The 7 Investigators have found major changes in the Detroit Public Schools are happening against the advice of turnaround experts.
Retired Bankruptcy Judge Steven Rhodes who is transition manager at DPS, was told in March that the accounting systems inside the district “are largely in the same shape as was the case with the city. There is no monthly close of the books. And it will be several months following the close of the year before you know what the actual deficit will be.”
The email also said, “How did they get from $97 million deficit to $61 million deficit if the books haven’t been closed?”
Judge Rhodes then wrote an email to Michigan Treasurer Nick Khouri, “Nick-I just got this alarming report from Al Koch from AlixPartners. Are you in Detroit tomorrow or Friday to discuss this?”
Rhodes retired from Federal Bankruptcy Court after presiding over the Detroit City case, the largest in U.S. history.
On April 29, Rhode was also sent another email from AlixPartners that said splitting DPS into two districts, the OldCo to take the debt and the NewCo to start fresh, “would prove to be a frustrating and enormously costly exercise to actually set up a NewCo. It is an action that we believe should be avoided if at all possible to do so.”
The experts also submitted a three-page expensive, legal to-do list for the NewCo.
The DPS School Board is suing to stop these changes. “What’s the phrase, something’s rotten in Denmark?” said Tom Bleakley, the attorney who filed the suit.
The Michigan Legislature provided $617 million to DPS and that includes $150 for starting the new district. Critics say that’s a waste of money and the experts, email now reveals, seem to agree.
“They’re playing loose and free with taxpayer money,” said Bleakley.
Board President Lamar Lemmons did not know any of this until 7 Investigator Jim Kiertzner showed him the documents.
“They’ve been operating a clandestine shadow government without any transparency,” Lemmons said. He blames the bleak status of accounting systems on previous Emergency Managers appointed by governors who have been running DPS for the last 7 years.
Judge Rhodes declined to comment to the 7 Investigators but his office released statements saying, “Jay Alix, AlixPartners and all community volunteers provided valuable services to the District entirely pro bono. No one was paid a dime.”
It continued: “The Governor's Office and the Michigan Department of Treasury made those decisions over a year ago before he (Rhodes) took office.”
Parent and activist Robert Davis sued to get the email. He’s done this for years before he pleaded guilty to embezzling $200,000 from Highland Park Schools. He just got out of Federal Prison this spring.
Davis says, “the power hungry governor is being allowed to mislead the citizens of Detroit and the citizens of the State of Michigan. I hope and pray Judge Rhodes stands up and says enough is enough.”
The 7 Investigators also got this statement, “The Governor’s Office was aware of differing opinions on how to remedy the financial and academic failures in Detroit Public Schools. It was determined that the method the state went with – splitting DPS in two – was the best option for the district, the families of Detroit that it serves, and the state as a whole.”
The lawsuit for an injunction to block the changes is seeking an immediate hearing.
READ THE EMAILS BELOW: