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Jackson water crisis flows from century of poverty, neglect and racism

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Jackson water crisis flows from century of poverty, neglect and racism

More than a century before failing infrastructure left Jackson, Mississippi, without running water this summer, thousands of the capital city’s residents gathered in a park downtown to celebrate the new water filtration plant that promised to turn the muddy liquid flowing into people’s taps into “clean, pure water.”

People poured in from nearby schools and factories to witness history that morning in November 1914, according to the account in the Jackson Daily

Train whistles blew, cheerleaders carried large banners, and city leaders spoke from a stage decorated with flags, pennants and bunting.

“Our historic capital city has many causes for congratulation,” said Edgar S. Wilson, a prominent and politically connected businessman who presided over the event, “but clear water is her crowning glory, her greatest asset; a blessing that will pass from generation to generation.”

Today, Jackson’s water system is a symbol of national embarrassment, highlighted by this August’s crisis that deprived more than 170,000 people of water to drink, wash or flush toilets.

It was the latest in a series of water-related problems plaguing the state’s biggest city. They include frequent line breaks, shut-offs, boil-water notices and an ongoing exposure to toxic lead and harmful bacteria. Jackson consistently has been in violation of safe drinking water standards since at least 2018 and has been under a federal order since 2020 to fix a host of issues impacting its water system. A 2013 consent decree Jackson entered with state and federal agencies requiring it to fix its beleaguered wastewater system also remains in effect.

Even now, the system continues to teeter on the brink of failure. It strained to meet the demand of an additional 55,000 people who attended Jackson State University’s homecoming game against Campbell University on Oct. 22. An even larger crowd is expected Saturday for JSU’s game against Southern University with ESPN’s “College GameDay” in town. Residents were warned on Monday that this could again push the water system to the limit and were urged to ration water usage.

State officials have blamed leaders of the predominantly Black city for fiscal mismanagement and neglect. Republican Gov. Tate Reeves in a recent statement called the situation “a crisis of incompetence” and pointed a finger directly at Jackson’s mayor.

City leaders, meanwhile, accuse state officials of the predominantly white legislative and executive branches of ignoring their cries for help. Democratic Jackson Mayor Chokwe Antar Lumumba during an interview earlier this year with Mississippi Today called state lawmakers’ attitudes toward Jackson “paternalistic” and “racist.” During a press conference in September, he told residents not to trust the state.

But a USA TODAY Network investigation reveals that the foundation for these current failures was laid decades ago and problems compounded as the city evolved. Since then, city leaders and state officials alike have abandoned civility in lieu of finger pointing and steered the system into a collision course with disaster. 

Reporters combed through more than a century of newspaper archives, decades of the city’s annual financial statements, water quality reports and studies of the municipal system over the years, as well as recent lawsuits and orders against the city for violating drinking water standards. They also interviewed more than a dozen residents, city and state officials and former workers of the water system who shared firsthand knowledge of the problems. 

The reporting found a complex story of population decline, poverty, racism, politics, mismanagement and . But key details emerged that, when pieced together, paint a portrait of a water system that was flawed from the start and worsened exponentially over the years as those in power seemingly lost control. 

The system was cobbled together over the course of several administrations into a needlessly complicated operation with several moving parts. Complaints about bad water were rampant early on, and the system, unlike most Mississippi communities, relies mostly on surface water instead of cleaner, simpler wells. 

Jackson now has some 1,000 miles of water mains and two treatment plants: the original one, named J.H. Fewell, that can draw up to 25 million gallons a day from the Pearl River; and another one that opened in 1993, named O.B. Curtis, that can draw twice as much from the manmade Ross Barnett Reservoir located northeast of the city. The O.B. Curtis plant uses two different types of filtration systems to treat the water – conventional and membrane, making it tricky to manage.

Further complicating things, Jackson also operates a small system of wells that rely on groundwater and serve about 16,000 customers in the southern part of the city and nearby Byram.

“Until someone disputes this, and no one has been able to, you have probably the most complex water treatment facility in the country,” Lumumba said at a community meeting last month.

The original plant and piping that was laid more than a century ago started reaching the end of their lifespans just as Jackson’s population began to decline and its wealthier white residents fled for the suburbs. By the time Jackson elected its first Black mayor in 1997, the system was already in desperate need of repair but lacked the customer base to afford the then-$300 million worth of improvements. 

The price tag for those and other improvements has ballooned over the years to an estimated $1 billion as one administration after the next postponed infrastructure projects amid a dwindling revenue stream. Although the city collected some $900 million from customers over the past two decades, it lost nearly a half billion dollars in unbilled and unpaid usage during the same time from rampant theft and a botched metering and billing system. 

Meanwhile, the city failed to keep its plants fully staffed and functionally operating, leading to a deterioration of water conditions. Jackson has racked up multiple state and federal drinking water violations in the past five years and, in 2020, got hit with an emergency order by the Environmental Protection Agency. It must now commit to costly improvements to remedy the problems but lacks the funds to do it. 

As Jackson struggles, state leaders have done little to help. Every year since at least 2018, Jackson has sought financial assistance from the Legislature to improve its water system. And every year, those bills have died in committee.

“We’re at a reckoning point,” said Leigh Terry, assistant professor of environmental engineering at The University of Alabama. “We’re going to see more of these cases come up if we don’t invest and do the maintenance needed to replace these pipes, and pump systems and everything that often gets neglected.”

Jackson’s water woes are extreme but not rare. They’re endemic of a problem plaguing cities from coast to coast, as failures from aging infrastructure outpace funding for improvements.

But Jackson’s residents are particularly hard hit. Nearly 84% of them are minorities, and one in four 1 in 4 lives in poverty. Many struggle to pay their bills, much less buy bottled water every time the system strains. 

“I can’t even count how many times we’ve been on boil-water notice with the main gaskets breaking and the pipes breaking in the wintertime,” said Evelyn Fletcher, a federal building inspector who moved to Jackson 13 years ago. “I feel that God allowed this situation to be exposed across America, and even other countries, so we could get the assistance that we really need. I feel like it was God’s timing because we’ve been going through it for a while.”

A fire that led to water

The state of Mississippi took its name from the mighty waterway slicing through the country, but it was the lesser-known Pearl River that gave rise to the state’s capital. 

Jackson was established as the seat of government in 1821 in part because of its proximity to the Pearl, which cuts down the center of the state. But it wasn’t until a fire threatened to consume the city’s business district six decades later that the river became its life force.

The 1884 blaze had left firefighters scrambling for water, so local leaders devised a plan to pump the Pearl. This would ensure a steady supply of water for drinking, bathing and fire protection. In April 1889, the “Water Works Co.” began operations, delivering “pure, healthful river water” through a network of underground pipes, according to newspaper archives.

But it was not without its problems. The untreated river water was subject to contamination from bacteria and pollutants. Sometimes it arrived in people’s homes full of mud.

Residents soon looked to artesian wells as a solution and, in 1910, voted to create a new system from these free-flowing underground springs. “We want artesian water,” a Jackson Daily News headline demanded that year. But, by 1912, the company hired to drill the wells could produce just 2.5 million gallons of water a day – not enough for the city’s 4 million gallon per day requirement. 

Jackson’s groundwater is limited because the city sits on top of an inactive volcano, which stunted the formation of the area’s underground aquifers as they developed over the eons. Because they formed on top of the existing volcano, they’re shallower and thinner than usual, said Bill Oakley, a geologist who worked for decades for the U.S. Geological Survey and still consults on well projects throughout Mississippi.

To reach the desired capacity would be costly, engineers said in 1912. It would mean drilling additional wells and maintaining gasoline engines or electric motors for pumping. This forced the city to consider two other options: either drawing ground water from shallow wells in nearby Rankin County or building a filtration plant to purify water from the Pearl River. 

The matter was decided in one afternoon in April 1913 when then-Mayor Swepson James Taylor and an ad-hoc commission of prominent citizens determined that “filtration of the Pearl river supply is Jackson’s only solution to the water problem,” according to an account from the Jackson Daily News.

Limited groundwater supplies forced their hand, Oakley said. But in choosing filtered river water, Jackson diverged from the path most Mississippi communities would take.

All but 15 of the more than 1,000 community water systems in Mississippi pull from ground sources, according to EPA records. Of those that use surface water, most purchase it from the Northeast Mississippi Regional Water Supply District, which draws water from the Tombigbee River.

Although it has its problems, groundwater from wells and aquifers is generally cleaner and easier to treat. It usually contains less bacteria and is of a higher and more consistent quality. By contrast, surface water from lakes, rivers and reservoirs can vary dramatically depending on where and when it’s collected, and it generally has more contaminants, sediments and debris to be filtered out. 

Memphis, Tennessee, which initially relied on the Wolf River as its primary source of drinking water, faced a similar dilemma as Jackson in the late 1800s, especially after a deadly outbreak of Yellow Fever that swept the region was linked to unsanitary water. But unlike Jackson, Memphis could tap into an abundant aquifer and continues to tout its clean water to this day. 

Memphis’ municipal water system has had no violations or enforcement actions in at least five years, EPA records show. Jackson, meanwhile, has 176 violation points and more than 70 enforcement actions during the same time period. 

As state and federal regulations over drinking water have stiffened over the decades, it has become more challenging to staff Jackson’s water system. It takes up to six years of training and a Class A certification to operate a surface water treatment plant, which requires someone onsite 24 hours a day. 

Jackson consistently has struggled to hire and retain enough operators to run its system. This stems from a combination of low wages, high training requirements and a dearth of other surface water systems from which to recruit talent. 

In choosing surface water, Jackson created for itself a host of challenges. But, in the view of Jason Barrett, associate extension professor with the Mississippi Water Resources Research Institute, 

Jackson’s decision was not a fatal flaw. Other cities – like Atlanta, Birmingham and Nashville – also pull from surface water sources without nearly the issues facing their Mississippi neighbor. 

“I don’t think Jackson’s issue is the quality of the source,” Barrett said. “I think Jackson’s problem is management.”

The rise and fall of a city

Jackson’s population, which hovered just above 21,000 when it opened its first filtration plant, continually swelled over the next few decades as it matured from a dusty river town to a bustling metropolis. 

More than 60,000 people called Jackson home by the start of the second World War, and the city was laying hundreds of miles of new pipes to accommodate the steady influx of households, schools and businesses. The filtration plant, which could pull just 4 million gallons of water a day from the Pearl River when it opened, was pumping up to twice that much by the mid-1940s.

Water quality problems and line breakages were common during those early years, newspaper records show, but it wasn’t until January 1944 that Jackson experienced its first widespread water loss. After a valve in the pumping station broke, the entire system shut down for two days and caused a panic among residents. 

“For 30 years, the Waterworks department has efficiently operated,” then-Mayor Walter A. Scott told the at the time. “It has never before been completely broken down or shut down as it was from Friday until Sunday at 3 p.m.”

It was a harbinger of things to come as the city’s population continued to grow, putting additional strain on an already aging system. The next three decades saw a series of annexations – including one in 1976 that was called the largest in state history – that more than doubled Jackson’s geographic footprint to some 120 square miles and boosted its population to over 200,000 people.

By 1979, the state Board of Health issued a grave warning that Jackson’s main surface water system was operating near capacity. The city should add no new homes or industries until fixing its “problem-ridden water treatment system,” according to a Clarion Ledger article at the time. 

“It is clearly evident that some of the water problems were inherited with city expansions,” the board said. “Other problems are due to continuing neglect of adequate operation and maintenance procedures and lack of adequate planning and foresight by city officials for many years.”

The public scolding led to the approval of $4.4 million in water infrastructure improvements the following year, but it was not enough.

Just as Jackson was making plans for the biggest expansion its water system had seen in decades – its second water treatment plant, the O.B. Curtis – its population and pocketbook was were about to shrink from the reverberations of societal upheaval that had started years earlier.

