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More Corruption and Conflict of Interests In Judicial System and Contractors
Juvenile system under fire

Audits of privatized Wayne County program show overpayments, conflicts of interest.

Todd McInturf / The Detroit News

Former Wayne County Auditor General Brendan Dunleavy says he was let go for helping the FBI investigate financial mismanagement in the juvenile justice system. Below is an excerpt of his deposition.



What The Detroit News found


Audits have found more than $300,000 in overpayments to contractors.

Hackers accessed a computer system used to verify bills.

Relatives of some county officials benefited from contracts.

Allegations persist of payments for fictitious youths.


Wayne County's Delinquency Wraparound Services - A Guide for Parents
Assistance for families with children that are wards of the state and emotionally challenged, exhibiting delinquent behavior or those in danger of out-of-home placement
Wayne County's Institute for Youth and Family Development Policy
Related links to community organizations and family services
The Juvenile Assessment Center
The Juvenile Justice Delinquency Prevention Act

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Todd McInturf / The Detroit News

Former Wayne County Auditor General Brendan Dunleavy says he was let go for helping the FBI investigate financial mismanagement in the juvenile justice system.

Five years after Wayne County became the first in Michigan to hire private companies to care for delinquent youths, its juvenile justice system is awash in accusations of financial mismanagement, cronyism and fraud.

Taxpayers have footed the bill for improper billings and overpayments to contractors. The relatives of elected county officials have benefited from some contracts. And there are multiple allegations the county paid for hundreds of fictitious youths.

Two former high-ranking county officials allege in court papers they lost their jobs after serving as informants for the FBI. Both have filed whistle-blower suits against the county, alleging retaliation for speaking out and seeking unspecified damages.

Chief Circuit Judge Mary Beth Kelly, who has oversight of the system, vows major reforms by year's end, citing concerns about the system's effectiveness and how its finances are managed.

"There has to be more accountability within the system," Kelly said. "We just can't afford this."

Three county audits, a probe by the county inspector general and a Detroit News investigation show:

County taxpayers have paid more than $2 million for contracts that have benefited relatives of Sheriff Warren Evans and Detroit Mayor Kwame Kilpatrick.

Hackers compromised a $2.5 million computer program that records personal information about teens and is used for billing, prompting an investigation into whether taxpayers spent money on fictitious teens. Separately, there are allegations the county paid contractors at least $198,000 for youths who don't exist.

Nonprofits awarded millions of dollars in delinquent care contracts by the County Commission are among the most reliable campaign donors to its members. Contractors have given at least $32,000 since 2002, campaign records show. The top recipient was Commission Chairwoman Jewel Ware, who received at least $12,500. A typical commission campaign costs about $10,000.

The county can no longer borrow money without the state's permission because of a series of problems that began with $12 million in billing irregularities.

Taxpayers have footed the bill for at least $300,000 in overpayments to contractors.

The county has issued at least $20 million in no-bid contracts to care for youths since 2000.

Many of the problems started under the administration of county Executive Edward McNamara. Some have been addressed by his successor, Robert Ficano, who took office in January 2003. But others are just now unfolding.

"Has he cleaned it up? Probably," said Robert Wollack, chief executive officer of Wolverine Human Services, which owns youth lockups in Saginaw and Vassar. "They're working hard to get whatever's wrong right, but there's still stuff that can be straightened out."

Arthur Carter, director of the county's Department of Children and Family Services, acknowledges problems, but says the $103 million program has improved care for the county's 3,400 delinquents dramatically.

Seven years ago, about 60 percent of teens who committed crimes and were declared delinquents by juvenile courts were sent to lockups. Because of a state shortage of juvenile facilities, many were institutionalized out of state even for lesser offenses.

Today, about 60 percent of Wayne County's delinquents -- who account for half the state's delinquent population -- serve their sentences at home, under the supervision of contractors. Only the worst offenders are sent to youth jails.

The county maintains it has saved $10 million under the new system and cut recidivism rates. The system's cost is split evenly between the county and state.

