“Miss Rogers, there’s flies, there’s flies.”
“What? What are you talking about?”
Sherri Rogers (not her real name) figured the girl in the back of the class was messing with her. She loved her students, but they had such a hard time paying attention. As she approached the girl’s desk, she expected to see nothing except the grin of a fifth-grader who has just punked her teacher.
But then there it was. A fly. A gnat?
Rogers peered closer.
Something flashed in her peripheral vision, down low, near the floor.
The floor seemed to twitch.
She looked again. The floor resolved into a rippling mass of what she would later learn were termites: thousands of them, writhing in the wood. She could no longer see the floor at all.
All of this took just a couple of seconds. “I disassociated from my body,” Rogers told me. She screamed a little, then her students screamed, too. She got on her walkie-talkie and radioed over to the administration. Rogers was told to take her class of fifth- and sixth-graders into the chapel of the church that was next door to the school.
It wasn’t the first time she’d been forced into the chapel. She and her students had spent weeks there over the previous winter, when something had gone wrong with the heat, and the kids had frozen in their parkas, exuding visible puffs of breath. The charter school was funny like that: One end of the main classroom building had no heat, and the other end had no air-conditioning. At a separate campus a mile away, a woman named Cindy Cole taught on the second floor of a dilapidated building. She remembers how one of her students had a medical condition that had left him on crutches. Every day, to get to his class, he had to scoot up the stairs on his butt, like a baby, facing backwards, because the building had a broken elevator that wasn’t fixed.
Something had obviously gone horribly wrong here. Emanuel Freeman launched Germantown Settlement Charter School in 1999 and had renewed his charter in 2003 with the support of his many powerful friends and allies — not just Democrats like Congressman Chaka Fattah and Councilwoman Donna Reed Miller, who praised Freeman to the skies, but also Republicans in the suburbs, like ex-Governor Mark Schweiker, who adored the idea of helping a black guy make the city’s public school system look bad. Freeman’s goal was to vault poor children in the city’s Northwest to “world class standards of academic excellence.” But the school ran into trouble almost immediately. Freeman wasn’t an educator. Not only was the school falling apart; it couldn’t supply enough paper or pencils or chalk. Settlement Charter failed to make Adequate Yearly Progress in state test scores in 2003, 2004, 2005, 2006 and 2008. Between 2003 and 2007, the number of children who scored “below basic” in reading actually increased, from 40.6 percent to 45.3 percent. The children were drowning.
One day a few years back, after the situation had become unbearable, the students were called to an assembly, and Freeman took the stage. A fit, powerfully built black man near 60, he’s known as “The Buddha” because of the silent way he walks. He wore a finely tailored suit and a hat. He spoke in a round, resonant, soothing voice. There was no need to worry, Freeman told the children. Plans were under way for an expansion. Soon the school would have amenities that even kids in suburban schools would envy. Indoor tennis courts. A track. A pool. It was going to be better than ever.
According to Rogers, “The children would raise their hand and ask, ‘Can we have that? And can we have that?’ ‘Oh, sure, you can have that.’ And when? ‘Ooooooh, soon.’ And the kids, they were so excited.”
The promised renovation never happened. No pool, no indoor track, only escalating chaos until the School Reform Commission finally caught on in 2008 and held hearings. The commission eventually declined to renew Freeman’s charter, shutting down the school.
Freeman didn’t blink. The school was small potatoes, a tiny part of his empire. Directly or indirectly, Freeman has controlled at least 30 different companies concentrated in the city’s Northwest. As recently as 2007, he was president of at least 16 of the companies. Mostly nonprofits, they’ve got these impenetrable names — the Northwest Education Development Corporation; Urban Community Health Systems, Inc. Together, they’re known as “Germantown Settlement.”
In its most boiled-down form, Settlement is a social agency plus a housing company. Over the years, the agency side has provided a basket of services to truant children, foster children, the elderly, the poor, the HIV-infected, new mothers, families, and people facing foreclosure.