Mississippi, like many Southern states, went through a period of dramatic changes in the 1960s and 1970s as a system of legal white supremacy and violent oppression of Black people gave way to the expanding movement. The federal government struck down the separate-but-equal Jim Crow laws that defined the way of life across the South and forced the integration of

Southerners largely balked at these changes. But in 1969, a decision finally forced Mississippi and other holdouts to begin desegregating. For Jackson municipal schools, the change came in 1970.

“Forty percent of the student body is gone overnight with desegregation in the city of Jackson,” said Robert Luckett, a historian at Jackson State University.  “Their parents are the political, social, economic, religious leaders of the state of Mississippi, and when they withdraw their children from the public schools – when they themselves withdraw from the city – you begin seeing almost immediately the subsequent withdrawal of support for all things Jackson.” 

White people, which had represented nearly two of every three  residents in 1960, accounted for just one in two by 1980 – and just one in six  by 2020. 

Their exodus coincided with sweeping new federal mandates. The Clean Water Act and the Safe Drinking Water Act, both passed in the 1970s, required most cities to invest in significant improvements to be able to comply with the strict new standards on testing and contaminant thresholds. 

Jackson was no exception, but not long after these rules kicked in, the federal government started to phase out its generous infrastructure grants in lieu of loans that municipalities would have to pay back. It was a double whammy for the capital city.

“I’m not sure you can point to any period in time and say, ‘this is when the problem occurred,’” former Mayor Harvey Johnson told USA TODAY in a recent interview. “But once the federal government took away its grant funding mechanism, that’s when local governments had to start relying on their own resources to get the job done. It especially hurt communities like Jackson with high incidents of poverty and low-income neighborhoods.”

Cozy relationship frays

Johnson was elected in 1997, and his ascension into office marked a historical milestone as the first time an African-American won the city’s mayor’s race. 

That distinction came with a new set of problems. Whatever cozy relationship might have existed between Jackson’s white mayors and the state’s majority white leadership was over now. Johnson and the Black mayors that came after him have faced skepticism and distrust when seeking financial aid for the struggling water system.

When the state approved a 1% sales tax for Jackson water improvements in 2009, lawmakers wouldn’t let the city control the funds. They instead created a nine-person commission outside the city’s purview to oversee and approve the tax fund’s expenditures. Johnson noted that the state placed no such restrictions on a similar sales tax for Tupelo, a majority white city in northeast Mississippi.

More recently, when Jackson received funds, the legislature singled out the city for extra oversight of its spending. And a bill that would have given Jackson an additional $42 million beyond what the ARPA rescue funds provided died in committee earlier this year.

State Sen. Hillman Frazier, a Democrat from Jackson who works with local leaders to represent in the state house, said the lack of continuity in Jackson’s leadership has prevented the city from adopting a “long-term vision.”

“It takes more than a term to become familiar with the problems and how to address them and how to get the votes on the local level to pass it,” Frazier said.

And the plans that were in place often needed more money to actually be carried out, but lawmakers were hesitant to give Jackson more money after years of mismanagement.

Frazier said a popular sentiment in the capitol is, “Why should we send resources that they might squander?”

Reeves said in September the city doesn’t have a plan to fix its water woes and doubted it could be relied upon to provide one, echoing a sentiment that has rippled across the executive branch in recent weeks. In October, he issued a press release criticizing Lumumba’s handling of the water crisis and accusing him of acting in bad faith.

Lumumba disputed that he has no plan to fix the water system. During a September press conference, the mayor held up several documents outlining needed repairs and associated costs – documents he said he had previously shared with state elected officials. He also named previous Black mayors, including his father, who died in office in 2014, and said they, too, had tried to work with the state on this issue.

“The reality is that (former Mayor) Tony Yarber asked for money to deal with this issue. The reality is that my father asked for money to deal with this challenge,” Lumumba said. “I know that Mayor Harvey Johnson asked for money to deal with this challenge.”

USA TODAY Network reached out to both Reeves and Lumumba through their representatives, but neither was made available for comment.

Theft, broken promises and distrust

As the cost to fix Jackson’s problems climbs, the city’s utility revenues are in a freefall. 

Despite raising water and sewer rates several times in the past two decades, Jackson has struggled to generate enough revenue to keep the operation financially solvent. 

Part of the issue is its dwindling customer base. Jackson has lost utility sales as its population declines and major customers like schools and hospitals disconnect from the system in lieu of more stable sources of water like wells. 

But it’s also because of rampant theft by residents who altered meters and connections to avoid paying for water, as well as by city workers who circumvented the billing system and bribed customers to give them cash in exchange for wiping out their monthly bills. A pair of investigations, one launched in 2015 and the other in 2019, nabbed more than two dozen people in a scheme that then-Public Works Director Bob Miller called “the worst I’ve ever seen.” 

But perhaps the biggest culprit is a faulty water meter and billing system installed by German technology company Siemens as part of a $91 million contract signed in 2012. 

The meters didn’t link up to the billing system as promised, measured usage incorrectly and resulted in some customers getting overcharged while others didn’t get billed at all. The city sued Siemens and settled in 2020 for about $90 million, but Jackson is still reeling from the mess and doesn’t anticipate a resolution until late 2024.

“In my household, we have not gotten the bill in five months,” said Fletcher, the Jackson resident. “We’ve called to the city water department to ask about the bill, and they said, ‘Oh, we haven’t gotten you a bill yet.’ So we’re just holding our breath to see what five months of a bill will look like.”

Utility sales to customers, which in 2014 reached a peak of more than $69 million, fell to less than $48 million in 2020, the latest year for which data was available. 

Meanwhile, its accounts receivables — mainly unpaid water bills — continued to climb. In 2003, Jackson was owed some $6 million in unpaid bills. By 2020, that number reached nearly $55 million. Customers now owe the city more than they’ve paid.

“It’s kind of like the frog in the pot,” said Quentin Whitwell, who served on the Jackson City Council from 2011-2014. “You’re in water and don’t realize it’s boiling until it’s too late. My observation today is that, you know, it all came to that boiling point, and everybody was caught off guard.”

When the system finally snaps

As the city’s financial fortunes have faltered, so too has its ability to keep its water department fully staffed. Over the last two decades, former plant employees said, the institutional knowledge needed to operate a complex system such as Jackson’s was depleted as longtime workers became dissatisfied and left. 

Employment at the water plants became top heavy with managers who knew little about the operations, while experienced workers got squeezed out, said Ronald Gilbert, who started in 1995 as an operator at J.H. Fewell before moving to operation supervisor at O.B. Curtis. 

Gilbert said the system, which always struggled on a shoestring budget, started to strain in the late 1990s. By the time he left in 2005, he said, things were getting worse.

“Not enough money, natural age and loss of skilled people,” Gilbert said. “You put that together, and anything’s going to fail.”

Gilbert said that during his tenure, the city operated its water system with a crew of about 35 people. In January 2020, just seven people were working in the entire water department, city records show. 

The city council approved across-the-board pay raises for plant operators in November 2021. But the increase did not alleviate staffing concerns in the way city administrators had hoped.

Jackson’s water system now has so few operators that some are forced to work up to 75 hours a week without overtime pay just to cover all the shifts, and supervisors are taking on the extra load in addition to their managerial duties, according to an assessment of the city’s water system conducted earlier this year.

The staffing shortages have contributed to widespread failures, including the inability to routinely monitor and maintain the system to prevent pressure loss and water contamination, a fact seized upon by the Environmental Protection Agency during a February 2020 site visit to the facility amid ongoing concerns. 

Inspectors also found numerous leaks and line breaks – as many as five or six a day – leading to a loss of water pressure and requiring the city to issue boil-water notices. In just four years, the report noted, Jackson had sent out more than 750 such notices.

The EPA slapped Jackson with an emergency administrative order citing numerous problems, including inadequate staffing, high sediment levels and poor corrosion control, all of which put consumers’ health at risk. Jackson must now implement a comprehensive plan to address the issues, but it told the EPA it lacks the funds to make improvements. 

It wasn’t the first time the city has run afoul of safe drinking water regulations. In 2016, the Mississippi Department of Health notified Jackson that several of its water samples exceeded the maximum amount of allowable lead – 15 parts per billion. The state determined that the O.B. Curtis plant had a failing corrosion control system, which is supposed to prevent lead and copper in the pipes from dissolving into the drinking water.

Jackson was ordered to fix this problem, but it continues to rack up violations for non-compliance. According to a recent notice the city distributed to customers, from “2018 to 2022, we failed to consistently meet treatment technique requirements for our system which is a violation of the Lead and Copper Rule and a requirement of the City’s Optimized Corrosion Control Plan.”

In addition to increased state and federal oversight, the city also now faces a series of lawsuits from citizens claiming they’ve been poisoned by lead and plagued by water shutoffs. This summer’s crisis was just the latest to leave Jackson residents without water for long periods of time – they faced a similar scenario after a February 2021 ice storm deprived them of water for weeks.

The most recent of these lawsuits, filed in September, claimed Jackson leaders have long ignored the need to upgrade the system and could have avoided all of this had they just done their jobs.

“The people of Jackson, like all people in this country, deserve access to clean and safe water,” EPA Administrator Michael S. Regan said in a statement after meeting with Jackson officials in September. “They also deserve more than words – they need action.”

That the city’s water system would collapse amid finger-pointing and federal oversight was likely far from the minds of those who celebrated its first filtration plant that cold November day more than a century ago.

But at least one person there felt the occasion held a lesson for future Jacksonians. Speaking to the crowd of how the city put aside differing opinions and rallied around the plan to filter river water, then-City Attorney William Hemingway called the plant a “monument to harmony and unity of purpose.” He said it should remind people of the value of working together.

“And if at any time discord comes among us,” Hemingway said, “let us look to this matter and give up personal matters for the common good.”

This story was produced in partnership with the Community Foundation for Mississippi’s local news collaborative, which is independently funded in part by Microsoft Corp. The collaborative includes  the Clarion Ledger, Mississippi Today, MCIR, the Jackson Advocate, Jackson State University and Mississippi Public Broadcasting.

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

12,000 poor Mississippi kids slated to lose child care

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12,000 poor Mississippi kids slated to lose child care, welfare chief warns lawmakers

The number of spots in child care for poor children in Mississippi will be reduced by 12,470 in September 2024 when the state’s allotment of federal relief funds is exhausted, a special Senate committee was warned on Tuesday.

The Mississippi Department of Human Services is currently using a substantial portion of its federal COVID-19 relief funds to open more spots in child care for poor parents working in low paying jobs, going to school or looking for employment.

But those COVID-19 funds are scheduled to be spent by September 2024, meaning the state will have only its normal federal appropriations to direct to the child care block grant, said Bob Anderson, the executive director of the Mississippi Department of Human Services.

The state is using the federal child care funds to provide services to 35,646 children across the state, according to latest statistics. But the COVID-19 funds the Department of Human Services is directing to child care is paying for the services for more than 12,400 of the children.

Anderson’s revelation came at hearings held by a special state Senate panel of lawmakers who have said they aim to pass policies to help women and children following the ’s striking down of .

The nine-member Senate Study Group on Women, Children and Families, chaired by Sen. Nicole Akins Boyd, R-Oxford, was announced by Lt. Gov. Delbert Hosemann after the nation’s high court in June struck down longstanding Roe v. Wade and a dormant Mississippi ban on the books subsequently took effect. Hosemann said it’s now incumbent on lawmakers to come up with policies to help mothers and children as experts predict the state will see an additional 5,000 unplanned births a year.

State Sen. Rod Hickman, a Democrat from Macon, asked Anderson at Tuesday’s hearing whether the state could use a portion of its federal TANF funds, normally called welfare benefits, to pay for the child care spots the state is slated to lose in September 2024.

