the district had contracts with these vendors.  It is not against the law to do poor quality work (except for safety issues).  If the district felt that a vendor has not fulfilled their contract, that would be up to the district to sue them in civil court.  (I personally feel that this won't happen as it would cost too much in legal fees to make it worth it.)   

Mr. Satterberg agreed and said what would make it a criminal case is if both sides had conspired to created a contract based on little work or no work and yet get paid.   Proving that might be very hard to do without witnesses or evidence (like e-mails).  What is also troubling to me is that perhaps some of the vendors perceived that Silas didn't actually care a lot about the quality of work (but he cared about handing out a lot of contracts) and that the vendors may have thought "Easy money.  I'm not going to do much here."  But if there was no collusion, it is unlikely anyone could be criminally prosecuted. 

Same for Fred Stephens.  He may have been lousy in his oversight of Potter but unless there is evidence that he and Potter colluded to create a way to funnel money to these vendors for little or no work, there's no prosecuting Stephens. 

That leave Potter holding the bag.  He did do at least two illegal things (taking the district's money from the check from Tacoma public schools and trying to put it in his own account and misrepresenting himself as working for the district when he was working for himself).   He did give the check back (under pressure) but I'm not sure that doing that legally gets him off the hook.  At any rate, not a lot to charge him with doing.

*I suddenly realized that I need to go back and look at the audit report.  I'm not sure anyone has done a forensic audit of the Small Business Works and accounted for where all the money went from 2008-2010.  That's the timeframe when SBW morphed into the big spending monster it was.  The spending went way up in those years and I wonder if all of it has been accounted for so that the district at least knows where it all went (at least on paper but maybe not in actuality). 

18 comments:

drwilda said...

Melissa,

Pottergate is just one reason of a host of reasons why a current forensic audit of the district is necessary. I have not met with Dr. Enfield, but my interests are a forensic audit of the district and a plan for southend schools. I hope that you join in a request for a forensic audit of the district

Kathy said...

A forensic audit of district finances and operations should be considered.

Audits have been the only method to assure transparency of the district's operations and finances.

The district needs to be held accountable and transparent. Public assets need to be protected.

mirmac1 said...

Third thing he did illegally, was pass off work on his spin-off's office space as somehow a district obligation. If you invoice a charge to a public agency that is not legit, that is a no-no.

BTW, use of the term "forensic" audit is misplaced. Does anyone really know WTH that means? Sure sounds good BUT. No, what we need is managers who actually know how to create streamlined, effective adminitrative departments that don't piss away money. Now.

hschinske said...

http://en.wikipedia.org/wiki/Forensic_accounting

It's a standard term in the field, as far as I can see.

Helen Schinske

mirmac1 said...

"Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. "

I believe it is used with a specific goal in mind like "who spent what where and why?" Bernie Madoff got a forensic audit. I could see its purpose in the area of whether philanthropic grants paid for all the items some have suggested. It clearly looks backwards.

I have urged a new set of eyes look forward. Build a streamlined organization that uses our limited dollars efficaciously for educating our children. Enough time and money has been frittered away on reform and initiative du jour.

Michael H said...

Holy Crap, mirmac1! I finally agree with you on something!!! I knew it was a sunny day for a reason!

"BTW, use of the term "forensic" audit is misplaced. Does anyone really know WTH that means? Sure sounds good BUT."

Definitely misplaced and misused. Despite the Wikipedia definition - which, of course, relying on wikipedia for a definitive explanation is not a good practice.

One thing to remember or keep in mind for those that want a "comprehensive" forensic audit: Who is going to pay for it? This is not a snarky or smart-alec question. And, please no comparisons about how much it costs to do this or that. Just who is going to pay for it? Should a CPA firm do it pro-bono? Or should they charge the district $200-$300/hr and up (sounds like some of those Potter contractors)? Curious as to what y'all think.....

drwilda said...

Since the tag line is "follow the money" the question is why not follow the money and find out where it leads.

There is plenty of information about the field of forensic accounting:

1. What is Forensic Accounting ?


The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting.

"Forensic", according to the Webster's Dictionary means, "Belonging to, used in or suitable to courts of judicature or to public discussion and debate."

"Forensic Accounting", provides an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution.

Forensic Accounting encompasses both Litigation Support and Investigative Accounting.

As Forensic Accountants, we utilize accounting, auditing and investigative skills when conducting an investigation. Equally critical is our ability to respond immediately and to communicate financial information clearly and concisely in a courtroom setting.

Forensic Accountants are trained to look beyond the numbers and deal with the business reality of the situation.

Other Terminology

Forensic Investigation

The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law. A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline.

Forensic Audit

An examination of evidence regarding an assertion to determine its correspondence to established criteria carried out in a manner suitable to the court. An example would be a Forensic Audit of sales records to determine the quantum of rent owing under a lease agreement, which is the subject of litigation.

Internal Audit

An audit performed by an employee who examines operational evidence to determine whether prescribed operating procedures have been followed.

