Former Official Claims She Tried To Warn About License Scheme

Former Official Claims She Tried To Warn About License Scheme

CREATED May 16, 2013

by Jennifer Kraus
Consumer Investigator

NASHVILLE, Tenn. - The TBI continues to investigate an alleged money for license scheme involving state cosmetology license, the agency said.

That investigation started soon after NewsChannel 5 Investigates first discovered that dozens of immigrants had bought licenses, meaning they were working in salons without the required training or experience. It's a situation that some say could be dangerous for customers.

But the former head of the Tennessee cosmetology board told NewsChannel 5 that she tried to warn the state about the problems back in 2011, but she couldn't get anyone at the state's Department of Commerce and Insurance to take what she found seriously. 

"I just knew something was wrong. Something was wrong," Beverly Waller recalled. 

Waller said that she tried to sound the alarm more than a year and a half ago. 

"Why would they (Commerce and Insurance) not want to investigate?" we asked Waller.

"I have no idea why," she replied. 

Waller said that she no longer goes to nail salons because she believes there are manicurists working with state licenses who do not have the training or experience they need to do nails safely.

"You don't trust the licensing process any more?" NewsChannel 5 Investigates asked.

"No," she said.

Waller was director of the state's Cosmetology Board in 2011 when, according to her, she discovered license applications and files were missing.  She said that she found applications that did not qualify for licenses hidden under an employee's desk.

"I told my supervisor that basically an investigation should be opened to determine if someone in the Board office was issuing licenses with fraudulent documentation and being paid for it," Waller recalled.

But Waller said that, instead of launching an investigation, her boss, Bill Giannini, simply suggested that she move the employee to another position.

Steve Majchrzak, deputy commissioner at Commerce and Insurance, told NewsChannel 5 that the department did all it could.

"It's real easy to level allegations and say, 'Well, I believe this is happening.' But you do need, in fact, evidence," Majchrzak explained.

But Waller felt an investigation was the only way to get that evidence. And she said that she kept pushing Giannini to investigate after the same employee was caught using the computer of the person who approves licenses.

"You went back another time?" NewsChannel 5 Investigates asked Waller.

"Yes, oh, yes," she answered.

"How many times did you go back?" we inquired.

"Four to five times."

"Saying you were concerned?"

"Yes," Waller said.

"There was a problem?" Waller was asked.


The result? Waller shook her head and answered, "Nothing happened."

NewsChannel 5 Investigates then went to Majchrzak.

"She (Waller) said she went to her supervisor and asked him repeatedly to open an investigation" we noted.

Majchrzak responded, "I don't believe that is correct. And, I don't believe the record over the totality would demonstrate that."

But NewsChannel 5 Investigates obtained an internal Commerce and Insurance email from Bill Giannini -- dated February 2012 -- that confirms Waller had been giving documentation to managers to support her suspicions "for the last several months."

"Please advise. This is serious," Waller finally urged.

Giannini responded in the email by apologizing and admitting Waller's requested investigation had "been delayed by me inadvertently."

NewsChannel 5 Investigates asked Majchrzak, "Do you believe someone in that office was selling licenses?"

"Obviously, we had an issue with licenses in the office," he acknowledged.

But the state still insisted that it didn't know anyone might be selling licenses until a hearing in late February of this year. That's when more than three dozen Vietnamese immigrants told regulators they had bought their licenses from Green Hills salon owner Lee Phan for thousands of dollars each.

"The only time that something has come up where somebody says they've purchased anything was in the hearing you attended," Majchrzak said.

But Beverly Waller strongly disagreed.

"That's untrue. That is not true," she told NewsChannel 5 Investigates.

In fact, a cosmetology board inspector wrote last summer that he suspected someone was using a license that had been purchased.

And Waller said that her office got several tips last summer with the names of people who had allegedly bought licenses and tips, she says, about who allegedly was selling them.

"It was a Vietnamese gentleman that had a salon in the Green Hills area," Waller recalled of the tips.

"They were that specific?" NewsChannel 5 Investigates asked.

"Yes. Oh, yes."

"And, you passed that information along to your supervisor?"

"Oh, yes," she insisted.

But Steve Majchrzak maintained that the higher-ups at Commerce and Insurance were not aware of any of that.

The Department did finally finish its internal audit last summer and afterwards began taking steps to revoke the licenses from the manicurists who in February admitted they'd bought them.

The state also fired Waller. She said that she believes it's because she pushed for answers.

"So they held you responsible?" Waller was asked.

"Yes," she replied. "I was held responsible."

But the state said that it simply decided to go in another direction.

Majchrzak told NewsChannel 5 Investigates, "The Department is taking great pains not to scapegoat anybody."

"It was a situation that we took very seriously and we took a great deal of effort and time to untangle what was very complicated because the records were not in very good shape, he added.

Waller, meanwhile, said that she's glad the TBI is now taking another look at the case.

Yet, the fact that it took more than a year and a half to get to this point, she said, was a big mistake.

"Was this (the delay) putting the public in danger?" NewsChannel 5 Investigates asked her.

"Yes, it was and it is," Waller said.

But the state has refused to tell us exactly what their internal audit found. We do know they discussed the findings with the TBI last summer, but the TBI's initial investigation went nowhere. 

Agents didn't even interview Beverly Waller.

It wasn't until after that hearing in February when the three dozen people admitted to buying their licenses that Davidson County DA Torry Johnson asked the TBI to take another look at the case which is what agents are doing now.

And NewsChannel 5 Investigates has discovered that there are more manicurists with fraudulent licenses out there than just those three dozen who admitted to buying licenses in February. The state is still unsure how many there are.

But we've been told they've already found nearly 30 more and they are continuing to review their files.