Former school worker indicted

Man accused of stealing $200,000 from city system

Suspect arrested in Florida

U.S. and Md. prosecutors clash over jurisdiction

March 13, 2004|By Tanika White | Tanika White,SUN STAFF

A former Baltimore school employee accused of stealing more than $200,000 from the financially struggling system was arrested on federal charges yesterday and then indicted by a city grand jury.

Lewis Edward Williams, 61, of Pikesville, was responsible for collecting payments from groups that periodically rent school space, prosecutors say. From April 2002 through August 2003, they say, Williams deposited a significant portion of those payments -about $220,000 - into a checking account he opened at Mercantile Bank under the name L.E. Williams Enterprises.

Prosecutors say Williams then wrote personal checks, moving money out of the account to buy two cars and pay off debt, among other things.

City and school officials quickly called a news conference to say that the discovery of the loss was a signal that new financial controls were having results - and not an indication that the system's financial problems were caused by widespread theft.

Investigators for U.S. Attorney Thomas M. DiBiagio found Williams yesterday in Fort Lauderdale, Fla., where he was placed under arrest and charged with bank fraud.

Williams, a former prison warden who retired in October after more than eight years with the schools, was apparently in Florida on vacation.

Vickie LeDuc, a spokesman for DiBiagio, said that Williams was released on bond and told to return to Maryland for arraignment in federal court Friday.

The school system's financial crisis, which set off a tug of war weeks ago between Mayor Martin O'Malley and Gov. Robert L. Ehrlich Jr., appears to have provoked a similar struggle between the federal and state prosecutors.

Hours after DiBiagio's office released news of Williams' arrest, State Prosecutor Stephen Montanarelli announced that a city grand jury had indicted Williams for stealing school money.

Montanarelli said when he told federal prosecutors Thursday night that he would be bringing an indictment yesterday, they asked him to defer to their charges. He refused.

"This is a state case," he said. "It involved state taxpayers' money."

The federal bank fraud case makes the victim Mercantile, Montanarelli said, because the bank is responsible for repaying the school system.

In the state's case, he said, the school board and the taxpayers are the victims. "I don't want to make it a political case," he said. "I don't want to argue with the U.S. attorney. ... But I think the state has a superior interest here. They're looking at bank fraud. I'm looking at the theft of schools funds."

Montanarelli said Patricia C. Jessamy has waived her right as the city's state's attorney to prosecute Williams first.

Williams' arraignment on the state charges is scheduled for June 3.

At yesterday's news conference, the school system Chief Executive Officer Bonnie S. Copeland and O'Malley said they are serious about ensuring fiscal integrity in an organization that has been battered recently for years of overspending and mismanagement resulting in a $58 million deficit. "We will not tolerate anyone taking money away from the children in Baltimore City," Copeland said.

Copeland said she received information about possible embezzlement in February and "immediately" reported it, triggering the investigation.

"New accountability is coming here to North Avenue," O'Malley said, referring to school headquarters. "What has occurred in our school system in the past is unacceptable."

Copeland said the school system - with assistance from O'Malley - is working on developing new controls for its financial and management systems to prevent such crimes.

"Although the current deficit is the result of overspending, primarily on academic programs," O'Malley said, "when you have a lack of internal controls, you open the door that someone might take advantage of that situation."

Prosecutors say that as a facilities coordinator, Williams granted permission for groups to use school facilities for such activities as sports contests or church events, set up rent schedules and collected payments. "There were no checks and balances on him," Montanarelli said.

Although the city officially owns school buildings, Copeland said the schools are permitted to collect revenue off short-term leases. Over the past four years, such leases have generated yearly revenues ranging from $60,000 to more than $200,000 - suggesting that as much could have been stolen as was turned over to the school system.

In April 2002, prosecutors allege, Williams created his Mercantile account to deposit checks made out to the school system.

A federal affidavit says that Williams admitted to using the money to buy two cars and other personal items, such as two watches totaling about $12,000, and to pay off debt.

Court records show that he filed for bankruptcy in November 1995 and that he has at least one federal tax lien against him.

The state prosecutor said he is pursuing at least six other investigations into school finances but has found no other evidence of criminal activity. "You have to understand mismanagement is not a crime," Montanarelli said.

Sun staff writer Laura Barnhardt and researcher Jean Packard contributed to this article.

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