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Washington Teachers' Union
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| Individual | Total |
| Barbara Bullock | $1,247,210.75 |
| Gwendolyn Hemphill | 129,669.86 |
| James Baxter | 100,486.30 |
| Total | $1,477,366.91 |
As part of our investigation, we reviewed and discussed Hankerson's American Express charges with her. Hankerson stated that she never received the American Express statements and it wasn't until we provided her copies of those statements that she had an opportunity to review them. As a result of our investigation she reviewed her charges and identified a small number of charges as questionable. Upon further review, she stated that the purchase of an airline ticket for her granddaughter was personal. She explained that her secretary has both her WTU American Express card and her personal American Express card and must have inadvertently charged the airline ticket for her granddaughter to accompany Hankerson to a WTU / AFT convention on the WTU corporate American Express card. According to Hankerson, she had instructed her secretary to charge her granddaughter's tickets on her personal American Express card and never intended for this charge to be incurred on the WTU American Express charge. As a result, since she never had received the American Express statements until recently, she had no knowledge that in fact it had been charged, and paid for by WTU. As to the other items, Hankerson, upon closer scrutiny, determined that she could simply not recall the nature and extent of the business purpose for these charges. Hankerson believed that they were incurred as legitimate WTU expenditures but, since she could not now, after the fact, specifically document the exact business purpose, she, out of an abundance of caution, decided to repay the WTU for those charges. As a result, she reimbursed the WTU for these charges and her granddaughter's airfare, totaling $1,559, in November 2002.
In the category labeled "questionable" we included credit card purchases that were charged to WTU's corporate American Express account that appeared to be, based upon the information we received and analyzed, inappropriate. However, we felt that even though these purchases appeared to be inappropriate, additional documentation and / or explanation from the actual purchaser would be required to make a final determination. Accordingly, we prepared an extensive and detailed notebook for Bullock, Hemphill and Baxter. Each notebook contained a copy of each credit card statement with back-up slips where available. These notebooks were forwarded under cover of AFT's outside counsel to counsel for the individuals. Counsel's letters to the individuals specifically stated that unless they provided sufficient documentation demonstrating that the charges were for legitimate WTU business, that such charges would be deemed personal. Though requested, additional documentation / explanation has not been provided as of the date of this report.
Accordingly, we believe that it is appropriate for us to draw a negative inference from the failure of the individuals involved to provide such requested documentation / explanation. That is, if such purchases were incurred for legitimate WTU operating expenses, the individuals involved have had adequate time and ability to provide proof that such was the case and therefore their failure to do so is further confirmation that the "questionable" charges were in fact inappropriate-personal charges. Examples of these questionable items include significant numbers of charges for travel, hotel, food, liquor, gasoline, art, antiques, furniture, political contributions and other items.
We have nevertheless determined that it is appropriate to segregate theses charges from the clearly inappropriate-personal charges discussed in the section above to avoid confusion over these findings. In total, the questionable American Express charges totaled $947,560.45, broken down by individual as follows:
| Individual | Total |
| Barbara Bullock | $598,794.67 |
| Gwendolyn Hemphill | 181,967.17 |
| James Baxter | 166,798.61 |
| Total | $947,560.45 |
When the above totals are added to the totals set forth in the section above entitled "Inappropriate-Personal American Express Charges", the total improper-personal American Express charges are as follows:
| Individual | Total |
| Barbara Bullock | $1,846,005.42 |
| Gwendolyn Hemphill | 311,637.03 |
| James Baxter | 267,284.91 |
| Total | $2,424,927.36 |
Holmes was employed by WTU to act as Bullock's personal chauffeur. His responsibilities included driving her to and from WTU's offices and her home as well as to meetings. According to Holmes, he believed his 2001 salary was $105,000,12 though he received a tax form from WTU in the amount of approximately $150,000.13 However, as of the date of this report, it appears that checks were issued payable to Holmes and cashed in the approximate amount of $1,200,000 over the period from late-1998 to mid-2002. Of this approximate amount, we found that two checks made payable to Holmes totaling approximately $13,000 had been negotiated at Amalgamated Bank in Washington, D.C. Of the $1,200,000, we found checks that had been cashed in the amount of approximately $800,000. The difference in amounts results from the fact, as noted throughout this report, that we have not been provided all canceled checks and other items. Most checks were written directly to Holmes with his name as the listed payee. However, we noted that some checks were written to other payee names that were subsequently crossed off and changed to his name. (The altering of checks is discussed as a separate finding below.) In addition to his salary, Holmes said that WTU also paid for expenses related to his three Cadillac automobiles, including insurance, gasoline and repairs.
According to Holmes, his modus operandi entailed cashing the checks, deducting his "salary" from the cash obtained, and then returning the excess cash to Hemphill. Occasionally he would deposit some cash into Bullock's personal bank account. According to Holmes, his frequent check cashing over a prolonged time period led to a close working relationship with at least one bank employee, Gretchen Calloway, and he, at Calloway's request, would call her before cashing large checks to verify that the bank had enough money on hand.14 We have not been able to determine what the excess cash was used for or to whom, if anybody, it was distributed. If Holmes' statements are correct, from the period of approximately October 1998 through December 2001, he kept approximately $390,000 of the cash and turned over the remaining amount, approximately $810,000, to Hemphill or deposited it into Bullock's personal bank account. Hemphill refused on numerous occasions to meet with us concerning this matter. Accordingly, we are unable to establish at this time the ultimate disposition of the $810,000 in cash purportedly received by Hemphill from Holmes. Due to the lack of response by Hemphill, we are forced to draw a negative inference and conclude that at least the $810,000 was retained by Hemphill or deposited into Bullock's personal bank account and constituted an improper disbursement of funds from the WTU.
Over the periods January 1996 through December 1998, WTU made payments to a nonWTU Diners Club credit card account.15 Additional payments were made in November 2000 and July 2002. As noted above, since we did not receive any cancelled checks for the year 1999, we only had limited information regarding payments that may have been made during that year.
This credit card account was in the name of Bullock's sister, Gwendolyn Clark.16 In total, the payments made to this account totaled at least $119,516. It is our opinion that such charges were not related to WTU business. Though we were not provided with a complete inventory of all Diners Club statements for which payments were made,17 it appears from the statements that were provided that most charges were for clothing, restaurants and travel.18 Though requested, we have not been provided with missing statements nor have we been provided with supporting documentation and / or explanation indicating that such charges were related to or in furtherance of legitimate WTU business.
This category includes purported expense reimbursements paid to listed WTU personnel that were not supported by receipts and did not include any explanation as to the business nature of the expense and other questionable payments. In instances where expense reimbursements had receipts, we assumed they were legitimate and did not include them in this finding. Here again, we have requested supporting documentation and explanation for these items from the individuals who received payment and, as of the date of this report, have not received any such documentation / explanation. As a result, we believe that it is fair to draw the negative inference that documentation / explanation showing that these were in fact legitimate business expenses incurred on behalf of WTU in furtherance of WTU business has not been provided because it does not exist. Accordingly, we therefore believe that the amounts listed below constitute improper payments to the listed individuals. As discussed above, these amounts do not include any payments that may have been made in the year 1999 since cancelled checks have not been made available for that year.
In total, the improper expense reimbursements and payments totaled $697,876, broken down by individual as follows:
| Individual | Total |
| Barbara Bullock | $247,345 |
| Gwendolyn Hemphill | 180,768 |
| James Baxter | 269,763 |
| Total | $697,876 |
Most of the payments made to Baxter were denoted as "professional fees" and / or appeared to be payroll checks. Baxter was previously a full-time employee of the WTU, however, in 1998, he reportedly became a full-time employee of the DC government. According to Hankerson, Baxter was to only be paid a small stipend as his duties were minimal and entailed only the signing of checks. It is our understanding that Baxter spent limited time at the WTU offices indicating that he apparently expended minimal efforts in his capacity as Treasurer. As a result, we do not believe that the significant amount paid to Baxter could reasonably represent remuneration for his services as Treasurer. We also noted that two payroll checks for the same period, for the same dollar amount and with the same check number and payable to Baxter, were negotiated by Baxter. We saw no evidence of any repayment of either of these checks.
There were three authorized signers on the WTU checking accounts. The authorized signers were Bullock, Baxter, and Hankerson. When interviewed, Hankerson indicated that she had very little involvement with the financial activities of WTU, however she did, from time to time, co-sign WTU checks. However, it is important to note that prior to Gwendolyn Hemphill arriving at WTU in 1996, Hankerson co-signed a number of checks. Subsequent to Hemphill's arrival, Hemphill purchased a stamp for Bullock's signature. At that point, the amount of checks co-signed by Hankerson decreased significantly and did not increase again until July 2002 when this investigation by AFT began.
During our investigation we showed Hankerson a sampling of checks issued by WTU, some of which bore her signature. Upon reviewing the checks appearing to be signed by her, she stated that in a number of instances her signature had been forged. The checks from this sample that were forged included four checks payable to Bullock totaling $22,990, as well as numerous checks payable to Gwen's of Columbia (Bullock's sister), Diners Club, Domestic Bliss and Ascension Gallery.
Hankerson stated that sometime during 1997, she received a phone call from an individual at WTU's bank (Independence Federal Savings Bank) stating that they had been presented a check for payment from another bank in the amount of $8,000.19 The check was made payable to Bullock. The banker indicated that the signature of Hankerson appeared to have been forged. Hankerson indicated that she had not signed a check for $8,000 payable to Bullock, but nonetheless instructed the bank to pay it. She stated that she then instructed the bank not to authorize payment of any more checks where her signature was in question and to call her immediately if any other forged checks were presented for payment.20 Hankerson stated that she allowed the check to be honored for payment because she didn't know if Bullock had signed her name due to an unusual circumstance and for WTU business and did not want to cause the check to be dishonored. Hankerson told us that she immediately confronted Bullock as to the circumstances surrounding this occurrence. According to Hankerson, Bullock admitted to having forged Hankerson's signature and indicated that she was sorry and represented that this would not occur again. Hankerson recalls Bullock telling her that she (Bullock) needed the money and was going to repay the $8,000 to the WTU. Hankerson checked with Bullock several times about the repayment and Bullock said that she was paying the $8,000 back to the WTU. We found no evidence of any actual or attempted repayments of this amount by Bullock to the WTU. During our investigation, we showed the $8,000 cancelled check to Hankerson who confirmed to us that the check had been forged. The examination of the check indicated that the check had in fact, been negotiated by Bullock through a bank account that we had previously associated with Bullock. To our knowledge, Hankerson never reported the incident to anyone at the WTU (other than Bullock), the WTU Board or the WTU membership, or any other appropriate authority.