Anderson said using TANF funds to shore up the child care program is “an option we are exploring.”

“We would be allowed to use up to 30% of the funds,” Anderson said. “But understand, people have a lot of other plans for that money as well. But yes, that’s always an option, assuming we haven’t already committed some of it.”

Mississippi is currently leaving about $18 million in available TANF funds on the table, according to information MDHS provided to Mississippi Today as well as a review of public expenditures. That could provide a year’s worth of vouchers for 4,600 children based on the 2022 reimbursement rate of $3,911 annually. In the most recent available federal report for 2020, Mississippi had an unused balance of roughly $50 million in federal TANF funds.

Anderson said that ultimately he would make the decision whether to convert some of the TANF funds to the Child Care Development Fund program.

Health, education and business experts told the panel Tuesday that lack of affordable child care is a major impediment to Mississippi moving forward economically and socially.

READ MORE: ‘We’re 50th by a mile.’ Experts tell lawmakers where Mississippi stands with health of mothers, children

“The number-one topic that continually comes up is child care, or lack of available child care,” said Ryan Miller, director of Accelerate Mississippi, the state’s workforce development agency. “It is a real issue, and anecdotally, industry has been saying this for years.”

Miller said lawmakers should consider tax or other financial incentives for businesses to create child care programs, consider providing more state funding for programs and eliminate policies that thwart single parents’ access to child care. Miller and others testifying Tuesday said that MDHS’ requirement — per state law — that single mothers identify a child’s father before receiving benefits such as child care appears to keep some from applying.

Boyd said she has heard this brought up repeatedly during committee research.

“I think there are issues about not only feeling like they’re being judged, but probably some protection reasons, safety for the mother,” Boyd said of the requirement.

Other requirements that prevent people from getting child care assistance — and thus from joining the workforce — include a state provision that single mothers turn their child support cases over to the state to participate in the federally funded Child Care Payment Program.

Gov. Tate Reeves’ appointed State Early Childhood Advisory Council has already recommended that the governor instruct MDHS remove this requirement, but it has not done so.

Anderson also told lawmakers how the so-called HOPE Act, passed in 2017 at the behest of the state’s Republican leadership to crack down on fraud in federal programs administered by the state for poor people, was actually costing the state money. The program looks for fraud by those receiving benefits through , Temporary Aid for Needy Families and other welfare-related programs.

Hickman questioned some experts who testified Tuesday about strict regulations Mississippi has put in place in the name of fraud prevention that instead just prevent people from applying or qualifying for programs.

Mississippi has in recent years been plagued with fraud and embezzlement of government money, but it has mostly been perpetrated by powerful politicians, bureaucrats and business leaders, not the beneficiaries of the programs. Notably, investigations continue into or misspending of tens of millions of TANF dollars, not by the few people who receive the benefits, but by those who were supposed to administer them or provide services.

“I believe in preventing fraud, but we need ideas that make sense and not just provide barriers to poor people receiving help,” Hickman said. “We’ve seen the amount of people applying for benefits dramatically dropped when we made all these requirements … But so much keeps getting fed into this thought that poor people are creating the fraud.”

Anderson said that MDHS is being required to create fraud and abuse systems “that we will never use” because they are redundant or not needed.

“It’s costing the state,” Anderson said.

Hickman asked Anderson if “we are costing the state by over-policing poor people” through the HOPE Act, Anderson said essentially that is true. Anderson, a former prosecutor who worked on governmental fraud cases, said fraud by the poor is “not a big part of the problem.”

He said the last two years prove that as the welfare fraud case has unfolded in Mississippi where numerous private contractors and those close to the contractors have benefitted from the program.

The Mississippi Low-Income Childcare Initiative, led by longtime advocate Carol Burnett, is among numerous groups outlining issues faced by women and children in Mississippi and making policy recommendations to the Senate panel.

In a written statement to the committee, the initiative’s recommendations include:

  • Reducing the mounds of red tape single mothers face in enrolling in and staying in the federally funded Child Care Payment Program.
  • Mississippi using “every dollar it can” on childcare assistance to serve more families. Currently, only about 25% of eligible children are served.
  • Extending postpartum Medicaid for new moms from the current two months to 12 months.

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

Lawmakers to hold first welfare scandal hearing

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Lawmakers to hold first hearing on welfare scandal after years of legislative inaction

For the first time since Mississippi’s multimillion welfare scandal broke in February 2020, lawmakers will hold a hearing about the misspending or of at least $77 million in federal funds intended to alleviate poverty in the poorest state in the nation.

Mississippi has earned broad national scrutiny in recent weeks for new revelations in what’s been called “the biggest public embezzlement case in state history” — wealthy, politically connected individuals misspent or personally benefited from millions in federal welfare funds that were supposed to help needy Mississippians.

The Tuesday morning hearing, the first major public hearing following years of calls for such a probe, will be a thoroughly partisan affair. While several notable Republican elected officials and their appointees, friends and campaign donors have been named in the scandal, the hearing will be hosted by the Mississippi Democratic Caucus with sponsorships from several progressive advocacy organizations.

“Mississippi Legislative Democrats will host the first in a series of public hearings on major reforms needed to fix the TANF program and address the millions of dollars in federal penalties the state faces due to years of rampant misspending of TANF funds,” an announcement for the hearing reads. “Impacted families and state and national experts will discuss how to repair Mississippi’s broken public assistance program and head off up to $100 million in federal penalties.”

Democrats enjoy little legislative influence at the state Capitol — as Republicans hold a three-fifths supermajority in both the House and the Senate — and the hearing’s testimony will not likely lead to substantive policy change. Several Democrats over the years have decried the welfare misspending and even filed dozens of bills to curb it in the future. But those talks and legislative efforts have been ignored and killed by Republicans.

Republican lawmakers, meanwhile, have not hosted a single hearing nor publicly investigated the misspending of funds by the state’s welfare department and its nonprofit partners. They have also not drafted or passed a single bill to address the welfare scandal’s stark revelations or increase state oversight over block grant programs.

It is unclear whether a single Republican lawmaker or elected official will attend the Tuesday hearing.

Any lawmaker can reserve a room at the Capitol and host public meetings. Official legislative committees may even subpoena experts or witnesses to testify, but such hearings are a rarity in Mississippi. The Tuesday hearing is not hosted by an official legislative committee, and all of the scheduled speakers will participate voluntarily.

Government officials used the money to lavish their family and friends, invest in a pharmaceutical start-up and make outrageous purchases, such as a new volleyball stadium, a horse ranch for a famous athlete, high-dollar rental agreements on properties that sat empty, lobbying contracts, luxury vehicles, religious concerts, expensive getaways and even a speeding ticket, according to a state auditor’s report.

READ MORE: Mississippi Today’s complete “The Backchannel” investigation

For years, advocates and political observers have posed several critical questions that have gone unanswered by lawmakers. Some of those questions include:

  • How, exactly, were welfare officials and nonprofit leaders able to get away with this misspending for several years?
  • Should Mississippi lawmakers strengthen oversight of the welfare agency to ensure misspending won’t continue? Should the welfare agency be removed completely from the purview of the governor?
  • Should federal TANF regulations be tightened to stop the possibility of state misspending?
  • Do we even know the full extent of the misspending? If not, why? Should lawmakers mandate better accounting practices at the welfare agency?
  • How badly were poor Mississippians left behind while all this misspending occurred, and how can they be better served by state leaders in the future?

The Tuesday hearing will be held at Mississippi State Capitol Room 216 at 10 a.m.

READ MORE: Officials stole taxpayer money from the poor. Mississippians deserve answers and accountability.

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

Data Dive: Mississippi’s TANF Work Program expenditures 2015-2022

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Data Dive: Mississippi’s TANF Work Program expenditures 2015-2022

Editor’s Note: Public reports regarding the state’s administration of the Temporary Assistance for Needy Families program give little detail as to how Mississippi uses the $86.5 million in federal grant funds it is allocated each year. To provide a deeper look at the spending, Mississippi Today pulled and analyzed all expenditures from 2015-2022 labeled “TANF Work Program” from the state’s public accounting database, called MAGIC, available through the state’s Transparency website. The organization also analyzed all federal financial reports for the program from 2015-2020.

There are several caveats to the data, but as lawmakers and policy experts research ways to improve this program’s operations, Mississippi Today is releasing the entirety of the data for the public’s use. If you have any questions or comments about the data, please email Anna Wolfe at awolfe@.org. For a downloadable PDF version of this report, click here.

Attempts by officials to quantify the misspending within the “Mississippi welfare scandal” appear in two main reports.

But the purchases they examined make up just a fraction of the state’s total welfare spending — leaving millions in spending a mystery to the public.

The state auditor’s 2019 Single Audit found misspending of $98 million in funds from the Mississippi Department of Human Services — the bulk of which were funds from the federal Temporary Assistance for Needy Families (TANF) program, but also included other federal grants: Supplemental Nutrition Assistance Program (SNAP), Child Care Development Funds (CCDF) and Social Services Block Grant (SSBG). The 2019 Single Audit is an annual report that examined spending in just that one year but extended into previous years in some cases, such as if the grant was a multi-year agreement.

MDHS commissioned a separate forensic audit that covered four calendar years, 2016-2019, and examined TANF spending exclusively. That report found misspending of $77 million. In the four fiscal years 2016-2020, Mississippi spent $317 million in federal TANF dollars.

In both cases, auditors questioned payments for multiple reasons — because the purchases didn’t comply with federal grant regulations, they constituted a conflict of interest or simply because they didn’t contain supporting documentation.

The primary difference in findings between the two reports comes from the fact the state Single Audit reviewed more grant spending than just TANF, and that the forensic audit attempted to comprehensively cover a four-year period. Other documents that help quantify the scandal include the initial indictments against six individuals in 2020, which alleged the of $4.15 million, and the civil suit MDHS is bringing against 38 individuals or companies, which alleges the defendants improperly received roughly $24 million.

Almost all of the identified DHS and TANF misspending occurred through subgrants that MDHS issued to outside organizations.

MDHS says it is addressing this by strengthening its internal controls and subgrantee monitoring. In late 2019 after the auditor’s investigation began, MDHS reinstituted a “Request for Proposals (RFP)” process for awarding TANF subgrants — a process the agency had not used since 2012, according to public records retrieved by Mississippi Today. The stricter rules have resulted in far fewer TANF dollars going out to service providers across the state.

The TANF program, a federal block grant to states, is best known for providing cash assistance — referred to as the “welfare check” — to very poor families. But the program gives states broad flexibility to spend the money in the ways they think will reduce or prevent poverty. Federal law does not require these the state to spend the money on evidence-based programs or to achieve specific desired outcomes. Across the country, states spend 80% of the money on things other than direct aid, on programs they call workforce training, child care, child welfare, out-of-wedlock pregnancy prevention and fatherhood. Most of these services are provided by organizations who vie for TANF subgrants to do the work.

But these grants do not make up the entirety of the TANF program in Mississippi.

The federal government allocates $86.5 million in federal TANF funds to Mississippi each year.

Unspent funds may roll over to the next year. In any given year, the state may be spending federal funds from previous grant years. The state must also put up a state match. Historically, the state has reported its college scholarship program as the bulk of its TANF state match.

From 2015 to 2022, Mississippi pushed about $156 million to subgrantees under the TANF Work Program, according to a Mississippi Today review of public expenditures, but that’s less than 40% of the roughly $418 million in federal TANF funds the state reported spending during those years. Just $36.5 million, less than 9%, went to cash assistance, per federal reports. So where did the rest go?

