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Ex-DCFS director’s friend accused of ‘large-scale’ fraud of state funds

Former DCFS Director ErwMcEwen. (Sun-Times file photo)

Former DCFS Director Erwin McEwen. (Sun-Times file photo)

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Updated: November 19, 2011 8:43AM

The state’s executive inspector general on Monday alleged “large-scale fraud” involving millions of dollars in taxpayer money awarded to a health-services provider who was a “personal friend and mentor” of the recently departed director of the Department of Children and Family Services.

The contractor, Dr. George E. Smith, also appears to be part of a wider, federal investigation of government grant fraud, according to grand-jury subpoenas obtained by the Chicago Sun-Times earlier this year. Smith and four of his companies are named in subpoenas to three state agencies that seek information about grant and contract awards.

Smith, who did not return telephone calls, hasn’t been charged with any crimes. But the 201-page report from Executive Inspector General Ricardo Meza recommends that the state seek “criminal prosecution” for Smith’s “fraudulent billing practices,” which involved “forged signatures,” “ghost employees” and “excessive administrative expenses.”

The report alleges that Smith’s companies were awarded “millions of dollars of grant funds for services that cannot be substantiated,” including DCFS money. Additionally, investigators questioned Smith’s purchase of $95,847 worth of tickets to Bulls, White Sox, Cubs and other sporting events, including the NBA All-Star game.

The report also alleges that former DCFS chief Erwin McEwen, who left the agency in September, “apparently ignored repeated ‘red flags’ that DCFS employees raised about Dr. Smith.”

McEwen also allegedly refused to cooperate in the investigation by Meza’s office and the DCFS inspector general.

In a written response to the inspector general’s findings, McEwen wrote, “There is no credible evidence that McEwen said or did anything inappropriate or unlawful.” The allegations, McEwen added, “are all primarily individuals allegedly repeating what third parties allegedly told someone else.”

Smith, according to the report, had been awarded more than $18.5 million since 2008 from DCFS and other state agencies — including Chicago State University, the Department of Human Services and the state Board of Education — as well as the Chicago Public Schools.

Asked about the report and McEwen, Gov. Pat Quinn replied, “He’s no longer the director. He was given the opportunity to resign and he took that opportunity.”

The report also makes mention of former state Sen. Rickey Hendon (D-Chicago), who abruptly resigned in February as federal investigators probed a series of questionable state grants bearing his fingerprints.

When questions arose internally at DCFS about how Smith was spending state grant money, a DCFS employee paid a visit to Smith’s offices to ask specifically about a $13,000 payment to a group known as Better Life for Youth, which was among organizations named in a 2010 federal subpoena to the State Board of Education.

The employee “asked Dr. Smith for information about the $13,000 payment. In response to his inquiries, Dr. Smith asked [the employee] if he knew that Better Life for Youth was [former] Illinois State Senator [Rickey] Hendon’s organization,” the report states.

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