Documents raise questions about SUSD superintendent's personal ties

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One of the central criticisms of SUSD superintendent Dr. Denise Birdwell has to do with her decision to hire her housemate’s brother, Louis Hartwell, as chief operations officer. (Source: 3TV/CBS 5) One of the central criticisms of SUSD superintendent Dr. Denise Birdwell has to do with her decision to hire her housemate’s brother, Louis Hartwell, as chief operations officer. (Source: 3TV/CBS 5)
Documents obtained by CBS 5 Investigates show that years before that controversial arrangement, Dr. Birdwell signed off on payments to her housemate’s brother while working at Higley Unified School District. (Source: 3TV/CBS 5) Documents obtained by CBS 5 Investigates show that years before that controversial arrangement, Dr. Birdwell signed off on payments to her housemate’s brother while working at Higley Unified School District. (Source: 3TV/CBS 5)
The public records also show that Birdwell placed Hartwell, an IT consultant, under the direct supervision of another one of her housemate’s relatives: her housemate’s son. (Source: 3TV/CBS 5) The public records also show that Birdwell placed Hartwell, an IT consultant, under the direct supervision of another one of her housemate’s relatives: her housemate’s son. (Source: 3TV/CBS 5)
SCOTTSDALE, AZ (3TV/CBS 5) -

The ongoing scandal over ethics and spending at Scottsdale Unified School District has prompted two resignations, triggered a lawsuit by the Arizona Attorney General, and landed the superintendent on administrative leave amid a persistent drumbeat: claims of nepotism and cronyism.

One of the central criticisms of SUSD superintendent Dr. Denise Birdwell has to do with her decision to hire her housemate’s brother, Louis Hartwell, as chief operations officer.

[RELATED: SUSD superintendent on paid leave amid parent outcry & investigations]

Documents obtained by CBS 5 Investigates show that years before that controversial arrangement, Dr. Birdwell signed off on payments to her housemate’s brother while working at Higley Unified School District.

The public records also show that Birdwell placed Hartwell, an IT consultant, under the direct supervision of another one of her housemate’s relatives: her housemate’s son.

From 2009 until 2010, David Ligon approved invoices to his uncle Hartwell’s company totaling more than $200,000. In all, HUSD paid Hartwell’s company, Diversified Productions Inc., more than $306,000 from July 2009 until July 2011.

Dr. Birdwell declined to comment when contacted at her home last week. When emailed a list of detailed questions, a spokesperson for Scottsdale Unified School District said Birdwell was “not available to respond to questions while she is on administrative leave.”

Hartwell stated he was a principal and partner of Diversified Productions Inc. on paperwork filed with Higley Unified. The company claimed to be a corporation on invoices, letterhead, email addresses and its own logo. Higley Unified treated it as a corporation for tax purposes as it distributed the funds, district staff attorney Linda Good said.

[READ MORE: Hundreds rally for leadership change at Scottsdale district over corruption allegations]

However, the corporation did not legally exist. CBS 5 Investigates checked business records in all 50 states.

Because Higley Unified believed Diversified Productions Inc. was structured as a corporation, the district did not report the $306,000 in payments to the IRS on Form 1099, according to HUSD spokeswoman Michelle Reese.

That fact alarms activists, because the payments began in 2009 while Mr. Hartwell was subject to federal tax liens.

“I'm very concerned about the payments,” said Higley Board President Kristina Reese, who joined the board after the payments. “With the information you've brought forward and many others have brought forward regarding the previous financial findings, our current administration is investigating and looking into the claims.”

LLC vs. INC

Hartwell provided a brief response by email. “As an employee of SUSD, while I am not at liberty to discuss this matter with you since this concerns another district, take a look at LLC instead of Inc,” he wrote.

Arizona Corporation Commission records show there is currently a Diversified Productions LLC, although online records do not list Hartwell as having an ownership stake.

Limited liability companies and corporations follow different rules on reporting taxes. Arizona law prohibits companies structured as LLCs from using abbreviations such as “Inc” in their name.

An initial form filed with the district lists the company as “Diversified Productions LLC.” All other invoices and documents list the company as Diversified Productions Inc., including the computerized financial system used by the district.