We do not consider the forged checks noted above to be a separate monetary finding because, to the extent we have determined that such payments were improper, we have included the amounts in other findings in this report. For example, the checks payable to Bullock are included in the section of this report discussing undocumented reimbursements.
We do not know who actually signed Hankerson's name to many of the forged checks, but our investigation revealed that Bullock, Hemphill and Baxter:
A detailed review of all available cancelled checks indicates that on a number of occasions WTU checks were written to payees and then subsequently had the payee name changed. We noted altered checks originally made payable to WTU vendors such as Blue Cross / Blue Shield, American Express and Spectra that were subsequently made payable to Holmes and Cheryl Martin. In almost all cases, the initials of Bullock, Baxter, or both, appeared to accompany the changes to the payee of the checks. While we did not have the handwriting analyzed by a handwriting expert to determine whether in fact Bullock or Baxter initialed the checks, our internal analysis of the handwriting of the initials indicates that the initials do not appear to match that of Bullock and Baxter, which raises serious questions as to who, in fact, had initialed these changes.
To the extent that any of these payments have been considered inappropriate, the amounts are included in other sections of this report. We, however, list the act of altering checks as a separate finding because we consider it to be a further indicator of the alleged fraudulent activities carried out by Bullock, Hemphill and Baxter discussed throughout this report.
While searching Hemphill's Desk we noted that financial records and documents were scattered about in no order. As a result, it was difficult to determine the precise source of many items. This includes, among other things, two receipts for postal money orders. Both money orders were apparently purchased April 11, 2002 in the amount of $500 each. The receipts indicate that the same clerk processed both and only one number separates the serial numbers on the money orders. This suggests to us that a third money order may have also been purchased at the time these two were purchased.
We have been unable to determine who purchased these two money orders, for what purpose they were purchased, to whom they were payable, and the source of the funds used to purchase the money orders. We note only that since they were discovered in Hemphill's desk and various individuals have informed us that Hemphill received large amounts of WTU funds in cash, we view these money order receipts as suspect and raise the possibility that they may have been purchased with WTU funds for purposes that are unknown.
Kwame Bryant, the dues auditor at the WTU, stated that for many years he cashed checks for the WTU's "petty cash" fund at the direction of Hemphill. Our review of the checks provided to us as well as accounting records of WTU revealed that from October 16, 1998 through July 24, 2001 checks payable to Bryant were cashed in the amount of $64,150.21 Bryant acknowledged that he cashed them and that he gave the "petty cash" to Hemphill believing that the cash was being used for WTU purposes, including payment of the salary of Lynwood Williamson, a former teacher and WTU officer, who currently is employed as the WTU's receptionist and COPE22 coordinator at a rate of $500 per week. The payment of cash salaries is discussed below.
With respect to the "petty cash" fund, it is not clear exactly how much of the $64,150 was actually paid to Williamson. Further, since Hemphill continually declined to be interviewed by us, we are not able to determine the disposition of the cash that Hemphill reportedly received in excess of Williamson's "salary." This salary, according to interviews, was approximately $500 every week over a number of years.
WTU has expended funds for purchases we deem to be inappropriate and as such appeared to be a wasteful use of union funds and / or were payments that were made other than for appropriate WTU expenses. In addition to the specific findings of payments detailed throughout this report, we believe that certain other general findings related to inappropriate or wasteful expenditures should be noted, including:
Bullock's Chauffeur
As noted above, Holmes was employed by WTU as Bullock's personal chauffeur. Setting aside our finding above concerning the payment of approximately $1.2 million to him over the relevant period of time, the mere fact that Bullock expended significant amounts of union funds on a personal chauffeur itself appears to be a wasteful, inappropriate use of WTU resources. Holmes believed his salary to be approximately $105,000 in 2001.23 For that year, WTU issued him a tax form indicating that his salary was approximately $150,000. While Holmes did drive Bullock for official WTU business, we also learned that Holmes, on many occasions, transported Bullock to a custom dressmaker in Pikesville, Maryland, a town close to Baltimore, Maryland, and to numerous shopping malls around Washington, DC.
Bullock's Personal Consultant
Bullock paid WTU funds to Michael Martin, Hemphill's son-in-law, currently employed by the DC Department of Health,24 as compensation for allegedly assisting Bullock in selecting clothing for meetings and acting as a personal hairstylist. Additionally, Michael Martin reportedly was also paid for artwork selection, decorating and party planning services. In total, Martin was paid at least $24,850. Accounting records indicated that an additional check in the amount $5,350 was paid to Michael Martin, however, we have not been provided with a copy of that check. In support of his charges to the WTU, Martin provided recently created invoices purporting to describe his services.
