In addition, Davis' sister, Crystal Stewart, and her husband, Darrell, ran the sheriff's real estate operations for varying periods, personally reviewing Reach's invoices and expediting payments to the firm, according to the controller's report.
The report suggests that the arrangements ran afoul of city and state ethics codes.
"This was a machine that functioned as a giant suction, to take money out of the pockets of homeowners and put it into the pockets of these companies," said Controller Alan Butkovitz, whose office paid $642,000 to have Green's real estate operations reviewed by Deloitte Financial Advisory Services.
An attorney for Reach Communications, Thomas S. McNamara, disputed most of the findings regarding his client.
Deloitte's investigation was run by Louis R. Pichini, a former federal prosecutor who sent organized-crime leader Nicodemo "Little Nickie" Scarfo to prison and later ran the criminal division of the U.S. Attorney's Office.
His "forensic investigation report" - 149 pages, not counting several dozen exhibits - is the first detailed look at the operations of the Sheriff's Office since Green resigned under fire last year.
Green's longtime chief of staff and deputy, Barbara Deeley, became acting sheriff in January. One week into the promotion, she stopped dealings with Reach, fired Crystal Stewart, and transferred Darrell Stewart to a sheriff's unit in Traffic Court.
Davis declined to talk to Deloitte's investigators and the firm did not have access to Reach's records, according to Deloitte's report, leading the consultants to rely on what they could find in the sheriff's real estate files.
Butkovitz's office provided a copy of Deloitte's report to The Inquirer ahead of a formal release expected Wednesday. Under ground rules set by Butkovitz, the newspaper was not permitted to share the report with Davis or others targeted for criticism.
Davis declined to talk to The Inquirer about the report. McNamara said he was confident that virtually all payments to Davis' firms - both part of Reach Communications - were covered and specified by contracts or other written agreements.
The Deloitte report said that under the City Charter, all the sheriff's contracts should have been drafted, approved, and kept on file with the city Law Department, and at least one significant Reach contract was not.
McNamara contended that the charter requirement did not apply to money spent from the proceeds of sheriff sales, which accounted for virtually all of the money paid to Reach.
Rather than being overpaid by the city, McNamara said, Reach had been underpaid, never compensated for work under way at the time Deeley fired the firm, without warning, in early January. He said he was preparing a lawsuit against the city and the Sheriff's Office, but he said he was not prepared to provide a more specific figure.
In addition to Davis, other major figures criticized in the Deloitte report - Green, Crystal and Darrell Stewart, and Green's director of finance and compliance, Tyrone Bynum - did not return phone calls.
Reach Communications Specialists and RCS Searchers Inc. handled more than $206 million from the Sheriff's Office from 2005 through 2010, with only feeble financial controls in place. The company's work included advertising sheriff's-sale properties, maintaining websites where the properties were listed, handling deed transfers after the properties were sold, and distributing the sheriff's-sale proceeds to the right entities.
More than half the money paid to Reach - at least $135 million - was supposed to be redistributed to third parties, including mortgage-holders, utilities, and the city Revenue Department. The former property owners were to receive payments when proceeds from sheriff's sales exceeded the debt on the property.
The Sheriff's Office, however, had no system to verify that Reach was making the payments, according to Deloitte.
In an effort to verify the payments, Deloitte's researchers devised a small test, which the company flunked: After getting complaints from the city-owned Philadelphia Gas Works, the investigators checked on 10 properties sold at sheriff's sale in early 2010. The 10 property owners had owed $26,112 to the gas utility, among other debts, and Reach was supposed to forward money to PGW from sheriff's-sale proceeds. The gas company said it had received no payments at all on nine accounts, and just a partial payment, for $966, on the 10th.
"Our testing of unpaid liabilities raises reasonable questions about the proper disbursement by RCS of monies it received from the Sheriff's Office . . .," the Deloitte report said. "The results also require an analysis of RCS records by someone with the authority to access those records."
McNamara said Reach was already providing information to the U.S. Attorney's Office, which opened a federal probe of the sheriff's operations early this year.
McNamara said the Deloitte group had never specified any particular records in Reach's possession that it wanted to see. And he called the firm's check on 10 PGW accounts "ridiculous."
"PGW has its own issues in terms of record-keeping," McNamara said. "The notion that Reach can be faulted for PGW's inability to find or deposit a check is troubling. . . . Reach was never informed by PGW or anybody else that there was a problem."
Despite public statements by Green in 1999, 2003, and 2005 committing the Sheriff's Office to written contracts with vendors, open to public inspection, the Sheriff's Office was initially unable to provide Deloitte with an advertising contract with Reach Communications specifying how much the company would be paid to publicize sheriff's sales.
Going through the sheriff's files, Deloitte later found a written agreement, dated February 27, 2003, between the department and Reach Communications - but the person who purportedly signed it on behalf of the Sheriff's Office, Janet Pina, told investigators it was not her signature.
Reach provided a copy of a similar contract with the same date and signature - but different terms for how it would be paid.
Neither of the contracts had been approved and recorded with the Law Department, and neither was available to the Stewarts when they were overseeing the department's payments to Reach, according to Deloitte.
Comparing the payments Reach received with the arrangements specified in written agreements, Deloitte calculated that Reach had been overpaid at least $6.2 million over a six-year period. Those payments included $2.9 million for two websites not mentioned in the contracts, $1.2 million in "excess production costs," and $1.1 million for handbills to be placed on properties awaiting sheriff's sales.
The Sheriff's Office paid more than $4.4 million to a company called Alotta.Edu Inc., based in Fort Washington and headed by Claude Carter, to locate individuals owed money after their properties had been sold at sheriff's sales.
Carter's fees ranged as high as 35 percent, Deloitte found, and the checks were normally made payable to the former property owner in care of Alotta.Edu Inc. The investigators said they had reviewed 120 of the 151 checks issued to Alotta and none had been endorsed by the former property owners. Carter could not be reached for comment.
The Deloitte investigators questioned sheriff's checks totaling $389,742 written in 2009 and 2010 to three companies - the Processing Link in Houston; Yellow Rose Enterprises of Wilmington; and 400 PTM L.L.C. of Philadelphia.
"Investigation of the six checks . . . found little or no connection with the activities of the Sheriff's Office," the report said. It noted that the owner of 400 PTM, Jackiem Wright, had purchased a property from Bynum, the sheriff's director of finance, in 2007. The Inquirer's calls to the three companies were not returned.
Contact staff writer Bob Warner at 215-854-5885 or email@example.com.