There are many devoted people who have worked at Settlement and provided quality services, but Freeman has never been able to retain the most effective employees — he ends up stiffing them on their paychecks or their health insurance, or he lays them off, or else they simply quit in disgust, and service goes downhill. Settlement is the mother ship, the brand name; it’s the place where Freeman draws his salary — $156,000 in 2006 — and where he parks his large, late-model silver Mercedes-Benz, in the spot that says RESERVED FOR GERMANTOWN SETTLEMENT CEO. (Freeman’s wife, Emma Cummings-Freeman, is a VP at Settlement, in charge of its Department of Health and Human Services; she drives a gold Cadillac.) Freeman is also president and CEO of the Greater Germantown Housing and Development Corporation, or GGHDC, which as of 2006, the last time Freeman gave a full inventory to the city, owned at least 372 units of multi-family and tax-credit housing, 127 units of senior housing, and 170,500 square feet of retail space that stretched across a two-mile swath of the city. (Reached on his cell phone, Freeman asked me to send him questions via e-mail, but he didn’t reply to my subsequent e-mail, and his lawyers didn’t return my repeated calls.)
Until very recently, through the social agency, Freeman provided services directly to 15,000 of the city’s most vulnerable residents, and he has always bragged in his grant requests that when you add in his real estate ventures, he touches the lives of 195,000 people—one in every seven residents of Philadelphia.
He’s the largest developer in Germantown, and is also the community’s largest employer, which partly explains why politicians, both white and black, have always liked him: everyone from Governor and ex-mayor Ed Rendell, who used to call him “Manny,” to Congressman Bob Brady, who scored him a $250,000 federal earmark in 2009, to Councilwoman Donna Reed Miller, whose daughter, Shakira, was paid $55.14 an hour by a Freeman-run nonprofit to “consult” with her mother, using walking-around money controlled by legislators and administered by Rendell’s Department of Community and Economic Development (DCED). (Brady didn’t respond to an interview request, and Miller said her daughter worked hard, and that to single her out for scrutiny was “unfair to the children of elected officials.”)
When you start to add up the grants, tax breaks and low-interest loans, you find that Freeman has raised at least $100 million for his enterprise since the mid-’80s. To an oil company, $100 million is a rounding error, but for a nonprofit working in a single part of a single city, it’s unheard of. Crazy, though: When you visit Germantown, you can’t see where any of this money went. When I walked through Germantown this spring, with two black women who used to work for Settlement and have since become its critics — Anita Hamilton and Debra White-Roberts, of the Wister Neighborhood Council — what we saw was blight: a run-down, graffiti-tagged strip mall called Freedom Square, built with $400,000 from the city, $600,000 from the Philadelphia Industrial Development Corporation (PIDC), and $600,000 from the federal government; three abandoned, boarded-up stucco homes on East Penn Street; and a gaping foundation pit on Wakefield Street, full of trash bags. Settlement “developed” these properties. “This is all we got,” White-Roberts told me. “We’re worse off than if the money hadn’t come here in the first place, because we don’t know where it went.”
Where did the money go? The story of the charter school provides a clue. In 2008, the School Reform Commission revealed that Freeman kept 14 upper-level managers on his bloated school payroll, ran massive deficits ($439,230 in one year alone), and used the school as a kitty to bail out his other failing entities, at one point loaning $50,000 in cash to a related company. In 2002, the charter school’s former education director, Linda Ralph-Kern, claimed in a lawsuit that Freeman had illegally transferred $538,000 from state funds in the school’s checking account to Germantown Settlement, then fired her for blowing the whistle. (The case later settled out of court.) The charter school is the Freeman enterprise in microcosm. He’s amazingly good at getting money and shockingly awful at spending it well. An incompetent manager, he is always in way over his head — though that might be a generous assessment, given that an accountant Freeman hired to look into his books in an attempt to mollify the city would tell me, “Emanuel Freeman is the Robert Mugabe of Germantown.” Mugabe is the dictator of Zimbabwe.
This story, however, is not simply about one bad apple. It’s about a system that understands it’s eating a bad apple and keeps eating it anyway. Tax break by tax break, contract by contract, across administrations, the city, state and federal governments created a monster. They knew it. The proof is in their own documents and e-mails, which I obtained via Right to Know and the Freedom of Information Act. In April, Settlement and its housing company declared Chapter 11 bankruptcy. All of that money went to nothing. And no one wants to talk about it.
In August, I received a sweetly and cunningly oblivious e-mail from former mayor John Street. “I would love to help you with your story but I’m on vacation,” he wrote. “(Hawaii is a great place.) … I was saddened to hear of the organizations [sic] continued problems. Has something else happened?” It was as if we were discussing a mutual acquaintance of ours, someone we both remembered fondly, like an old college professor, instead of a corporation that had devastated a neighborhood. “Hopefully,” Street wrote, “[Settlement] is doing better now.”
Given that Freeman was on John Street’s transition team when he was elected mayor in 1999, this coyness is disturbing. To say the least.
IT BEGAN AS A REVOLUTION, a typewritten memo delivered to a white man one day. “YOUNG AFRO AMERICAN,” it said on top (all spelling and grammar [sic]). “We have self help program designed to cater the needs of the Black community. Those functions will be handled by Black People so that we can begin to have a self determind attitude for Communities. We feel that these white organized and operated community programs have delt dishonestly with the Black Community.”
The year was 1968, and the white man in question was the president of a social agency called Germantown Settlement. Originally founded by Quaker women in 1884 as a free kindergarten for the children of Irish mill hands, Settlement grew into a more comprehensive operation. It ran a library, and activities for kids, and organized the community to advocate for better housing. But by the ’60s, its white-immigrant clientele had mostly fled Germantown, and now Settlement was a colonial outpost: white people allocating resources to black people. And some of these young black people—teens—were suddenly aflame with a desire for change.
A 19-year-old Emanuel Freeman was one of them. His signature can be seen on subsequent communications from groups close to the Young Afro Americans. He was a kid from the Brickyard neighborhood, cradle of an eponymous street gang.
All over the city and the country, Afro-Centrism was sweeping black neighborhoods; what made Germantown’s movement especially potent was its founder, David Richardson. Six-foot-three and a former gang leader himself, Richardson used to walk the streets in a dashiki, talking to gang kids like Freeman, preaching the virtues of politics and the pointlessness of the knife and the gun. Pretty soon, Richardson had organized Freeman and his friends into the “Young Progressives,” a grass-roots political base that helped elect Richardson to the state assembly in 1972. “They weren’t gangbangers anymore,” Debra White-Roberts told me. “They were legit.”
Freeman’s skill was the word. Persuasion. He wasn’t eloquent, exactly, but he had an inborn sense of how to win over a room, and no one had a stronger command of the language of social uplift: “We must reorganize the community, block by block and person by person,” he once wrote in a letter to an adversary. “Much of the challenge before us is the development of the very people who find themselves caught in the middle of a life devoid of hope.” Black people deferred to him — he was an intimidating presence in private, aloof, frosty — and white people respected his entrepreneurial vigor, good posture, and strong links with black churches.
Freeman rose quickly within Settlement. In 1972, at age 24, he was elected its first black board member. From his new perch, he recruited more black board members, until, by 1983, Freeman was no longer just a board member — he was executive director. The Quakers didn’t know what had hit them until it was too late: Freeman had pushed them out of their own organization. (“The Quakers didn’t see this racially,” says one black activist with a long history in Germantown. “By the time they realized what Freeman was doing, it was over.”)
Freeman began knitting himself into the broader political tapestry of the city. Mayor Wilson Goode named him to his housing task force, and in 1986, Freeman helped pick the city’s housing director. By the early 1990s, he was no longer some rinky-dink neighborhood guy; he was a player.
And next, he did what players do, which is to think big and build big. Along with his deputy, Melvin Burgess, a 300-pound bear of a man, Freeman embarked on an ambitious effort to transform Germantown’s bricks and mortar. So-called “community development corporations” have been doing this for decades. The model is straightforward: If you live in a run-down neighborhood, private developers won’t come in and transform it, because they don’t see any money to be made. So you get some tax dollars, hire some contractors, and start building and rehabbing homes yourself. If you build good homes, people will buy them at market rates, and then those private developers will want in. When CDCs are successful, as they’ve been in North Philly and Mount Airy, it’s a beautiful thing — economic necessity meets racial justice.
And for a time, Settlement got its tax-financed projects done: 87 units of elderly housing at Elders Place I and II; 228 apartments near the Germantown Cricket Club; Freedom Square, a retail development. Former Settlement employees say it was Burgess, a kind-hearted nuts-and-bolts accountant, who drove the company’s success — but it was Freeman who took the credit. By 1994, the Inquirer was calling him the “Willard Rouse of Germantown,” and the Annie E. Casey Foundation in Baltimore awarded him more than $3 million over several years to “reverse social isolation and disinvestment” in Germantown. The Casey grant was a game-changer, more steady money than Germantown had ever seen, and it was augmented by $300,000 in yearly “core operating support” from Rendell, who also connected Freeman with additional funds through a partnership with Mellon Bank and gave him a direct line to his powerful deputy, David L. Cohen. (Cohen e-mailed me, “My recollections on these issues are just not that strong.”)
Why such love from the top? “Jason, I don’t remember this,” Rendell says. “I’m in a fog.” He does remember that Settlement “was highly regarded,” he says. “People would come and talk to Emanuel Freeman about how he did stuff.” Rendell says that when he read about the bankruptcy in the newspapers, he found it “shocking”: “I just have no idea how that happened.”
It’s true that in the early to mid-’90s, Settlement was basically a functional operation, held together by the twin forces of Burgess’s pragmatism and the legacy of Dave Richardson’s idealism.
Things started to go haywire in 1995, when Richardson died, followed four years later by Burgess. “That unity broke up,” says a black political activist who was close with Richardson. “Everybody wanted to be somebody.” By 1998, Settlement’s freshman class had graduated to positions of real power in the city, thanks in part to Freeman’s connections: Donna Reed Miller was a City Councilwoman, Steve “Wassi” Vaughn was her chief of staff, and John Myers was the state rep; Mjenzi Traylor was the city’s deputy director of commerce, and Herb Wetzel, co-founder of Settlement’s housing company, was soon to be executive director of the Redevelopment Authority. In 2000, Freeman moved Settlement’s headquarters from its traditional home, a modest three-story house on East Penn Street, to a 20,000-square-foot commercial suite on Wayne Avenue, purchased in part with an $800,000 second mortgage from the PIDC.
“When Melvin was alive,” says James Igess, a former Settlement employee, “he’d tell Emanuel, ‘All money is not good money. We gotta stick with what our niche is.’” With Burgess dead, Freeman expanded into uncharted territory — the charter school, for instance. He hired new executives and a small army of consultants. Until then, it seems no one had questioned Freeman’s commitment to the community. His tactics, maybe, but not his heart. “Once he got that big money,” black activist Anita Hamilton says, “I saw big changes comin’.”
Increasingly, Freeman spent his grants in questionable ways. For instance, in 2002, Freeman asked the state for $55,000 to “enhance and promote the image and services of Germantown Settlement.” With the grant money, he hired a PR consultant, who billed the state for attending Freeman’s induction ceremony into the Germantown Historical Society and getting a story about it placed in four newspapers. In 2004, a subsidiary of Settlement called the Germantown Community Collaborative Board, a relic of the failed Annie E. Casey project, received $10,000 for “community engagement and strategic planning,” but it actually spent the cash on parties and clothes, including a $762 political event for Donna Reed Miller at a Chinese restaurant; at least $1,000 in pizzas, hoagies and fried chicken; and, weirdest of all, 96 pairs of women’s panties, sizes XL and XXL.
This grant came from the state’s Department of Commerce and Economic Development. (Miller said that she “wouldn’t know that $700 came from a DCED grant unless somebody told me.” DCED eventually forced Settlement to pay most of this grant back, but that was a rare exception; since 2000, DCED has given Settlement and its related entities nearly $2 million.)