Expressions Unlimited
In addition to acting as Bullock's personal consultant as described above, Martin and his wife Cheryl Martin, were apparently also involved with a business called Expressions Unlimited. The exact nature of their involvement is unclear. Our investigators interviewed Martin on several occasions. During the initial interview, Martin was specifically questioned regarding his knowledge and involvement in a business called Expressions Unlimited. At the very outset, Martin denied knowing anything about this business and denied involvement in the business. He was questioned also about his relationship with an individual named Errol Alderman. Again, Martin flatly denied knowing anyone by this name. Reportedly, Errol Alderman owned Expressions Unlimited.25
Subsequent to Michael Martin's first interview with our investigators, Mrs. Cheryl Martin agreed to meet with us. During this interview Cheryl Martin stated that Expressions Unlimited was a retail-clothing store that was located in Georgetown, Washington D.C. and that a man named Errol Alderman ran the business. According to Ms. Martin, the business was recently closed due to financial problems. She recalled hearing something regarding back rent being overdue and Expressions Unlimited going out of business as a result. She stated that Michael Martin had worked with Alderman in the D.C. Government some years back, possible at a halfway house or drug-counseling center, she couldn't recall. She did recall that Errol Alderman attended a Christmas party at the Martin's house in 2001. In addition, according to Cheryl Martin, Michael Martin was receiving money from WTU's payments to Expressions Unlimited, but she could not determine the amount of such payments. She did indicate that Expressions Unlimited had some connection with the WTU, providing services for parties and t-shirts etc. She stated that Michael Martin was making extra money from Expressions Unlimited. She also admitted that she had made deposits of WTU checks that were payable to Expressions Unlimited into the Expressions Unlimited bank account at Bank of America. She recalled making the deposits at two different Bank of America branches near her home. According to Ms. Martin, Michael Martin asked her to make these deposits. She was shown a copy of a number of checks that were made payable to Expressions Unlimited. She identified the endorsement on many of these checks as hers.26
Cheryl Martin also stated that mail from Expressions Unlimited was delivered to her house during 2002. She recalled in particular, that bank statements for Expressions Unlimited from Bank of America were received at her home in Maryland. Through an extensive background investigation surrounding this supposed business, we could not confirm the existence of a business operated under the name of Expressions Unlimited. We did confirm that a bank account for Expressions Unlimited was maintained at Bank of America in Washington, DC, but was closed in or around April 2002.
Subsequent to interviewing Cheryl Martin, Michael Martin was re-interviewed by us. It was during this re-interview that Martin, when confronted with the evidence regarding his involvement with Expressions Unlimited, finally admitted that he had lied to us during the initial interview regarding his knowledge of Expressions Unlimited. He stated that the reason he lied about knowing Expressions Unlimited and Errol Alderman was because he did not know where we were going with our investigation. However, he strongly urged us to discuss Expressions Unlimited with Bullock stating that she "knew all about it" and any further questions would have to be answered by her.27
Numerous attempts were made to contact Errol Alderman at his last known address. As of the date of this report, no such contact has been made.
In total, we identified payments to Expressions Unlimited in the amount of approximately $450,000.28 We could not determine what, if anything, Expressions Unlimited provided the WTU in return for these payments.
Curtis Lewis is an attorney who represents WTU. He is the brother of WTU's Treasurer, Baxter. Over the period 1994 through 1998, and 2000 through 2002,29 he and/or his law firm was paid approximately $1,600,000 purportedly for legal services provided to the WTU. Additionally, a check dated December 13, 1996 in the amount of $10,000 was paid to Robert Nicholas, Esq., a member of Lewis' law firm. We have reviewed the invoices submitted by Lewis' law firm to the WTU to the extent they have been available to us, as well as the payments made to Lewis' law firm. We have not been able to locate documentation supporting the payment to Robert Nicholas, Esq. nor have we been provided an explanation as to why the check was written. In order to verify the legitimacy of the payments to Lewis' law firm, we would need to sit down with Curtis Lewis, along with WTU personnel who had knowledge of these services in order to make any finding. As of this time of this report, this has not been done.
Additionally, we reviewed information that indicated Curtis Lewis and another member of his law firm, Robert Nicholas, Esq. were covered by WTU health insurance plan. It appears that both attorneys had family coverage with premiums of approximately $1,260 per month. Although we learned that some attempt was made by Lewis to reimburse the WTU for some of these payments, we were not presented with any information or documentation showing that Lewis, Nicholas or the law firm reimbursed the WTU for the entire cost of this health insurance. We have been told that these health insurance premiums were being paid for by WTU for at least the past several years. Accordingly, we estimate that approximately $55,000 in such health insurance premiums were paid for by WTU over the past two years. This amount could be much higher if it discovered that the health insurance payments extended beyond the past two years.
Finally, it does not appear that the WTU issued IRS forms 1099 as required under Internal Revenue Service Regulations to report the amounts paid to Lewis' law firm.