External Audit

An audit performed by an auditor engaged in public practice leading to the expression of a professional opinion which lends credibility to the assertion under examination.

So, if you still haven't got a clue, try Google.

As to cost, the district should be seeking a foundation grant. Surely, this would be an interesting case of how a large urban district could be put on a firmer financial footing.

Remember the key is to be able to trace the money's movement through a given system. Of course, some folks don't want those answers.

drwilda said...

Ihope this wasn't posted 2X since my original comment appears to have been lost. The tag line is to "follow the money" so why not trace the movement of the money through the system? If you want a good explanation of forensic accounting and forensic investigation, go to: http://www.forensicaccounting.com/one.htm#start or just plain use Google.

As to cost, why not apply for a foundation grant? Surely Seattle Public Schools would be an interesting case for putting a large urban school district on firmer footing?

Of course, some folks really don't want to follow the money and find out where it leads.

seattle citizen said...

Michael H asks who might pay for a forensic audit. It would benefit students to follow the money from SPS to contractors (and vice versa.)

I propose this is right up the alley of the Gates or Broad foundations. They're all about maximizing return on our educational dollars, I'm sure they're eager to follow the money from themselves, from SPS, the city, the feds and other money pots, to the Urban League, Strategies 360, the Alliance, and other contractors.

seattle citizen said...

Oh, and NWEA. They're a contractor, too. Who benefited, either financially or professionally, from moneys given to NWEA?

hschinske said...

Fine, if you don't like Wikipedia, go look it up in Encyclopedia of white-collar & corporate crime: A-I, Volume 1, by Lawrence M. Salinger, Auditing for Dummies, by Maire Loughran, or Fraud Auditing and Forensic Accounting, by Tommie W. Singleton and Aaron J. Singleton.

Helen Schinske

mirmac1 said...

Oh Oh, Michael H agrees with me? Where did I go wrong?....

I'll be a little more specific, in a situation like the RSBDP debacle, the prosecutor's office (if they choose to file charges) will perform a forensic audit.

To call for one for the entire district, that's money mispent for dubious gain.

If Robert Boesche does anything, he must work at reconstructing each department, starting from zero. Cut the fat and the crap. Tell the leeches to go back to their think tanks. The district must undergo zero-based budgeting to get to 6% or LESS!

drwilda said...

One person's "dubious" gain is another person's understanding where money is actually spent and whether money is spent effectively and legally. IF the prosecutor does a forensic audit it will be limited and specific. Among the questions which should be answered are whether some schools or programs are disproportionate funded at the expense of others and whether there are more conflicts of interest yet to be discovered? A true follow the money scenario could end up surprising some folks who think they know where the trail leads. It is interesting that some are so dismissive, do you really have all the facts?

Melissa Westbrook said...

Whatever you call it, I would like it done for the Small Business Works for 2008-2010. Until we know where all the money went (and I think Satterberg may only be looking at vendors), we won't truly know what was happening.

That I used the wrong term, geez, sorry.

mirmac1 said...

drwilda,

As someone who read the reports, saw who got what; someone who knows the industry, public works in general, and minority contracting in specific; I guess I can say, yes, I know the facts. I'm not dismissive; I care about following the law and making the scofflaws pay a price.

Big picture, I also care about getting us the h*ll out of this mess. That's why I take the position of let's fix this now.

I don't mean to belittle anyone's ideas. I've just heard "forensic audit" alot and wanted to distinguish between it and the alternative.

Kathy said...

Melissa,

Please google Roslyn School District; forensic audit.

It is interesting to see how a
$30K transaction at Home Depot led to a forensic audit. The forensic audit was extensive and detailed the manner in which the superintendent and others stole $11M from the district.

I agree with Dr. Wilda, a criminal investigation is limited.

What else, who else and to what extent were others involved with Silas Potter? What happened to the internal audito?

My understanding is a forensic audit (both operation and finance) give a thorough look at the manner in which money flows.

A forensic audit would provide an incoming superintendent a clear picture of district operations/ finances. Has anyone been able to figure out the bucket instructional coaches are paid? What else is there?a

Since Oleschefski, the district has sustained 2 major scandals; both which short change our children.

The costs of an audit may be huge, but what about future potential losses?

I'm not an expert but believe a forensic audit deserves conversation and thought.

drwilda said...

To everything there is a season ....There is been more movement toward more people asking more questions about district finances. There will be critical mass eventually because the district will not be able to provide answers about the flow of money through the system. Even though we have different ideas about the institutional structure of schools, I believe that people here believe that ALL children deserve a good basic education. At this time, we differ as to whether the district can really put the financial scandals behind it and proceed without a financial audit, cash flow analysis or whatever one calls it. I do think this blog is a great public service, though.

seattle citizen said...

I am still wondering why the district gave $200,000 to the Alliance. I thought the Alliance gives money to the district....This example points me to wondering about all the various monies that flow into (and out of?) the district from the foundations and coalitions and alliances...Follow THAT money.