September 21, 2012 09:52 AM
Little-known government agency that oversees hundreds of millions of taxpayer dollars for Lyons Township schools is in turmoil amid questions into its financial practices.
By Robert Herguth/BGA
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More than a dozen school districts in the western suburbs depend on the Lyons Township School Treasurer’s Office to manage and invest their funds – amounting to over $200 million in taxpayer money that’s supposed to go toward the education of 20,000 kids.
But a months-long review by the Better Government Association found big problems in the little-known public agency, including investments that appear to violate state law, financial records so shoddy it’s difficult to get an accurate picture of all the money coming and going, and an oversight board with little financial expertise but deep political connections.
The findings are all the more disturbing given the results of a just-completed internal audit that found school treasurer Robert G. Healy – who ran the office for more than 20 years, reporting to a three-person board elected by voters in Lyons Township – improperly paid himself more than $500,000 by cashing in supposedly unused sick, vacation and personal days during his tenure. The agency plans to sue Healy to recoup some of the payouts, and refer the case to prosecutors to see whether a crime was committed.
Healy – whose family has deep ties to former Cook County Circuit Court Clerk Morgan Finley, a Democratic powerbroker convicted in the late 1980s in a bribery case – resigned effective Sept. 1, though he insists he did nothing wrong.
Either way, some school officials are worried. The treasurer’s office not only serves as a sort of bank for their systems – including Lyons Township High School District 204 and Western Springs Elementary District 101 – it’s also a conduit for county, state and federal money, and handles payroll and some accounting for districts.
"It’s an entity very, very few people in the township have heard of – but it’s managing the assets that were collected from the taxpayers for the benefit of the schools," said District 101 board member Marty Brown, whose concerns several months back helped prompt the internal audit and the BGA review.
In written statements forwarded to the BGA by his lawyer, the 53-year-old Healy indicated there may have been innocent mistakes made on his watch, but he insisted he was above board with his cash-outs, which occurred over many years.
"The township trustees never questioned Mr. Healy’s discretionary compensation until 2012," according to one of the statements.
Healy also wrote, referring to the agency as a whole: "There are no funds missing from the accounts of the treasurer."
However, board members said they plan to conduct a deeper audit to make sure all funds are in tact and school districts received what they were entitled to. They also said they would look at the advisors through which Healy had been investing school money to see if fees and commissions were "market place."
State records show many of those investment consultants donated to a campaign fund called the Committee for School Financial Excellence, which helps support political candidates and is chaired by Healy – a potential conflict of interest given Healy’s role in hiring and overseeing money managers.
Among the consultants is Joe Nawrocki, who invests roughly $40 million in school money on behalf of the treasurer’s office, according to interviews.
Nawrocki contributed $2,000 to Healy’s political fund over the past decade, but Healy wrote in his statements that although he "enjoys a personal relationship with Mr. Nawrocki, the decision to entrust approximately 20% of the township’s funds with him was based on Mr. Nawrocki’s qualifications, including his unquestioned integrity."
Nawrocki said he wasn’t pressured to donate money, and added that his investment returns over the past decade were solid – "we never had a losing year."
Nawrocki’s net return for the treasurer’s office (after fees) was more than $18 million during that time, he said.
However, the BGA enlisted the pro bono help of Duff & Phelps – a financial advisory firm with a forensic arm – to analyze treasurer’s office documents, and the company indicated Nawrocki appears to have invested in areas inconsistent with the school treasurer’s own investment policy.
For instance, Nawrocki had roughly $4 million in an international bond fund in 2006, according to records obtained under the Illinois Freedom of Information Act.
The investment policy mirrors state law, which dictates that when governmental agencies invest in corporate securities, they have short-term maturities and involve only large, U.S.-based entities.
Between 2005 and 2007, the bond fund lost roughly $200,000, records show.
Nawrocki said the school treasurer’s office never provided him with rules dictating "this is what I can be in or can’t be in." He said he took direction from one person: Healy.
Healy, though, said in a written statement: "Recently the risk parameters of the township’s fund may have been exceeded in a [misguided] attempt by the advisors to continue their past performance. The amount of assets invested in these funds equaled less than 1% of the township’s total funds. Further, these investments were profitable and did not cause the township to suffer any losses. Once it was discovered that the parameters had been exceeded, the situation was rectified."
Brown contends there’s been an appalling lack of oversight at the school treasurer’s office.
The three-member board of trustees includes Theron Tobolski, brother of Cook County Commissioner and McCook Mayor Jeff Tobolski; Karen Civinelli, an ally of state Sen. and Bridgeview Mayor Steve Landek; and Mike Thiessen, who has worked as a consultant for Bridgeview. Thiessen is the only member with a professional financial background. He replaced Ed Maloney, an attorney running for Cook County judge who resigned from the board several months ago as Healy’s troubles started unfolding.
Healy, whose mother was a secretary for Finley and ex-Circuit Court Clerk Aurelia Pucinski, apparently had no formal training to be overseeing such a large portfolio. He said he earned a business degree from Loyola University Chicago and learned the ins and outs of finance through 30 years of on-the-job experience.
But he must not have learned the importance of keeping a budget. The agency didn’t have one – even with operational expenses topping $1 million a year and eight full-and part-time employees.
But that’s going to change, Thiessen said, adding a professional budget is now being established along with other controls.
It’s clear they are sorely needed.
The audit addressing Healy’s sick, vacation and personal day cash-outs noted Healy instructed his staff to stop logging his off-days, which they did. Even though sources said he often was not in the office, by Healy’s calculation he used only 25 vacation days in 24 years, and no sick or personal days.
Healy’s total compensation this past year topped $270,000, records show.
Healy’s attorney John Muldoon said Healy "didn’t do anything wrong" and was "coerced into signing a letter of resignation."
If the treasurer’s office ends up suing Healy for restitution, "we’re going to file a counter-claim – they’re in for a battle," Muldoon said.
This story was written and reported by the Better Government Association’s Robert Herguth, who can be reached at email@example.com or (312) 821-9030.