As the city, state and federal funding to Settlement went up and up — from $1.6 million in 1998, the year before Burgess died, to a whopping $6.8 million in 2003 — service went down. By January 2003, for instance, the white-stucco houses Settlement built on Penn Street had badly leaking roofs and foundation walls that were sinking and cracked, and the empty foundation hole on Wakefield Street was such an obvious scar on the neighborhood that even John Street took note of it during a walking tour of Germantown later that year, griping to a representative of Settlement, “You’re not doing a damn thing with it — tear that crap down.”
Meanwhile, Freeman and his deputies were complaining to the city of large shortfalls and “cash flow issues.” In 2003, the year he took in $6.8 million in taxpayer funds, Freeman’s current liabilities exceeded his current assets by nearly $2.5 million; the following year, his negative working capital gap increased to a staggering $4.8 million.
Did anyone at the city notice? Well, yes. It was impossible not to. In 1998 and ’99, Freeman stiffed the city, state and federal governments for $208,100 in payroll taxes, and in 2000, the city’s Office of Housing and Community Development (OHCD) tagged Settlement as “high-risk” — a shout-out to future auditors, saying, basically, Watch out for this guy. In 2001, OHCD temporarily suspended Freeman’s contract because he was delinquent on submitting a required financial audit.
OHCD did its job, but it was the exception to the rule. For the most part, bureaucrats at other agencies, namely Commerce, the Department of Human Services, the Redevelopment Authority, and the City Controller—the city’s own independent fiscal watchdog — simply seemed to note the anomalies in memos and file them away.
Also passing unnoticed was a significant event in the evolution of social change in Germantown. In 2003, Freeman bought a four-bedroom home with a fireplace and central air in suburban Wyncote. The champion of building community from within was moving out of the community, for good.
CITY COUNCIL IS A primitive body ruled by tradition, especially a tradition called “Councilmanic Prerogative,” in which the 16 other Councilpeople let a Councilperson do whatever she wants in her district in exchange for her vote on broader legislation. “If there’s an exception to this prerogative, I can’t remember it,” says Zack Stalberg, of the reform group Committee of Seventy. And so Donna Reed Miller could easily checkmate Freeman’s opponents just by making a phone call. If you were a white activist or a private developer who wanted access to the inner circle of the Germantown machine, you were routinely branded an “outsider,” a political opportunist, or one of what Freeman called the “Doubting Thomases.” “It was basically a closed family,” says Irv Ackelsberg, a white consumer lawyer in Germantown who ran against Miller for Council in 2007 and lost narrowly in the Democratic primary. “You were in or you were out.” (Miller says, “Irv hates me now, because he ran against me and lost. Prior to that, Irv and I were great.”)
And if you were a black activist opposed to Freeman, your challenge was an especially delicate one; any scandal that hurt Freeman would hurt you, too. When a white leader fails, it’s never a crisis of white leadership, but when a black leader fails, it’s always a crisis of black leadership, and the fallout makes it harder for good people to get anything done.
As of late 2005, the situation was grim. Settlement was piling debt on top of debt, mortgaging one property to pay off the debt on another. It had current assets of $3.3 million and current liabilities of $6.8 million. Yet Freeman apparently had no plans to scale back: In an unintentionally chilling letter to the city, he listed $155 million worth of future projects in his development pipeline, including a nursing home and a hospital. Eventually, the monster would consume Germantown. What Philadelphia desperately needed was a whistleblower. An accountant with a conscience. And Ray Devlin is as surprised as anyone that it turned out to be he.
IT WAS DEVLIN, a former officer at a Freeman-run company, who told me this:
“Emanuel Freeman is the Robert Mugabe of Germantown.”
Devlin is a finance guy. He understands how to structure tax deals, how to marry public money with private development. He worked for years at PIDC, the city’s nonprofit economic development company, then went to the Philadelphia Housing Authority. Taking a job at GGHDC seemed like a natural next step. He didn’t live in Germantown, and as far as he knew from the outside, GGHDC was “the premier development agency in the city.”
