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No punishment for preschools
Second of four parts -LESSONS IN WASTE
The allegation could not have been more blunt:
"Wendy Williams, director of the Right Direction Day Care, has embezzled funds for personal gain," an audit of the taxpayer-funded preschool began.
State education auditors flagged $182,833 in "questionable" expenses at the privately owned Irvington center, including ATM withdrawals in Las Vegas and payments for cruises, airfare, motels, restaurants and clothing. The state was so alarmed that it referred its findings to New Jersey's chief law enforcement officer.
The state Attorney General's Office closed the Williams case. No action was taken against her.
In all, five of the seven preschool cases forwarded to then-Attorney General Peter Harvey by the state Department of Education were closed under his watch.
The reason given: The state's contracts with the private preschools were so lax and loosely written that they failed to spell out even the simplest rules on what taxpayer dollars could -- and could not -- be used for.
"You may have misappropriation of government dollars or theft by deception or something of that nature," spokesman John Hagerty said in an interview late last year. "But the way the contracts were, the way the monies were provided to the day cares, it didn't place limitations on the dollars per se. Therefore, we can't charge a crime."
Education officials say they've tightened their contracts and spending guidelines for the so-called Abbott preschool program, begun seven years ago under a court mandate to provide free classes to 3- and 4-year-olds in the state's 31 neediest communities.
But they remain frustrated by the attorney general's lack of movement.
"I've never been given a satisfactory explanation for why what was seen at the start as criminal activity was not prosecuted," said Gordon MacInnes, the assistant state education commissioner who oversees the program.
Now, those cases will be getting a second look. Last week, four days before the start of an investigative series by The Record, Hagerty said the dormant cases could be revived under the new attorney general, Zulima Farber.
"The Division of Criminal Justice is reassessing all of the Abbott preschool cases to determine whether or not any of the cases should be reopened for additional investigation," Hagerty said.
The preschool program will hand out more than $560 million in taxpayer dollars this year to try to help 38,400 disadvantaged children catch up to their more affluent peers. The program relies on private centers to serve two-thirds of the children because the public school districts don't have enough space to accommodate them.
State audits sent to the attorney general uncovered apparent financial abuses -- from rent kickback schemes and gambling to Jaguar car payments and indulgent spending sprees.
· Right Direction Day Care in Irvington
"Suspected Embezzlement of Funds" was the title of the auditors' report on Right Direction Day Care. They determined that personal expenses were classified as "loans" -- including payments to Williams' Right Direction bus company and Right Path charter school. They found $51,000 in cash withdrawals but no record of how the money had been spent. Endorsements on $11,414 in checks made out to employees looked suspiciously like Williams' own handwriting.
Before Right Direction's contract expired last year, public dollars filled the storefront preschool with supplies. Today, two abandoned classrooms are still packed with blocks and toys. Little wooden chairs are pulled up to matching desks. Child-sized easels, picture books and computers are visible from the street. Shelves lined with plastic jugs of paint are gathering dust.
State education officials said they did not know the supplies had never been retrieved.
Irvington school district officials declined to discuss Right Direction, believing the matter remained under investigation. Howard Weinstein, Williams' attorney, said he had heard nothing since his client turned over "a load of documents" two years ago.
"I'm presuming the investigation has not uncovered any unlawful activity," he said.
Hagerty said late last year, during The Record's four-month investigation of the Abbott program, that any possible case against Right Direction was hampered by the Education Department's failure to detail its spending rules. Auditors' findings, he added, are a long way from a criminal prosecution.
"While a report may say one thing, you've got to have the proofs, the evidence, the contracts, the paperwork, the expenditures -- a paper trail," Hagerty explained at the time. "If it doesn't come up to that, it doesn't matter what a recommendation or referral says. We have a far different standard than an audit in order to move a case to a court for trial."
· Kidz Pre-school Academy in Paterson
It was nearly six months before Malikah Abdullah, the owner of Kidz Pre-school Academy and a former nine-year member of the Paterson Board of Education, answered auditors' requests for her financial records.
