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Ringside: Another Phila. example of clout, incompetence

Germantown Settlement under Emanuel Freeman ran through millions in tax dollars, detailed in Philly mag.

An estimated $100 million in taxpayers' money has been plowed into a nonprofit known as Germantown Settlement with essentially little to show for it.

Yet, no one seems to know where all the money went. Nor does anyone seem too concerned about determining who is responsible for such incompetence, or worse, let alone hold anyone accountable. More troubling, the troubles fit a pattern of failures that are all too common in Philadelphia.

Those are just some of the takeaways after reading the excellent piece in this month's Philadelphia magazine by Jason Fagone titled "The Man Who Duped City Hall."

The story details Emanuel Freeman's mismanagement of Germantown Settlement, a hodgepodge of nonprofit social-service agencies and housing properties that operates in Germantown. The organization was founded by Quakers in 1884 but was eventually taken over by Freeman.

To be sure, he had some early success helping the community. But by the mid-1990s, Germantown Settlement began receiving more and more funding, while seemingly doing less and less.

Freeman's clout grew thanks to support from a number of influential politicians, enabling him to obtain and throw more good taxpayers' dollars after bad. Perhaps Freeman's plans were well-meaning, but that doesn't excuse giving him tens of millions of tax dollars over the years with little scrutiny or accountability.

My colleagues on the news side of The Inquirer detailed many of the problems at Germantown Settlement in recent years, but Philly magazine stitched it all together.

According to the magazine, Freeman's organizations have received at least $100 million in grants, low-interest loans, and tax credits since the mid-1980s. But decades later, the Germantown neighborhood where Freeman operates as the largest employer and developer remains mostly an urban blight.

One person has clearly benefited: Freeman. He receives a six-figure salary and drives a Mercedes-Benz. His wife, also an executive at Germantown Settlement, drives a gold Cadillac. The Freemans are so dedicated to helping the inner city that they live in a four-bedroom house in the suburbs of Wyncote.

From 1998 to 2003, the amount of city, state, and federal funding poured into Germantown Settlement jumped from $1.6 million to $6.8 million. Meanwhile, in 1998 and 1999, the organization failed to pay $208,100 in city, state, and federal payroll taxes, according to the magazine.

Freeman launched a charter school in 1999 that was a consistent failure, but managed to limp along for almost a decade. The School Reform Commission finally shut the school last year. To have the often impotent SRC go to such an extreme shows how bad things were at the school.

Indeed, the magazine said the SRC found that Freeman maintained a bloated payroll and used school funds to bail out other failing entities he controlled. A former charter school administrator claimed in a lawsuit that Freeman illegally transferred $538,000 from state funds to the school's checking account and that she was fired for blowing the whistle. The case was settled.

In all, the charter reportedly received $31 million in taxpayer money over nine years, while student test scores languished and teachers and staff often went unpaid.

Despite Freeman's financial woes, the city continued to throw money at him. In 2006, the city's Redevelopment Authority gave Germantown Settlement a $1.3 million loan, and the state provided $500,000 to purchase the Germantown YWCA.

Former Mayor John F. Street and City Councilwoman Donna Reed Miller, whose district includes Germantown, were the main supporters of this bright idea. Never mind that Germantown Settlement had a federal tax lien of $62,000 - a possible red flag regarding its finances. No problem. The RDA just paid off the lien as part of the loan.

Freeman promptly missed the first mortgage payment on the loan and, in fact, never made any payments.

Stellar due diligence by the RDA, where one of its then-executives served on the board of Germantown Settlement.

The magazine described Freeman as an "incompetent manager" who was "always in way over his head." But he never lacked any high-powered political friends, including Miller, Street, Gov. Rendell, U.S. Reps. Bob Brady and Chaka Fattah, and former Gov. Mark Schweiker.

As Germantown Settlement's financial woes became public, most of the pols claimed shock or memory loss regarding their dealings with Freeman.

In April, one of Germantown Settlement's subsidiaries filed for bankruptcy. The U.S. Department of Housing and Urban Development foreclosed on two apartment complexes for elderly residents. The move came after HUD found that Germantown Settlement couldn't account for more than $900,000 in federal and local funds.

This boondoggle began well before Mayor Nutter was elected. His administration, to its credit, is taking steps to stop the gravy train. The city ended $1 million in annual social-service contracts with Germantown Settlement. The RDA has scheduled a sheriff's sale in December for the Y.

Federal prosecutors are said to be investigating. Let's hope so. In the meantime, whom do the taxpayers see about getting their money back?

Ringside:

Chat live with Paul Davies at 1 p.m. Monday at www.philly.com

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