Lessons Learned from the School Board — the Hard Way.
By: Debra Rade
"Insanity is doing the same thing over and over and expecting different results."
— Attributed to Albert Einstein
CHAPTER FIVE — There are tools to fix this house...
Time to learn lessons from these facts and move forward. There is a lesson in realizing that virtually
all information provided in this report was intentionally concealed by the
School Board. As a result, residents were prevented from making
any informed decisions. Rather than representing the community that elected them as school officials, the School Board was manipulating the residents.
The consistent failure of the Board of Education to take
appropriate steps to hold administrators accountable for their actions has negatively
impacted the high school district in Highland Park and Deerfield in myriad ways. This has materially harmed the education of our children in the community as well as District
employees. Not only has this created an untenable level of mistrust between employees
and the board, it impacts taxes and potentially lowers property values.
If each of the major incidents that took place in District 113 were unique, that would be a greater challenge. As they stay, “stuff happens.” However, each incident in this report is inextricably bound by the same fabric. Year after year, District 113’s Board of Education appears to have failed to face and disclose facts. They have failed to determine controls and implement policies designed to avert similar problems in the future.
In every organization, there exists a potential vulnerability to crime, falsification of records, embezzlement, and theft. Yet, what distinguishes one entity from another is how they avert problems, and what they learn from them when problems arise.
Just
last week, the Department
of Justice announced that a financial administrator pleaded guilty to fraud and tax offenses related to her theft
of $40,000,000 in computer and electronic hardware from her employer, the Yale University
School of Medicine. Many wonder, how did Yale lose track
of $40 million?
You could ask a similar question about District 113. How was it possible that District 113 issued a few checks, in the aggregate of approximately $365,000 each year, made payable to Petty Cash? In the ten years that this took place (maybe more), that means that $3.65 million dollars in small bills was handled without any appropriate accounting controls. Think about that.
The difference between Yale and
District 113? It’s not just one of scale. It's in the response. Rest assured, Yale
will closely examine the failure of their financial controls and will take appropriate corrective
action. Certainly, Yale Med did not inform the Department of Justice that its Board had no intention of assisting in the investigation or prosecution of its former Director of Finance and Administration.
The Board of Education of District 113 distinguishes itself by failing to appropriately respond to bad actors, and covering up the facts in closed doors. It has repetitively failed to take corrective action.
This must change. There are tools to fix this house, but until the Board of Education accepts its responsibility for these failures, nothing will improve.
Here is a summary of significant deficiencies, based primarily on the Whistleblower Letter, the Cash & Carry report, and supporting documentation:
- Failing to hold administrators responsible for serious, if not criminal, actions, including falsification of records, mismanagement of funds and cash, theft, and records destruction.
- Retaliatory termination and demotion of administrators for their efforts to maintain compliance with Illinois laws.
- Failing to set appropriate financial controls and lack of supervision of approximately $365,000 a year in cash for more than a decade.
- Failing to appropriately discipline a principal for falsification of records required to be filed by Illinois law.
- Failing to fully cooperate with the Lake County State’s Attorney in two criminal investigations of District 113, including the response to a Grand Jury Subpoena.
- Flaunting the law by permitting a registered child sex offender to be on campus without required supervision; retaliatory demotion of an administrator for complying with Illinois law; and, allegedly, allowing/requiring the next administration to resume the noncompliance (as alleged by the Burnetti Complaint, para. 39-48, 77-84).
- Creating an environment where administrators, teachers, and staff perceive the School Board as a web of corruption and causing them to fear retaliation for reporting noncompliance with law. A
- Failing to ensure that District 113 was an inclusive environment, and failing to "eliminate and reverse past practices" (with an implication of discrimination). (Burnetti Complaint, para. 27).
- Hiring the son of the lawyer who represents District 113 in HR matters as the HR administrator without regard to the appearance of impropriety and potential conflict of interest.
- Failing to take steps to set appropriate governance and compliance programs.
- Intentionally covering up problems in the school district behind closed doors, possibly in violation of the Open Meetings Act.
- Certain Board Members going so far as to specifically encourage and instruct teachers and/or community members to file complaints about the Superintendent while not disclosing the facts covered up by the School Board. (Burnetti Complaint, para. 54-57)
The appearance of impropriety and unethical behavior are a strong threads that bind these elements together. This has had a profound impact on our children’s education, as well as teacher and staff morale, the community’s taxes, and the reputation of our communities in Deerfield and Highland Park. The perception of public corruption within elected local government entity is an assault on democracy.
All is not lost. If the community insists on change and holds the School Board, including each individual member, accountable for the Board of Education's past and present performance, there can be much improvement soon, for relatively little expense. Our toolkit must address failures in accountability, oversight, and transparency (readers might be interested in this article about "Fighting 'Small Town' Corruption").
