Welfare fraud tipster turns alleged perpetrator

by Anna Wolfe, Mississippi Today
December 15, 2022

The former welfare agency official who brought information about corruption to then-Gov. Phil Bryant — breaking open a massive public fraud case that eventually ensnared NFL legend Brett Favre — is now one of the scandal's biggest culprits, according to the state.

“‘Shot himself in the foot' is a great way to phrase it,” said Logan Reeves, spokesperson for the state auditor's office, which originally investigated the case.

State-employed attorney Jacob Black is facing allegations that he himself participated in the illegal welfare scheme, that he racially discriminated against an employee under him, and that blowing the proverbial whistle was for his own benefit.

“He was just always bragging how he was the whistleblower,” Kristie Greer-Ellis, former regional director of the Mississippi Department of Human Services, said during a court deposition earlier this year, “that he was going to be the next executive director and that he was going to be the one who makes all of the changes and that nobody was to … go through anybody but directly to him.”

Greer-Ellis also alleged Black was hostile towards Black women — an allegation he denies — to the point that when Black women working for the agency needed him to address something, they would enlist a white colleague instead. This is the basis of an ongoing race discrimination lawsuit that former MDHS deputy administrator Dana Kidd is bringing against the agency.

Black did not respond to requests for comment for this story.

Black, now a staff officer at the Mississippi Division of Medicaid, joined the executive staff at the Mississippi Department of Human Services in 2015, just before John Davis became director. Davis pleaded guilty in September to a combined 20 state and federal counts of fraud, conspiracy, or theft.

Since arrests in 2020, officials have pegged Davis and politically connected educator Nancy New, who founded a nonprofit that received tens of millions in welfare funds to run a program called Families First for Mississippi, as the main architects of the scandal. New has also pleaded guilty to bribery and fraud. Forensic auditors say they and others stole or misspent at least $77 million.

Had Black not turned information over in mid-2019, the fraud may have never been uncovered.

But as legal counsel, Black was instrumental in crafting many of the grants in question to appear to fit within the guidelines of different federal programs the agency administers, including the welfare program Temporary Assistance for Needy Families. If Davis was the architect, according to the auditor's findings, Black was the engineer.

Black once wrote in an email to Nancy New's son Zach New, assistant director for the nonprofit, that if they wanted to construct a building with TANF, or welfare funds, it shouldn't take receipts from the contractors because that “seems to get really close to showing that you all are controlling the Brick and Mortar process which TANF has a strict prohibition against; however, if you have worked with your attorney, I have no issues with [it] because this is a lease that you will be a party to not MDHS.”

He recommended adding a clause that would “be vague enough to not tie you directly to the construction.”

In this email, Black was discussing a palliative care facility for medically fragile children that Nancy New and then-Mississippi first lady Deborah Bryant were working to build, a project that eventually fell apart.

But MDHS, New's nonprofit Mississippi Community Education Center, and the University of Southern Mississippi used this same legal analysis when crafting a $5 million lease agreement to build a new volleyball stadium at the school, according to an amended civil complaint MDHS recently filed to recoup misspent welfare funds.

The volleyball stadium scheme, first uncovered by Mississippi Today, has emerged as the centerpiece of the welfare scandal in recent months.

“Jacob Black, then-Deputy Administrator of MDHS, and Garrig Shields, then-Deputy Executive Director of MDHS, provided substantial assistance to the co-conspirators by advising on how to circumvent the TANF prohibition,” the complaint alleges. “… Black provided substantial assistance to John Davis, Nancy New, Zachary New, and MCEC by providing the template for the sham USM Athletic Foundation Sublease as a means of fraudulently disguising the true nature of the payments made to the USM Athletic Foundation.”

The amended complaint alleges for the first time in court that Black and Shields met with USM athletics officials and university administrators in mid-2017 and “advised at this meeting that the source of the funds would be TANF funds and that the sublease would be with MCEC because MDHS ‘can't directly fund a building project.'”