Using data from the state’s public accounting database, Mississippi Today found that between 2015 and 2022, MDHS spent more than $40 million on “Contractual Services” labeled under the “TANF Work Program.” This spending rose dramatically during the time of the corruption, from $162,077 in 2015 to $6.4 million in 2016 and $8.4 million in 2017. The agency has since quelled this spending since the scandal broke, reducing contractual services to $1.6 million in 2022.

Mississippi Today analyzed all expenditures labeled “TANF Work Program” under “Functional Area” in the state’s public accounting database, MAGIC, available through the state’s Transparency website, in state fiscal years 2015 to 2022.

Payments made under TANF subgrants — the subject of ongoing criminal investigations — are labeled under “TANF Work Program” and are reflected in the following figures.

There are some caveats to the data. Mississippi Department of Human Services told Mississippi Today that not all purchases made with federal TANF funds, such as cash assistance payments, are labeled this way and not all are retrievable through the state’s public accounting database. Additionally, some limited other grants are “charged” to the TANF Work Program, MDHS said, so these expenditures could reflect other grant spending. For these reasons, the agency said it would be impossible to compile an accounting of federal TANF funds using publicly facing data.

Sept. 19, 2022 email from MDHS:
 
6.) Generally, how can I match up the funding categories in the ACF reports with expenditures from the state? 

You can't. Federal reporting requires cost collection fields from MAGIC that are not available in Transparency. 

At the bottom of this report is Mississippi Today’s full list of questions to MDHS and the agency’s answers. While recognizing imperfections with the data, Mississippi Today the TANF expenditures available in the public database to the TANF expenditures Mississippi reported in financial reports to the U.S. Department of Health and Human Services’ Administration for Children and Families (ACF) as a rough overview. State and federal fiscal years differ by about three months, so annual totals are not a perfect comparison. Additionally, the federal reports are typically behind by two years, so the most recent available federal ACF report is for the year 2020. Mississippi reported the highest expenditures of TANF funds on record in 2018, during the height of the welfare scandal.

Mississippi spent anywhere from $17 million (2020) to $52 million (2018) each year under TANF subgrants to outside organizations, according to Mississippi Today’s analysis of expenditures labeled under the “expense items” called “Grantor Payments Nontaxable” and “Transfer to Subgrantee” in MAGIC.

This spending is the primary subject of state audits and independent forensic audits conducted in the last two years. Mississippi Today’s analysis of MAGIC data shows Mississippi paid the two “Families First for Mississippi” nonprofits at the center of the scandal, Mississippi Community Education Center and Family Resource Center of North Mississippi, $55.8 million and $41.4 million in TANF funds, respectively, from 2015 to 2020. The two nonprofits did not receive any TANF funds in 2021 or 2022. Because of missing documentation, auditors say there are still roughly $40 million in purchases from MCEC that have not be examined.

The nonprofits are listed as “Vendors” in MAGIC. TANF subgrantees aren’t the only vendors who receive payments labeled “TANF Work Program” under “Functional Area” in the state expenditure database. Other governmental divisions, consulting firms, tech companies, accountants, a law firm and hotels are also some of the vendors that receive payments labeled “TANF Work Program.”

After MCEC and FRC, the next 20 highest paid “Vendors” for expenditures labeled “TANF Work Program” from 2015-2022 were Mississippi Alliance of Boys & Girls Club ($29.5 million), SPAHRS Payroll & Travel ($21.7 million), Jobs Bank Account ($7 million), Mississippi State University – MAFES ($6.1 million), Department of Employment Security ($5.8 million), Cambria Solutions Inc. ($5.2 million), Institutions of Higher Learning ($5 million), University of Mississippi-Accounting Office ($4.9 million), Midtown Partners ($3.8 million), Community College Board ($3.7 million), Mississippi State University ($3.7 million), Mississippi Children’s Home Society ($3.5 million), YMCA Association Metro Jackson ($2.8 million), Mississippi State University ($2.8 million), Three Rivers Planning & Development District ($2.8 million), Save the Children Federation ($2.6 million), Jobs for Mississippi Graduates ($2.4 million), Heart of David Ministry ($2.1 million), Mississippi State University ($2 million), Boys & Girls Club of Central Mississippi ($2 million). Some vendors, like Mississippi State University, have several vendor profiles in the state’s accounting database, which is why they may appear multiple times.

Payments of $62,727 to Pigott Law Firm, the private firm MDHS hired to bring the civil suit against people who improperly received welfare funds, were labeled under “TANF Work Program” in 2022.

The Office of the State Auditor also received payments labeled under “TANF Work Program” in 2018 ($137,568.67), 2019 ($276,997.26), 2020 ($420,692.81), 2021 ($420,692.81) and 2022 ($394,184.70). The office did not receive any of these payments from 2015-2017.

According to the ACF spending reports Mississippi sent to the federal government, the state spent a total of $104.4 million in federal TANF funds in 2018 and $55.1 million in 2020.

Comparing total spending to the subgrantee payments, the state spent $52 million in 2018 and $38 million in 2020 on things other than subgrants to outside organizations.

The state spent $6.1 million and $3.7 million in those years on direct cash assistance to needy families.

The ACF spending reports includes payments labeled “Child Welfare Services” — $20.8 million in 2018 and $21.8 million in 2020. Mississippi Department of Human Services confirmed it has been using a large chunk of its TANF fund to supplement the budget of the Mississippi Department of Child Protection Services, the agency tasked with overseeing the state’s foster care system and investigating child abuse and neglect. The agency has not stated how these dollars are utilized at CPS — whether they are used on salaries for caseworkers, for example, or on contracts with family unification agencies.

MDHS says it is currently awarding subgrants of $34.5 million each TANF grant year, spending $4.1 million on cash assistance and transferring $30 million to child welfare, leaving about $18 million in additional available federal funds on the table.

While MDHS said it spent $62.3 million in TANF funds in 2022, expenditures in the public database only reflect expenditures labeled “TANF Work Program” totaling $21.9 million. It explained that the remainder, $40.4 million, reflects payments that are not retrievable through Transparency, such as the payments to child protection services. To explain what this additional spending would be, MDHS only gave the example of cash assistance payments — which they said total $4.1 million — and “work related expenses on behalf of our clients.” MDHS did not provide any more information about how it spends the money.


2015-2020 ACF and MAGIC comparison

In federal ACF spending reports from 2015 to 2020, Mississippi reported spending $418 million in federal TANF funds. For this analysis, Mississippi Today only looked at expenditures, excluding transfers of TANF funds to the Child Care Development Fund (CCDF) or Social Services Block Grant (SSBG), which have also varied greatly from year to year.

Of the $418 million, $115 million was reportedly spent on “Child Welfare Services” — likely reflecting the transfers to CPS. It does not appear these transfers are reflected in expenditures labeled “TANF Work Program” in MAGIC. Excluding the transfers to child welfare, Mississippi reported spending $303 million in federal TANF funds from 2012-2020. The state’s public accounting database only reflects TANF spending of $221 million, leaving around $80 million in TANF funds that cannot be identified in the state’s public accounting database.

MDHS told Mississippi Today that cash assistance payments to TANF clients are not available in the state’s public accounting database. Mississippi reported to ACF spending $36.5 million between 2015-2020 on basic cash assistance, leaving at least $45.5 million in additional TANF spending during those years a mystery to the public.

According to interviews, MDHS began offering $250-a-month transportation stipends to TANF clients in the mid-2000s, but this spending is not broken down or identifiable in either the ACF reports or on Transparency, according to MDHS. It’s unclear how much this service is offered today.

When Mississippi Today requested from MDHS in May 2020 all TANF expenditures for fiscal year 2020, the agency provided two spreadsheets with information from the state’s accounting database. The spreadsheet of payments to vendors are coded as “TANF Work Program” under “Functional Area” — similar to what is available on Transparency — and contained the same kinds of vendors analyzed here. A separate spreadsheet contained the “EPAY” data — “EBT – Family Assistance,” “Children Assistance,” and “Other Assistance” — that is not retrievable by pulling “TANF Work Program” expenditures on Transparency. For a roughly seven-month period, the total issued through EPAY was about $4 million. That included roughly $1.3 million labeled as transportation — “PAY TR TRANS”, “PAY TRANSPORT” and “TRANS NOT WORK.”




“Expense Type & Item” comparison 2015-2022

A comparison of the “Expense Type” and “Expense Item” of “TANF Work Program” expenditures in MAGIC from year to year shows a large variation in program operations.

From 2016-2020, the largest payments to subgrantees were labeled in the “Transfer to Subgrantee” category. Today, the state is recording the bulk of these payments not as “Transfer to Subgrantee” but as “Grantor Payments Nontaxable.” For the purpose of this analysis, Mississippi Today is combining and considering both “Transfer to Subgrantee” and “Grantor Payments Nontaxable” — which, according to Mississippi Today’s review, typically go to TANF subgrantee organizations — as TANF subgrant payments.

TANF subgrants recorded in MAGIC have declined from $52 million in 2018 to $15.7 million in 2022, which tracks with the state cutting funding to MCEC and FRC in 2020, as well as imposing stricter requirements on TANF subgrants. Similarly, the state isn’t spending as much on contractual services ($8 million in 2018 versus $1.6 million in 2022) or on travel ($367,767 in 2019 versus $15,864 in 2022).

Salaries and wages for the program, however, have increased significantly since the scandal occurred.

In 2016, when John Davis became director and began moving to privatize functions of the agency, such as the child support enforcement division, salaries under the TANF program decreased from $5.3 million in 2015 to $1 million in 2016. While there wasn’t an acknowledgement the agency was “privatizing” the welfare program, MDHS began relying more and more on employees of the private “Families First” nonprofits to perform agency functions. The nonprofits were hiring away former employees of MDHS, but officials like Davis treated the state agency and private nonprofits as one in the same. Since the scandal broke and Families First shuttered, salaries charged under TANF have increased from less than $1 million in 2019 to nearly $2.5 million in 2022.

MDHS explained that during the time of the scandal, "additional funding was available from another source" to pay for salaries associated with the TANF Work Program and that when that funding ended, the salaries were charged back to TANF.



Vendors under the TANF Work Program 2022

MDHS paid 81 vendors a total of $21.9 million under the "TANF Work Program" in 2022. From 2015-2022, MDHS paid nearly 400 different vendors. The table below includes all the vendors who received at least $1,000 under the “TANF Work Program" from 2015-2022.


Current TANF subgrantees

According to a spreadsheet MDHS provided Mississippi Today, the agency awarded $36.7 million worth of TANF subgrants for the 2021 grant year. The agency has not awarded grants for 2022, which has ended. Based on the dollar amount spent in each category, it appears MDHS is placing more priority on workforce development ($14.9 million) and after school programs ($13.7 million) than parenting initiatives ($8.1 million), which was the primary function of Families First for Mississippi.

There is not a public-facing repository of information or data regarding the efficacy or outcomes of these programs.

Below are the answers MDHS provided Mississippi Today regarding data retrieval from Transparency. For several of the questions, MDHS did not provide a response.

