Former DPS Executive Pleads Guilty to Extortion Under Color of Official Right and Conspiracy to Commit Fraud Upon a Program Receiving Federal Funding

The former head of the Detroit Public Schools Risk Management Department pleaded guilty today to charges stemming from his receipt of cash kickbacks from a vendor he had hand-picked to facilitate a wellness program for DPS employees, United States Attorney Barbara L. McQuade announced today. Hill pleaded guilty to one count of extortion under color of official right and one count of conspiring to defraud a program receiving federal funding.

McQuade was joined in the announcement by Erick Martinez, Special Agent in Charge, Internal Revenue Service Criminal Investigations, and Andrew Arena, Special Agent in Charge, Federal Bureau of Investigation, Detroit Field Division.

Stephen A. Hill, 59, former Executive Director of the Risk Management Department of the Detroit Public Schools of Detroit, Michigan, entered the guilty pleas in United States District Court before Judge Paul D. Borman.

The information presented to the court at the time of the plea showed that in 2005, while Hill was employed as Executive Director or Risk Management at DPS, he selected a company called Associates for Learning (“A4L”) to facilitate a wellness program for DPS employees. Hill hand-selected A4L without opening the wellness program for competitive bidding and without a written contract. A4L proposed a six-month pilot wellness program for a total of $150,000. Within a year’s time thereafter, A4L submitted fraudulently inflated invoices to DPS for over $3.32 million, which Hill approved. A4L members paid Hill a 5 percent cash kickback.

Under the terms of the plea agreement, Hill faces up to 108 months’ imprisonment. Although the agreement contains no specific amount of restitution, Hill could be ordered to pay $3.32 million in restitution. The plea agreement contains a cooperation provision which provides that if Hill testifies truthfully at any trial of the case, the United States will ask Judge Borman to reduce Hill’s sentence.

Hill’s guilty plea is the seventh conviction stemming from the case. Nine individuals were charged in the superseding indictment, including Christina Polk-Osumah, Hill’s assistant at DPS, who died in September of 2010. The final defendant, Sherry A. Washington, is scheduled to commence jury trial in front of Judge Borman on June 21, 2011.

“Violations of the public trust are among the most serious felonies that we prosecute, but cases like this one, involving stealing money belonging to our struggling schools, is even more egregious,” said United States Attorney McQuade. “We hope to send a strong message of deterrence to anyone who would steal from school children.”

FBI Special Agent in Charge Andrew Arena stated, “Public schools are one of the largest recipients of federal funding. The FBI continues to aggressively investigate individuals who steal funds originally designated for the Detroit Public Schools and the children of the City of Detroit.”

IRS Special Agent in Charge Martinez stated, “IRS Criminal Investigation will use our financial expertise to expose any public official who thinks that the normal course of doing business involves false invoices and kickbacks.”

A sentencing hearing was set by Judge Borman for August 2, 2011.

The case is being prosecuted by Assistant United States Attorney J. Michael Buckley.