STATE V DEANN RAYMOND STONE MONTGOMERY CO CIRCUIT

STATE V. DEANN & RAYMOND STONE MONTGOMERY CO. CIRCUIT COURT Alabama Office of the Attorney General Special Prosecutions Division & U. S. Dept. of Education, OIG

Parties � � Hon. Johnny Hardwick State of Alabama � Asst. Attorney General Bill Lisenby, Jr. � Dep. Attorney General Peter J. Smyczek � Special Agent Jim Murray � U. S. Dept. Ed. Special Agent Greg Peoples � Defendants � Deann K. Stone Tommy Goggans, Esquire � Raymond D. “Dave” Stone Micheal Jackson, Esquire

Overview � Trial Began Sept. 29, 2014 � Concluded � October 9, 2014 2 Defendants: Former Dir. Of Fed. Prog. , Dr. Deann K. Stone � Raymond Davis Stone, or Dave Stone � � 5 Count Indictment: � 5 Ethics Charges 3 Charges for Grants to Lowndes, Marengo, & Coosa Counties 1 Charge for Using State Materials for ITS’ Benefit 1 Charge for the Cambium Boston Trip � Both Defendants charged in the same counts

State/Federal Cooperation � � Alabama Office of the Attorney General Alabama Ethics Commission Alabama Department of Public Examiners U. S. Department of Education � Office � of Inspector General Federal Bureau of Investigation

Investigation � � � Public Records Consensual Search/Access Search Warrant Court Order Subpoenas Grand Jury o Records o Witnesses o � � Interviews Forensic Computer Examination

OIG � Mission Statement: To promote the efficiency, effectiveness, and integrity of the Department's programs and operations, we conduct independent and objective audits, investigations, inspections, and other activities.

OIG Components § Audit Services § Investigation Services § Evaluation, Inspection and Management Services § Information Technology Audits and Computer Crime Investigations § Immediate Office/Counsel/Public Affairs

Genesis of case � OIG received multiple complaints � Audit of $49 Million Stimulus Funds � School Improvement Grants added to audit � Article in the Birmingham News by Marie Leech titled, “Spouses on both sides of federal grant money” dated July 11, 2010 � Alabama Attorney General’s Office opens investigation DAGs Matt Hart & Mike Duffy � Special � Grand Jury empanelled in Montgomery Co. Federal/State cooperation

Indictment Overview � � � Count 1 -ETHICS- Lowndes County SIG Grant Count 2 -ETHICS- Marengo County SIG Grant Count 3 -ETHICS- Coosa County SIG Grant Count 4 -ETHICS- Use of State Resources for ITS’ Benefit Count 5 -ETHICS- Boston Trip

Counts 1, 2, & 3 Section 36 -25 -5(a) of the Code of Alabama: � (1) A public official or public employee; � (2) Intentionally uses or causes to be used her official position or office; � (3) To obtain personal gain for him or herself, or family member. . . or any business with which the public official or employee is associated; and � (4) The use and gain are not otherwise specifically authorized by law. The term “Business with which the person is associated” is defined as “Any business of which the person or a member of his or her family is an officer, owner, partner, Board of Director member, employee, or holder of more than five percent of the fair market value of the business. ” 36 -25 -1

Counts 1, 2, & 3 Evidence �Deann K. Stone was the Director of Federal Programs at the Alabama State Department of Education until October 5, 2010 �Dave Stone is an Officer and Employee for ITS (Vice President of Project Management in 2010) �Dr. Stone did not reveal the nature of her husband’s work to officials at the AL State Dept. of Education

Counts 1, 2, & 3 Evidence �Over $24 Million grants awarded to ITS Customers: Lowndes County Marengo County Coosa County �Over $10 million received by ITS

Counts 1, 2, & 3 Evidence �Recap of Scoring Process 16 LEAs qualified for SIG funds Phase 1 “Written Applications” � 7 external graders Phase 2 “Capacity & Commitment Interviews” �Internal graders Phase 3 “Budget Analysis” �Top 8 LEAs graded by Dr. Stone & Federal Programs Staff Funding Scenarios Steering Committee Meeting May 5, 2010 SIG Award Winners Announced May 7, 2010

Counts 1, 2, & 3 Evidence �Dr. Deann K. Stone participated in the SIG Award Process by: Not cutting bottom LEA’s after Phase 1 Grading 5 LEAs in Phase 2 “Capacity & Commitment” (Lowndes, Coosa, Marshall, Tuscaloosa City, Birmingham) Adding unauthorized Phase 3 “Budget Analysis” Removing bottom 8 LEAs from Phase 3 (Marshall, Barbour, Dallas, Tuscaloosa County, Monroe, Fairfield, Bullock, Birmingham) Grading top 8 LEAs in Phase 3 (Montgomery, Lowndes, Marengo, Coosa, Mobile, Huntsville, Macon, Tuscaloosa City)

