Tags: Detroit Schools Facing Possible Bankruptcy

Detroit Schools Facing Possible Bankruptcy

Tuesday, 16 Mar 2010 01:24 PM

NEW YORK -- A deepening corruption probe of Detroit's troubled public schools has not changed the timeline for any possible bankruptcy filing for the district, an official said on Thursday.

Detroit's public school district is struggling with a $259.9 million deficit and is considering a rare municipal bankruptcy filing, despite embezzlement and other charges filed against another five individuals on Wednesday.

While there is "no timeline for any bankruptcy filing, it is under consideration," said Jennifer Mrozowski, a spokeswoman for the district, which has built the deficit over the past several years.

"But (it's) by no means a sure thing," she said.

Wayne County Prosecutor Kym Worthy on Wednesday charged five more employees of the school system with multiple felonies as part of an ongoing corruption probe.

The probe, carried out at the request of Robert Bobb, the district's emergency financial manager, has already led to charges against two other individuals.

Wednesday's charges included embezzlement by public officials linked to unauthorized payroll transactions. One individual was charged with stealing lunchroom receipts, while another was charged with cashing school fund checks and embezzling other funds.

One of the accused could face up to 35 years in prison and face over $40,000 in fines for fraudulently authorizing over $50,000 for one of the other employees.

Another employee could face up to 30 years in prison and over $40,000 in fines for giving kickbacks.

The clerical employee charged with cashing checks could face up to 20 years in prison on two accounts of embezzlement totaling over $20,000.

The investigation also uncovered 257 people receiving paychecks from the school district who are unaccounted for and 517 people receiving healthcare who are ineligible or even deceased.

"It's time we put a final stop to those who still view DPS as their own personal bank account," Bobb said.

Another eight individuals are under investigation, said Maria Miller, assistant prosecuting attorney for Wayne County.

The Detroit school district's problems led the state school superintendent in December to declare it in a financial emergency.

The school system has about $1.5 billion of outstanding debt that is enhanced under Michigan's school bond loan program, which helps districts meet their debt service requirements, said Elizabeth Foos, an analyst at Moody's Investors Service, in July.

Mrozowski said that ideally the district would make a decision regarding bankruptcy before the school year for teachers begins at the end of this month.

"Its an ongoing discussion as we review our financing and our deficit elimination plan as we go into serious negotiations with our unions," she said.

Chapter 9 bankruptcies are rare and are usually seen as a last option for municipal governments. Vallejo, California, is the biggest local governmental entity currently in bankruptcy proceedings.

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NEW YORK -- A deepening corruption probe of Detroit's troubled public schools has not changed the timeline for any possible bankruptcy filing for the district, an official said on Thursday.Detroit's public school district is struggling with a $259.9 million deficit and is...
Detroit Schools Facing Possible Bankruptcy
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2010-24-16
Tuesday, 16 Mar 2010 01:24 PM
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