Payback of $1.5 Million for Detroit Schools Bilked in Kickback Scheme

Associate Editor

The financially strapped Detroit school district received a $1.5 million restitution check this week from Norman Shy, who is in prison for his role in a kickback scheme that involved 13 school leaders in the city, according to a report in the Detroit Free Press.

That payment means he has paid 58 percent of the $2.7 million he owes Detroit schools for the fraud he committed while his company, Allstate Sales, provided auditorium chairs, supplemental teaching materials, and paper to Detroit schools.

Shy, who is 76 and serving a five-year prison sentence, has now paid $1.56 million to the district, the Free Press reported. Formerly the owner of Allstate Sales, which was on the district’s approved vendor list, he pleaded guilty in May 2016 to giving kickbacks to school officials.

According to the original complaint against Shy and ex-assistant superintendent Clara Flowers, the conspiracy involved Shy fraudulently obtaining funds from the district by agreeing to pay principals kickbacks related to business worth millions of dollars to him and his company.

In exchange, the principals—including Flowers, who was eventually promoted to assistant superintendent—agreed to certify and submit fraudulent invoices. In total, the 12 principals and Flowers received about $908,500 in payments.

In some instances, Shy did not deliver any of the goods that were listed on the fraudulent invoices, the complaint said. In other cases, he delivered only a portion of the goods. Shy maintained a ledger to keep track of how much money he owed in kickback payments. The fraudulent activity dated back to at least 2009, federal prosecutors said in their complaint.

Flowers was a special education administrator, and she received the most money in the scheme—nearly $325,000. The Free Press reported that she was sentenced to three years in prison last year, and is required to pay full restitution to the district. She admitted that her actions meant special-ed students never received supplies that the district had paid for, but that Shy’s company did not deliver.

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