When documents were made available, auditors found that Abdullah wrote herself more than $46,000 in checks from the company account -- not counting any salary she was collecting. She wrote an additional $7,000 in checks to a property management company in Manhattan, they said.
Meanwhile, Abdullah was sending monthly checks to a local Board of Education member. Jonathan Hodges, a former co-owner who had sold his share of the business to her for $500,000, was paid monthly installments of $2,666. Hodges eventually faced a hearing before the state School Ethics Commission. The matter was dismissed with a reprimand and Hodges is still on the board.
In an interview, Abdullah said she stopped paying Hodges after her Abbott contract ended.
"We're not able to make any type of payments, my funds have dwindled so," she said, also noting a costly legal dispute with her preschool landlord. "I'm just barely surviving, because the contract was taken."
She maintains that the audit report was "unfounded," and that a decision to end her contract in 2002 was politically motivated. She said she never spoke with state investigators.
Local education officials told reporters they had been alarmed when they visited Kidz.
"They would say, 'Look at that corner there -- that's the science corner,' " said Anna DeMolli, director of early childhood education in Paterson. "And all there would be is a sign that said 'Science Corner.' No materials, no desks, no books. You would go by and see three dolls with their hair pulled out. They're filthy dirty, no clothes on them. That's the corner for 'housekeeping.' "
Abdullah tried unsuccessfully to regain a Board of Education seat in 2003. She now runs a day-care center called Wee Kidz, serving children whose tuition is paid by taxpayer-funded voucher programs.
Abdullah asked Paterson for another Abbott preschool contract in the fall. She never received a response, she said.
· Miss Dot's Small World in Paterson
Auditors say they also got the runaround at Miss Dot's, where, they said, public funds intended for New Jersey children appeared to have been used by owner Dorothy Williams to buy land for a camp in Pennsylvania and to promote her city-based transportation service.
Williams, who had moved to Pennsylvania, said she was too busy to meet with auditors. Her records were being reconstructed by her daughter and son-in-law -- in California.
Eventually, her accountant dropped off "all the records he had on hand." Williams and her son delivered more paperwork two days later, including bank statements and canceled checks.
The records that materialized were "unorganized, incomplete, and lacked supporting documentation," the auditors found.
Petty cash and non-payroll checks made out to Williams totaled nearly $30,000. Money was used to pay for "a driver, a tow truck, repairs, and insurance for several vehicles." There were checks to Jaguar and Ford dealerships in two states. Checks written to "Rick" were marked as bus inspection and repair payments. Williams' accountant said she owed about $100,000 in payroll taxes.
And tickets for bus trips to Atlantic City were for sale at the preschool, where auditors believed Williams was also operating Miss Dot's Transportation.
Auditors said there was evidence she had purchased property in Pennsylvania with preschool funds and planned to open a camp. They cited, for example, checks to a lawyer marked "Pa. land."
Public records show that Dorothy Williams filed to open a business named Miss Dot's Small World in Freeland, Pa., in 2002. Efforts to reach Williams were unsuccessful.
· First Steps Day Care in Jersey City
In 2003, auditors found nearly $180,000 in personal spending at First Steps, including $11,381 for gambling in Atlantic City, $6,276 for Princess Cruises and $4,887 for the Diamond Den.
Director Jacqueline DiFranco said in a 2004 interview that she had done nothing wrong -- she just didn't know she was supposed to keep money from her other day-care center separated from state tax dollars. She said all the state money given to her for the preschool program was spent properly.
DiFranco said the Attorney General's Office took documents from the preschool and returned them 18 months later.
"Nothing was found that I did anything inappropriate," she said last week. "I was cleared."
The Jersey City school district renewed DiFranco's contract for two more years, entrusting her with hundreds of thousands more in tax dollars.
But in early 2005, auditors returned to First Steps and found that an additional $2,500 had been spent in Atlantic City, including cash withdrawals at the Caesars casino. The company hadn't completed its tax returns, financial statements or required independent audits since 2002.
They also learned that DiFranco was charging families $2 a day for food, even though the state strictly prohibits such charges and pays the centers to provide meals and snacks.