Freeman hired Devlin in January 2006 to get GGHDC’s books in order so it could produce the audits the city required. Two weeks into Devlin’s first month on the job, his paycheck bounced. Freeman’s people apologized, blamed a bank error. “I thought, no big deal,” Devlin says. “I’ve been through worse.” In his 20s, serving a stint in the Peace Corps, Devlin lived for two years as the only American man in a remote village in what’s now called Congo.
But then Devlin discovered something. He looked at the accounting ledgers, which were in disarray; he looked at the deeds, the agreements of sale, the mortgage pro formas. “I did not have the courage to look at the records that were being kept in the abandoned muffler store,” he says. And he discovered something profound: Both GGHDC and Settlement were “essentially bankrupt.” Freeman couldn’t afford to take care of his properties, or pay his employees’ health insurance (although he kept his own family’s health insurance current), or make his mortgage payments. For the first time, the disconnect between Settlement’s income and its deficits made sense. The reason the company was broke was that one part of it was always raiding another part.
“We were just blown away by how little understanding they had of life in the financial world,” says one person familiar with Settlement’s records who corroborated Devlin’s story. “If I worked at Settlement and I wanted to steal a million dollars, it would have been very easy.” In 2003, an auditor found that two large federal grants — one for $530,000, another for $770,000 — weren’t recorded properly in the ledgers. Work proceeded slowly, because auditors were always having to re-create records that had been destroyed in what Settlement explained were freak accidents: fires, computer crashes. Said the person familiar with Settlement’s records, “They just seemed to have an inordinate talent — I’m choosing my words exceedingly carefully — to lose important documents that would either exonerate or prove malfeasance.”
So where had all the money gone?
Even though he was on the inside now, Ray Devlin wasn’t in a position to say. It would take some law enforcement agency six months of poring over the bank records to figure it out. But to Devlin, that was the whole point: Without proper records or internal controls, there was no way to know where the money had gone, or would go in the future — and if the money wasn’t going into keeping the buildings safe, or to the employees, or the health-care premiums, or the pencils and books for the charter school, then it was going somewhere else, in which case “the only moral course of action” in Devlin’s mind was to declare bankruptcy, so that Settlement’s properties could be off-loaded into the hands of owners who would take care of them.
Devlin called a meeting with the chairman of the GGHDC board and told him what he knew. The next day, Freeman called Devlin and said, according to Devlin, “Don’t you ever go behind my back again.” Next, Devlin went to officials at PIDC and told them why Settlement was missing its mortgage payments on the PIDC loans. “I thought I had a fiduciary responsibility to our lender,” Devlin told me. That was on a Wednesday. On Friday, Freeman fired Devlin.
AT THIS POINT, Freeman was telling the city he was so broke that he couldn’t make payroll. If you’re the city, what do you do?
One: You pay him more.
Two: You pay him faster.
In late 2006, the city, at Donna Reed Miller’s urging, lent Freeman $1.3 million to acquire a historic building: the Germantown YWCA. The state kicked in $500,000.
It was a Hail Mary, a way to get Settlement on its feet; the idea was that Freeman could take his scattered operations, house them all in the Y, add a gym and some retail shops, and claw his way out of the hole. But Freeman missed his very first mortgage payment on the Y. He would never make a single payment. By August 2009, the Germantown Chronicle would report that the Y’s ground-floor windows were smashed and there was a “gaping, unsecured door into the basement of the building,” attached to a stairway littered with trash.
Also in 2006, a city worker in the managing director’s office — I’ll call him David Smith — started to get phone calls “like clockwork” from the office of Mayor Street, from Miller, and from Smith’s boss, Pedro Ramos, the managing director.
These high-ranking officials wanted Smith to process a series of expedited “emergency” payments to Settlement on its existing contracts with Commerce, the Department of Human Services and the Department of Public Health. (By now, OHCD was no longer funding Freeman, due to his repeated failure to submit audits and tax returns.) When I asked Street about the emergency payments, he responded via e-mail, “I’m not sure I have much to offer as it was my practice to allow the departments to manage their contracts.” But his chief of staff at the time, Joyce Wilkerson, told me that she made the calls, and Pedro Ramos told me he would get calls from either the mayor’s office or the departments asking for the expedited payments. Says Wilkerson, “I remember [Settlement] was having a hard time making payroll.” She got involved because “somebody called” her and asked for a “turnaround” — she says she doesn’t remember who. Settlement’s clients were “people you want to receive services,” Wilkerson says, “so you end up in kind of a catch-22.”