[READ MORE: Scottsdale district's CFO resigns amid conflict of interest allegations]

“There has been a complete turnover in the District’s Finance Department in the several years since DPI did work for the District. We do not know who may have been responsible for the oversight.  The Higley School District was growing rapidly at that time, and this was overlooked,” wrote staff attorney Linda Good in an email.

Good acknowledged the district did not verify the tax status of the company before issuing payments, a procedure that is considered standard practice by most companies to ensure proper tax reporting to the IRS. She said the district does not have a form W9 on file for the company.

As the district distributed the funds, the tax liens against Hartwell grew. The IRS assessed a $6,363 lien against him in February 2009 and a $24,598 lien in December 2011. The IRS filed additional liens in 2012, bringing his total unpaid federal tax liability to more than $44,500.

Payments not a “statutory” conflict of interest

Good noted she did not work for the district at the time, but said in her legal opinion, the arrangements do not violate conflict of interest statutes.

“The relationship between Dr. Birdwell and Ms. Hunnicutt or Mr. Ligon does not fall within the statutory definition of ‘relative,’ meaning there was no conflict of interest,” she wrote. “Even if there had been a conflict, the available documentation shows that Dr. Birdwell did not participate in the decision of the hiring of Mr. Ligon, as the statute and the District’s policy and statute would have required. Joyce Lutrey was the superintendent at that time, and approved the employment.”

To be considered a conflict of interest, state law defines a “relative” as a spouse, child, grandchild, parent, grandparent, brother or sister, along with the parent, brother, sister or child of a spouse.

[READ MORE: Emails suggest SUSD superintendent sought favors from unlicensed architect]

“While Ligon and Hartwell are related, the [nephew-uncle] relationship is not one that creates a conflict of interest,” Good wrote.

Since Dr. Birdwell is not married to her housemate, Kay Hunnicutt, there is no conflict over the payments to Hartwell’s company either, according to Good. Dr. Birdwell has repeatedly said Hunnicutt is her friend and landlady.

But activists, like Jann-Michael Greenburg, say the deeply personal and financial ties between Birdwell and Hunnicutt should raise ethical concerns. Greenburg has been collecting thousands of public records and emails involving Birdwell, Hunnicutt and Hartwell.

The records show the two have lived together in three homes, go on trips together, own a timeshare together and briefly shared guardianship of Ligon’s child.

[RELATED: Scottsdale superintendent decries 'fake news' amid AG spending investigation]

Hunnicutt is listed as a creditor to Dr. Birdwell in bankruptcy filings. In January, CBS 5 Investigates reported that Birdwell sought favors from an unlicensed architect to find and furnish a home for her personal use. The home and furniture were purchased by Hunnicutt.

“The issue of having someone provide value to you in a position, as the superintendent of a school district, and then hiring that individual’s family members to be employees of that school district might be a serious ethical and legal violation,” he said.

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Derek StaahlDerek Staahl is an Emmy Award-winning reporter and fill-in anchor who loves covering stories that matter most to Arizona families.

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Derek Staahl

This once-uncompromising "California guy" got his first taste of Arizona in 2015 while covering spring training baseball for his former station. The trip spanned just three days, but Derek quickly decided Phoenix should be his next address. He joined CBS 5 and 3TV four months later, in August 2015. Before packing his bags for the Valley of the Sun, Derek spent nearly four years at XETV in San Diego, where he was promoted to Weekend Anchor and Investigative Reporter. Derek chaired the Saturday and Sunday 10 p.m. newscasts, which regularly earned the station's highest ratings for a news program each week. Derek’s investigative reporting efforts into the Mayor Bob Filner scandal in 2013 sparked a "governance crisis" for the city of San Diego and was profiled by the region’s top newspaper. Derek broke into the news business at WKOW-TV in Madison, WI. He wrote, shot, edited, and presented stories during the week, and produced newscasts on the weekends. By the end of his stint, he was promoted to part-time anchor on WKOW’s sister station, WMSN. Derek was born in Los Angeles and was named the “Undergraduate Broadcast Journalism Student of the Year” in his graduating class at USC. He also played quads in the school’s famous drumline. When not reporting the news, Derek enjoys playing drumset, sand volleyball, and baseball.

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