Wake schools recover $3 million

Company admits fraud, will pay

With the recovery of $3 million in stolen taxpayers' money Friday, Wake County school leaders hope they're putting the school transportation fraud case behind them.

Barnes Motor & Parts Co., based in Wilson, pleaded guilty Friday to obtaining property by false pretenses. Barnes agreed to pay a $2.5 million criminal fine and an additional $500,000 civil settlement to the school district.

That means the district has recovered $4.8 million from Barnes and from the employees of the company and the school transportation department who submitted thousands of fake invoices for supplies. The amount the district lost in the scheme is uncertain, but investigators say it lost at least $3.8 million.

School leaders hope the recovery of the money and the planned release Tuesday of the findings of a special fraud audit of the school district will restore public confidence.

"We're receiving money that belonged to us," said Patti Head, chairwoman of the school board. "The audit will answer questions and clear up doubts about the district."

That message was echoed by Wake County District Attorney Colon Willoughby.

"This will bring a measure of justice and hopefully restore the good name and credibility of the school system," Willoughby said.

Restoring that credibility is key to winning public support of a school construction bond issue in November that could exceed $1 billion. It could also affect the district's ability to get more county money for its operating budget, which will be presented Tuesday.

Wake Superior Court Judge Donald Stephens accepted the deal but had harsh words for the company.

"Obviously, business practices that defraud the government are not only illegal, they are unpatriotic, too, because they are crimes against the people and against democracy," Stephens said. "The penalty in this case is significant, but it needed to be that."

Investigators allege that at least $3.8 million in fraudulent invoices were paid. Much of the money was used by employees to buy personal items such as automobiles, campers and golf carts.

Willoughby said authorities still aren't sure how much money was stolen, but he thinks Barnes' repayment will make the district whole.

Six people, including two former Barnes managers and four former Wake school transportation employees, have pleaded guilty in the case. A seventh person, the husband of one of the Barnes managers, also was indicted but has pleaded not guilty.

Former Wake school transportation director Vern Hatley was sentenced last month to seven to 10 years in prison.

Representatives from Barnes said they weren't aware of the fraud until it was uncovered. But they say they accepted responsibility because under state law they're responsible for the criminal actions of company officers.

Counting the amount in Friday's agreement, Barnes has repaid $4.4 million to the school district. To come up with the final $3 million, Barnes will sell three of its stores, including the Raleigh store where the fraud took place.

"Barnes is hoping to close the chapter on this case," said Stephen Smith, Barnes' attorney.

Since the fraud was discovered, school administrators have implemented a number of changes designed to prevent abuses.

"We'd hope in the future that the public will gain confidence in the Wake County Public School System," said Deputy Superintendent Del Burns, who will take over as superintendent in July.

To further reassure the public, the school board voted to spend $470,000 to hire an outside firm to examine the changes made by administrators and to look for other potential weaknesses.

Carol Parker, chairwoman of the school board's finance committee, said Burns' announcement that he will hire a non-educator to fill the new position of chief business officer also will help reassure the public.

"It's wonderful that we're getting taxpayer money back, but that's not the point," Parker said. "We lost it in the first place."