As discussed above, Lynwood Williamson was employed by the WTU as a receptionist and COPE coordinator and received his wages in cash. When interviewed, Williamson described himself as a consultant to the WTU and that his activities included interviewing candidates for political office and coordinating the activities of the WTU Executive Board related to Mayor Williams 1998 election campaign. He left employment with the WTU in 1999 only to return later that year to become the receptionist and COPE coordinator. According to Williamson, it was upon his return in 1999 that he began receiving his wages in cash. Note, however in our discussion concerning the "petty cash" funds, that Bryant began cashing "petty cash" checks at least as early as October of 1998, which, according to him, was in part, intended to pay Williamson.
We did not uncover evidence as to the exact amount Williamson has been paid over the years in cash, nor did we discover evidence indicating that Williamson or the WTU paid appropriate taxes and other legally required items related to his salary. Williamson indicated that he has not received a IRS Forms 1099 or a W-2 from the WTU. Under these circumstances, we believe it is highly unlikely that the WTU paid the required taxes related to Williamson's salary to either the federal or DC governments.
Unions are required to file a report containing, among other things, basic identifying information within 90 days after the date on which the union first became subject to The Labor-Management Reporting and Disclosure Act of 1959, as amended ("LMRDA") or The Civil Service Reform Act of 1978 (CSRA) Standards of Conduct.
Form LM-1 information reports disclose the union's name, affiliation, mailing address, fiscal year, membership fees and dues, and constitution and bylaws provisions governing specific aspects of its activities. The initial information report also includes copies of a reporting union's constitution and bylaws.
The initial Form LM-1 must be filed within 90 days after the date on which the labor organization first became subject to the LMRDA or CSRA. Thereafter, a union updates its initial Form LM-1 report by filing an amended Form LM-1 as necessary with its annual financial report to disclose changes in the practices or procedures which are not contained in the union's constitution and bylaws. A union must also file copies of any amended constitution and bylaws.
Form LM-2 - Annual Financial Reports - Unions must file one of three types of annual financial reports based on the total annual receipts of the union. The annual financial reports vary in the level of detail, which must be reported and must be filed within 90 days after the end of the labor organization's fiscal year. Form LM-2 is the most detailed report. Unions with total annual receipts of $200,000 or more and subordinate labor organizations held in trusteeship file this twelve-page report, which discloses certain information items and financial activities in separate line items under assets, liabilities, receipts, and disbursements. Supporting schedules detail loans, investments, payments to officers and employees, and other items. Form LM-2 reports submitted by large labor organizations often contain numerous attachments and may be very lengthy.
The WTU was subject to the detailed LM-2 filing requirements described above. Accordingly; we sought to locate the LM-1 and LM-2 Forms for the periods from 1996 through 2001. We could only locate copies of the LM-2 Form for the period of 10/1/00-9/30/0l The report was signed by Bullock and Baxter and was dated 12/28/01. After reviewing the entries contained thereon, it is our opinion that the form does not accurately depict the true nature and amount of the transactions that we discovered during our investigation. For instance, Statement B- Receipts and Disbursements Line 56 entitled Cash Disbursement - To Officer does not accurately report the total cash distributed to the officers during the time period for which it depicts. The amount of $167,156 apparently purports to be only the salary disbursements paid to Bullock, Hankerson and Baxter. However this number is significantly understated since it does not include the additional monetary disbursements made to the various individuals as described in our report. Further Line 57 entitled Cash Disbursements Employees does not include the cash amounts paid to Williamson in cash as salary nor does it include the large sums of money purportedly paid to Holmes, the chauffeur. We noted many other discrepancies in this report, which was filed by Bullock and Baxter under the penalties of perjury. It is our understanding that the AFT has sought copies of all prior filings of Forms LM-1 and LM-2 for the relevant time periods and we would anticipate reviewing those filings when received. Of further importance to note is the fact that Goosby, the tax preparer employed by the WTU during a majority of the time period covered by our investigation, assisted in the preparation of these forms knowing that these filings were not accurate and, at a minimum, were grossly misleading.
Improper Reporting of Expenses on The IRS Forms 941
Each quarter (15th of January, April, June and September) employer's must file Form 941 with the IRS outlining the withheld income taxes including all tips, wages, sick pays, unemployment benefits, etc., plus social security and Medicare taxes. This filing should include all wages and/or compensation, whether paid in cash, check or other means. Our review of the available Forms 941 reveal that the cash payments for wages and/or compensation paid to Williamson are not included in the amounts reported. Additionally, we also verified that no Internal Revenue Service (IRS) Form 1099-MISC, Miscellaneous Income were issued to Williamson for 2001, a year in which we came to understand he was paid in cash for his services. This form, which must be completed by January 31 of each year, reports payments made to individuals and unincorporated businesses in the previous fiscal year of $600 or more for rents, services (including parts and materials), prizes and awards. Nor did we find any such filing or reporting of the vast sums of money that Holmes received vis-a-vis the checks cashed by him. (See discussion earlier in the report)
Again, due to the disarray and lack of business records and the limited availability of other payroll information, we are unable to draw any other conclusions regarding the accuracy of such reports at this juncture.
