SEATTLE - The KING 5 Investigators have uncovered new information about the scandal that is rocking Seattle Public Schools -- an alleged scheme to steal school district money.

A Washington state audit found that the district paid $280,000 for services it didn't receive and $1.5 million in spending for services that did not benefit the distri

There is a connection to a key city worker in Tacoma. He s one of the founders of a business that was set up by three men in February of last year.

The Tacoma worker established the company with Silas W. Potter, a Seattle school district employee who ran a district program that taught small businesses how to bid on public contracts.

For several years, Potter coordinated the so-called Regional Small Business Development program, operating out of the district's own headquarters. The school board says it was unaware that Potter started a private business by the same name last year.

The school district and other entities cut checks thinking the money was going to the district's own small businesses development program. But state auditors found the checks were actually being cashed by Potter's new company. The Washington state Auditor's Office identified $1.8 million of the school's money that either vanished or was used by Potter for questionable purposes.

The damage collectively to the Seattle Public Schools is a tremendous loss of the public confidence, said School Board President Steve Sundquist.

The school board ordered an internal investigation into what everyone, from the district's superintendent on down, did when suspicions about Potter's activities started to grow last year.

Were there signs that were missed? Was there a failure of management or oversight? Sundquist asked.

The state auditor thinks there is plenty of fault to go around and even thinks the district's internal auditor was part of the scheme.

In public records, the KING 5 Investigators found the names of two other men who serve as the officers of Potter s company. One of the founding officers is Percy F. Jones, Jr. He runs the small business training program for the city of Tacoma, a program that is very similar to the one Potter ran for Seattle schools.

The Tacoma City Manager's Office says it did not know about Jones' connection to this shadowy company. A City of Tacoma spokesman says a quick check did not uncover any city money that was directed to Potter's company. The city is still investigating and hasn't been able to reach Percy Jones on Wednesday.

KING 5 was also unable to reach Jones or Potter.

The audit has been turned over to Seattle police and King County prosecutors. The school board has hired a private attorney to investigate.

The Associated Press contributed to this report.

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