Seattle superintendent's job at stake after blistering report

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by CHRIS INGALLS / KING 5 Investigators

Bio | Email | Follow: @cjingalls

KING5.com

Posted on February 25, 2011 at 12:24 PM

Updated Friday, Feb 25 at 6:36 PM

SEATTLE – Seattle Public School Superintendent Maria Goodloe-Johnson's job is on the line. That's according to the president of the school board following the release of a blistering report Friday into a troubled school program that raises questions about an attempted cover-up.

The report examined who in the district knew about possible fraud by the man who ran the Regional Small Business Development Program, Silas Potter, and his direct boss, Fred Stephens.

Friday's report was commissioned by the Seattle School Board.

"There have been absolutely management oversight flaws and errors made here and they appear to go all the way to the top of the organization," said School Board President Steve Sundquist. He says that includes Goodloe-Johnson.

The board hired former prosecutor Patty Eakes, who found a memo to be the first warning sign about serious problems in Potter's program. It was the first in a series of red flags that were either ignored or covered up.

On Feb. 8, 2007, a risk manager issued the warning about Potter's program, including "one instance in which he saw there could be potential fraud by a contractor," said Eakes.

In the summer of 2008, problems persisted and the Sutor Group was hired to conduct an investigation. That December, it reported serious problems with oversight of Potter's programs.

By then, Goodloe-Johnson was well aware of the report's findings. She met with others in January to discuss the troubled program. Among them was Stephens.

Two days later, Stephens wrote an e-mail indicating Goodloe-Johnson didn't want the Sutor report revealed to the school board.

"That's what I found most concerning, because of the nature of the Sutor Group report, the fact that nobody could remember discussing it with the board, talking about the details of how severe those findings were, I thought was troubling," said Eakes.

The following month, Goodloe-Johnson glossed over the Sutor report at a board meeting.

"It obviously was a missed opportunity for the Superintendent to share with us the full gravity of the situation," said Sundquist.

By the end of 2009, Potter's program was actually growing with even more questionable spending than before.

Then in February 2010 came perhaps the biggest red flag and a bold move by Potter. He established a private company in the same name as the public program he was running – the Regional Small Business Development Program. People thought they were writing checks to the school, but in fact, they were going to Potter's private company and his bank account.

A recent audit reveals Potter diverted $1.8 million in school district money to benefit his private company.

In June of 2010 -- more than three years after the first red flag -- the school district finally called Seattle Police to report the alleged fraud.

Goodloe-Johnson was unavailable for comment Friday. Several people say she was dealing with a sick family member.

Stephens, who now is with the Department of Commerce, tells us by e-mail that he's deeply troubled by the audit, but puts the blame on Potter.

Potter and several hundred thousand dollars diverted to his company, are nowhere to be found.

The board will meet in executive session Tuesday and perhaps decide the fate of the superintendent and the district's chief financial officer at its regular board meeting on Wednesday.

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