Investigators also are looking at the school's involvement with Chaka Fattah Jr. - the son of the Democratic congressman - and whether that helped shield the firm from cuts made to other providers last summer amid the district's widening financial woes, sources said.
An Inquirer examination of Delaware Valley - drawing on documents obtained from the district under the state Right-to-Know Law, court filings, and interviews with former staffers - found that the company has received mixed reviews.
The documents show Delaware Valley does graduate a higher percentage of students than some providers, and its fees sometimes are lower.
But some former teachers allege grades are changed and students promoted even if they skip class and fail to turn in assignments.
"Everybody graduates," one former staffer said. "Everybody gets a piece of paper, no matter what."
They also questioned the school's attendance records and said teachers were paid significantly less than is shown in contracts with the district.
Shulick, who participated in two long interviews with Inquirer reporters in March, declined to answer questions for this article on the advice of his lawyers.
Earlier, he said FBI agents had told him that neither he nor Delaware Valley High School was a focus of their probe. He said agents said they just were trying to determine whether he had hired Fattah Jr. at the congressman's behest - a notion Shulick called "absurd."
As The Inquirer reported in February, the school was paying 10 percent of its district contract to 259 Strategies L.L.C., a minority firm owned by Fattah Jr., 29, a college dropout.
Shulick subcontracted with Fattah Jr.'s firm to oversee and pay the salaries of the support staff and a psychologist. The deal enabled the company to meet district requirements that 10 percent of its contracts go to a minority-owned firm or one run by a woman.
Federal agents served subpoenas Feb. 29 for records at Fattah Jr.'s apartment at the Residences at the Ritz-Carlton and seized documents and a computer from Shulick's Logan Square law office, where Fattah Jr. worked.
According to district sources, the district also received a sweeping subpoena several weeks ago for five years' accumulation of documents, contracts, and all communications - including e-mails - related to Shulick and Delaware Valley High School.
Delaware Valley started in 1969 as a private, for-profit school on Bustleton Avenue in the Northeast to help struggling students from George Washington, Lincoln, and other nearby high schools earn credits toward diplomas.
Shulick's association with the school began when he represented it in an insurance case. He told The Inquirer during an interview this spring that he became close to board members during the case and was named president in 1999.
Shulick now runs it through a corporation he controls called Unique Educational Experiences Inc., with headquarters at his law office.
Under his guidance, the school has become a regional force in alternative education, with four campuses in Philadelphia and the suburbs.
The year Shulick became the school's president, the legislature passed a law allowing districts to contract with for-profit companies to run disciplinary schools.
Shulick pressed Delaware Valley to shift its focus, and it became one of the early companies to win state approval.
In 2002, Bristol Township became the first district to contract with Delaware Valley. A year later, Philadelphia sent 100 students.
Delaware Valley also has a campus in Warminster with 103 students from Montgomery and Bucks County districts and one in Pottstown with 130 students.
Its largest operation is in Philadelphia. Under its current, $4.1 million contracts with the school district, it gets $8,800 apiece for 300 seventh to 12th graders sent to the Kelly Drive site for serious infractions, including truancy.
Delaware Valley also is paid $5,201 for each of the 200 students in its program in Southwest Philadelphia for teens and young adults who have dropped out of school or are at risk of doing so.
The Southwest Philadelphia program uses extensive computer-based instruction. To accommodate job and child-care responsibilities, students attend in half-day shifts to earn needed credits to graduate
The disciplinary school in East Falls is the company's flagship operation. Inside a pair of white buildings trimmed in red, the school offers academic courses, counseling, and a peer-mediation program that stresses character-building and seeks to reduce aggression.
During a recent visit, a group of eighth graders, including Natira Brown and Shanija Spann, related experiences where newly acquired skills helped them avoid trouble.
Afterward, Shanija, who was sent to the Kelly Drive site from Edward T. Steel Elementary School in Nicetown for fighting, said the school "has helped me a lot. I think now before I do stuff."
Delaware Valley's disciplinary approach draws on the expertise of behavioral-support specialists on staff and rewards good behavior with increased privileges. Students who act out are assigned to after-school classes.
Andre Bean, the Kelly Drive site's director, said the school has begun to "turn the tide in terms of not being looked at as an alternative school."
The Judith B. Shulick Memorial Foundation, which Shulick founded to honor his late mother, has provided money for scholarships, enrichment programs, and a basketball tournament for students.
Kelly also has added a prom, yearbook, and other extracurricular activities.
"The major focus I was trying to get the teachers and the principals to focus on . . . is behavior first and then academics," Bean said, noting that the students "weren't put out of school for their academics. If we can address the behavioral issues, getting the academics will be very easy."
He said 38 of 40 seniors graduated Friday. The two others are expected to "finish what they need to do in summer school."
Bean became the Kelly Drive school's director in May 2010.
