A little more than a month after the U.S. Attorney’s Office made a big splash by filing the first criminal charges in its investigation of corruption in the Philadelphia Sheriff’s Office, City Controller Alan Butkovitz told a small group of Northeast residents about the impetus for the probe.
During a Jan. 11 meeting of the Fox Chase Homeowners Association and Town Watch, Butkovitz said a full-scale audit launched by his office two years ago provided a foundation for the criminal investigation — which he believes could still be in its infancy.
“This is an ongoing project. We’ve invested about two years into it. … I think it’s one of the most important investigations the city has undertaken in a while,” said Butkovitz, a former state representative elected in 2005 to replace Jonathan Saidel as the city’s fiscal watchdog.
Butkovitz was re-elected in 2009.
Last January, then-Sheriff John Green resigned after 23 years on the job and with one year still left in his sixth term. His chief of staff, Barbara Deeley, replaced him on an interim basis until early this month, when former state Rep. Jewell Williams was sworn into the office.
Much of Green’s tenure was marked by accusations and findings of financial irregularities within his office, Butkovitz said. But Green repeatedly seemed to emerge from the controversies unscathed, reassuring auditors, the city’s administration and the electorate that his office was working toward better efficiency and accountability.
The controller launched his own audit of the sheriff in 2010. After discovering a series of “red flags” indicating suspect transactions and a lack of internal controls, Butkovitz obtained funding from the Nutter administration to hire an outside accounting firm for a full forensic audit of the sheriff’s accounts.
“The reason they got a forensic audit was because they were off the charts with red flags of fraud,” Butkovitz said.
At first, auditors examined sheriff’s sale transactions dating back three years. When they discovered a pattern of alleged mishandling of funds, they extended the scope of the investigation to a 10-year period, Butkovitz said.
Auditors found that the sheriff’s office was sitting on some $50 million in proceeds from property sales, money that should have been redistributed to lien holders and property owners. Yet, auditors were unable to determine where the money should’ve been paid.
Typically, Butkovitz said, the sheriff should have $4 million to $5 million on hand at any given time.
Further, auditors calculated about $135 million in funds that were unaccounted for, that the sheriff apparently had collected in proceeds from property sales, but had no record of its redistribution. So, the controller’s office doesn’t really know if the lien holders and property owners were paid, if the money ended up in someone else’s hands or if the sheriff actually collected it in the first place.
“They don’t know where the $135 million is,” Butkovitz said.
Most of the “irregular” transactions occurred during the final five years of Green’s tenure and involved tens of thousands of individual property sales, Butkovitz said.
A private company with personal ties to Green is central to the investigation, according to the controller. The sheriff’s office initially awarded a no-bid contract to Reach Communications to handle the marketing of sheriff’s sales. Essentially, Reach was in charge of placing newspaper ads.
Later, the sheriff hired an affiliated company, RCS, to be its “title broker,” Butkovitz said. Authorities are still investigating what state or federal certifications RCS should have had, if any, to operate in that role. RCS was not considered a title insurer, however.
Nonetheless, Reach and RCS collected millions in fees from the sheriff’s office, Butkovitz said. Yet, the contracts do not include the usual provisions allowing the city access to the companies’ own financial records.
So the controller has not seen the private companies’ accounts.
According to Butkovitz, the city’s lawyers have found themselves in a unique position because of the controversy. They may choose to sue Reach and/or RCS to gain full access to their financial records and to recoup fees paid to the companies. Yet, some 6,000 unpaid lien holders and property owners are suing the city claiming that they didn’t get money due to them following sheriff’s sales.
By suing Reach and/or RCS, the city may further expose itself to those private claims against it.
Meanwhile, the validity of countless title transfers remains in doubt.
“Of all the tens of thousands of houses that were sold, we don’t know if they have a clear title,” Butkovitz said.
A federal grand jury reportedly continues to investigate the case. Possible indictments are pending.
The U.S. Attorney’s Office in Philadelphia on Nov. 20 announced fraud and tax evasion charges against Richard Bell, a former auditor in Green’s accounting department, along with three others not employed by the sheriff. Those accusations were filed via criminal information independent of the grand jury.
Bell is accused of writing fraudulent checks to three other men from the sheriff’s accounts. The co-conspirators allegedly took the checks, deposited them into their own accounts and shared the proceeds with Bell.
Bell’s three co-defendants have pleaded guilty to their roles in the fraud and are scheduled for sentencing in April. Bell was scheduled for a plea hearing in U.S. District Court on Tuesday. ••EndFragment