Counts 1, 2, & 3 Evidence �Dr. Deann K. Stone participated in the SIG Award Process by: Presenting 2 Funding Scenarios to the Committee �ITS Awarded under both Scenario 2 adopted: funding Lowndes, Marengo, Coosa, Montgomery and Mobile*

Funding Scenarios State’s Exhibit 9

Funding Scenarios State’s Exhibit 9

Scoring Data

Effect of Dr. Stone � Phase 1 � Bottom 8 LEAs NOT eliminated � Marshall #1; Macon #3; Huntsville #4 (Top � Marengo #11; Coosa #13; Lowndes #14 � Scored Phase 2 / Present during discussions � Marshall #16; Macon #8; Huntsville #14 � Lowndes #1; Coosa #4; Marengo #5 (Top � Removed roughly 12 Score Sheets � 5) 5) Added unauthorized Phase 3 � Bottom 8 eliminated; Top 8 considered for $ � Marshall #9 � Lowndes #2; Marengo #3; Coosa #4 (Top 5) � Huntsville #6; Macon #7 (skipped in 1003(a))

Count 4 Section 36 -25 -5(c) of the Code of Alabama: � � (1) A public official or public employee; (2) Intentionally uses or causes to be used equipment, facilities, time, materials, human labor, or other public property under her discretion or control; (3) For the private benefit or business benefit of the public official, public employee, or any other person; and (4) The benefit materially affects his or her financial interest, except as otherwise provided by law or as provided pursuant to a lawful employment agreement regulated by agency policy.

Count 4 Evidence � In order to steer the grant money to ITS and to benefit herself, Dave Stone or ITS, Dr. Stone used the following equipment, facilities, time, materials, human labor, or other public property under her discretion or control: A state computer; A state email account; The human labor and/or the time of herself and a subordinate (e. g. , sent her to ITS); or ALSDE documents and/or materials (e. g. , the list of eligible schools)

Count 5 Section 36 -25 -7(b) of the Code of Alabama: � (1) A public official or public employee; � (2) Intentionally solicits or receives thing of value for herself or for a family member; and � (3) For the purpose of influencing official action.

Count 5 Evidence August 2009 Boston Trip � Deann and Dave discussed visiting Boston with Cambium sales rep Cambium paid for $1, 086. 04 in hotels, meals, boat tour, ground travel, etc. expenses for Dave and Deann’s trip to Boston on August 22 -24, 2009 Testimony from employees of Cambium � State’s Exhibit 45, pg. 2 � �

Official Action State’s Exhibit 114, pg. 1 (August 23, 2009) State’s Exhibit 47, pg. 2

Deann Sends Subordinates State’s Exhibit 47

Aiding & Abetting Complicity -Alabama Code § 13 A-2 -23 A person is legally accountable for the behavior of another constituting a criminal offense if, with the intent to promote or assist the commission of the offense: . . . (2) He aids or abets such other person in committing the offense; or “Subdivision (2) imposes liability in the situation where one joins in the complicitous action… aiding and abetting comprehends all assistance rendered by acts, words of encouragement, or support or presence, actual or constructive, to render assistance should it become necessary, and no particular acts are necessary. ” . . .

Dave Stone � Counts 1, 2, & 3: Grants to ITS Customers � Was involved in K-12 and SIG work � Obtained the list of eligible schools � Showed it to former ITS employee � Emailed information to Pres. of ITS � Attended Regional Meetings � Reported information to ITS � 2009 -2010 ITS Time Sheets showed numerous entries for SIG and other educational work (e. g. , MPS sales) � Part of his 2010 “Business Forecast” was to get SIG business

Dave Stone’s 2009 Performance State’s Ex 63, pg. 4 State’s Ex. 65

Dave Stone’s Marketing Plan for 2010

Working with Deann State’s Exhibit 71

State’s Ex 72, pg. 1 -2

State’s Exhibit 37, page 4

Dave Has Preliminary List State’s Exhibit 77

Exhibit 90 � � � ITS marketing event in Wetumpka Conflict of Interest is obvious Dave Stone reaches out to SDE to use employee for ITS event Lowndes, Coosa and other customers present Deann Stone asks subordinate to attend

Dave’s Increased Compensation State’s Exhibit 64, pg. 3

Dave’s Bonus State’s Exhibit 74

Dave Stone � Count 4: Use of State Resources � Asked Deann not to come to ITS meeting on March 16, 2010 because someone told Pres. Of ITS she thought it was a conflict � Then asked Deann to send one of Deann’s subordinates � Frequently requested information via-email from Deann about SIG and ARRA funds � Asked for advice and assistance on ITS work product regarding SIG, including documents and power points � Showed the list to employees at ITS

