Former transportation director Vern Hatley and two former managers from Barnes Motor & Parts pleaded guilty to charges of conspiracy and obtaining property by false pretense in excess of $100,000.
Each will serve a sentence between 58 and 79 months in prison, but the judge said the sentence would not be handed down Wednesday because the investigation was still ongoing.
Investigators believe Hatley, as well as other former transportation employees, was involved with the Barnes employees to divert millions of dollars through orders for fake parts.
According to indictments handed down last month, at least $3.8 million was spent illegally over a period of years. An investigator in the case testified Wednesday that Hatley had been authorized to approve invoices under $2,500 and that hundreds of invoices related to the fraud scheme were coming into the transportation department each day for under that amount.
The investigator said $600,000 was used for gift cards to department stores and that another $500,000 had apparently been put into a personal account. While some of the money had been used for legitimate school supplies, investigators said some of it was used for personal purchases such as jet skis, golf carts and televisions.
"In North Carolina, white-collar crime laws are pretty tough," said Wake County District Attorney Colon Willoughby. "But this is a lot of money and it's public's money. It's a very serious matter."
Two other suspects who worked for Barnes -- Connie Capps, a former manager, and Bobby Browder, a former regional manager -- also entered guilty pleas Wednesday in connection with the case.
While Browder pleaded guilty to the charges, his attorney, Rick Gammon, said his client barely benefited.
"It was important to Mr. Browder that the court know he didn't gain personally to the extent that some other people did," Gammon said. "[It was] less than $3,000, according to the investigation."
Capps turned over $200,000 in merchandise, such as cars and campers. Her boyfriend, Harold Estes, is accused of putting about $500,000 in his bank account and on his credit card. Capps, however, told WRAL she did not get anything.
""I just did what they told me to do," Capps said. "I'm guilty of setting up a pre-bill," she said, referring to the pre-payment account that the transportation department set up with Barnes.
Capps maintained that the items she turned over belonged to another suspect in the case, former transportation department budget analyst Carol Finch, who was arrested in July and charged with diverting more than $1 million from the school system. On Monday, a judge reduced Finch's bond from $1 million to $100,000 because she had been cooperating with investigators.
Authorities also believe Estes facilitated many of the purchases in the case. He has issued a written plea of "not guilty."
A portion of the money returned to the school system is no longer being held in trust. Barnes relinquished any claim to it, so the school system has it. To date, the Wake County Public School System has recovered $1.8 million.