MS TODAY questions (italics) and answers (bold) provided by MDHS on Sept. 19, 2022:

I looked at every expenditure in MAGIC labeled “TANF” in the “Functional Area” category. Here are the total expenditures in MAGIC from 2015-2022: 2015 ($12,929,221.02), 2016 ($26,406,682.63), 2017 ($42,461,946.71), 2018 ($63,755,024.00), 2019 ($48,772,637.14), 2020 ($26,406,682.63), 2021 ($18,780,281.73), 2022 ($21,869,598.21).
The amounts in MAGIC are far lower than the amount of TANF we reported spending to the feds. I realize MAGIC uses state fiscal year and the ACF reports are probably by federal fiscal year, but that wouldn’t account for the drastic differences between the total amounts labeled TANF in MAGIC and the figures we report to the feds. ACF “Federal Funds – Total Expenditures” highlighted next to the MAGIC figures below:
2015: $12,929,221.02 ($46,124,884)
2016: $26,406,682.63 ($49,844,769)
2017: $42,461,946.71 ($83,633,112)
2018: $63,755,024.00 ($104,424,460)
2019: $48,772,637.14 ($79,221,691)
2020: $26,406,682.63 ($55,119,534)
The ACF reports are very outdated, which is why it’s been so hard to look at current spending in the last two years. When the scandal broke in early 2020, the most recent report was from 2018. But in all the expenditure reports/subgrantee data I’ve gathered from the agency over the years, I’ve never seen enough to add up to the totals we report to the feds.
I know we transfer a good bit from TANF to CPS every year, so I even accounted for that in my analysis, in case those inter-agency transfers don’t appear on MAGIC.
The figures below are the ACF “Total Expenditures” minus “Child Welfare” (which I’m guessing are the CPS transfers — although the amounts under “Child Welfare” in the ACF reports, ranging from $12m to $27m, are still less than what CPS recently told me they get from TANF every year):
2015: $29,277,558
2016: $33,777,260
2017: $70,774,040
2018: $83,666,783
2019: $52,133,231
2020: $33,363,256
Comparing the amount of federal TANF dollars (minus “child welfare”) we reported spending to the federal government and the amount of TANF expenditures available on MAGIC, the difference is still as much as $28 million in some years.
1.) How do TANF Expenditures appear on MAGIC? 
TANF Expenditures are captured in MAGIC using a system assigned Grant Number. 
 2.) Are all purchases made with TANF funds labeled as TANF in "Functional Area"? 
No. A functional area represents an organizational division within the agency, and not a grant. 
 3.) If not why? 
TANF expenditures may be charged to other organizational divisions, and would not appear in the TANF Work Program Functional Area. For example; TANF Assistance payments are charged to the "Assistance Payments" functional area. 
 4.) And how would I be able to view TANF expenditures then? 
The public view on the Transparency Web Site does not provide the Grant Number / Description therefore you will not be {able }to categorically identify TANF specific charges using Transparency. 
 5.) If a purchase is labeled TANF under "Functional Area" does that mean it was funded with TANF funds? 
No, there are other Grants that are charged to this functional area. For example, Sexual Risk Avoidance Grant charges appear under this functional area also.  
6.) Generally, how can I match up the funding categories in the ACF reports with expenditures from the state? 
You can't. Federal reporting requires cost collection fields from MAGIC that are not available in Transparency. 
7.) How do TANF cash assistance payouts appear in MAGIC? 
TANF Assistance payments are charged to the "Assistance Payments" functional area, using a Special Fund Type called a Bank Account Fund. Expenditures charged to this fund type are not available in Transparency.  
8.) The most recent federal caseload data suggest we may be bulking up the cash assistance side of the program, but where is that reflected in agency spending/expenditure reports? 
See answer to #7 
9.) There is a category in MAGIC called "EBT-Family Assistance" but take a look at the totals in this category for each year:
2015: $0
2016: $0
2017: $0
2018: -$27,223
2019: -$121,654.16
2020: $0
2021: $0
2022: $1,955,000
a. Surely some people received cash assistance in these years, I hope, so why does this category in MAGIC appear so low? 
If Transparency provided visibility of the Bank Account Fund type, then we would see assistance payments appear under this Commitment Item. (See also answer to #7) The "EBT-Family Assistance" Commitment Item is a category that we charge both SNAP and TANF assistance payments to. However, you are not seeing the payments, you are only seeing some relatively immaterial adjustments made through Journal Entries which are being charged to the MDHS Grant Fund. 
b. What do these figures, especially the negative figures mean? 
As stated above, you are not seeing the payments, you are only seeing some adjustments made through Journal Entries which appear in the Grant Fund. 
c. Why did it jump so drastically in 2022? 
The $1.9 million in 2022 were expenditures for the Pandemic Emergency Assistance Fund (PEAF), which was a new federal grant, and not a part of our normal payments to clients. 
10.) What are the payments to the vendor JOBS BANK ACCOUNT? 
The "Jobs Bank Account" is a checking account and is primarily used to pay work related expenses on behalf of our clients. We deposit funds into this account and then write checks to cover the work related expenses. It is also used as a clearing account to wire funds to the vendor who handles TANF Assistance Payments and TANF Work Programs. 
11.) What are these Jobs Bank Account Payments, who gets them, and why did the amount vary so drastically between 2020, 2021 and 2022? The amount jumped from just $685.75 in 2021 to $2 million in 2022? What explains this? 
See answer to question 9.a. and 9.c. The Pandemic Emergency Assistance Fund ($1.9M) payments moved through the JOBS BANK ACCOUNT, hence the increase for 2022. 
12.) What is the "EBT-Family Assistance - 67090000" and "Children Assistance - 67055000" and why are the amounts so low?  We spent just $80 on Children Assistance in 2022, compared to $1.4 million in 2015. 
"EBT-Family Assistance - 67090000": See answer 9.a. 
"Children Assistance - 67055000: See answer to 9.a.
The amounts for 2015 are payments to clients through the JOBS Bank Account using State Funds for transitional transportation. Typically this is paid for from TANF Federal dollars, but in 2015 State Funds were needed for the TANF Maintenance of Effort. It was necessary to move these funds to the JOBS Bank Account, from sources that didn't involve the Bank Account Fund, and these fund sources appear in Transparency. 
13.) I don't see anything in MAGIC that appears to represent the $250 transportation vouchers that MDHS offers. Where are the transportation vouchers reflected in agency spending? 
These expenditures are found in the Bank Account Fund, see answer #7. 
14.) My next question is about the administrative side of TANF. In the expenses labeled "TANF" in MAGIC, the "Salaries & Fringe Benefits" category has changed drastically over the years - from $5 million in 2015 to less than $1 million in 2019 to now up to nearly $2.5 million in 2022. 

During the timeframe where there was a decrease in the use of TANF funds for Salaries & Fringe Benefits, additional funding was available from another source. When this funding ended some of the salaries migrated back to TANF. 
a. What does this mean for the TANF program? 
b. Who are these employees and what are they doing? 
c. The amount of TANF going to payroll in 2022 has more than doubled since 2019, but is half the amount in 2015. What is the ideal size of the program staff? 
15.) MDHS used to spend between $10,000 and $140,000 in TANF funds on equipment every year, but we haven't spent any on equipment in 2021 and 2022. Our TANF commodities and travel spending has similarly declined.
a. How was this spending quelled? What has been the effect on the agency or program? 
b. Ideally should any TANF funds be used on hotels, food, office furniture, etc.? 
c. We still spend some of the money this way. Is that allowed and under what circumstances? 
16.) Contractual services, and especially professional fees, have declined significantly as well. Did current MDHS leadership find these contracts unnecessary? Or were they moved to a different division in the agency? 
17.) "Transfer to Subgrantee" vs. "Grantor Payments Nontaxable"

The Department of Finance and Administration required that the agency change the General Ledger Accounting Codes used when making payments to our subgrantees resulting in the expenditures appearing under different Commitment Items. 
18.) I assume we're spending a lot less on subgrants because of what happened, but how does the agency plan to rectify this moving forward so that the money is being pushed out to valuable services across the state?
Should be answered by the program 
19.) Who are the following vendors and/or what are they doing for the TANF program 
Mississippi Children's Home Society ($2.8 million) 
Institutions of Higher Learning ($1.6 million) 
Dept. of Employment Security ($677,000) 
Community College Board ($500,000) 
Guidesoft Inc. ($348,000) 
Strategic Solutions for Families ($145,000) 
United Family Life Center ($83,000) 
Rose of Sharon ($77,000) 
SASSI Institute ($49,500) (I know this is the drug testing vendor, but I don't see it as a vendor in every year, so I'm curious about that. Also, I thought clients had to pay to get drug tested? Do taxpayers also pay for this?)
Georgia Department of Human Services ($24,700) 
Deer Oaks EAP Services ($8,850) (This is the Division's share of the Employee Assistance Program, and is an employee benefit not a client assistance payment.) 
Med Screens ($1,900) 
Random small payments to various county boards of supervisors. 
20.) Again, we spent just $21.9 million, according to MAGIC, in 2022 on the TANF program, which is a $86.5 million-a-year program. How is that possible?
The $21.9 million is understated, and the actual amount for State FY 2022 was $62.3M. See answers to questions 1-3 & 7 for an explanation of why these expenditures would not be showing up in Transparency under the TANF Work Program 
21.) Generally, what does MDHS hope to see for the TANF program in the future? Mississippi has so much more federal money for this program than we're currently spending. How does the state plan to best utilize these funds moving forward? 
22.) Also, recent caseload data shows there were 256 adult recipients on TANF in November 2021, then 1,809 in December 2021 (the month Mississippi offered $1,000 bonuses to TANF recipients), then 166 in January 2022. How did that happen? How were that many more applicants able to qualify (for a program with such strict eligibility) and why did they fall off the rolls so fast? 

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

Wrestler alleges Gov. Bryant cut welfare funding over politics

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Retired wrestler says GOP Gov. Phil Bryant cut welfare funding to nonprofit because of Democratic support

A former professional wrestler and defendant in the Mississippi welfare scandal is alleging that he personally witnessed Republican Gov. Phil Bryant instruct an appointee to cut welfare funding to a nonprofit because its director supported Democrat Jim Hood in the 2019 governor’s race.

The allegation that Bryant leveraged his control of welfare spending to punish a political opponent comes in a two-year-old federal court filing released Friday after Mississippi Today successfully motioned to unseal the case.

The account echoes a similar allegation Mississippi Today published just over a week ago that the same nonprofit was forced to fire Hood’s wife in order to keep receiving welfare grant funding.

Former WWE wrestler Ted “Teddy” DiBiase Jr. had received millions of federal welfare dollars to conduct various anti-poverty services for two private nonprofits when suddenly, the state allegedly pulled the program.

Federal authorities, who are attempting to seize DiBiase’s house because of his alleged role in the welfare scheme, say the Mississippi Department of Human Services “abandoned” the program and the wrestler failed to perform the work under his contracts. The federal complaint against DiBiase mirrors new federal charges that former welfare director John Davis pleaded guilty to on Thursday.

But what actually happened, DiBiase says, is that in 2019, Gov. Bryant directed Davis to discontinue the agency’s partnership with nonprofit Family Resource Center of North Mississippi because of its connection to Democrats in the state. 

Family Resource Center director Christi Webb was an outspoken supporter of her friend and then- Jim Hood, a Democrat who was running against Republican then-Lt. Gov. Tate Reeves for governor in 2019. That year, the term-limited Bryant, who still oversaw the welfare agency, also worked hard on the campaign trail to get Reeves elected to the Governor’s Mansion.

FRC was one of two nonprofits that funded the wrestler. DiBiase said his program, called the “RISE” program, was then moved out from under the private nonprofits to the state agency.

“Shortly before John Davis retired in mid-2019, he indicated … that the RISE program would be taken ‘in-house’ and overseen at MDHS as opposed to being overseen by FRC or MCEC,” reads DiBiase’s Aug. 10, 2020, answer to the federal complaint for forfeiture against him. “Upon information and belief, this occurred as a result of the Governor directing John Davis to cease funding and working with FRC because FRC’s Executive Director, Christi Webb, was openly supporting Jim Hood in the race for Mississippi Governor.”

“The claimant, who witnessed Bryant give that direction to Davis, was subsequently informed by Davis that his contracts with FRC would be moved to MCEC,” the filing continued. “This did not affect Claimant’s performance under the contract.”

Former Gov. Phil Bryant, left, and welfare grant recipient and former WWE wrestler Ted “Teddy” DiBiase pose for a photo.