Following are the top 10 recommendations to the Board of Education District 113:
1. SET AN ETHICAL TONE AT THE TOP.
The tone at the top isn’t just an axiom. Set and demonstrate the School Board’s commitment to integrity, financial controls, legal, and ethical compliance. A good ethical compass is a great way to steer the ship. Continually reinforce, maintain, and renew procedures to ensure that a culture of governance and compliance is effective.
Study up. It is inexcusable that in 2022 so many government entities, including the City and Village, and the Park Districts, have failed to institute even the most basic elements of good governance. The imperative to implement sound governance is just as important within government entities and not for profit organizations. A lot can be learned from the corporate world. (See, Principles of Corporate Governance, Harvard Law School Forum on Corporate Governance, 2016)
What was the tone at the top when the School Board learned about the Grand Jury Subpoena? What was the guiding principle the School Board considered in responding to the Lake County State's Attorney? The community was certainly not the beneficiary of their response thatthe School Board had no interest in further investigation or prosecution, andthat they never had any intention of holding the former employees accountable. Nor were the students or remaining employees the beneficiaries. From the perspective of administrators and the Whistleblowers, that response merely confirmed what they had perceived for a long time — that the School Board and its legal counsel would always protect their cronies and friends, and retaliate against those who were not.
The Board of Education must set and follow an ethical guide star in all decisions.
2. COMMIT TO IMPROVING GOVERNANCE AND COMPLIANCE IN DISTRICT 113 — ESTABLISH A COMPLIANCE FUNCTION.
Establish
a compliance function within District 113’s administration. This report will
not cover all the details and nuances of that program, but it should include a
new administrative position, a director of compliance. A governance and
compliance consultant(s) should be retained to assist the Director of
Compliance and the Board Members in developing this necessary function.
Serving as a School
Board member should not be a fly-by-the-seat-of-your-pants job. Provide School
Board members with an education about the importance of governance and compliance, and make this a part of their continuing education.
The new Director of Compliance should conduct a review of all existing governance policies and determine and consider what needs to be improved, as well as what is missing. Even the best policies can do great harm if they are merely placed in a drawer. If not already developed, programs should be implemented to ensure that all employees are aware of, and understand, the policies. Given the existing fear about retaliatory discharge and demotions, the District may need to take additional to encourage reporting among employees.
3. PROVIDE A WHISTLEBLOWER HOTLINE TO ALL DISTRICT EMPLOYEES ASAP.
It was a tragic situation when whistleblowers, in fear of retaliatory discharge, sent an anonymous letter to Gerry Meister and me crying out for help. Sadly, we were in no position to change the course of the School Board when they needed it most. No employee should have to go through the angst of working in, what they believe, is a corrupt organization, especially fearing punishment for bringing attention to malfeasance.
It is essential to provide an anonymous Whistleblower hotline program. This is not just an 800# telephone line but includes other ways to report non-compliances anonymously. Under no circumstance should a hotline be directly connected to District 113 or its administrators. There are many companies that provide affordable independent hotline and reporting services – likely for less than a couple of thousand dollars per year. They can provide 24/7/365 accessibility, as well as multiple language support. A small investment with substantial rewards.
After a report is initiated and the director of compliance and/or the School Board determines it requires investigation, an independent legal or investigative firm should be given full rein to fully investigate the matter. The firm should advise the director of compliance and School Board directly. The School Board should not then ask for an overriding, second opinion from their usual law firm (as was done when Robbins and Schwartz investigated the theft and document destruction, provided an independent report to the Board, but was apparently overruled by HLERK).
4. SET A POLICY TO REINFORCE FAIRNESS AND EQUITY IN ALL ACTIONS.
Treating administrators, teachers, and other staff fairly and equitably is in the School District’s best interests. It is vitally important to hold everyone accountable for poor performance and, especially, harmful and criminal actions.
District 113 is a relatively small community. It’s hard to create a bubble in which School Board members have no personal relationships with District 113 employees. To the greatest possible extent, however, School Board members should be encouraged and expected to be professional in all their conduct.
Policy should be set to require School Board members to disclose personal relationships and recuse themselves from any determination that might be clouded by friendship or other potential conflicts of interest. Additionally, the School Board can develop a policy to ensure that all employees are treated fairly. Friends and family should not be hired, and, for many reasons, a nepotism policy would be helpful as well.