MDHS originally told Mississippi Today in February of 2020, during a two-month long stretch in which Black was interim director of the agency, that MDHS officials had no knowledge of any deal related to the volleyball stadium.

Shortly after the 2017 meeting, Shields left MDHS to work for New's nonprofit, then went into private practice with another attorney working under the Families First program, Laura Goodson. Shields has not returned Mississippi Today's request for comment.

The complaint said Black and Shields are both jointly liable, along with several others, for damages totaling nearly $6.9 million and $6.7 million, respectively. These are civil charges, but Zach New pleaded guilty to a criminal charge of defrauding the government because of the sham USM lease agreement.

Whether or not he intended to, Black was instrumental in exposing this and other alleged fraud schemes he's now accused of perpetuating.

Black, who was second in command at MDHS, and a few of his colleagues began gathering evidence about his boss' potential corruption in the last months of Davis' tenure. They were focused on Davis' relationship with a professional wrestler named Brett DiBiase, whom Davis had hired and then showered with lucrative welfare contracts, and his brother Teddy DiBiase Jr., who appeared to be going into business with Davis. At this time, the welfare agency operated under a nebulous structure in which public and private ventures were commingled and much of the federal spending happened outside public sight and without proper documentation.

Even for some on the inside, it was a challenge to discern or document exactly what was going on at the agency and the private welfare delivery system called Families First for Mississippi, according to several interviews with employees of the state agency and nonprofit.

“When you started publishing all of this stuff, that's when a lot of us found out what was going on,” Dana Kidd, who ran the division TANF is housed under during the scandal, told Mississippi Today in a recent interview. “It wasn't until you started publishing stuff that we found out what was going on. We had no clue.”

It's unclear what Black knew about the overarching fraud scheme polluting the agency, though emails and texts show he played a critical role in keeping the funds flowing.

But the fraud tip he took to Bryant was a relatively small discovery. Under the contract Davis awarded to Brett DiBiase's company, the wrestler was using a P.O. Box that belonged to Davis. The abnormality suggested Davis might be accepting a kickback, though prosecutors have never presented evidence to that effect. Instead, the men explained that DiBiase was using his boss' P.O. Box because he was having marital problems and wanted to hide the earnings from his wife.

In June of 2019, while Davis, Nancy New, Ted DiBiase Jr., Kidd and others were in D.C., where Davis was testifying before Congress about the federal food assistance program, Black took the information to Bryant's office.

Bryant turned the information over to State Auditor Shad White, Bryant's former campaign manager and the rising politician Bryant appointed to fill a vacant state auditor seat in 2018. White's office began investigating Davis and Brett DiBiase, and within days, Bryant forced Davis to retire.

“Everything changed when Mr. Davis left,” Greer-Ellis, former regional director, said in her deposition. “I mean, immediately Jacob went on, in my personal opinion, an attack, like he – everything was done deliberately, and he was not ashamed about anything. He even mentioned himself being the whistleblower and all that. He was just outright just flamboyant with his stuff.”

Auditor White has since credited Bryant — not Black — as the whistleblower of the case, though the tip would eventually lead investigators to an alleged illegal scheme to funnel welfare money to a pharmaceutical company connected to Bryant. Bryant denies knowing the company, Prevacus, had received public funds, though texts show Favre and Bryant discussed the project at length and that Favre even told the governor when it began receiving money from the state. The texts also show Bryant continued to lobby for the company and agreed to accept a stock agreement after leaving office. These texts were not revealed until Mississippi Today published them in April, more than two years after investigators collected them.

Favre, Prevacus, and its founder, Jake Vanlandingham, are all named in the ongoing MDHS civil suit, but Bryant is not.

The auditor's office maintains that Black is not the “whistleblower” because he did not take the information to an investigative body, as specified in the state's whistleblower statute.