A Tennessee native with a background in psychology, he came to Philadelphia in 2009. He was recruited by Benjamin J. Wright - a Nashville acquaintance and neighbor there - who is now the Philadelphia School District's associate superintendent in charge of alternative education.
Bean began as a student liaison at Philadelphia Learning Academy South, a district-operated alternative school that opened that fall. Several months later, Shulick hired him to run the Kelly site.
A district report of a visit in October praised the "major changes that have occurred at DVHS [Delaware Valley] over the past few years," since Bean took over.
The district's 2010-11 report card for DVHS-Kelly lauded it for showing that 68 percent of its 12th graders would graduate by year's end.
But the report also said students at Kelly were not making sufficient academic strides.
For those who arrived at least two grade levels behind, only 33 percent had gained a level in reading in 12 months. The rate was 35 percent for math. Some schools made greater gains, others less. None of the five contracted disciplinary providers that year met the district's goal of 70 percent improvement.
Some former teachers describe Delaware Valley classes as "babysitting" and compare the school to a "warehouse," where grades are changed and teachers are required to promote students and award academic credits, even if the students skip class and fail to turn in assignments.
Bean said that he did not know what had happened before he arrived but that "no grades under my tenure have been modified or changed."
The Kelly school's reported average daily attendance of 80 percent in 2010-11 was better than percentages at most disciplinary schools. But former staffers said attendance records are inflated and even show students in juvenile placement as "present."
Bean said Delaware Valley includes students sent to the Youth Study Center because it is part of the district attendance system and offers classes. He said students sent to other juvenile facilities are dropped from the Delaware Valley rolls.
Former teachers also say the budgets cited in Delaware Valley's contracts with the school district contain inaccuracies. Those documents show teachers receive $45,000 salaries plus benefits. The former teachers said DVHS pays $36,000 if they waive their benefits, $31,000 if they want them. The lower amounts are shown in ads for teaching positions Delaware Valley has posted for the 2012-13 year.
Three former teachers who worked at Kelly in 2010-11 included copies of their contracts showing those amounts in a suit they filed against Shulick and his company in March, alleging they are owed a total of nearly $20,000.
Although DVHS contracts call for salaries to be paid over 12 months, the complaint said the three have not received paychecks since being laid off last summer.
Shulick and Delaware Valley have disputed the claims in court filings.
Yet other former instructors who say they are owed money say Shulick has threatened to sue if they violate confidentiality terms of their contracts and disclose school information without permission.
Shulick's involvement with Fattah grew out of his efforts to raise Delaware Valley's profile. In the fall of 2008, the company responded when the district sought proposals for a revamped alternative-education program.
Shulick requested 900 students in disciplinary programs and an additional 600 in accelerated high schools,
In the spring of 2009, the School Reform Commission approved a three-year contract authorizing DVHS to operate one disciplinary school for 400 students in rented space on Kelly Drive.
The site stirred intense opposition from residents and business owners who feared the school would kill redevelopment prospects for the East Falls business corridor.
Shulick said he hired Fattah Jr. and two consultants to try to reduce community resistance.
The district's 2009 alternative-education program included new, detailed performance objectives for schools under contract, including academic growth, attendance, and graduation rates.
Based on the 2009-10 results, the district ended some contracts, including those of Community Education Partners (CEP). The Tennessee firm was paid more than $7 million for 1,050 students that year.
The district shifted some former CEP students to its own programs. It also increased the rosters of the remaining firms in 2010-11. Delaware Valley was tapped to take over CEP's accelerated program for 200 students at 6404 Elmwood Ave.
Last summer, as the district's financial crisis worsened, the SRC cut funding for alternative-ed firms from $36.3 million to $24.7 million.
The district scuttled some contracts, reduced the number of students sent to surviving programs, and in some cases trimmed per-pupil fees.
But Delaware Valley survived mostly unscathed.
Other firms signed contract amendments to reflect the changes as of July 1, 2011. Camelot Schools of Pennsylvania L.L.C., the district's largest provider, had enrollment at its disciplinary schools cut from 883 to 400.
Delaware Valley signed an amendment that kept 200 students in its program in Southwest Philadelphia at a slightly reduced rate - $5,201 per student instead of $5,279.
But Shulick's company has fought the district's efforts to cut enrollment at Kelly Drive from 400 to 300 students.
The district's Wright said Kelly is the only program without an amended contract. The district and Shulick's lawyers are still negotiating.
"They said they were going to work it out," Wright said. "So put it like this: The billing they send us is for 300 kids."
He said all companies still under contract have similar performance records, even though their programs differ.
"All of them are pretty much even," Wright said.
"Everyone runs a different program with a different population," Wright said. "I have told Mr. Shulick this on a number of occasions."
The district's contracts with alternative-education firms expire June 30. Wright said the School Reform Commission is expected to vote this month to take advantage of a provision and extend them for a year.
"This is a one-year renewal," Wright said. "And we'll see what happens."
Contact Martha Woodall
at 215-854-2789 or email@example.com.