Delaware Valley High School Update

Posted: Thu, Aug. 8, 2013, 12:00 AM

Indictments Are Expected in School Probe, But No Sign of Reform

Ryan Briggs

City Paper

Matthew Smith

In February 2012, FBI agents searched the Center City condo of Chaka “Chip” Fattah Jr., son of Congressman Chaka Fattah, and the offices of lawyer David T. Shulick, chief executive of the Delaware Valley High School Management Corp. Now, after a year and a half of scandal, investigation and leaks, a source says grand-jury indictments are imminent. The anticipated charges involve the alleged misuse of as much as $600,000 in government funds.

But the same source, who requested anonymity because of the ongoing investigations, also says the pending charges may not address the full extent of the alleged mismanagement at Delaware Valley High School-Kelly, the School-District-funded “alternative” (i.e., disciplinary) school on Kelly Drive in East Falls at the center of this investigation.

Charges are expected to focus not on DVHS-Kelly, but on an auxiliary, computer-based DVHS school in Southwest Philly that had received a $2.2 million federal stimulus grant through the School District. Those were federal funds, but DVHS-Kelly, which was District-funded, received far more money — about $10.5 million — over its three years in operation and was, according to documents obtained by City Paper, potentially the site of even greater waste and mismanagement than has previously been reported.

School dollars were allegedly diverted for political donations, used for personal cars and home remodeling and transferred into a charity that operated in Shulick’s late mother’s name. School security contracts were directed to those with local political ties and to Nation of Islam members who, school staff allege, made the school environment unstable. But the School District never audited spending or other practices there, leaving 300 of its most troubled and vulnerable students to endure the consequences.

The problems at DVHS-Kelly began before the school even opened. In July 2009, Shulick announced his plans for the school site — and faced intense opposition from the community, the local CDC and district Councilman Curtis Jones Jr. In the face of that opposition, Shulick retained Fattah Jr., a longtime friend of Jones with far-reaching political ties, as his as chief development officer. He also hired politically connected PR consultant Anastasia Karloutsos. Both were paid $75,000 to come into work once a week, according to a source inside the school. Shulick also retained Melvin Jonakin, aka Prince Muhammad, a local barbershop owner whose brush with politics — an unsuccessful City Council bid — and community connections apparently made him an attractive advocate for the school.

“[DVHS] had come to me because the outside community was totally against a disciplinary school opening,” Jonakin tells CP. “I said, ‘In order to do that, it’s going to require you to hire residents … from this community.’” Jonakin says that Shulick agreed to give him the school-security detail to use as a carrot. “I went to the folks that were opposed to [the school] and said, ‘Well, do you have anyone who needs a job?’”

A former administrator says Jonakin was paid $25,000 up front for gathering hundreds of signatures in support of DVHS, and that Jonakin then demanded security jobs for his friends. Jonakin says Shulick had always promised him control over hiring in return for obtaining community support.

Whatever the agreement, the school obtained School Reform Commission approval in August 2009. When it opened in September, Jonakin and his crew were in charge of security.

That didn’t last long. Jonakin had introduced Shulick to a man named Mustafa Majeed. By the end of 2009, Jonakin was ousted and Majeed had won a security contract. “Mustafa brought in his own 30 guys, some of whom were ex-cons,” says Jonakin. But Majeed would lose his contract in less than two months, after a security member allegedly got into an argument with a teacher.

Improbably, former administrators say that at this point Shulick made an agreement with a local branch of the Nation of Islam to do security instead. “They were very strict … [they] wanted to put fear into the students,” says a former teacher. “They would fight the students and put hands on them.” A new administrator, Andre Bean, was installed in May 2010, and fired the Nation of Islam team.

If only the School District knew about these issues — the installation of three different sets of apparently problematic school-security officers in what was, after all, a disciplinary school — surely it would have raised a red flag. Right?

Wrong. The District was notified of the issues by Jonakin himself, who, in a letter dated March 16, 2010, complained that the company Majeed created, Two Tons Security, had been given checks for $30,000 and an additional $15,000 “without an EIN number, without insurance and without being bonded.” Jonakin was outraged.

