District loses $3.7 million in alleged Ponzi scheme

MONA SHORES, Mich. — The superintendent and finance director of Mona Shores Public Schools will leave the district in the wake of a financial loss involving an outside adviser that may have cost the district $3.7 million, according to The Muskegon Chronicle.

Superintendent Terry Babbitt and Finance Director Mike Schluentz will leave in March under separation agreements that include severance pay and benefits for 90 days, The Chronicle reported.

The case centers on an alleged Ponzi scheme operated by Dante DeMiro of the MuniVest Financial Group in Southfield, the district's long-time independent financial adviser, according to The Chronicle. The district sent DeMiro $3.7 million in August 2009 toward purchase of certificates of deposit in multiple banks, but he allegedly used the money to pay off other investors and for personal use, The Chronicle reported. DeMiro now faces wire and bank fraud charges in federal court.

The money came from voter-approved bonds for school improvements, according to The Chronicle. The district will use money from the general fund to pay off the work and said it now faces "very difficult financial decisions," The Chronicle reported.

Residents have been divided on whether the top administrators should be held responsible for the loss, The Chronicle reported.

SOURCE:
The Muskegon Chronicle, "Mona Shores school board approves separation agreements with Superintendent Terry Babbitt, Finance Director Mike Schluentz," Nov. 1, 2010

FURTHER READING:
Mackinac Center for Public Policy, "A Michigan School Money Primer: Separation of Funds," May 30, 2007