Improper Reporting of Expenses on The IRS Forms 990
An organization that has $25,000 or more in gross receipts must file an exempt organization information return From 990, Return of Organization Exempt from Income Tax. This return is due on the 15th day of the 5th month after the end of the fiscal year. We obtained copies of the 1998, 2000 and 2001 Forms 990. For all of these years, Goosby was the outside accountant who signed as preparer of such returns. Despite Goosby's admissions to us during our interviews in which he admitted that he knew, at the time of the preparation of these returns, that the figures reported on these returns were "wrong" he nevertheless signed them as the tax preparer knowing that they would be filed by the WTU. The copies we obtained were unsigned copies, but we have no reason to believe that these were not, in fact, copies of what was actually filed by the WTU with the IRS. Accordingly, as with the Forms LM-1 and LM-2, these returns are to be signed by an officer of the WTU under penalties of perjury. Our review of these tax returns did not indicate that, for instance, the vast sums of money received by Holmes were reported and disclosed to the IRS. The tax returns did not include disclosure of cash payments made to Williamson for the services he allegedly performed for the WTU. Additionally, section V of the Form 990 requires that amounts paid to " officers, directors, trustees, and key employees" as compensation, contributions to benefit plans and deferred compensation and expense account and other allowances be reported. WTU's 1998 Form 990 does not include any information concerning compensation of officers; the 2000 and 2001 Form 990s report only the salary, without other payments, made to the officers. It is our opinion that these tax returns do not accurately depict the actual income, expenditures and required salary information for the WTU for the periods they cover.
The WTU had established a retirement plan, the "Washington Teachers' Union Retirement Plan", on January 1, 1996. According to the most recent tax filing for the plan, the 2001 Form 5500, there were roughly 14 participants at the end of 2001. The plan was also administered by the Washington Teachers' Union and both Bullock and Hankerson served as the plan's custodian during 2001.
According to the documents secured by us, which cover the period from 4/1/02 through 6/30/02, the ending plan balance for the Washington Teachers' Union Staff Retirement Plan was approximately $131,000 on 6/30/02. The following individuals were participants in the plan as of 6/30/02: Baxter, Bryant, Henry Collins, Anita Corley, Rachel Hicks, Joyce Kelly, Doris Mathis, Charles Moore, George Parker, and Korie Twiggs. According to the information in our possession, Bullock, Hankerson, and Hemphill were not included in the list of plan participants. In fact, when interviewed, Hankerson stated that Hemphill had told her that there was not enough money from WTU to fund the retirement plans for herself (Hemphill), Hankerson and Bullock. In fact, we reviewed plan records for the following periods noting that no contributions had been made for any of the participants.
Of note is the fact that Baxter, essentially a non-employee during this time period, was a retirement plan participant, yet Bullock and Hankerson were not plan participants. Many questions remain unanswered about the structure, funding, and ultimate continued qualification of this retirement plan.
In addition, there may have been irregularities regarding the distribution of WTU pension plan monies with respect to Baxter and Bullock. Specifically, three checks were paid to Baxter, totaling $17,500, and one check was payable to Bullock in the amount of $3,061, that include notations indicating that the checks were issued as pension distributions.31 Although we do not have complete information to enable us to provide specific findings, the checks paid as "pension" payments appeared to be suspect. We have found no evidence that the checks were deposited into any WTU qualified pension fund account.
As discussed above, Leroy Holmes repeatedly cashed checks for significant amounts at Independence Federal Savings Bank. Most checks were made payable to him, however, some checks were originally payable to other payees but were clearly altered to be payable to Leroy Holmes. In most instances, the payee name was literally scratched out and Holmes' name was written in. Nonetheless, Independence Federal Savings Bank (IFSB) consistently cashed these checks and gave the proceeds to Holmes. In fact, according to Holmes he was very familiar to the various tellers and branch managers at IFSB.
An analysis of the checks cashed at IFSB revealed that from October 9, 1998 to August 29, 2002, approximately 228 checks were apparently cashed or negotiated totaling approximately $1.2 million.32 This included unusual activity, including, for instance, numerous checks being cashed by Holmes within days of each other. We also noted, that for example, two checks totaling $21,875 were apparently cashed by Holmes at IFSB on the same day, September 15, 2000. One of these two checks was for $20,000.
As Holmes stated, when he cashed this check for $20,000, he "stuffed" the cash in his pocket before returning to the WTU offices. In fact, our investigation and analysis revealed that a number of checks, many of which were just under the $10,000 amount, were routinely cashed by Holmes at IFSB as frequently as several times a week. There is no apparent legitimate business purpose for a union such as WTU to have the need for such large sums of cash. The significance of the checks that were cashed for amounts just under $10,000 appears to indicate that the transactions were structured in such a fashion to attempt to evade the reporting requirements under the Currency Transaction Report, such threshold being $10,000. We believe that the nature and extent of the transactions involved would have required Independence Federal Savings Bank to file either Currency Transaction Reports or Suspicious Activity Reports, or both. It is unusual for a bank to fail to file such reports.
