(Staff writer Debbie Cafazzo contributed to this blog post)
A Seattle Public Schools’ financial scandal that has prompted an ongoing criminal investigation has indirect ties to a longtime City of Tacoma employee, records and interviews show.
No one is accusing city employee Percy F. Jones, Jr of wrongdoing.
But state records show Jones, who coordinates the city’s Historically Underutilized Business Program, is listed as a registered agent and one of three governing members of the nonprofit at the center of the scandal: the Regional Small Business Development Program.
Public funds diverted into the private nonprofit’s bank account triggered a state audit last year, after Seattle school officials questioned a $35,000 check that Tacoma Public Schools wrote to the Seattle School District.
Seattle officials wondered why the Tacoma schools’ check – intended as payment for training provided to potential women- and minority-owned business contractors – was deposited with the private group instead of with the school district, interviews and records show.
The money from Tacoma schools was returned to the Seattle district after a police report was filed, but school officials still alerted the state auditor’s office, an auditor’s report now says.
In all, a state audit report released this week found nearly $1.8 million in questionable spending by the Seattle School District in connection with Jones’ nonprofit and to the school-funded contracts his nonprofit awarded to private vendors.
State Audit Report of Seattle Public Schools’ Spending Tacoma Public Schools is not implicated in wrongdoing, according to the state auditor’s office. Seattle police, the King County Prosecutor’s Office and Seattle Public Schools are now investigating the matter.
According to The Seattle Times, Silas Potter, a former Seattle Public Schools employee who is registered as the chairman of the nonprofit, has emerged as a key figure in the investigation:
The audit singled out former executive facilities director Fred Stephens, now working at the U.S. Department of Commerce, for failing to properly supervise program manager Silas Potter. Potter was one of the people who set up the private organization where funds allegedly were diverted, according to the audit.
Potter has since disappeared as investigators have sought to question him, The Times reported:
(Seattle school board attorney Patricia) Eakes said she has not been able to find Potter, who resigned from the district in June and then worked for a short time under a contract with the district. (State Auditor Brian) Sonntag said his office also had not been able to locate Potter.
Jones, who made about $75,000 in his city position in 2009, did not immediately return a phone call to his work office Thursday.
City spokesman Rob McNair-Huff said Jones is on the job and in the office today.
McNair-Huff added the Seattle Public Schools investigation “has nothing to do with the city, but (Jones) is a city employee.”
After receiving a media call about Jones Wednesday, city officials checked to see if any city money has been directed toward the nonprofit or another for-profit firm that Jones is involved in.
“We have not had any dealings that we could find with either of those companies,” McNair-Huff said.
City officials are also informally reviewing potential conflicts of interest and ethics issues involving Jones’s connections to the outside groups, McNair-Huff said.
“We haven’t come to any conclusions,” he added.
The city’s code of ethics states that city employees are prohibited from engaging in private employment or rendering of professional services “when such employment or service is incompatible with the proper discharge of official duties or would tend to impair independence of judgment or action in the performance of official duties.”
Some outside employment is allowed, McNair-Huff said, “but typically the employee’s supervisor would need to approve that.”
“We’re looking into if that happened (with Jones),” he added. “But I don’t have an answer yet.”
Jones was at the center of a 2004 city audit, during which an outside accounting firm found the city’s HUB program was rife with bookkeeping problems and missing records, and did not have any written standards in place for how the program is supposed to operate.
The News Tribune reported at the time:
But despite numerous examples of “sloppiness,” the audit by Moss Adams LLP found no evidence that the overall goals of the city’s Historically Underutilized Business Program had been compromised or that any businesses improperly received city money, said finance manager Steve Marcotte.
“The program itself has served the purpose it was set out for,” Marcotte said.
City Manager Jim Walton, who played a key role in the formation of the program, said it’s apparent from the audit that the program was overloaded with bureaucracy and that HUB administrator Percy Jones was asked to do too much.
“Something is going to fall off the plate,” said Walton, who added that despite the problems revealed in the audit, it demonstrated that “the integrity of the program was not compromised.”
Walton said the blame should be shared by everyone involved, including himself, Marcotte for failing to recognize that Jones wasn’t keeping up with the paperwork, and Jones for apparently not alerting those above him that he couldn’t keep up with the requirements.
“We’re all on the hook,” Walton said.