In the summer of 2005, Detroit businesswoman Sherry Washington and three partners sold Detroit Public Schools on a pilot wellness program for its employees. Their company, Associates for Learning, promised to educate roughly 3,000 employees on the benefits of a healthy lifestyle for $150,000.
By 2006, payments to Associates for Learning had ballooned to $3.32 million, DPS alleges in a lawsuit. And yet fewer than 150 workers had taken part in a health-assessment survey that was the key to the company’s proposal, DPS claims in the lawsuit, which is scheduled for trial in July. Software for the survey cost the district another $1.4 million.
According to court records, federal authorities now are investigating Washington, one of her partners and Stephen Hill, the school official who approved the payments.
DPS also is alleging that Hill, the former head of risk management for the district, accepted as much as $30,000 in kickbacks from Washington’s group.
This is not the first time Washington has been tied to questionable DPS payments. In February 2007, the Free Press reported that officials overseeing Detroit’s impoverished schools purchased $1.6 million in art from Washington’s downtown Detroit gallery.
Bank records recently obtained by the Free Press show that as Associates for Learning was collecting millions from DPS to improve the health of school employees, the company was spending money at the Somerset Collection, a BMW dealership, Comerica Park and casinos. And then there was that $16,000 stay and shopping spree in the Cayman Islands.
DPS says company did little, spent lots
The school district obtained the bank records as part of its lawsuit against Associates for Learning and its four founders: Sherry Washington, a prominent downtown art gallery owner; Dr. Gwendolyn Washington, a Southfield physician, and Detroit business consultants Sally Jo Bond and Marilyn White. Bond has worked for the City of Detroit and the Wayne County Commission, and White has taught at Marygrove College.
DPS contends the company provided few services in return for the multimillion-dollar payments it received between October 2005 and September 2006.
The company’s bank account routinely was debited for expenses ranging from the mundane (gas, groceries, a car wash, shoe repairs, dry cleaning, manicures and pedicures) to the luxurious ($1,733 at Louis Vuitton in Troy, more than $16,000 in the Caymans for unidentified travelers, $1,609 at a duty-free shop in Windsor).
The records do not show who made the purchases — they simply list dates and amounts paid.
The company also spent thousands more at Marshall Field’s and Nordstrom, jewelry stores and restaurants, including a $1,256 tab at Seldom Blues in Detroit. It paid for iTunes downloads, spent money at a BMW dealership, Comerica Park and Circuit City. It even paid $67.84 at the Build-A-Bear Workshop in Troy. And it routinely withdrew cash at casinos.
A larger pattern
The district’s claims against Associates for Learning are part of a larger lawsuit that alleges the former DPS director of risk management, Stephen Hill, and his assistant, Christina Polk-Osumah, diverted more than $57 million in improper wire transfers to a dozen vendors, including Associates for Learning. The suit claims Hill used secret offices and computer systems to hide the payments, which were made to vendors who were friends, associates or relatives of Hill and Polk-Osumah.
The FBI has opened a criminal probe of Hill, the Washingtons and others, according to court records.
In late 2007, FBI agents raided Hill’s Detroit home, where they seized a computer and two laptops, mail, paperwork and photos. They also searched the offices of Associates for Learning and Sherry Washington’s gallery, taking computer images and a dozen boxes of financial records and paperwork, according to search warrants filed in U.S. District Court.
Washington referred questions about the investigation to her lawyer, Jeffrey Collins of Detroit, who did not return repeated calls last week.
Collins, who also represents Gwendolyn Washington, said in a December court filing that a federal prosecutor has indicated the Washingtons are targets of a federal investigation.
“The government contends the evidence they have against Sherry Washington and Gwendolyn Washington is compelling,” Collins wrote. “The threat of criminal charges is real and imminent.”
Spokeswomen for the FBI and U.S. Attorney’s Office in Detroit declined to comment last week.
In a Feb. 16 deposition, Sherry Washington repeatedly invoked her Fifth Amendment right against self-incrimination when questioned by a DPS lawyer about the money paid to Associates for Learning.
Gwendolyn Washington also invoked the Fifth Amendment repeatedly.
White and Bond did not attend their scheduled depositions in December 2009, both citing the pending criminal investigation.