As discussed in the previous section titled "Inappropriate Cash Disbursements To Leroy Holmes", Holmes had apparently established a close working relationship with some of the branch managers of IFSB. Of particular significance was an envelope that was apparently sent by Ms. Gretchen Calloway, the branch manager for IFSB located on Georgia Avenue in Northwest Washington, D.C. to Mr. Leroy Holmes. The letter was addressed to Holmes at the address of the offices of the WTU in Washington, D.C. The envelope was sealed and heavily taped with scotch tape. This letter was intercepted at the WTU office. Upon further examination, it was discovered that it contained a photocopy of three checks that had been recently cashed by Holmes at IFSB. Along with that photocopy was Gretchen Calloway's business card from IFSB. Our investigators attempted to speak to Ms. Calloway regarding this discovery. However, Ms. Calloway declined to be interviewed and instead instructed the investigators to contact the Security Officer at the bank. Accordingly, we immediately made contact with Mr. Larry Alexander, Jr. who represented that he was the Security Officer for the bank. Our investigators immediately met with Mr. Alexander as well Mr. Derwin E. Cherry, Assistant Vice President of Operations of IFSB. We identified ourselves to Mr. Alexander and Mr. Cherry and indicated to them that we were auditors working on an audit of the WTU and had already been authorized by the WTU to receive information from the bank relating to the WTU checking account at IFSB. Early on in the meeting Donna F. Shuler, President and CEO of IFSB joined.
Mr. Alexander and Mr. Cherry were shown the letter and we discussed our concern regarding the nature and extent of the letter. We also showed them several copies of checks where the payees had been altered and negotiated for cash. We also discussed the large dollar magnitude of checks that Leroy Holmes cashed at the various branches.
Mr. Alexander stated that it is not normal bank procedure to send a letter like the one they were shown. Each branch has a machine that seals the mail. {This envelope was hand taped with a large amount of scotch tape). He also commented that on its face, things did appear suspicious, but they (the bank) would have to investigate further. Once Alexander made this comment, Mr. Cherry and Mr. Alexander excused themselves from the meeting and returned shortly thereafter accompanied by the President of the bank, Donna F. Shuler. At this point in time, the tone of the meeting changed dramatically and we were told that the bank could not release any more information to us and we would need to return with a resolution of the WTU Board if any further information was to be sought and the bank would decide what information it would then release to us. As discussed above, we indicated that the bank had already been notified and authorized to release information to either us or representatives from the AFT. Despite having been previously granted permission to release such information to us, Shuler insisted on us obtaining a full resolution from the WTU Board before the bank would release any further information. The Board resolution was delivered to IFSB the same afternoon we met with them. It is important to note, especially considering the bank's activities and the apparent close working relationship of Holmes and certain bank employees, that though some missing banking information, such as cancelled checks and copies of signature cards have been provided by IFSB, that complete information has not been forthcoming from the bank despite our, WTU's and AFT's repeated requests.
The WTU funded numerous political contributions from Bullock, Hemphill, and Baxter. Bullock made contributions to the Democratic National Committee and to Hillary Clinton's campaign during the year 2000 of $9,000 and $2,000 respectively. These contributions were charged to the WTU's American Express charge account.
Additionally, Baxter made a $1,000 contribution to Hillary Clinton's campaign that was likewise charged to the WTU's American Express charge account. Our investigation revealed that WTU made contributions to various other political organizations by check in the sum of approximately $4,200. These organizations included National Political Congress of Black Women, Mayor Marion Barry Constituent Services Fund and others. The AFT was not aware that these contributions were made. Upon learning that the contributions were made with WTU funds, AFT requested reimbursement from the Democratic National Committee and Hillary Clinton's campaign. Both have refunded the amounts in full.
As described throughout this report, Bullock, Hemphill and Baxter, with the aid and assistance of Holmes, Michael Martin, Cheryl Martin, Errol Alderman and Gwendolyn Clark, and perhaps others, appear to have conducted the financial affairs of the WTU for their own personal benefit and to the detriment of the WTU and its members. Those charged with ensuring internal controls, Bullock, Hemphill and Baxter, apparently cooperated to systematically divert the funds of the WTU. As has been repeatedly stated throughout our report, due to the large volume of still missing documents such as bank statements, cancelled checks and the like, upon their eventual receipt, our findings as to the total dollar magnitude of this situation will likely increase, and this increase could be substantial.
In total, the WTU and its members have been deprived of approximately $5 million dollars or more as a result of the described lapses that was concealed from the AFT, WTU members and others by a combination of false financial reporting to government agencies and the failure to submit audited financial statements to WTU's Board and its general membership.
Bruce G. Dubinsky, MST, CPA, CVA, CFE Lead Forensic Investigator
John J. Young, JD, CPA
Forensic Investigator
Jerome L. Simpson
Forensic Investigator
Emily C. Gratzer, CPA
Forensic Investigator
Keith A. Neus, CPA
Forensic Investigator
Charles M. Anderson, CFE
Forensic Investigator
1. Throughout this report, it is important to note that our findings are based upon the information available to us. We did not receive, nor have we to date received, complete information. Most notably we have not yet received all bank statements or cancelled checks for the year 1999. Accordingly, where noted, our findings do not include all transactions that occurred in 1999. Based upon our review of available information for 1999, we believe that many transactions appear to be highly suspect given what we now know about the other periods of time we examined. Assuming the same patterns of behavior that were evidenced before and after 1999 were occurring during 1999, it is our opinion that had we been provided complete information for 1999, the amounts stated in our findings below may be higher and the increase may be substantial. In certain instances we included information back to 1994 and 1995; See section entitled "Undocumented Expense Reimbursements And Other Payments of $698 Thousand."
