A year-long federal investigation of Detroit's U.S. Bankruptcy Court has been expanded to include a look into allegations that employes of the U.S. District Court here diverted filing and copying fees into a fund for their personal use.
Court employes reportedly have told the FBI that up to $50,000 in filing and copying fees lawfully collected by the district court was siphoned off and used for employes' personal expenses and for court furnishings, including television sets, refrigerators and other items for the clerks' offices.
Under federal law, the fees are to be deposited into a general revenue account with the U.S. Treasury Department, and failure to do so can constitute embezzlement.
Judge John Feikens, chief judge of the district court, said earlier this month that similar allegations have been investigated before without any finding of wrongdoing. He said reports of such a fund were investigated last year by the FBI and the Administrative Office of the U.S. District Courts and that those probes "did not disclose any evidence of theft or embezzlement."
The investigation of the federal Bankruptcy Court, being conducted by both the FBI and the U.S. attorney's office in Detroit, was launched earlier this year in response to numerous complaints involving corruption, drunkenness, sexual misconduct and drug violations by court personnel.
The Sixth U.S. Circuit Court of Appeals took over operation of the bankruptcy court last spring because of the problems.
Among the developments have been the abrupt retirement of Judge Harry Hackett, a 24-year veteran of the bankruptcy bench; the resignation of another bankruptcy judge; the conviction of the chief bankruptcy court clerk on charges of improperly buying property from a bankrupt estate, and a grand jury investigation into possible bribery of court personnel by attorneys seeking special treatment.
Hackett retired last June 25, the day a report by Judge George C. Edwards Jr., chief of the Sixth Circuit Court was released, concluding that Hackett was "unqualified to remain in office." Edwards' report was based on the recommendations of a three-member merit screening committee that was reviewing Hackett's record to determine whether he should be appointed to another six-year term on the bankruptcy bench.
Edwards' report cited a host of allegations of improprieties by Hackett, including demands for sexual favors from female court employes, sitting on the bench while inebriated, awarding exorbitant fees to certain favored attorneys, and repeated transgressions of the code of judicial conduct.
Hackett could not be reached for comment this week, but he has previously denied any misconduct.
A grand jury is investigating alleged improprieties in connection with the court's "blind draw" system of assigning cases to judges.
Edwards' report said Hackett and Judge David Patton received more Chapter 11 bankruptcy cases than normal under a random-assignment procedure.
Chapter 11 cases, which often involve corporations, are more likely to generate large legal fees than most other bankruptcies. In bankruptcy cases, the judge approves lawyers' fees.
The Edwards report also noted that many of the cases assigned to Patton were transferred to Hackett for no apparent reason and without a formal reassignment.
Patton, citing health reasons, has announced his resignation effective at the end of this year. He could not be reached for comment on the report.
Also under investigation is Hackett's handling of a high number of cases represented by Detroit attorney Irving August.
There are allegations that bankruptcy clerks steered August's cases to Hackett, who then awarded large fees to August.
August, who allegedly was awarded at least $400,000 in fees by Hackett during 1980, has been accused of granting social and financial favors to assignment clerks in the Bankruptcy Court.
The investigation includes allegations that August offered a female bankruptcy clerk $15,000 to be used as a down payment on a condominium and gave her a check for $1,000 to be used to secure her offer to purchase. The clerk resigned several months ago.
Neither August nor his attorney could be reached this week, but August's attorney has said in the past that his client denies any wrongdoing.
Published accounts in the Detroit Free Press say the grand jury is also looking into reports that one female lawyer provided cocaine to court employes in exchange for favored treatment.
Just days before Hackett left the bench last June, William Harper, the bankruptcy court's chief clerk, was convicted of illegally buying property from a bankrupt estate. He had purchased a 15-foot boat, 35-horsepower outboard motor and a trailer for $135. Federal law prohibits court officers from buying property from a bankrupt estate.
In August the Court of Appeals removed all 21 of the court-appointed trustees who are normally assigned to monitor bankruptcy cases.
Nearly 50 persons, including court employes and attorneys, have appeared before the federal grand jury investigating both the bankruptcy court and the possibility of the slush fund in the district court.