"This has been one of the county's most serious, complex problems. The problem stems from a lack of cash and trying to do with what you have," said McNamara, declining further comment.


Former officials sue


No one disputes the county is saving money under the new system, but Kelly and others wonder whether it's enough.

Even with a privatized system that favors home treatment, Wayne County spends almost as much per youth as the national average for incarcerating one delinquent in a juvenile facility for a year. The county spends an average of $30,000 a year per youth to pay for drug tests, tethers, counseling, monitoring and, sometimes, youth detention.

Nationally, the average cost to incarcerate a delinquent in a juvenile jail for a year is $35,000, according to the U.S. Department of Justice.

"The amount of money thrown at the system and layers and layers of administration is astronomical," Brendan Dunleavy, the county's former auditor general, said in an interview with The News.

Dunleavy, who was auditor general for seven years, is suing the county in state and federal courts, alleging his $152,000 contract wasn't renewed because he cooperated with the FBI on numerous investigations, including one about the juvenile justice system.

Marlene "Willow" Hagans, the former deputy director of Children and Family Services, is also suing, alleging she was demoted after talking to the FBI and angering Ficano's campaign contributors by advocating reforms.

Both lawsuits are in the discovery phase, in which lawyers gather evidence and take testimony from witnesses in depositions. On Friday, county attorneys filed a motion to dismiss Dunleavy's case.

Hagans refused to comment, but The Detroit News obtained the depositions taken in both lawsuits. (Below is an excerpt of Dunleavy's deposition.)

In their 2,500-plus pages, numerous allegations are made of millions of dollars in overspending; altered bills that charged taxpayers multiple times for individual youths; and retribution for officials who attempted changes.

In a Jan. 13 deposition, Hagans alleges contractors went so far as to move youths from one school in a youth lockup to another during state audits that determined funding. She alleges she was hired to clean up the system, then demoted when she found numerous examples of billing for fictitious youths and overpayments to contractors.

Ficano "knew something was wrong, but every time he sent someone over to determine exactly what was wrong, they were mysteriously removed," Hagans alleges in an April 4 deposition.

Dunleavy had completed one audit of the system, was halfway through another and planned at least five more when his contract wasn't renewed last fall. At the time, commissioners said he talked too much to the media.

In court papers, county attorneys claim Dunleavy alienated commissioners by politicking too hard for contract renewal and threatening to sue them.

Dunleavy says commissioners were afraid of what he'd find. He alleges that one audit he started before he left office found $198,000 in billings for fictitious youths on July 31, 2004, one day before the county cut the budgets of providers.

"They knew the information would be made available to appropriate individuals, including law enforcement," Dunleavy said.

While the county declined comment on both lawsuits, Ficano's spokeswoman, Sharon Banks, said allegations of political favors to donors are "unequivocally a lie." So are accusations of fictitious youths, said Michael D. O'Connell, director of finance for Children and Family Services.

"The (audits) are looking for something that isn't there" he said.

Other findings in the audits -- such as no-bid contracts -- happened before Ficano took office, said Sue Hamilton-Smith, deputy director of children and family services.

The Ficano administration was surprised by some of the costs when it took office, cut the budgets to providers, ended no-bid contracts and increased oversight, Carter said. The county is about to embark on yet another audit of the system this summer.

Next year, the administration is reducing payments to nonprofits by $900,000 to eliminate redundant services. A November audit found the county paid more than $100,000 in unnecessary drug and alcohol tests, including some for one teen who was screened 43 times in 16 months even though he never tested positive.

"We didn't just bill for anything that we weren't directed to do," said Cynthia Smith, director of the Juvenile Assessment System, a Detroit nonprofit paid $5.2 million to assess the needs of teens after judges declare them delinquents.

"Sometimes, there may have been misdirections, but it was always done with the best interests of the community and children."


Accusations plague system


From the start, the system has been dogged with conflict-of-interest accusations.

Some providers had been in business with each other or served on the boards of directors of subcontractors, according to a 2003 report by Inspector General David Esper, Ficano's internal watchdog.

