School Superintendent Covered Up IRS Investigation
Investigator’s Report Short on Details But Confirms that Superintendent Concealed Tax Issue from the BOE
A fact finding report on the Scarsdale School’s problems with the IRS written by investigator Anthony J. Brock clearly confirms that the former Scarsdale School Superintendent Thomas Hagerman, was well aware of the district’s tax problems seven months before he revealed them to the Scarsdale Board of Education. However, the report is short on details and explanations.
The three page timeline of the district’s tax issue, posted on the district website on June 28, 2022 gives a chronology of the unfolding of the IRS tax issue. It does not provide any context, evidence, recall of conversations, reactions, insights into what happened or findings about what occurred. Though Brock presumably interviewed the key players, there are no direct quotes from anyone involved. It fails to provide any information about the work environment in the district office at a time of ever mounting tax penalties, interest and a tax lien.
The report documents conflicting claims about who was informed and when:
September 20, 2021: Superintendent Dr. Thomas Hagerman stated he first learned of the IRS issues from Mr. Martin and Mr. Mattey on September 20, 2021.
October 12, 2021: IRS Notice of Federal Tax Lien/Right to request hearing is issued. The amount of the lien is $1,309,118.34.
October 29, 2021: Mr. Martin stated he returned from his leave of absence and opened the envelope containing the IRS Notice of Lien on October 29, 2021.
October 29, 2021: Mr. Martin stated he notified Mr. Mattey of the tax lien.
October 29, 2021: Mr. Mattey stated he immediately notified Dr. Hagerman of the lien. Dr. Hagerman stated he did not learn about the tax lien until after the IRS appeal hearing on March 16, 2022. According to the witnesses, there were no emails or other written communications between Mr. Mattey and Dr. Hagerman at that time.
October 2021: Dr. Hagerman stated that he had another conversation with Mr. Martin and Mr. Mattey in late October 2021 when they provided a further update as to what work had been done with the IRS.
What’s puzzling is that Dr. Hagerman admits that he was informed about the tax matter in September but also denied knowing anything about the tax lien issued one month later. He claims he did not learn about the lien until March 16, 2022. In the intervening months, in addition to the lien, the district accrued penalties and interest and paid considerable legal fees for representation with the IRS which according to the report was all concealed from the Scarsdale Board of Education.
During the period, it appears that Dr. Hagerman negotiated for a new position as Head of School at the Chicago Latin School, which he accepted in January 2022. Between the months of September and January he failed to inform either the Scarsdale Board of Education or his new employer about the district’s tax issue. He announced his resignation in Scarsdale on January 24, 2022 without giving the 12 months notice stipulated in his contract.
The report from Brock offers no explanation for conflicting reports on who knew what and when. For instance, Treasurer Martin states that he notified his boss Stuart Mattey about the tax issue on January 11, 2021 however Mattey claims that he did not learn of the IRS matters any earlier than July 2021, six months later.
There is no comment at all from the investigator on the fact that the superintendent concealed the IRS matter from the Board and the community for seven months. Did Brock interview Hagerman? What else did he learn? What reasons did the former Superintendent give for failing to disclose the tax issue?
The report has a two sentence conclusion that states that Brock did not find any evidence that the Scarsdale Board of Education knew about the issue any earlier than March 24, 2022. Rather than provide a broad look behind the scenes, Brock seems to have narrowed his charge to determine what the Board of Education knew, rather than to get to the bottom of what happened.
In their original email announcing the investigation the Board of Education said, “The Board is committed to confirming the facts of the IRS payroll tax matter and discovering any additional pertinent information. The scope of this investigation will focus on timeline and communication. This investigation will also assist the Board in determining appropriate next steps.”
On June 28, 2022, in an email to the community announcing the release of the fact finding report, the Board indicated that in addition to this report, they also received “Privileged advice,” which will not be shared with the public. Perhaps they have a fuller picture of what transpired from that report.
As next steps, the School Board is conducting an internal audit of the payroll withholdings function and will focus on the “broad payroll function” for the school year ending June 23, 2023.
Last week Mr. Martin and Mr. Mattey were sanctioned for failing to “properly supervise the business office,” and failing to “recognize that reporting the matter to the Superintendent of Schools was insufficient in meeting his (their) duty to the Board of Education.”
The superintendent resigned for a second time in May 2022 saying, “the IRS issue has become a major distraction,” but did not own up to his role in the issue or accept responsibility for concealing it from the Board of Education.
The report appears to be back up documentation for an analysis, recommendations and conclusions, leaving the public left to draw their own conclusions about what transpired.
Commenting on the report, Mayra Kirkendall Rodriguez said, “The Board of Education chose an investigator behind closed doors without telling Scarsdale taxpayers if any other lawyers had been considered. Mr. Brock’s idea of a report is to put together a timeline that anyone reading the documents posted in the District since May would have been able to assemble in a couple of hours, and for a lot less than what we the taxpayers have been compelled to pay for this investigation. Were all District employees interviewed about the IRS matter? Were member of the last couple of Boards interviewed? Did he FOIL emails about the IRS matter going back to 2020? The report is incredibly light on details. Moreover, Brock’s report does not include any documents to support some of the timeline, such as where are the contracts and invoices from BSK. Was the BOE supposed to approve BSK being hired to investigate the IRS matter. Weren’t the external auditors informed about the IRS matter by Messrs. Martin and Mattey? If BSK and the external auditors knew about the IRS matter since the Fall of 2021 and did not inform the BOE, their contracts, should be terminated immediately.”
Commenting on the report on Facebook another resident said, “Did the investigation stop short of an actual independent review of email servers? Investigator just took the witnesses’ word at face value?”