Bond declined to comment; Gwendolyn Washington and White could not be reached.
The company’s former lawyer, however, has said in court records the women did not commit any unlawful or improper acts, and did not orchestrate any fraudulent scheme. He said they had a deal with the district to provide services, which they delivered, and were entitled to be paid.
Robert Bobb, the district’s emergency financial manager, did not address the allegations against Sherry Washington and her partners in a recent statement to the Free Press, but said: “The level of corruption that has been allowed to flourish in Detroit Public Schools in the past simply cannot be tolerated. That is why we are quickly and aggressively working to hold accountable those who have chosen to enrich themselves at the expense of our children.”
Ida Short, a member of the Detroit Board of Education, said last week the board brought the lawsuit two years ago because “we want to get any and all money back that was illegally obtained by whoever it was obtained by.”
In the spotlight
Sherry Washington has made headlines before:
• In 2008, the IRS filed a lien against Washington for $253,006 in unpaid income taxes; as of early April, it had not been lifted.
• In 2007, the Free Press reported that DPS spent at least $1.6 million in bond money — funds that taxpayers approved to build or repair decaying schools — to buy artwork through her gallery. She told the newspaper then that she took a 20%-50% commission, depending on the artist and work. The school district’s inspector general, John Bell, said he currently is investigating the art purchases.
• In 2006, the Free Press reported that DPS was paying $200,000 to BWW Group of Detroit, a company formed by Washington, White and Bond, to teach entrepreneurs how, among other things, to get contracts from the district. At that time, DPS said it intended to spend another $180,000 with BWW in 2007. Critics said the money could have been used to hire teachers and that local business associations offered similar training.
• In 2004, the Detroit News reported that Cobo Center officials spent $500,000 to buy artwork from her gallery — at a time when the conference center was expected to lose millions.
A presence downtown
Washington, 53, is a prominent presence downtown. She has sold contemporary and African-American inspired art since 1989; was on the board of the Downtown Development Authority from 2002-08, and has been a member of the Detroit Library Commission since 2005.
In addition to her DPS contracts, Washington has helped the Wayne County Community College District develop a cultural arts program, according to WCCCD Chancellor Curtis Ivery. In 2009, the district paid her gallery $92,880, up from $77,500 in 2008 and $67,250 in 2007. Her services include setting up art exhibits at galleries on its campuses, coordinating fund-raising events to support cultural activities, writing news releases and coaching students in overseas programs.
Ivery wrote glowingly of Washington in a March 18 letter to the Free Press.
“Ms. Washington has a tremendous following throughout Wayne County and, therefore, has been a great asset in our community outreach initiatives,” Ivery wrote.
Associates for Learning had yet to be incorporated when it first approached Hill, then-head of risk management for the school district, about launching a wellness initiative in August 2005.
The company proposed a voluntary program to motivate and educate school district employees on the benefits of healthy lifestyles through education, special events and promotions.
It began as a pilot project with a $150,000 budget and plans to reach about 3,000 employees between November 2005 and March 2006. The company’s proposal called for the district to make three payments between September 2005 and May 2006, totaling $150,000.
Instead, by March 2006, the company had received more than $1 million, then billed the district for another $2.2 million in May for what it called additional phases.
Records show that Hill approved those payments that summer even though he was no longer a district employee.
At that time, Hill was working for a large risk-management company, Marsh & McLellan of New York, which allegedly had loaned him back to DPS. Marsh is also named in the lawsuit. The district accuses the company of billing the district for services at inflated rates or commissions, and for services DPS didn’t need.
The district’s lawsuit, filed in Wayne County in June 2008 and scheduled for trial this July, claims Associates for Learning billed the district for services it didn’t intend to perform, and never performed. It also contends Associates for Learning paid Hill as much as $30,000 in kickbacks.
The suit said Hill chose Associates for Learning without competitive bidding and without a written contract detailing the complete scope of the project, and that both Hill and Associates for Learning “knew that making the selection this way would conceal their fraudulent, unlawful or otherwise improper scheme to get unauthorized, excessive or illegitimate claims paid.”
– BY JENNIFER DIXON – DETROIT FREE PRESS STAFF WRITER – APRIL 11, 2010