State investigators say DCFS contract fraud could be worse than known

State ethics investigators say they may never know the full extent of an alleged contracting scheme that they say cost taxpayers at least $18 million and led to last year’s resignation of the head of the Illinois Department of Children and Family Services.

The comments came during a legislative hearing Friday examining a probe that found numerous violations by George E. Smith, who held various state contracts across a number of agencies, including DCFS.

The state executive inspector general’s office accused Smith of forging documents, presentingfalse information about grant funds for after-school services, submitting budgets that allowed him to conceal funds, and accepting payments he was not entitled to receive.

But Executive Inspector General Ricardo Meza said the wrongdoing may go further, as the state only investigated contracts Smith held dating back to 2008. Smith has been doing businesses with the state since 1986.

“This investigation could literally have taken us another year-and-a-half or two to uncover,” Meza told House lawmakers. “There had to be a point at our office where we decided that we thought that even though we did not fully uncover every piece of misconduct that Dr. Smith may have engaged in, we had to issue the report.”

Pressed if it was possible that more than $18 million in tax dollars were misspent, Meza said, “I think that’s a fair statement…we may never know.”

The Illinois attorney general’s office is investigating in an attempt to recoup some of the money, and federal grand jury subpoenas have named some of Smith’s companies among records sought from state agencies, including Diversified Behavioral Comprehensive Care.

Meza said the investigation’s scope was limited partly because agencies are only required to keep documents for three years, a timeline lawmakers said they will push to extend.

Legislators also said they will also seek changes to the state’s Ethics Act, which prevents many cases of wrongdoing by state workers from being made public. The allegations against Smith’s were laid out in a report that contended former DCFS director Erwin McEwen failed to properly oversee grants. McEwen and Smith are longtime friends, and McEwen eventually refused to cooperate with investigators.

Under the law, reports are made public if it leads to an employee being fired or being suspended for three or more days. McEwen resigned, but a lower-level employee was suspended for five days, leading to the report’s release by the Executive Ethics Commission.

The commission could have redacted the majority of the report not dealing with the suspended employee, but decided to make the findings public.

Lawmakers also lashed out against Gov. Pat Quinn for not firing McEwen when the administration received the initial report last May. Instead, McEwen was allowed to stay on the state payroll through September.

Quinn general counsel John Schomberg said the administration wanted to give McEwen “due process” and “provide for additional transition time” as it searched for a replacement.

Schomberg said ethics laws also placed the governor’s office “between a rock and a hard place” because if they fired McEwen, they were not allowed to say why until the report was made public.

It was an argument Rep. Jack Franks, D-Marengo, found lacking.

“What does one have to do to get fired working for Gov. Quinn?” Franks said. “If it was the private sector you would have opened yourself up to lawsuits for absolutely negligence. And I think that’s what’s happened here.”