By Jim Schutze
By Rachel Watts
By Lauren Drewes Daniels
By Anna Merlan
By Lee Escobedo
There was no mention whatsoever of the one deal I always thought was the single most intriguing allegation--that a major Dallas bank had been regularly paying out millions of dollars on checks for which DISD had no record and that when auditors began asking questions about those checks, historical bank records of DISD's accounts were retroactively altered to make the problem go away.
Let me explain this one a little. Three years ago, it was learned that the bank in question had paid out millions of dollars on DISD checks for which DISD itself had no records. These are called "paid-no-issues." A check comes to the bank; the bank pays on it; but DISD has no record of ever having issued it.
You think, well, they would catch that when they reconciled their accounts. Yeah, they would. Now. Because now they reconcile their accounts. Three years ago, they didn't--they paid the bank to do it. Isn't that great? Here's my billion-dollar account: Don't bother me with the details.
But at a certain point, after the details came to light, DISD sent over to the bank what were called "maintenance tapes"--computer tapes that were supposed to be used to give the bank the information it needed to reconcile the accounts, kind of like sending in your checkbook register for them to consult. But these particular tapes, according to the people I have talked to, did something very different. These tapes went back and altered old transactions, erasing most or perhaps all of the "paid-no-issue" transactions.
So how do I even know these transactions exist? Because a bank employee who smelled a rat kept hard copies of the original register, before the "maintenance tapes" had a chance to go back in and erase the evidence. And I have that hard copy on my desk.
All of this was presented to KPMG. Not a syllable of any of this is included in KPMG's final report to the district. I called Mike Wilson, KPMG's managing director of forensic and litigation services in Houston, to ask him why. He referred me to DISD's public relations office.
The PR people set me up to meet Ray Zies, the district's new chief financial officer. I would describe his reaction to my stack of printouts as very wide-eyed, and he did copy down a few check numbers to see what he could find.
But Zies just got here. He doesn't know about any of this stuff. Why would he? None of this happened on his watch. And the people who would know are either long gone or hiding in the woodwork.
Did I mention that, in the same period when these paid-no-issue transactions were going through the bank, DISD also had about 5,000 checks that were physically missing? Gone. Can't find 'em.
Picture it: This was a place with a $1 billion-plus annual budget. Whole boxes of checks went missing. The district signed many checks by rubber-stamp. The bank paid on checks--it paid out millions of dollars--even though DISD had no record of having written the checks. DISD didn't even reconcile its own books. Nobody missed nothin'. When someone did catch up with all of this, the records at the bank were erased. All of this was given to KPMG.
Not a mention.
Here's a caveat: It's important not to blame this stuff on the people holding the purse strings at DISD now. For example, Becky Oliver at Channel 4 did a really bad sucker-punch interview with Zies a couple weeks ago in which she acted as if he were personally responsible for a bunch of portable classroom buildings that are missing. Like there was going to be covert footage of Zies in a thong, lounging in front of the Caribbean castle he built entirely of stolen portable classrooms. The guy wasn't even here when the classrooms went missing! Give us a break.
As soon as Dr. Mike Moses got to town to take over as our new superintendent, he met with Defenbaugh. I have heard from both sides of that meeting that Moses told Defenbaugh to do whatever had to be done.
So this whole effort to get the FBI to call off its dogs comes from outside school headquarters, from the Morning News, and maybe the business community. And we have a right to be very suspicious. I can't help wondering who it is the News wants to protect.
Strange city, eh? If this were radio, I'd fade to the theme from The Twilight Zone.