2. All amounts reported herein are approximate, rounded, and are based upon our investigation and findings to date.
3. In addition to the two categories of American Express charges discussed in this report, we also identified a third category of charges - those that appeared to be legitimate WTU expenditures. These items are not summarized in this report since they do not constitute any part of our findings. Such charges included items such as America Online charges, telephone charges, postage, office supplies, and other business expenses. We did not undertake to determine beyond this, if in fact, these items were ever actually received and/or used in the operations of the WTU.
4. AFT Constitution, Article 4, Section 6.
5. James Goosby reportedly was the tax preparer for the WTU and for Bullock, Holmes and Cheryl and Michael Martin. He is not a Certified Public Accountant. He runs a business called Goosby's Income Tax Service located in Prince Georges County, MD. Goosby, although apparently hired to conduct the WTU audit (Goosby stated that Bullock asked him to do the audit), could not have done so since he was not a CPA.
6. It is important to note that our findings detailed below are based upon the information available to us. We did not receive, nor have we to date received, complete information. Most notably we have not yet received all bank statements or cancelled checks for the year 1999. Accordingly, where noted, our findings do not include all transactions that occurred in 1999. Had we been provided information for 1999 the amounts stated in our findings below may be greater assuming that the conduct observed by us both before and after 1999 also occurred in 1999.
7. We requested all other copies of electronic accounting files from Goosby who stated he had none. We did however, recover an electronic accounting file from Hemphill's computer that was similar to these files.
8. As noted in the Executive Summary, in addition to the two categories of American Express charges discussed in this report, we also identified a third category of charges - those that appeared to be legitimate WTU expenditures. These items are not summarized in this report since they do not constitute any part of our findings. Such charges included items such as America Online charges, telephone charges, postage, office supplies, and other business expenses.
9. See the detailed discussion of this item for information regarding other reporting years.
10. Counsel for the AFT asked counsel for Bullock to provide evidence of any reimbursement Bullock claims she made. Nothing has been provided.
11. In addition, we discovered a $15,000 check dated July 2,2002, drawn on the WTU bank account and payable to Vann (Van Style).
12. We note that this amount is close to Barbara Bullock's salary as President of the WTU and higher than any other employee.
13. Goosby, in addition to being the tax preparer for the WTU, also prepared Holmes' personal tax return. According to Goosby, Holmes' personal tax return did not claim as net income the entire $150,000 amount reported to him. Rather, Holmes' personal tax return netted the amount reported to him with certain "expenses" to arrive at the amount he believed was his "salary."
14. Holmes indicated that he dealt directly with other branch managers at Independence Federal Savings Bank
15. This was discovered when WTU checks payable to Diners Club were found.
16. In addition, approximately $14,600 in checks payable to Gwens of Columbia/Gwendolyn Clark were written on the WTU account.
17. We were only able to obtain the annual summary statement for this account for 2001 and only have several other portions of statements which were attached to Bullock's expense reimbursement vouchers.
1 8. During an interview, Bullock indicated that she recalls using the Diners Club charge account for clothing and food purchases.
19. The $8,000 check in question was dated April 2, 1997 and was negotiated on April 3, 1997.
20. Although there are a number of checks dated after April 1997 bearing a forged signature of Hankerson, the bank never called her about any of them.
21. This does not include two checks for $1,500 each that were payable to Korie Twiggs, a WTU employee, the purpose of which are unknown.
22. Committee on Political Education
23. Holmes stated that he recently acquired a new job in which he was only making approximately $50,000/year.
2 4. Michael Martin described his position at the Department of Health as Chief, Operations Division, HIV/AIDS Administration.
2 5. We discovered checks in the approximate amount of $20,700 made payable to Errol Alderman from the WTU bank account. However, check registers, albeit without the cancelled checks, indicate that this amount may, in fact, be significantly higher.
26. According to the affidavit filed by FBI special agent Katherine Andrews, Cheryl Martin deposited $10,000 of the Expressions Unlimited checks into Hemphill's bank account.
27. We have not been given an opportunity to interview Bullock subsequent to the Michael Martin interview.
28. Of this amount, we were provided cancelled checks in the amount of $183,754. The remainder of the amount paid to Expressions Unlimited we obtained from electronic accounting records (i.e., Quickbooks files).
2 9. We here again note that not all financial information was made available to us. Accordingly, additional payments may have been made to Curtis Lewis, including payments in 1999, of which we are unaware.
30. We could not locate any documentation for the period January 1, 1999 through March 31, 1999 in order to make any findings for this period.
31. As the true nature of these payments are not known, these amounts have been included above in the section concerning undocumented expense reimbursements and other payments.
32. Of this amount we have examined cancelled checks in the approximate amount of $797,000. As has been previously stated throughout this report, we do not have copies of cancelled checks for 1999 despite repeated requests to obtain them from IFSB. The 228 checks totaling nearly $1,200,000 was obtained from accounting records that we received from Mr. Goosby, the tax preparer. See prior discussion regarding Goosby and his relationship to Holmes, WTU and others.
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