DiFranco last week denied auditors' findings and said she had never seen their report. Auditors said she told them that she often deposited her personal money into the Abbott account to cover expenses, then reimbursed herself through the ATM and debit card. However, she had bounced 40 checks.
Jersey City school officials, who had defended DiFranco in the past, said they took the unusual step of ending her contract in the middle of the school year.
· My Little Friends in Vineland
Although owners Helen and John DiTomo received state funding for six computers for the children at My Little Friends -- a requirement of the Abbott program -- they provided the school with only two. They leased two other computers and brought them to Florida, where they moved in September 2003.
Meanwhile, teachers told auditors they had to use their own money to buy needed classroom supplies.
Auditors noted that the DiTomos' son had also moved to Florida during the school year, although he was still being paid as a janitor. But his timecards were missing for two months, and the owners were also making regular payments to a cleaning company. The school's director, Stephanie Knight, said she was instructed to punch the son's timecard in his absence, but did not.
An arrangement between the owners and Knight may have violated state and federal tax laws, auditors said. Knight, who rented a house next to the preschool from the DiTomos, was promoted to director after they moved. When she opened her next paycheck, she discovered her salary increased by $440 -- which was much more than negotiated. The DiTomos then told her to pay back the bulk of that money in a $340 monthly rent increase, auditors said.
In an interview, John DiTomo described the rental agreement as "my private issue. They can surmise whatever they want to surmise."
The preschool closed when the DiTomos lost their state contract in 2004.
· Hoboken HOPES
HOPES -- the Hoboken Organization Against Poverty and Economic Stress -- charged taxpayers twice for the same preschoolers.
The state attorney general was alerted last year after a random audit.
"This is a serious and possibly criminal violation," the auditors wrote, "since public funds were inappropriately obtained resulting in a duplication of revenue."
When The Record took a close look at HOPES, reporters found an estimated $1.8 million in payments for Abbott preschool and day-care services that may have been duplicated by federal Head Start money.
HOPES identified itself as "fully state funded" on its budgets for 2003-04 and 2004-05 even though it was also receiving federal dollars for some of the same preschool costs for 120 children. As a result, state education officials say, HOPES was overpaid by as much as $800,000.
HOPES contends that the federal Head Start money was not spent on preschool, but on before- and after-school day care, food, and health and social services for the students.
However, the agency accepted nearly $1 million in additional state funding that was also earmarked for some of those costs during those same years: $777,000 from the Human Services Department and $209,000 from the Agriculture Department, The Record found.
Ora Welch, HOPES' president and chief executive, said the agency operated with good intentions.
"By doing good by these children, doing things they wouldn't ordinarily get -- health care and dental -- that is not something these kids take for granted," Welch said.
State education officials have kept HOPES in the Abbott program -- and even expanded the agency's contract this year to 135 children.
In a meeting last week, the Education Department gave HOPES a blank budget form for the 2003-04 school year and asked for a new accounting, to show how all of the Abbott dollars were spent, officials said. The apparent duplication of funds during the 2004-05 school year is still under review.
The Hoboken school district has recovered $205,000 from HOPES and state education officials say the duplicate funding has been eliminated in the current school year. The state's audit also revealed missing computers and employee contributions to health insurance premiums that had already been paid for by the state.
Meanwhile, officials at the Human Services Department and the federal Health and Human Services Department, which oversees the Head Start program, said they were not investigating how money was spent at HOPES.
· New Africa Day Care in Newark
New Africa Day Care was referred to investigators after owners failed to show how $160,677.99 was spent to benefit the children. Financial records included debits for Burlington Coat Factory, Macy's and Oriental Rug Warehouse. The 2003 report noted charges at flower and wig shops, restaurants and hotels -- including the Chicago Hilton.
"That was fraud," said Gail Griffin, head of early childhood education in the Newark school district. "We had records that showed they spent this on personal expenses. That was in the record. We could prove that this was criminal activity."
Attempts to contact Muslimah Suluki, owner of the defunct preschool, were unsuccessful.
Griffin said her staff never recovered any supplies from New Africa -- because "there was nothing for us to collect."
"They had stolen the money," she said.
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