In May, after MDHS released a third forensic audit report revealing Black's email about “brick and mortar,” the auditor's office issued a $3.6 million demand for repayment on Black. He didn't face official civil charges until he was added to the state's lawsuit this month. As is true for most people named in the suit, including Favre, Black has not faced criminal charges related to the scandal.

Just a few days after MDHS added Black to the suit, a federal judge in Kidd's separate racial discrimination case ruled that the allegations against Black were enough basis for the case against MDHS to move forward and go to trial.

“An employee who worked under Kidd testified that Mr. Black ‘had a problem with Black females' and that he made clear that most employees he wanted to terminate were Black,” reads U.S. District Court Judge Daniel Jordan's recent order. “That same employee stated that Mr. Black would treat white employees more favorably than Black employees.”

Kidd brought the lawsuit against MDHS in April, alleging the agency discriminated against her on the basis of age, race, and disability when it forced her to retire in 2020. Kidd's attorney is the prolific north Mississippi trial lawyer Jim Waide, who is also representing a separate defendant in the MDHS civil lawsuit, Austin Smith, Davis' nephew.

The Mississippi Department of Human Services asked the court for a summary judgment. Jordan granted the state's request related to the age and disability claims, effectively throwing them out, but said the race claim should move forward. When asked for a response, MDHS told Mississippi Today it does not comment on pending litigation.

Black denied the allegations of racial bias in his deposition, saying the one employee he has promoted in his time at Medicaid is a Black woman. Black also said Greer-Ellis and Kidd are “super close friends, so the validity of that testimony I would highly question.”

Kidd has apparent connections, personally and through husband Alvin Kidd, with other welfare employees or contractors caught up in the welfare probe. Alvin Kidd is friends with and played high school football with Marcus Dupree, a former star high school running back and one of the high-profile defendants in the civil lawsuit. Dupree received at least $371,000 in welfare funds, the complaint alleges. Nancy New's nonprofit bought Dupree a horse ranch, Mississippi Today first uncovered in 2020, where he lives, according to the suit. Kidd said she didn't know how Dupree got connected to Families First.

Dupree and Alvin Kidd also grew up with the father of Gregory “Latimer” Smith, the young MDHS procurement officer charged with fraud related to payments to Brett DiBiase. The Kidds have been close with Smith since he was a kid; Dana Kidd even helped him get the job at MDHS, she said. Smith's case has since been referred through pre-trial diversion, a program that could keep the charge off his record.

Dana Kidd worked for the welfare agency for 30 years, starting out as an entry-level eligibility worker.

“This is not one of those employment cases where an employer fires an underperforming or heavily disciplined employee,” Judge Jordan wrote in his latest order. “By all accounts, Kidd was an excellent employee, consistently performed at a high level, and had an unblemished record.”

Greer-Ellis also speculated that Black may have wanted to get rid of Kidd because she “could have been easily the next person in line to be able to move the agency forward.”

“He wanted that executive director position so bad,” she said.

Kidd alleges in her lawsuit that in January of 2019, she became paralyzed due to a rare disorder and took a medical leave of absence from the department. “Black indicated that Plaintiff was not wanted at the agency because of her disability,” her complaint alleges.

When Kidd returned from medical leave in May of 2019, she alleges Black became more hostile towards her, eventually moving her from her post as deputy administrator in the state office to the Hinds County DHS office — an effective demotion. It was supposed to be temporary, but when current MDHS Director Bob Anderson became director in March of 2020, Kidd was still stationed there. Anderson decided to eliminate her position, forcing her to retire or be terminated in April of 2020. Black left the agency shortly after, starting his new job at Medicaid in June of 2020 in a lower position than he held at MDHS.

Kidd also alleges Black excluded her from meetings and generally ostracized her from the rest of the executive staff.

Black explained that Kidd was close to Davis, which is why he was keeping Kidd at bay during the internal investigation into their boss.

“We kept that investigation very close so we could make sure that we had an opportunity to finish that investigation and get everything reported with sufficient evidence without John finding out about it,” Black said in his deposition.

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.