EXCERPT FROM: Journal Sentinel
By John Diedrich
A Milwaukee man who collected more than $700,000 from the state's taxpayer-subsidized child care program has agreed to plead guilty to filing false reports in bankruptcy court, according to federal documents filed Wednesday.
Willie Kohlheim Jr., 43, agreed to plead guilty to one count of failing to disclose income from his business, the R Family Child Care Center, according to a plea agreement.
Pamela Kohlheim, who has filed for divorce from Willie Kohlheim, also is charged in the case. She earlier pleaded not guilty. No trial date has been set. If convicted, the 39-year-old faces up to two decades in prison and $1 million in fines.
The Kohlheims were charged in September - three months after the Journal Sentinel published a story exposing how the couple received nearly $1.3 million from the troubled Wisconsin Shares program over the years while regulators ignored numerous signs they were conning the taxpayer-financed system.
The story was part of the newspaper's ongoing series, "Cashing in on Kids," which has exposed rampant fraud and other flaws in the $350 million system.
The federal case focused on the bankruptcy issues of the Kohlheims, not on their suspected fraud of the state child care system.
According to his plea agreement:
The Kohlheims filed for bankruptcy under Chapter 13 in November 2001.
In January 2003, Willie Kohlheim received a license from the State of Wisconsin to run R Family Child Care Center in the 3400 block of N. 55th St. Nine months later, he received a second license to run a center by the same name in the 2600 block of N. 17th St.
From February 2003 to December 2004, the Kohlheims received more than $112,000 in child care funds from the state. Nearly $40,000 was received after the couple converted their bankruptcy to Chapter 7, the agreement said. Chapter 7 bankruptcy is for people with little or no income and allows them to wipe out most debts completely.
The couple failed to report that day care income in documents to the bankruptcy court and to the attorney who represented them, according to an FBI agent who investigated the case.
Under the plea deal, Kohlheim faces up to a maximum of five years in prison, but sentencing guidelines call for 10 to 16 months, according to the agreement.
Willie Kohlheim also agreed to pay restitution of $39,939 - the amount he received from the state after switching to Chapter 7 bankruptcy. The sentencing, before U.S. District Judge Rudolph Randa, has not been scheduled.
When Willie Kohlheim applied to become a licensed child care provider in 2002, state regulators were warned about Pamela Kohlheim by a Milwaukee county worker, according to documents.
"This lady is really bad," the worker wrote to regulators in an e-mail.
Pamela Kohlheim had been denied certification to run a child care business by Milwaukee County the prior year.
Her history includes arrests, charges or convictions for crimes such as dealing drugs and writing bad checks. She also was accused of threatening to kill Willie Kohlheim's former girlfriend. She was sentenced to 90 days in the House of Correction and 18 months' probation in 2002 for violating a domestic abuse order.
Still, the state licensed Willie Kohlheim with the stipulation that Pamela Kohlheim not be allowed on the premises. Willie Kohlheim said they were getting divorced, so she wouldn't be around.
Regulators soon began getting complaints that Pamela Kohlheim was running the day care center while Willie Kohlheim worked elsewhere.
Other complaints contended that Pamela Kohlheim offered parents employment and kickbacks if they would enroll their children. Employees told inspectors that the Kohlheims billed for children not in attendance and left older children in charge while they stayed in their bedroom.
The Kohlheims fought in front of children, kicking over furniture, punching each other and using obscenities, employees said.