Butkovitz discusses origins of probe of sheriff’s office


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. ••


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