“It was the only time I can remember the mayor’s office getting involved in getting a contractor paid,” David Smith says. Vendors are normally paid within 60 to 90 days, a buffer that allows the city to manage its cash flow in an era of nine-figure deficits. Settlement, though, would hand-deliver an invoice on a Tuesday, and a call would come on Wednesday, demanding payment on Friday — a three-day turnaround. Once the managing director’s office approved the payments, they were sent over to the City Controller, Alan Butkovitz, whose job it is to examine all payments to city contractors before the money leaves the city’s accounts. Butkovitz would then approve a physical check for five figures. Soon afterward, a runner working for Freeman would come to the Municipal Services Building on JFK Boulevard and whisk the check back to Germantown, into fiscal oblivion. The payments continued well into the Nutter administration. (Harvey Rice, the first deputy city controller, claims the Controller had no choice but to approve the payments: “[Settlement] served families at high risk.” Then he became agitated, accused me of “bias,” and threatened to “go right to your editor.”)
“We need to get together and talk,” Miller e-mailed Freeman in mid-2008. “We can not let this agency go under. God Bless you and GS [Germantown Settlement].”
From here until the bankruptcy declaration, Miller would exchange at least 50 e-mails with Freeman, strategizing on ways to buy more time with the Nutter administration to keep Settlement alive. I recently asked Miller why, after a decade of persistent failure, she continued to believe Settlement was worth saving. “This agency is more than 100 years old!” she said, spreading her hands wide. “Come on! … I’ve been referring people to Settlement all my adult life. When I was a kid, my grandmother lived down the street from one of the buildings, and I’d see the kids going to day camp.”
Depending on the topic, Miller was either irritated (the lack of private development in Germantown), befuddled (Settlement’s failures), or sad to the point of lowering her voice to a whisper (Emanuel Freeman). She insisted she never knew if Settlement was doing “a good job or a bad job,” adding, “I always thought they provided pretty good service.” What about Freedom Square? “It’s an eyesore now, but back when it was built, it was like, wow.” The Penn Street homes? “Yeah,” she exhaled, “that’s a mess.” The foundation pit on Wakefield? “Empty lots. I can’t tell you there. What I gather, what I heard, is that one of the contractors didn’t do the right thing.” The YWCA fiasco? “I thought that they could potentially do it. Plus, they brought people in. These financers, I guess.”
Finally, I asked Miller about the charter school. She looked away. “You know, I asked them once, why did y’all start a charter school?” Her voice trailed off. “They said it came from a parents meeting. … ”
Time and time again, Miller took Freeman at his word. She didn’t challenge him. And almost no one was willing to challenge Miller. Not even in the summer of 2008, which is the pivot point in the Settlement saga — the moment when it stops being a troubling historical yarn about race and real estate and becomes something way more raw.
In the summer of 2008, Elders Place I and II were baking. The hallways were hot. Some of the air conditioners were broken. Low-income old people lived there. On August 1st, HUD inspectors found rodent infestations, leaky roofs, and either “warm” or “extremely hot” hallways at both Elders I and II, plus a broken fire alarm system at Elders II; two months later, they went back, and their report noted problems with mold, ancient pumps, illegal wiring, water leaks, a lack of hot water, a “very hot” hallway, and trash. HUD wrote Freeman, to alert him to these dangerous problems.