5. CONDUCT FORMAL REVIEWS OF EXISTING ACCOUNTING AND LEGAL FIRMS; ISSUE ROUTINE REQUESTS FOR PROPOSALS.
Accountants:
The
Cash & Carry report raised significant issues, not only about cash
management, but the audit function. Checks for hundreds of thousands of dollars
were made payable to Petty Cash, were signed by one person (the treasurer)
without a countersignature, were endorsed by employees (including the
treasurer), and then picked up in small bills to be used in a book-buyback
program for which there was no viable control or accounting (no inventory, no
receipts, etc.). The practice of handling cash in this manner took place for
more than a decade and ended only when residents reported the transactions to
the Lake County State’s Attorney as potential crimes. Yet, over that decade, an auditor would have been required to review the accounts.
The practices reported in Cash & Carry were highly irregular. Indeed, each “Petty Cash” check was, on its face, improper, and you don’t need to be an accountant to understand that. Each represented sums far larger than most line items in an approved budget. It is unbelievable that checks of these sizes could fly under any auditor's radar. Did any audit firm report the Petty Cash checks to the School Board? Did they fail to do so every year? Or, perhaps, they issued a Management Letter that was ignored by the School Board. These facts should be further investigated.
By law, every high school in Illinois must be audited by a public accounting each year. However, the law does not require (nor prohibit) that Management Letters be published. District 113 failed to provide copies of Management Letters requested for the Cash & Carry report. It is proposed that the School Board should be far more transparent, and should provide residents with access to all the relevant audit documents, including Auditor Reports, Auditor Management Letters, and District 113’s responses to the Management Letter.
Transparency and accountability is key to compliance, even for auditors. There should be a review of the performance over the past decade, including if and why various auditing firms were swapped out. If the firm during the Cash & Carry time failed to report the Petty Cash checks to the School Board, this should be reported to the AICPA, even if these events took place 10 years ago.
Law Firms:
Every school board relies heavily on legal advice and representation, particularly with regard to the human resources function. There are many laws firms to choose from who have the requisite expertise. HLERK has represented the School Board for, at least, a decade. HLERK advised the Board of Education on virtually every matter discussed in this report.
There is a reasonable argument to be made that a law firms, as well as accounting firms, lose their independent judgment over extended periods of time. Indeed, consider that in the US, public companies must rotate their audit engagement partners. Some would say that it is not just the audit partner that needs rotation, but the audit firm, too. There is no similar requirement applicable to law partners and firms, but, perhaps, there should be.
While HLERK may have many talented partners and associates, the firm has also become, at least, witnesses to, and alleged by some administrators to be, actors in much of what has gone awry in District 113. The Whistleblower Letter refers to Tony Loizzi by name 16 times, alleging that he has a conflict of interest, and is favoring and protecting his friends, while enabling the School Board to terminate and demote administrators in retaliation. The Burnetti complaint refers to him, by name (but not as a defendant), eight times.
The appearance of impropriety can be just as meaningful as actual impropriety, as well as being indicative of it. Accordingly, as soon as possible, the School Board should issue an RFP to secure another law firm to represent District 113 — an independent law firm with no partners or associates who are friends with any member of the School Board or District 113’s administration or teachers.
Based on all the issues in this report, the School District should routinely and thoroughly review the performance of its service providers, including lawyers and accountants. Placing routine Requests for Proposals on a schedule is helpful to any organization. Not only does it foster some competition that encourages service providers to provide their best service and fee rates, it is an opportunity to review performance and relationships. The Board of Education should set a schedule for requesting RFPs for these professionals at least every 3 years.
6. REVIEW DISTRICT 113’S DIVERSITY, EQUITY, AND INCLUSION POLICY.
It is disturbing to read allegations in the Burnetti complaint (para. 27) that, prior to the arrival of Superintendent Dignam, District 113 has failed to provide for diversity, equity, and inclusivity —the implication of actual discrimination. If true, this needs to be addressed and rectified immediately by the School Board and reviewed by the community. If a Diversity, Equity, and Inclusion policy exists, it should be reviewed and the School District should oversee its implementation and ensure compliance with it. If there isn’t a Diversity, Equity, and Inclusion policy, it should be developed and implemented ASAP.
7. CLOSED MEETINGS SHOULD BE THE EXCEPTION — ENSURE TRANSPARENCY WITH THE COMMUNITY AND NEWS MEDIA.
By intentionally withholding information from residents, the Board of Education has earned the community’s lack of trust. A component in regaining trust is to ensure transparency. Closed meetings should be rare events and only in full compliance with the Open Meetings Act. The Act purpose is “protect the citizen’s right to know.” Exceptions to an open meeting should be "strictly construed against closed meetings.”