The report also found multiple no-bid contracts. Like most counties, Wayne usually requires competitive bids on services to get the best deal for taxpayers.

Esper's report criticized a $2.5 million contract awarded to a company co-owned by Evans and his brother, Blair, to manage the Blanche Kelso Bruce Academy, a charter school within the Calumet Center, a youth lockup in Highland Park. The company, Evans Solutions, also had a $54,000 contract for juvenile justice consulting in 2001.

At the time, Evans had retired as the county's undersheriff and former director of the Department of Community Justice, the precursor to Children and Family Services. His successor, Jeriel Heard, was a longtime colleague at the Sheriff's Department.

Esper's report concluded Heard "steered a no-bid (contract) to a business entity partly owned by his longtime professional associate and ally." The report quoted Heard as saying he had no involvement in the deal. He now works for Evans, making $117,000 as head of county jails and court security.

Evans has denied involvement in either deal. He put his company stock in a blind trust in December 2000 and sold his share of the company a few weeks before taking office as sheriff in 2003.

His spokesman, John Roach, wouldn't comment. Heard could not immediately be reached.

Also in 2001, taxpayers paid a $16,000 bill for Kwame Kilpatrick's wife, Carlita, to conduct 10 conflict resolution seminars at Inkster High School. At the time, Kwame Kilpatrick was still in the state House and readying a campaign for mayor. His father, Bernard Kilpatrick, was chief of staff for Ficano's predecessor.

In depositions for his lawsuit, Dunleavy alleges his former staffers couldn't document that the conflict resolution sessions occurred. Also in depositions for Dunleavy's suit, former Department of Children and Family Services Director Ralph Kinney said he worried Carlita Kilpatrick was paid for doing nothing.

Inkster school officials did not return calls for comment. Smith said "the work was performed." Her agency subcontracted the sessions to another nonprofit, which hired Kilpatrick.

Smith supplied The News with a canceled check and work invoices showing Kilpatrick was paid $250 an hour for the sessions. Laws protecting the confidentiality of delinquents, however, prohibit the county from making public sign-in sheets of the sessions, Smith said.

The mayor's spokesman, James Canning, declined comment.

In court depositions, Hagans and Kinney allege their days were numbered as soon as they began questioning the contracts to Evans' company and others.

"I was told I was not making any friends on the commission," Kinney said in an April 28 deposition for Dunleavy's suit.

Kinney refused comment for this story.

A longtime aide who served as Ficano's chief of staff when he was sheriff, Kinney oversaw the Department of Children and Family Services in 2003. He lost his job when he was charged in August 2003 with a felony count of using public funds to pay for Ficano campaign materials.

District Judge James Kandrevas dismissed the charges for lack of evidence before the case went to trial. Kinney returned to the county, kept his $125,000 salary and now works finding grants or other revenue for the county.

Hagans was demoted to her old job in economic development. She instead went on medical leave and retired last fall.


Negative impact persists


Some of the problems have eased under Ficano. But taxpayers continue to be affected.

Extensive sewer repairs planned this summer Downriver were delayed after the state in April barred the county from issuing bonds because of problems that began with contracts for delinquent care.

A yearlong, $2 million audit concluded the county delayed $12 million in payments to five nonprofit providers of delinquent services to make its 2003 budget appear balanced. The audit concluded the move was a deliberate attempt to deceive.

Negotiations to change the system are ongoing between Kelly, the county and the state Department of Human Services. Kelly said she's also concerned the system doesn't provide adequate mental health care for delinquents.

"It's not Wayne County's responsibility to keep these contractors in business," she said. "We have young people that need help."


You can reach Joel Kurth at (313) 222-2610 or jkurth@detnews.com.

Thomas M. Dutkiewicz, President
Special Family Advocate
Connecticut DCF Watch
P.O. Box 3005
Bristol, CT 06011-3005
P.S. Check out our web site for the FREE handbook on parental and children's rights.  There is also a manual on Title IV-E dealing with "reasonable efforts".

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