Hopkins payments detailed

Former officials received $224,513, audit concludes

Larger scheme outlined

School was charged more than $1.5 million

May 12, 1999|By Walter F. Roche Jr. | Walter F. Roche Jr.,SUN STAFF

A kickback scheme involving Johns Hopkins University construction projects was much larger and more widespread than previously reported, with fraudulent or improper payments by the school reaching $1.5 million, a confidential audit report has concluded.

The report, a copy of which was obtained by The Sun, also states that a former Hopkins executive, Robert J. Schuerholz, was not the only official at the school to get personal benefits from contractors.

Payments were made by one contractor, Thermal Services Inc. (TSI), "on behalf of various facilities personnel" for such items as air-conditioning equipment and boat repairs, the 36-page audit states. The payments for Schuerholz and others totaled $224,513, according to the report.

One former Hopkins executive, Robert F. Seward, had a TSI corporate American Express card issued in his name, the report said. Seward, a technical support manager who worked for Schuerholz, was fired in May 1997. The auditors said that after his departure, some of Seward's files disappeared from what was supposed to be a secured office area on campus.

Seward has strongly denied wrongdoing. Yesterday, he referred questions to his attorney, who did not return phone calls. TSI is no longer in business.

Schuerholz, the audit states, also got other previously undisclosed benefits from contractors, ranging from free architectural plans for his vacation home on the Eastern Shore to discounted ventilation equipment for a Frederick brewing company facility in which he had an interest.

The auditors found those benefits and more than $1 million in other questionable costs were tucked into bills paid by Hopkins to TSI and others for a variety of construction projects.

"KPMG [Peat Marwick] believes that in excess of $1.5 million worth of transactions addressed in this report improperly or fraudulently, through conspiracy or otherwise, were charged to JHU for services and/or equipment by the activities of various contractors," the report states.

Contractors' profit margins on some Hopkins projects, the report states, averaged 42 percent, a figure "substantially above the industry average."

The auditors said that TSI had been granted a series of sole-source contracts by Schuerholz, despite a university policy requiring competitive bids. It states that TSI paid Schuerholz $23,500 in 1992 by making out payments to a nonexistent company called Business Services.

Disclosure of the details of the audit report occurs as the 63-year-old Schuerholz, of Baldwin in Baltimore County, faces federal charges of income tax evasion. His arraignment on a federal information that he failed to pay $31,772 in income taxes for 1995 is set for tomorrow. He is charged with listing his 1995 income as $177,045 when it was $290,515.

James P. Ulwick, Schuerholz's attorney, said he could not comment on the audit report because he had never seen it. Details of the income tax charges are expected to be disclosed tomorrow.

Schuerholz was ousted from his job as executive director of real estate at Hopkins in 1997 after allegations of kickbacks and other improprieties surfaced in a civil suit filed by one of the owners of TSI. The suit was settled. Two university officials also had raised questions about Schuerholz's relationship with TSI.

In addition to Schuerholz and Seward, other Hopkins officials named in the report by accounting firm KPMG Peat Marwick include Edward Warns, who the audit states had $462.08 in repairs to his boat paid by TSI. Tickets to a rock concert and limousine service were given to David Ashwood, director of Homewood plant operations. Ashwood is still employed by Hopkins, while Warns, who was in the university's real estate division, has retired.

Ashwood said yesterday that he did get tickets to a rock concert and was provided a limousine ride to the event, but he considered it a personal matter that had nothing to do with the university. He said he also purchased a damaged air-conditioning unit from TSI.

Ashwood said he had been verbally reprimanded by Hopkins officials for the two transactions.

TSI also paid for meals and a hotel rooms for Schuerholz in Beijing, China, and Ocean City, and provided assorted gifts "such as knives, gift certificates, golf accessories, alcohol, etc." to Hopkins personnel. The company also paid for "various hunting and golfing outings" with university personnel and "extensive dinner and cocktail outings" with Hopkins officials as guests.

Johns Hopkins University spokesman Dennis O'Shea said yesterday that university officials had put on hold further action as a result of the audit pending the results of the federal investigation.

Four Hopkins officials have resigned, retired or been terminated as a result of the kickback allegations. In addition to the gifts and payments, the audit states that a series of conflicts of interest involved Hopkins officials and contractors working at the school. In one case, a company employed the spouse of the university official who was overseeing the firm's contract.

The report also states that on another Hopkins project, TSI gave a subcontract to a company owned by Schuerholz's cousin. The former executive director picked TSI as the general contractor on a major university construction effort, even though the company had no expertise as a general contractor.

Pub Date: 5/12/99

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