Dave Stone � Count 5: Boston Trip � Accompanied Deann on the Boston trip � Accepted the meals, hotel, etc. from Cambium rep. � Present during “business discussions” about Cambium products during the trip � Had direct contact with Cambium sales rep. via-email about working together � Invited Cambium rep to ITS “Wine Tasting” Federal Programs conference � Attended several dinners with Cambium sales rep. and Dr. Stone paid for by Cambium

Deann Stone’s Statements � � � � “I didn’t grade any interviews” “I sat in on interviews but didn’t score them” “I graded interviews, but scores were not counted” “My interview scores were counted, but it was accidental” “Husband had nothing to do with SIG grants at ITS” “I recused myself from grant process” “I removed score sheets” Blamed subordinates for problems

Disposition � � Both Defendants Found Guilty on All 5 Counts of Violating the Alabama Ethics Law Sentence Hearing on December 15, 2015 Sentenced on Jan 6, 2015 to 2 years � Because of prison overcrowding, Stones would be placed in a “halfway house” after 30 -60 days � � February 26, 2015 Dave and Deann Stone were resentenced Sentence “split” to serve 6 months, followed by 4 years of supervised probation � Released July 6, 2015 � On supervised probation until Jan 6, 2019 �

Why Report Fraud to Attorney General or Federal OIG? • • • Statutory and regulatory requirements. Ethical responsibility. To deter others from committing fraud and abuse. To protect the integrity of State/federal Programs. To avoid being part of a fraud scheme. To avoid administrative action. To avoid civil penalties. To avoid criminal prosecution. To avoid incarceration

Lessons for Education Employees � � Disclose Possible Conflicts of Interest Conflict Includes Family Members � Spouse, dependant children � Spouse, adult children for public officials � Business with which associated � � Recuse self if conflict exists Avoid even the appearance of a conflict or impropriety

Lessons Continued � � � Entitled to pay check and benefits from employer, that’s it! Don’t use office to benefit children or spouse If have side job, don’t use your office to benefit business � State computer � State employees

Conflict of Interest � � � Ala. Code section 36 -25 -1(8): A conflict on the part of a public official or public employee between his or her private interests and the official responsibilities inherent in an office of public trust. A conflict of interest involves any action, inaction, or decision by a public official or public employee in the discharge of his or her official duties which would materially affect his or her financial interest or those of his or her family members or any business with which the person is associated in a manner different from the manner it affects the other members of the class to which he or she belongs. A conflict of interest shall not include any of the following: a. A loan or financial transaction made or conducted in the ordinary course of business. b. An occasional nonpecuniary award publicly presented by an organization for performance of public service. c. Payment of or reimbursement for actual and necessary expenditures for travel and subsistence for the personal attendance of a public official or public employee at a convention or other meeting at which he or she is scheduled to meaningfully participate in connection with his or her official duties and for which attendance no reimbursement is made by the state. d. Any campaign contribution, including the purchase of tickets to, or advertisements in journals, for political or testimonial dinners, if the contribution is actually used for political purposes and is not given under circumstances from which it could reasonably be inferred that the purpose of the contribution is to substantially influence a public official in the performance of his or her official duties.

Lessons Continued � � Ala. Code 36 -25 -5(a) No public official or public employee shall use or cause to be used his or her official position or office to obtain personal gain for himself or herself, or family member of the public employee or family member of the public official, or any business with which the person is associated unless the use and gain are otherwise specifically authorized by law. Personal gain is achieved when the public official, public employee, or a family member thereof receives, obtains, exerts control over, or otherwise converts to personal use the object constituting such personal gain.

Lessons Continued � � Ala. Code 36 -25 -7(a) a) No person shall offer or give to a public official or public employee or a member of the household of a public employee or a member of the household of the public official and none of the aforementioned shall solicit or receive anything for the purpose of corruptly influencing official action, regardless of whether or not the thing solicited or received is a thing of value.

Federal Law 18 USC 1341, Mail Fraud � Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U. S. C. 5122)), or affects a financial institution, such person shall be fined not more than $1, 000 or imprisoned not more than 30 years, or both.

Federal Law 18 USC 1343, Wire Fraud � Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U. S. C. 5122)), or affects a financial institution, such person shall be fined not more than $1, 000 or imprisoned not more than 30 years, or both.

Federal Law � 18 U. S. C. § 2, Aiding and Abetting Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal. � 18 U. S. C. § 4, Misprision of a Felony Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.

Lessons Continued � Don’t accept gifts from vendors you do business or could do business with � Same � for family members Familiarize self with Alabama Ethics law � AL Ethics Commission website (training, opinions, other resources) � You can ask Ethics for an Opinion

What to do? � If you find yourself with possible conflict: � Alabama � � Ethics Commission at 334 -242 -2997 Contact a lawyer If you see conflict/suspicious activity, contact: � Alabama Attorney General’s Office at 334 -353 -2128 � U. S. Dept. Education OIG at 1 -800 -MISUSED � FBI at 251 -438 -3674 (Mobile) � Alert Supervisor