CUYAHOGA HEIGHTS, Ohio - A special audit alleges $4.2 million was stolen by former IT Director for Cuyahoga Heights Local School District, according to Auditor of State Dave Yost.
The auditor's report blames former District IT Director Joseph Palazzo for using seven companies owned by his brother and friends of Palazzo to send payments and or to buy goods and services never received by the school district.
The report shows the investigation was triggered when a school board member contacted the state auditor's office by telephone with concerns over the IT department's purchases which included software, laptops, and Blackberries.
The auditor's report found that Palazzo used school district money to make 436 payments worth millions of dollars over four years to these companies without ever disclosing his relationships with the companies to the School Board.
Yost alleges that Palazzo also took $1.3 million in kickbacks.
Officials said Palazzo stole school money to build a big house in Independence, where there have been federal raids.
School officials said they will go after Palazzo's house to recoup money. Yost also called the theft stunning and one of the biggest findings for recovery in state auditor history.
"He (Palazzo) built a brand new house during that time and yes we have taken steps to try and secure that property as well as other assets in is his home and in businesses and the other individuals that are mentioned in this report," said Cuyahoga Heights Schools Superintendent Edwin Holland.
"It's very rare that we see something where this kind of money is changing hands and the public gets nothing for it, this is just outright stealing, it just stuns the conscience, money for nothing," Yost said.
The news stunned taxpayers who approved a levy last May.
In the school library where the new conference was held, a nearby sign read "We can only see with open eyes". That got taxpayer Vic Voinovich wondering "how Palazzo could have gotten away with four million dollars under the noses of the people who were supposed to be watching the store," Vic Voinovich said.
Palazzo resigned from Cuyahoga Heights Local School District last year once the investigation started.
The auditor's report also found that the school district kept incomplete or no records at all to document many of Palazzo's purchases of equipment.
Palazzo, who is named in the special audit, has not been charged but the Cuyahoga County Prosecutor's Office confirms Palazzo is the focus of an ongoing criminal investigation.
A school board meeting is scheduled for Seven Wednesday night at the Cuyahoga Heights Board of Education.
Palazzo did not return phone calls for this story.
Anyone with a tip about government fraud can call the Ohio auditor's hotline at 1-800-FRAUD-OH.