Feds: Ex-CPS CEO 'fraudulently' steered $40M contract in Detroit

Barbara Byrd-Bennett warrant in Detroit

An FBI agent believed corrupt former Chicago Public Schools CEO Barbara Byrd-Bennett worked to “fraudulently steer” a $40 million contract to one of the country’s biggest educational publishers while she worked for the Detroit schools, according to records obtained by the Chicago Sun-Times.

The court documents obtained Monday also show federal law-enforcement authorities suspected two aides who later worked for CPS helped Byrd-Bennett to rig the bidding process in Detroit in favor of Boston-based Houghton Mifflin Harcourt.

The revelations appear in a March 2013 affidavit the FBI filed for a warrant to search Byrd-Bennett’s America Online email account. That’s the same personal account Byrd-Bennett allegedly used to work out the details of a kickback scheme at CPS.

Byrd-Bennett pleaded guilty Oct. 13 to steering $23 million in CPS contracts for The SUPES Academy and Synesi Associates, two north suburban education-consulting companies that employed her before she became Mayor Rahm Emanuel’s schools chief in 2012.

When federal authorities in Chicago indicted Byrd-Bennett and the two owners of SUPES and Synesi on Oct. 8, they said their investigation was ongoing and that Byrd-Bennett was cooperating with the probe.

Nobody has been charged criminally in connection with the investigation of Houghton Mifflin Harcourt’s Detroit deal.

As the Sun-Times first reported last week, federal investigators were looking into the massive deal Houghton Mifflin Harcourt won in Detroit in 2009, when Byrd-Bennett was a high-ranking official for the Michigan city’s school district.

And the newly obtained court records shed further light on how authorities believed long ago that they had “probable cause” to suspect corruption in the dealings between Houghton Mifflin Harcourt and Byrd-Bennett.

In the sealed affidavit from more than 2-1/2 years ago, FBI Special Agent Joseph Richard Jensen told the judge he thought Byrd-Bennett “worked with and through” longtime aides Sherry Ulery and Tracy Martin and Houghton Mifflin Harcourt executive John Winkler in a fraudulent scheme. In the Detroit deal, Houghton Mifflin Harcourt was paid about $40 million in federal stimulus funds.

The feds told the judge an “unusual financial transaction” took place about three weeks before the contracting process for the Detroit deal began. Records show the FBI’s “analysis of bank account belonging to Barbara Byrd-Bennett shows a deposit into her Money Market account on July 20, 2009 in the amount of $26,530.26 from ‘Houghton Mifflin Harcourt.’”

Before arriving in Detroit in May 2009, Byrd-Bennett had worked for Houghton Mifflin Harcourt for three years for an annual salary of more than $155,000, according to court records.

A couple of months after leaving the Detroit schools — where she was an independent contractor with the title of chief academic and accountability officer — Byrd-Bennett returned to Houghton Mifflin Harcourt. The company offered her $182,000 a year to work 21 hours each week, the FBI said.

Jensen wrote that he thought emails in Byrd-Bennett’s AOL account would show Byrd-Bennett lied to Detroit school officials about her relationship with Houghton Mifflin Harcourt and that “she had a conflict of interest with regard to contracting between” the company and the Detroit district.

The federal investigator then detailed how Ulery and Martin were involved in awarding the lucrative Detroit contract to Houghton Mifflin Harcourt.

The Detroit schools issued a request for proposals, or RFP, for the deal and conducted a bidding process. But Jensen wrote there were emails indicating that Houghton Mifflin Harcourt “was selected by Barbara Byrd-Bennett, Tracy Martin and Sherry Ulery as early as June 2009, two months before the RFP was released, and thus that the bidding process was rigged to award the contract to HMH.”

According to the court documents, three Detroit schools officials were assigned to review bids made in response to that request for proposals. Ulery and Martin, who were working directly for Byrd-Bennett in Detroit, were two members of the three-person bid panel, with Byrd-Bennett’s then-chief of staff, the records show.

Martin and Ulery were part of Byrd-Bennett’s inner circle for over a decade, trailing her from Cleveland’s school district — where Byrd-Bennett was chief executive until 2006 — to Detroit and finally to CPS.

Ulery was hired at CPS just before Emanuel promoted Byrd-Bennett to the chief executive’s job, while Byrd-Bennett briefly was Chicago’s chief academic officer. Ulery became Byrd-Bennett’s $175,000-a-year chief of staff at CPS and was a constant presence at her side at public events in Chicago.

About a month after Byrd-Bennett was elevated to the top job, she hired Martin to manage a pet project for $170,000 a year.

Ulery and Martin were named in federal subpoenas delivered to the Chicago schools in April. Ulery also was called to testify before a federal grand jury.

Both resigned from CPS in June. The school district was paying for lawyers for both Ulery and Martin, saying they were obligated to cover the costs of representing employees being questioned about their work. District officials now say they have stopped paying for Martin’s attorney, but they would not say when or why that happened.

Neither Ulery nor Martin returned emails seeking comment Monday.

Besides the Detroit deal, Houghton Mifflin Harcourt was mentioned in September 2014 court records regarding the alleged kickback scheme at CPS. According to those records, there was a 2012 email in which SUPES co-owner Thomas Vranas told Byrd-Bennett: “If we are purchased by HMH [Houghton Mifflin Harcourt], we will give you 5 percent of total amount we are purchased for.”

Vranas and the other SUPES owner, Gary Solomon, were indicted with Byrd-Bennett and have pleaded not guilty.

Vranas’ attorney Michael Monico said the FBI’s September 2014 reference to Houghton Mifflin Harcourt was “hypothetical.”

“As far as we are aware, there were no substantive discussions regarding such a sale,” Monico said Monday.

A spokeswoman for Houghton Mifflin Harcourt declined to comment. Winkler, the company executive named in the FBI affidavit, did not respond to calls or emails.

Detroit schools officials also did not return messages. In 2009, a spokeswoman for that school system reportedly told the Detroit News that Byrd-Bennett had not been involved in the bid process for the Houghton Mifflin Harcourt contract.

Byrd-Bennett referred a Sun-Times reporter to her criminal defense lawyer, Michael Scudder, who declined to comment.