Teddy DiBiase made this claim in his response to a federal forfeiture complaint the U.S. Department of Justice filed against him in 2020 alleging he entered fraudulent contracts in order to obtain welfare funds. Mississippi Today motioned to unseal the case on Aug. 18. 

U.S. Magistrate Judge Keith Ball dismissed the U.S. Department of Justice’s initial complaint against Teddy DiBiase in 2021, after his lawyers successfully argued that the complaint failed to allege a , and allowed the government to enter an amended complaint in August. Teddy DiBiase argues that he completed the work the nonprofits paid him to conduct, therefore earning the money legally.

Teddy DiBiase Jr.’s allegation against Bryant adds to claims that the former governor used his power to influence welfare spending, not just to benefit political allies, but to punish a Democratic opponent.

Officials have not charged Bryant civilly or criminally.

The state prosecutor who secured a guilty plea from Davis last week said investigators have their sights set on higher level officials as the welfare probe continues.

“We’re still looking through records and text messages as we continue to move up,” District Attorney Jody Owens said after Davis’ guilty plea Thursday. “We also continue to work with the federal authorities in Washington and in Mississippi. John Davis is critical because the ladder continues to move up.”

Mississippi Today first reported a similar allegation from Webb that a local lawmaker had threatened her on Bryant’s behalf to fire Hood’s wife Debbie Hood in order to keep receiving funding from the state. Webb said she relayed the to Debbie Hood, who agreed to resign. Hood’s campaign manager Michael Rejebian said Debbie Hood confirmed the account. Webb also alleged that she eventually refused to continue paying the DiBiases, which angered Davis.

READ MORE: Welfare defendant alleges Gov. Phil Bryant used federal funds to hurt political rival

Family Resource Center’s original founder, Cathy Grace, was also running as a Democrat in 2019 for a local House seat against Republican Rep. Shane Aguirre, R-Tupelo, who worked for FRC as an accountant in charge of reviewing invoices from its partners. Aguirre told Mississippi Today he did not work on or review the DiBiase projects.

Teddy DiBiase Jr. is the son of WWE legend Ted “The Million Dollar Man” DiBiase Sr. His younger brother, Brett DiBiase, also received welfare funds and pleaded guilty to his role in the fraud scheme in 2020. Through various contracts with the men, as well as Ted DiBiase Sr.’s Christian ministry, the DiBiase family received over $5 million in welfare funds.

In the 2020 ongoing forfeiture complaint against Teddy DiBiase, federal authorities are attempting to seize his $1.5 million French-colonial lakeside home in the Madison community of Reunion, Clarion Ledger first reported. Prosecutors say he purchased the property with money obtained from the state’s welfare program — a total of over $3 million, according to the state auditor. At the time in 2020, the complaint contained details of an ongoing investigation.

Davis pleaded guilty on Sept. 22 to two federal charges — one count of conspiracy to commit wire fraud and one count of — related to these payments to Teddy DiBiase. Mississippi Today identified one of the four unnamed alleged co-conspirators in the charges against Davis as Teddy DiBiase. 

Teddy DiBiase Jr. and Ted DiBiase Sr. have not publicly faced criminal charges, though they are targets of an ongoing state civil case that attempts to recoup misspent welfare funds.

All of the charges are part of a wider scandal that resulted in the misspending of $77 million in federal welfare funds. The money flowed through Family Resource Center of North Mississippi and another nonprofit Mississippi Community Education Center, founded by defendant Nancy New. New, who has pleaded guilty to bribery and fraud, was a friend of Bryant’s wife.

The two nonprofits were running a statewide program called Families First for Mississippi.

Filings in the federal forfeiture case against Teddy DiBiase Jr. outline several alleged events:

June 2017: Teddy DiBiase’s company Priceless Ventures signed a contract with FRC and MCEC for $250,000 to “act as a ‘leadership training coordinator’” for Families First for Mississippi. FRC paid the retired wrestler in full on June 1, 2017, the first day of the contract period.

August 2017: FRC paid Ted DiBiase Sr. $250,000, near the beginning of a year-long contract to be a motivational speaker for Families First.

May 2018: Teddy DiBiase’s company Priceless Ventures signed a contract with FRC for $500,000. MCEC paid $500,000 on May 17, 2018. He “performed no significant work under this leadership outreach contract,” the complaint alleges, “but instead merely provided one or two training sessions — an immaterial amount of work that fell far short of what the contract required.”

July 2018: FRC paid Priceless Ventures nearly $500,000 in emergency food assistance funds on July 13, 2018, for a contract that was supposed to run from May 2018 to September 2018. “The only work DiBiase Jr. completed on this contract was to send a list of food pantry locations to FRC,” the filing alleged.

October 2018: Priceless Ventures signed a $130,000 contract with MCEC to create a personal development training program. MCEC eventually paid the company $199,500 under this contract.

December 2018: MDHS signed a $48,000 contract with Brett DiBiase to conduct training sessions on opioid addiction from December 2018 to June 2019. 

February 2019: Brett DiBiase began treatment at a luxury drug rehabilitation center in Malibu called RISE, where he would receive therapy for four months. Davis directed MCEC to make four $40,000 payments to the facility.

The federal complaint alleges that Teddy DiBiase used the money from the Family Resource Center contracts to make a more than $400,000 down payment on his Madison home. Teddy DiBiase denies the assertion that he failed to complete the work for which he was hired.

The federal complaint also uses Davis’ text messages to establish the close relationship that the government bureaucrat developed with the DiBiase family, such as Davis telling his administrative assistant that he “loves B. DIBIASE like his own child,” the amended complaint reads. Davis also pleaded guilty last week to charges related to welfare payments to Brett DiBiase and to pay for his drug rehab stint.

As Mississippi Today previously reported, Davis and Teddy DiBiase swapped Christian devotionals, traveled out of state and exercised at the gym together. Davis frequently texted the older brother, “I love you.” The welfare director flew across the country to visit Brett DiBiase while he was in drug rehab, discussed his treatment options with a specialist and called him the “son I never had.” When not together, they shared long, late-night phone calls, phone records show.

While Teddy DiBiase Jr. was never a payroll employee of the state welfare agency — only a contractor of the welfare-funded private nonprofits — he occupied one of the largest offices inside the private downtown high-rise where Davis relocated MDHS offices after he became director.

Under one of the contracts, Teddy DiBiase was supposed to accomplish several things, including meeting “the multiple needs of inner-city youth”; identifying services for “successfully linking the youth served with opportunities for self-sufficiency and independence”; providing feedback about “parents as they pursue skill-building and education that lead to better jobs”; and helping employers on “improving opportunity and outcomes in the workforce.”

Ted “Teddy” DiBiase Jr. appears in a 2019 internal Mississippi Department of Human Services message to agency workers.

In Mississippi, nearly one in five people live in poverty. Average wages in the state, as well as the state’s workforce participation rate, are among the lowest in the nation. Teddy DiBiase’s contract illustrates both the state’s frenetic emphasis on workforce development and its disregard for whether the programs it supports actually produce the desired outcomes.

In this case, the U.S. Department of Justice contends the actions were illegal.

Davis and DiBiase Jr. entered into the workforce-related contracts, according to the federal complaint, “even though DAVIS and DIBIASE JR. knew, at the inception of the contract … that, in fact, no significant services would be performed under the contract and that the actual purpose of entering into the contract and disbursing funds under it was to enrich DIBIASE JR. by stealing and misapplying funds under the federally-funded contract.”

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

Emails: DHS pushed to limit welfare misspending probe

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‘A whitewash’: Emails show MDHS pushed to hamstring probe into welfare misspending

The Mississippi Department of Human Services hired an accounting firm, using welfare dollars, to ostensibly get to the bottom of who stole or misspent millions in federal grant funds and try to recoup them.

But never-before-published emails Mississippi Today obtained through a records request show Gov. Tate Reeves’ appointed MDHS director pushed to limit who and what the hired forensic audit could examine. And he tried to keep the state auditor and other law enforcement agencies out of the mix.

“This is nothing but a whitewash to show that MDHS was not complicit in this problem, except for (former MDHS Director) John Davis,” a deputy in state Auditor Shad White’s office wrote to White in April of 2020 after reviewing the proposal MDHS drafted to solicit an auditing firm.

White’s office was to be a “third party” to a contract with a forensic auditor. But MDHS pushed to limit the Office of the State Auditor’s involvement and even at one point omitted language requiring the independent auditor to contact OSA or other law enforcement if it spotted potential crimes — a standard practice in audit contracts.

Gov. Reeves said he appointed MDHS Director Bob Anderson, a former prosecutor, in March of 2020 to clean up the welfare agency. Weeks into Anderson’s administration, he clashed with White over the forensic audit proposal, records show. White pushed to expand the breadth of the review and provide more OSA involvement.

“We should be on the same side – the side of the taxpayers, trying to find the misspending that happened at DHS and all the people responsible,” White wrote to Anderson in April of 2020 during heated negotiations about the forensic audit proposal. “In my view, you are either for an audit that will reveal those things, like the audit we have proposed, or you are not. Your proposal as it stands would waste taxpayer money and not reach the issues that need to be reached.”

Neither Reeves nor Anderson would agree to an interview about the forensic audit issues or provide comment in response to Mississippi Today’s findings.

READ MOREWelfare head says surprise subpoena led to attorney’s firing. Emails show it wasn’t a surprise

White, who is involved in separate state and federal criminal investigations into the welfare scandal, appeared to win some concessions on the final forensic audit contract. At the same time, he objected to MDHS having access to the auditor’s office’s workpapers.

But in the end, the prominent national accounting firm Clifton Larson Allen hired for the audit noted it was limited — and in some cases “severely limited” — in what and whom it could examine in its probe and said it could likely have found more misspending if allowed freer rein.

MDHS recently lamented the forensic audit’s limitations, and attempted to lay those limitations off on Auditor White’s office. But communications between the two during spring of 2020 indicate MDHS pushed for severe limits on the probe.

“If I were you, I would want to know where the misspending happened and who is responsible, not spend my time negotiating downward an audit with OSA,” White wrote to Anderson. “If you want to spend DHS money on this audit so that the current staff can avoid looking bad, without you discovering who was involved with the misspending, then you will bear the responsibility for that and any additional misspending that happens going forward. I will not participate.”

Gov. Reeves, who oversees MDHS and appointed Anderson, recently said the CLA forensic audit is the lodestar for the state’s against numerous people and businesses to try to recover some of the at least $77 million in misspent welfare money. He also made clear he’s calling the major shots at MDHS when it comes to the lawsuit.

Reeves fired the attorney MDHS had hired to recover the money after the attorney went beyond the scope of the forensic audit. The attorney tried to subpoena records about possible involvement of former Gov. Phil Bryant and his wife, former NFL football star Brett Favre and the USM Athletic Foundation — many of whose board members are large campaign donors and political supporters of Reeves. Reeves said attorney Brad Pigott should have stuck to the metes and bounds of the forensic audit, and accused him of having a political agenda and seeking the media spotlight when he went beyond it.

READ MOREGov. Tate Reeves says ousted welfare scandal lawyer had ‘political agenda,’ wanted media spotlight

White has criticized Pigott’s firing and said the state should seek to recover all the misspent money it can. He said he will make sure state and federal criminal investigators have the records Pigott attempted to subpoena.

At the time MDHS was preparing the forensic audit proposal request, White was already gearing up to release a report in May of 2020 that questioned $94 million in MDHS spending and illustrated systemic failures of the welfare department.

White’s audit found that the welfare department continually violated the law by spending funds from a federal program called Temporary Assistance for Needy Families, a federal block grant notorious for being used as a slush fund in some states on projects that did not fulfill the purposes of the grant or did not serve the needy.

But the forensic audit by an independent firm, not White’s report, would be the document the state would use to determine who to bring civil litigation against to recoup misspent funds.