It is reasonable to conclude that there was, at least, one closed meeting, with Anthony Loizzi present, to discuss alleged violations of criminal law by certain former administrators. This likely was in violation of the Open Meetings Act that defines an employee as a person who is currently employed, not a former employee. Residents will not find a record of any open meeting in which the Grand Jury Subpoena was discussed, nor a record of any open meeting in which the School Board was advised by Loizzi, or in which Loizzi would have been instructed by the School Board, to send the “no harm-no foul” letter. These matters had to have been discussed somewhere — more likely than not, in a closed meeting.
Consider
the termination of Superintendent Digman’s contract. The residents were only told by the School Board that he had created an exodus of administrators because of a toxic enviromment the Superintendent had created. The School Board did not tell the residents that the three administrators who left included a principal previously determined to have falsified records, and that he, in concert with two other administrators, had destroyed school records on their way out the door, including putting some documents in a car for unknown purposes and transportation to a place that remains a mystery.
It is hard to believe residents would have approved of the superintendent's termination or the severance payment, or the hiring of two administrators to replace the one if they had access to the facts. In any event, and surely, it was a lack of transparency that permitted the School Board to manipulate the residents in that situation.
Of course, if there had been transparency and the facts were available, the Chicago Tribune would likely not have published the article claiming that a “toxic environment” was caused by the superintendent. The Trib's report would have been correct if it had revealed that our superintendent was trying to do a good job of cleaning up the swamp and was meeting resistance from the School Board.
The lack of transparency, including specific cover-ups, that resulted in the termination of the Superintendent, cost residents nearly $1 million in unbudgeted expenses that year, seriously disparaged and harmed the Superintendent, and further damaged the reputations of Highland Park and Deerfield.
Moving forward, the Board of Education should err on the side of transparency and hold open meetings unless strictly required. Perhaps independent counsel should be retained just for the purpose of ensuring compliance.
8. THE SCHOOL BOARD NEEDS TO BE HELD ACCOUNTABLE FOR ITS ACTIONS — MAKE AMENDS.
Many
people have been personally harmed by these School Board actions. So has
the community. It is time for the School Board to acknowledge their
mistakes and the harm done.
In addition to implementing the recommendations in this report, the School Board should undertake to make some reparations. The School Board should consider:
- Burnetti Lawsuit. Don’t waste tax dollars fighting this lawsuit for the sake of fighting it. If what she alleges is true, work out a reasonable settlement, and make things right. Litigation defense is expensive — residents should not have to foot the bill. Also, assuming Ms. Burnetti remains qualified for the job that she was demoted from, consider reinstating her to the same or similar position, if she will take it after all this.
- Christopher Dignam. Retain one or more recruiting firms to place Christopher Dignam in another school district where they would appreciate his ethical compass. The School Board shamelessly and publicly defamed this man. Make it right, as right as it can be now.
9. IF THE LAKE COUNTY STATE’S ATTORNEY CONDUCTS AN INVESTIGATION INTO DISTRICT 113, ASSIST THEM.
The Lake County State’s Attorney is there to pursue justice. The School Board should never be an obstacle or impediment in the pursuit of justice.
10. RESIDENTS — PAY ATTENTION TO THE BOARD OF EDUCATION AND HOLD THEM ACCOUNTABLE.
Several years ago, three
people called me and asked for help. They expressed their deep concerns about alleged
corruption in Township High School District 113 at both the administrative
level and within the Board of Education. None of them had children in the school
system at the time, they were mostly retired. They were critical thinkers. Financial
mismanagement was their primary interest. Their claims sounded outrageous. “There is no such thing as a Petty Cash check for hundreds of
thousands of dollars!” I told them. I was wrong.
Among the group was Margaret A. ("Maggie") McPhee, z"l. We need more Maggies — smart, detail oriented, tenacious, and willing to review every financial detail. We need more Gerry Meisters, who will attend School Board meetings and challenge the assumptions being made. With his expertise in architecture, Gerry has also been able to point out when funds were released improperly in construction projects, as well as noting possible violations of building codes.
It
would be great to just sit back and rely on the Board of Education to perform all
their responsibilities well. Based on history, though, we know that they
perform some of responsibilities very well while they fail at others of great consequence.
All of
the recommendations proposed today, if implemented, will help reduce the incidents
and improprieties. However, there is never a time that even the best of
organizations is immune. Remember Yale Med and their missing $40 million. When we
relax, controls relax. Be ever vigilant. If you have the skills, step up and keep
a watchful eye on District 113 for the sake of education and our community. Meanwhile, implementing an Whistlblower Hotline is a great and necessary first step.
There will be one final chapter — an epilogue, covering some things that have been learned since starting to publish this report. Hope readers will "stay tuned."
Links to all chapters of this report:
Chapter FourChapter Five