Meanwhile, the social-agency side of Settlement was falling apart, too. On August 25th, an inspector with the city’s Department of Human Services began a spot check on Settlement’s “Services to Children in their Own Homes” program, which was designed to keep children in their own homes and prevent foster-care placement where possible. The city paid Settlement more than $460,000 on its SCOH contract alone in 2008. Here’s what the city inspector, who recommended that the city shut the program down, wrote in the report:
This agency seems to be able only to provide minimal social services to the families. They are deficient in most of the required standards, many of which are safety-driven. There were months and months of contacts notes missing. The agency blamed this problem on workers who were no longer employed with the agency. It appeared to this evaluator that many of the problems were systemic; meaning that the agency had no real or concrete understanding of what was required of them.
ONE CITY AGENCY actually followed procedure and cut off Freeman’s funding, despite his repeated requests. On November 17, 2008, the director of housing, Deborah McColloch, rejected a request from Freeman for $40,000, pointing out in a letter to him that his audits were still delinquent, and that Settlement and its housing company owed outstanding payroll taxes to the city, state and federal governments totaling approximately $800,000. “I am sorry I cannot approve your request,” McColloch wrote.
On December 9th, Freeman wrote to Don Schwarz, head of the city’s Department of Public Health. Schwarz is a distinguished pediatrician, and a senior Nutter administration official. Freeman e-mailed Schwarz asking for help in getting an emergency payment of $133,855 from the Department of Human Services.
At this point, Schwarz’s agency, DPH, hadn’t received an audit from Settlement since 2005, a clear signal to give Freeman nothing more. Instead, 14 minutes later, Schwarz replied to Freeman, copying Donna Reed Miller, apologizing for any delay in funds: “I am sorry for this.” Later that day, Schwarz sent a longer reply to Freeman, promising three separate payments for various needs, totaling $119,500 that would be rushed into Settlement’s hands. “I hope this helps,” Schwarz wrote Freeman. “We will continue to push to get you paid.”
I called Schwarz in August, because I wondered why a distinguished pediatrician would grovel to a slumlord. He brought up the same defenses as Joyce Wilkerson and Pedro Ramos — nonprofits can be cash-strapped, we try to help them out, and what’s so bad about that?
I asked Schwarz about Settlement’s record of fiscal chaos and poor service. “The issue that we had with Germantown Settlement was not about quality of service,” he said. “It had to do with audits.” What about that August 2008 inspection report, though? The one that found “systemic” problems with Settlement’s SCOH program? Deficiencies in “safety-driven” standards? Did Schwarz read that inspection report before he went to bat for Freeman?
“Yes,” he said, tersely. “Yes, I knew about it.” Schwarz told me that even if there was a concern with one part of Settlement’s services, other services might be fine.
I asked another question: Did Schwarz know that the city had considered Settlement “high-risk” as far back as 2000?
Tom Sheaffer, Schwarz’s deputy, who was listening on the line, told me I was probably mistaken. I found the 2000 memo and read it to him.
There was a pause.
“Did you know about that?”
“That’s news,” Schwarz mumbled.
“I wasn’t aware of that,” Sheaffer said.
What about the charter school, then? Did they know about that?
“I think I read about it,” Sheaffer told me, as his boss listened in silence, “in the newspaper.”
THE CITY HAS NEVER come out and condemned Emanuel Freeman. Even after everything that happened, there’s still a silence about this guy. The city abruptly cut off all contracts with Germantown Settlement in September ’09 because Philadelphia risked losing billions in federal stimulus funds if its own house wasn’t in financial order — those missing audits from Settlement, in other words, could have been an impediment to a federal funding stream. Only then was Settlement cut off.
But Settlement could easily regenerate, or something like it. There will be other monsters.
On May 14, 2010, less than two months after the bankruptcy declaration, Freeman wrote to Miller with some personal news. Along with Ilya Chebotar, who is listed as vice president of a check-cashing store in the Northeast, and who was sentenced to 30 months in prison in 2003 on federal money-laundering charges, Freeman was going into private business. He wrote that the two men had formed both the Metro Ambulance Company and a partnership to develop real estate, called IEI Development, LLC. “We are seeking your assistance with regards to the acquisition of several properties,” Freeman wrote to Miller. He added that he was also embarking on a “significant” venture to develop the vacant land behind what used to be the charter school.
“Please let me know when you are available for a meeting.”
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