His work relationship with Shulick ultimately ended in a public confrontation. On May 19, 2010, Shulick filed a criminal complaint against Jonakin.

The district admits it was aware of the trouble with security at DVHS-Kelly. “There was a dispute between this fellow and the head of DVHS that we knew about because [Jonakin] also came to a [SRC] meeting,” says School District spokesperson Fernando Gallard. “They supposedly worked it out.”

When it came to DVHS-Kelly’s accounts, things don’t appear to have gone much better.

Every month, $348,430 from the district poured into a bank account for school operations. But records show anomalies in the disbursement of those funds. Shulick would routinely shift enormous sums out of the school’s accounts and into his own — in one instance, $255,000 in a single transaction — and then deposit back other sums.

Perusing years of financial records, it seems that, early on, there was a pretense of covering potentially suspicious payments through these fund transfers and “addbacks.” What seems to have begun as substantial, but perhaps plausible, reimbursements for work expenses charged to Shulick’s personal American Express card ballooned over time into regular payouts — $69,603 in a single month in 2012.

There were other expenses not typical of school balance sheets. For example, school accounts indicate that on Feb. 21, 2012, Shulick received $10,000 with the memo “Repayment for Pileggi.” On March 19, 2012, Friends of Senate Majority Leader Dominic Pileggi logged two $5,000 donations from Shulick. “Internally, I knew that [Shulick] wanted to do more than $100,000 a year in political contributions,” the source says.

Shulick also started a nonprofit in the name of his deceased mother, Judith B. Shulick, the same year DVHS opened, with the mission of “supporting at-risk youth.” In 2011, he transferred more than $50,000 from DVHS into the foundation, whose board of directors included Shulick, his wife, his “surrogate mother” and her husband, and a DVHS administrator he had hired. The foundation, among other things, adopted a beach in Margate, where Shulick had a condo; made donations to the Beth Hillel Synagogue in Wynnewood, near Shulick’s house; and made grants back to DVHS-Kelly.

School funds were also used for innumerable small payments: Parking tickets in Lower Merion, where the Shulicks reside; $1,585.72 to Green Valley Country Club; $2,000 in gas reimbursements to Fattah Jr. in a single 30-day span. Also apparently paid out of school coffers were utility bills for Shulick’s law office at 2 Logan Square, which doubled as headquarters for DVHS Management Corp. and the Judith B. Shulick Foundation.

The full scope of the alleged misuse of funds may never be known or proven. A former administrator claims that Shulick gave Fattah a $10,000 advance on his salary to cover gambling debts. And Shulick allegedly used tens of thousands of dollars in school funds to lease two Land Rovers and for home renovation, landscaping and radon testing. A source describes the spending as out of control: “David would drive by the school and say, ‘The flags aren’t flying perfectly: Replace all the flags.’ David Shulick spent $40,000 on [the floor at his house]. He said, ‘There are scratches on this floor, replace the whole floor.’ And then he sold the house a month later.” Jonakin puts it more simply: “David got greedy.” Shulick declined to comment.

Shulick was seeking to expand his operation to other states, such as Maryland, a source says. But the spending caught up with him first. By 2012, Shulick was shifting money out of his and his wife’s 401(k) just to make the school payroll.

“We weren’t getting our checks on time,” says a former teacher who is suing DVHS for back wages. “They were stealing,” she says.

At the end, there wasn’t much left to steal. In June 2012, days before the District terminated its contract, an ominous line was entered in the school’s financial logs: “$25,000 - Billing - DOJ Investigation.” That represented a retainer for law firm Ballard Spahr.

A source claims Shulick pocketed $2 million in 2011 alone from four different DVHS schools he ran. In three years of operation, the District never audited DVHS-Kelly’s finances.

Gallard says the District doesn’t audit these contracts. He says the City Controller is supposed to audit the finances of every school — including alternative schools — once a year. But Harvey Rice, the controller’s chief of staff, says his office has never been allowed to audit any alternative or charter schools.

“The School District has been very resistant in allowing us to conduct compliance audits of their individual contracts,” Rice says.

Although Shulick and Fattah could face jail time for their alleged roles in misusing federal money, there is little indication that any substantial reform has taken place on the District level.