Some people, including at least one criminal defendant arrested in February of 2020, expected a forensic audit to significantly contradict White’s narrative about widespread misuse. An email White sent his deputies alludes to the perception some had that the auditor’s office had an agenda in going after MDHS.

“I’m also tempted to tell them this is a great way to determine if we’re auditing to ‘frame’ a ‘narrative’ or not: just let a private CPA have broad leeway to confirm or disprove our findings,” White wrote.

Emails Mississippi Today obtained now reveal that MDHS’s current leadership may have attempted to place its thumb on the scale to mitigate exposure for the agency as a whole, including dozens of employees who reviewed expenditures and contracts.

“To be completely honest — this is a half-hearted attempt to complete a forensic audit that has completely erased our input,” wrote Stephanie Palmertree, financial and compliance audit director for the state auditor’s office who headed up much of its MDHS probe. “And seeing how MDHS is defending the clearly fabricated contract procurements that they have completed, I’m not sure I would trust the current staff to choose an independent auditor. This is a PR attempt at making MDHS look like they did all they could.”

READ MORE: 7 baffling things about Mississippi’s welfare fraud scandal case

As part of the discovery process in the civil case, Mississippi Community Education Center, the nonprofit founded by criminal defendants Nancy New and her son Zach New, has asked for communication from MDHS related to the forensic audit to examine how it may have artificially targeted select vendors. 

In his email response to a missive from White in April 2020, Anderson said, “My objective is and has been since I arrived here at MDHS to ferret out the misspending and the responsible parties … We’re trying to fashion an RFI (Request for Information) that captures the agreement between both the agencies and that defines the parameters of what will be an expensive and lengthy audit undertaking.”

The contract with CLA was for up to $2.1 million. But according to a review of expenditures on the state’s transparency website, MDHS has only paid the firm less than $800,000, one of few times the agency has appeared frugal with spending federal welfare dollars on things other than poor people.

At one point, in response to White’s office suggesting changes to the audit proposal, Anderson said, “Much of what we took out relates to the criminal investigation … which is not the purpose for this forensic audit since the criminal case is already indicted …”

White took umbrage with this and responded: “You are aware that the statement ‘the criminal case is already indicted’ is incorrect; I’ve told you and the public that the case is still being investigated. More indictments are possible. Even if the investigation were not still ongoing, one would want criminal activity reported to law enforcement.

“… I’m not sure why you removed both your previous language and OSA’s language on reporting criminal activity,” White wrote to Anderson. “… Also, there is some confusion about what a ‘forensic’ audit is. The AICPA (American Institute of Certified Public Accountants) notes that the term forensic means to be suitable for use in a court of law. Removing the language that says this audit may serve as evidence in a legal proceeding is to remove part of the audit’s very purpose.

“The same could be said for removing the language about how auditors may be called to testify in court,” White wrote. “And the same could be said for removing language requiring misappropriations to be ‘listed by individual, as could be proven in a legal proceeding.’ This audit should trace expenditures to completion and show, with findings that could stand up as evidence in court, who directed that spending, whether those people are inside or outside DHS.”

Asked for comment about limitations on CLA’s forensic audit, a spokesman for White’s office said, “We will let CLA’s audit speak for itself on areas where CLA believed they had adequate information to conduct the audit and where CLA was limited.”

In its audit reports delivered in September of 2021, CLA noted that it was not given access to former DHS Director John Davis’ computer hard drive and it was initially limited in whose emails it could examine.

“CLA was unable to obtain a copy of John Davis’ MDHS hard drive, as it was in the possession of the (Office of State Auditor) investigative division. Additionally, the scope of work limited CLA’s review of emails to include only John Davis’ MDHS emails. If other electronic evidence had been made available to CLA, additional information not currently known to CLA could impact the findings communicated in this report.”

READ MORE: ‘It doesn’t look good’: At 3-year mark, more questions than answers in Mississippi welfare fraud scandal

White’s spokesman said: “As we have explained previously, the hard drive (it was actually his computer) was obtained through our criminal investigation. We do not make evidence obtained in a criminal investigation available to anyone outside of law enforcement. That includes private CPA firms. Of course, we obtained that computer from DHS. If DHS backed up any files on the computer to their network, that could be made available per a public records request. We would also remind you that, while we will not provide the computer to a private CPA firm, we have made all of our evidence, including the hard drive, available to the FBI.”

CLA also noted that the New nonprofit, Mississippi Community Education Center, did not provide records to the auditors and did not cooperate with its probe. Much of the and misspending in the scandal occurred through MCEC, which was helping run a statewide anti-poverty program called Families First for Mississippi.

White’s spokesman said: “Despite pledging to assist auditors, the failed to provide MCEC’s original documentation of spending to CLA, as CLA noted. CLA was given access to copies of all the MCEC documents (contracts, invoices, general ledger reports, etc.) that the auditor’s office had. Unfortunately, copies are not considered original documentation. Only MCEC could provide original documentation. Without original documentation, CLA had to note that their audit was limited. DHS ultimately decided to not pursue obtaining original documents from MCEC after MCEC failed to cooperate. OSA was asked to use our subpoena power to obtain documents from Heart of David, and we did.”

But in a supplemental forensic audit report released in April, Clifton Larson Allen noted that they didn’t even have access to a lease agreement that the State Auditor possessed, and were forced to retrieve it from a news article.

Another deputy in White’s office who reviewed MDHS’ drafts for a forensic audit proposal, at the time noted, “Very limited scope outside of TANF (federal welfare dollars). We know SSBG, CCDF and SNAP funds were also misused. They’ve even limited the scope to contracts directed by Davis to only TANF contracts … Firm is only required to alert MDHS of potential criminal activity, not us, the federal government or law enforcement.”

White, at the time, wrote to Anderson: “Obviously criminal activity should be reported to us, not just DHS, as we are the state’s chief law enforcement agency for crimes involving public funds. DHS’s failure to report criminal activity to the Auditor’s office has been a problem in the past.”

White’s spokesman this week explained that OSA auditors, as routine, repeatedly asked DHS staff over several years if they knew of fraud at the agency, and “… Staffers repeatedly failed to report any fraud in these meetings.”

While it was admittedly incomplete, the forensic audit report released in October 2021 did not significantly reverse White’s findings. It determined a total of $77 million was misspent: $36.1 million in welfare purchases that broke federal rules, including $12.4 million worth of possible fraud, waste or abuse, plus an additional $40 million that auditors said they did not have proper documentation to analyze.

THE BACKCHANNEL: Full coverage of Mississippi’s welfare scandal

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

7 baffling things about Mississippi’s welfare fraud scandal case

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7 baffling things about Mississippi’s welfare fraud scandal case

It’s now been three years and counting since investigations began into the largest public fraud case in Mississippi history — a case that involves powerful public officials, former pro football stars and pro wrestlers, and tens of millions of dollars.

And to date, authorities have provided scant information on those investigations, and judges have tried to stifle those involved. Most public information about the case has come from investigation and reporting by Mississippi Today, often to the chagrin of state officials.

THE BACKCHANNEL: Full coverage of Mississippi’s welfare scandal

State officials have assured that federal authorities will run the case to ground, and that punches are not being pulled on any powerful or famous people involved in the or misspending.

But to date, to quote former Gov. Phil Bryant about his own role in the scandal, “It doesn’t look good,” and there appear to be many incongruities about the case and investigations.

Brad Pigott fired from case

State leaders can’t get their stories straight on why attorney Brad Pigott was dismissed from leading the state’s to try to recover millions in stolen or misspent welfare dollars.

First, Mississippi’s welfare agency chief said officials were blindsided by Pigott’s subpoena of communications between the USM Athletic Foundation, former Gov. Phil Bryant and others over $5 million in welfare money spent on a USM volleyball stadium. But then emails showed Pigott gave them a draft of the subpoena 10 days before he filed it.

Gov. Tate Reeves, who said he signed off on Pigott’s dismissal, first said Pigott, as a semi retired sole practitioner, wasn’t up to leading such a lawsuit (despite having done so for a year). Then later he said Pigott also had a “political agenda” and was seeking the media spotlight.

Pigott said it was because he was looking into the roles of Bryant, the USM Athletic Foundation and other powerful and connected people or entities Reeves and others didn’t want him looking at.

READ MORE: Welfare head says surprise subpoena led to attorney’s firing. Emails show it wasn’t a surprise

READ MORE: Gov. Tate Reeves says ousted welfare scandal lawyer had ‘political agenda,’ wanted media spotlight

Feds weren’t initially called in

State Auditor Shad White spearheaded the initial investigation and charges with a local district attorney — for eight months — without contacting federal authorities. Federal investigation experts said this seems odd, given the case involved tens of millions of federal dollars, and federal authorities have more resources to fully investigate and prosecute such a case.

At the time the auditor and DA charged six people in early 2020, the then-U.S. attorney for Mississippi complained he was surprised by the move and only learned of it from media reports.

Subsequent reporting by Mississippi Today that former Gov. Phil Bryant — a close friend and former boss of White — was set to accept stock from a company involved in the fraud scheme in the days before White made arrests. Announcement of the arrests prevented the deal from going through, a Mississippi Today investigation showed. Did the decision to bring charges stymie or delay federal intervention, or give others involved a chance to take cover?

White has said that after the initial arrests, his office and the DA turned everything over to the FBI and have been working closely with federal authorities.

READ MORE: Phil Bryant had his sights on a payout as welfare funds flowed to Brett Favre

READ MORE: Former auditors question whether Shad White was too close to investigate Phil Bryant

Auditing firm was limited in what and who it could examine

The Mississippi Department of Human Services and auditor’s office hired prominent national accounting firm Clifton Larson Allen for up to $2.1 million for a forensic audit to get to the bottom of where the money went.

But CLA was limited in what and whom it could examine. In its findings, it noted it was not given access to the former welfare director’s computer hard drive or financials and it was limited in whose emails it could examine — initially just those of the welfare director, then later a few more lower level employees. CLA noted in its reports that it perhaps would have found more misspending had it not been severely limited in where and at whom it could look.

READ MORE: ‘It doesn’t look good’: At 3-year mark, more questions than answers in Mississippi welfare fraud scandal

Bryant as the ‘whistleblower

Since the 2020 arrests, White has called Bryant the whistleblower in the case — though the fraud tip White says Bryant turned over to his office pertained to a small portion of the larger welfare scheme.

But more recently, communications obtained by Mississippi Today between Bryant and others — including Bryant agreeing to accept stock from a company involved in the scheme — cast doubt on the idea of Bryant being the whistleblower.

Here’s a text exchange between Bryant and the company’s owner around the time of the alleged whistleblowing:

“Is this your company mentioned in the second paragraph (of a article on arrests)?” Bryant wrote.

The company’s owner said yes, that he’d been subpoenaed and “just gave them everything.”

“Not good…” Bryant wrote.

READ MORE: Q&A with former Gov. Phil Bryant about Prevacus, welfare scandal

No Attorney General case

Lynn Fitch has been mostly silent about the largest public fraud case in state history, and her involvement appears to have been limited to signing off on a civil case attempting to recoup misspent money.

Asked recently whether she had any interest in leading a state investigation into the case, Fitch said: “Certainly the AG’s office is very engaged, but that’s pending litigation and I cannot comment … We are very invested in it. I just cannot comment any further.”

Auditor White initially said he took the case to the notoriously understaffed and backlogged Hinds County district attorney’s office for expediency — to quickly halt the fraud and misspending.

More recently, White said he brought in the Hinds DA, a Democrat, to bring bipartisanship to an investigation that might involve powerful Republicans.

READ MORE: Alleged scam: Nancy New’s school claimed to treat hospitalized kids

Many known recipients not included in civil recovery case

MDHS is suing 38 people or companies trying to “claw back” $24 million of the at least $77 million in stolen or misspent federal welfare money.

But those not named in the lawsuit to date have been the subject of much discourse. The lawsuit, for example, doesn’t address the largest purchase made in the scheme — $5 million in welfare money spent to build a volleyball stadium at USM, with the payments disguised as a lease. Reeves shied away from committing to recoup those funds, saying he didn’t know if the payments were illegal, despite the fact that a defendant in the criminal case has already pleaded guilty, admitting that he defrauded the government by paying welfare money to the USM athletic foundation.

One defendant in the case recently filed a subpoena for Bryant’s communication and records involving the volleyball stadium, and has claimed Bryant directed her to spend welfare dollars, including to pay former NFL star Brett Favre $1.1 million in welfare money for speeches he allegedly never gave.

READ MORE: State files lawsuit to recoup $24 million in welfare funds from Brett Favre, WWE wrestlers and 34 other people or companies

READ MORE: Gov. Reeves justifies omitting volleyball stadium from welfare lawsuit, equivocates on legality of expenditure

Never-ending gag order and lack of public information

The initial auditor/Hinds DA case has been the subject of judicial “gag orders” for nearly two years — aimed at preventing defendants, attorneys and prosecutors from speaking to the media about the criminal charges.

Most recently, gag orders were extended to include Auditor White and the new welfare director talking about former welfare Director John Davis, who faces criminal charges. The two opposed this, saying such an order amounts to unconstitutional prior restraint and would “severely interfere” with their responsibilities as public officials.

It is unclear whether there will ever be a state-level trial in the case, or when these gag orders might be lifted. The gag orders have appeared to be only mildly effective.

Federal authorities have given no public information about any investigation into the welfare fraud and refused even to confirm they are investigating, although state officials said the feds are.

READ MORE: Auditor, DHS head object to broad gag order in welfare theft case

READ MORE: In welfare scandal, judge weighs public interest versus the right to a fair trial

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

Former auditors question whether Shad White was too close to investigate Phil Bryant

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Former auditors question whether Shad White was too close to investigate Phil Bryant

Three former state auditors say they would have recused themselves or limited their involvement in the investigation into Mississippi’s welfare fraud scandal to avoid perceptions of conflict of interest due to current auditor Shad White’s close relationship with former Gov. Phil Bryant.

White and his office identified the misspending and possible of tens of millions of dollars in federal money meant to help the state’s poor. But Bryant’s responsibility in directly supervising his welfare department director and the fact that some of the taxpayer money flowed to people and programs favored by the former governor are notably missing from his extensive audit report. 

White also faced questions early on — and criticism from the U.S. Attorney’s Office — as to why he didn’t promptly bring in federal authorities, who have massive investigative resources, particularly since the malfeasance involved federal tax dollars. 

The spotlight on White has grown more intense in the wake of Mississippi Today’s “The Backchannel” investigation, which showed Bryant using private texts to influence his welfare director and try to broker a deal with a pharmaceutical startup that enticed him with stock in the company. 

Bryant has since acknowledged that the content of his messages “doesn’t look good,” but while the auditor’s office has possessed the records for over two years, it concealed them from the public and has not made any indication it has further investigated the matter.

White’s relationship with Bryant goes back more than a decade. He served as policy director when Bryant was lieutenant governor and was his gubernatorial campaign manager in 2015. Bryant appointed White as state auditor, a job that has been a launching pad for runs to higher office, and supported him in his subsequent election.

Those connections have helped cast doubt over the independence and rigor of the state welfare investigation led by White. 

“The rule that I lived by was if there is any question whatsoever, don’t do it,” said Pete Johnson, who served as state auditor from 1988-1992, and ran unsuccessfully for governor, losing to Kirk Fordice in the Republican primary in 1991. Johnson said under similar circumstances, if he had such connections to someone potentially involved, he would have recused himself or limited his role in the investigation.

“You’re not only jeopardizing your integrity but the integrity of the purpose you’re pursuing … Those facts raise the question of whether or not it passes the smell test,” Johnson said. “And when those facts are looming out there, you’ve got to back off and ask will my involvement jeopardize the integrity of the investigation … I think (White) is a man of high integrity, but you asked me personally what I would do and that’s it.”

Former Mississippi Gov. Ray Mabus served as state auditor from 1984 to 1988. He worked closely with federal authorities in the “Operation Pretense” investigation and prosecution of widespread county government corruption across Mississippi. Mabus said that given White’s ties to Bryant, he should have handed off his lead role in investigating to someone else.

“Look, if you’re going to give the taxpayers confidence that investigations are being done impartially and objectively, even if this one is being done that way, it’s never going to look that way because of their closeness, and nobody’s going to believe that punches weren’t pulled,” Mabus said.

“… I guess a similar situation would have been if I ever learned something about (former Gov.) William Winter, whom I worked for as governor and a little bit on a campaign and I was his legal counsel,” Mabus said. “William Winter is the very last person who would ever do anything like that, but if I had come across evidence, I would have removed myself. Especially if I wasn’t going to take strong action on it, I would turn it over to somebody else.”

Steve Patterson was state auditor from 1992 to 1996, when he resigned after pleading guilty to a misdemeanor charge of using a false affidavit to buy a car tag. In 2009 he was sentenced to two years in federal prison for his role in a judicial bribery case.

Patterson said that were he in White’s position, “I would hope that I would have recused myself or brought the in to do the investigation.”

“Having said that, it’s a timing thing,” Patterson said. “You get those complaints that come in, and it’s what did you know and when did you know it. Knowing what we know now, clearly he should have recused himself and should be recusing himself now.”

Former Auditor Stacey Pickering, whom Bryant replaced with White, declined comment.

White as auditor has burnished a reputation as a hard-charging defender of state tax dollars, and was credited with unmasking a massive scheme in the 2019 welfare scandal. But some holes in the audit have since emerged, especially relating to Bryant’s involvement behind the scenes.

The Mississippi Today investigation revealed that the former governor assisted a company called Prevacus, which improperly received welfare money, and he was poised to receive stock in the company until White’s office made arrests and announced its investigation.

READ MORE: State Auditor Shad White discusses welfare investigation, former Gov. Phil Bryant

The text messages between Bryant, the owner of Prevacus and retired NFL star Brett Favre have been in the possession of the auditor’s office for more than two years. They show the two men telling Bryant the company had received public funds, and that the governor intended to make his own business deal with Prevacus after he left office. But White did not reveal that storyline to the public.

Instead, White has credited Bryant as the “whistle blower” who prompted his investigation, and said that it was Bryant’s welfare director’s responsibility to know the law and refuse any improper directives from the governor.

Questions about if and when White’s office alerted other authorities to the text messages remain. The auditor’s office refused to turn the messages over to Mississippi Today after a public records request, and the outlet has a pending Ethics Commission records complaint against the office.

White and numerous other officials have declined comment on the case for months citing a gag order from a state judge.

But in an October 2021 interview with Mississippi Today — before the judge strengthened the gag order in the case to further restrict White — the auditor said he had not seen instances of Bryant directing his welfare chief to spend federal money on specific programs. Mississippi Today later obtained communications between the governor and principal players in the scandal discussing the allocation of financial aid.

White also said then that it was the welfare director’s duty to reject improper requests from the governor, not the governor’s responsibility to know the rules and laws.

An early oddity in the auditor’s probe came when White went to the District Attorney’s Office — notoriously understaffed and suffering huge backlogs of cases — after he launched an eight-month investigation without notifying federal authorities.

Then-Southern District U.S. Attorney Mike Hurst in early 2020 issued a release noting, “We in the United States Attorney’s Office and the FBI only learned … from media reports about the indictments and arrests, at the same time the general public did.”

“While we commend the reported actions, neither the FBI nor the United States Attorney’s Office was contacted by the State Auditor or the Hinds County District Attorney about this investigation, although millions of federal dollars are alleged to have been stolen.”

White at the time said that his office moved swiftly and without notifying or involving federal authorities so as to halt the scheme before any more money was misspent or stolen. White has pointed to slow action by federal authorities as justification for his agency investigating and making the arrests. More than two years later, federal authorities have not brought any charges related to the welfare scandal.

White did face questions about Bryant, given that the former governor’s director of human services and close friends of Bryant were among those arrested and indicted, and the malfeasance appeared to involve programs or companies Bryant had championed. But shortly after the arrests, White said that then-Gov. Bryant was actually the whistleblower who prompted the auditor’s office investigation.

Federal criminal investigations are notoriously slow, but also notoriously thorough. Their vast undercover, wiretap and other resources allow the FBI and DOJ to cast wide nets over criminal conspiracies.

Hurst, in his statement at the time of the arrests, noted, “Investigating and prosecuting cases of this magnitude and complexity is routinely what the FBI and U.S. Attorney’s Offices do here in Mississippi and around the country.”

Hurst, a Trump administration appointee who left office in early 2021, declined a recent request for comment on the case.

White has said that after his initial eight-month investigation and arrests, he has involved federal authorities and turned over everything his investigators have.

Nearly three years after the massive scandal involving at least $77 million in misspent or stolen federal welfare dollars, the state Department of Human Services on Monday announced a civil attempting to claw back $24 million from famous former athletes and pro wrestlers — including Bryant’s friend Brett Favre and Ted “The Million Dollar Man” DiBiase – among others.

It’s unclear where any continuing federal or state investigations stand at this point. No further arrests have been made since White’s office initially arrested six people in February of 2020 — Bryant’s head of DHS and another agency employee, former pro wrestler Brett DiBiase, a nonprofit and private school owner and her son and an accountant that worked for them. Four out of six have since pleaded guilty to state charges.

In a statement about the DHS lawsuit White said: “We will continue to work alongside our federal partners — who have been given access to all our evidence for more than two years — to make sure the case is fully investigated.”

Bryant’s appointment of his former campaign manager and policy director White as state auditor in 2018 was something of a surprise to most political observers. Bryant said at the time that he wanted someone with “independence” who did not have numerous political relationships and ties to the government officials and institutions he would be auditing.

At White’s swearing in as auditor after he appointed him, Bryant said: “When I was auditor, I used to enjoy saying, ‘In God we trust. All others, we audit.’ Shad, you’re welcome to use that.”

READ MORE: Phil Bryant had his sights on a payout as welfare funds flowed to Brett Favre

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

Nancy and Zach New plead guilty to bribery, fraud charges

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Nancy and Zach New plead guilty to bribery and fraud in state welfare case

Nancy New, a once prominent private school and nonprofit founder, and her son Zach New pleaded guilty to state criminal charges in Mississippi’s sprawling welfare scandal on Friday.

The 69-year-old former educator is pleading guilty to four counts of bribing a public official, two counts of fraud against the government, five counts of wire fraud and racketeering. Her deal comes with a total maximum sentence of 99 years, with 25 to serve.

But state prosecutors have recommended that the state judge wait to sentence Nancy New until she receives a sentence in her separate federal case — which is expected to produce a sentence of no more than ten years — and then sentence her to equal or lesser time to run concurrently with the federal sentence.

In other words, state prosecutors recommend Nancy New serve her entire sentence in federal prison and serve no additional time for the state charges above what she serves in the federal case. She pleaded guilty in the federal case earlier this week to one count of money laundering, which carries a maximum sentence of ten years.

Zach New, the 39-year-old vice president of his mother’s nonprofit, pleaded guilty to the same charges, minus racketeering. His charges come with a total maximum sentence of 75 years, with 17 to serve. State prosecutors have offered him the same deal to serve only the number of years he receives in the separate federal case. He pleaded guilty in the federal case to conspiracy to commit wire fraud, which comes with a maximum sentence of five years.

Both Nancy and Zach New have agreed to cooperate with prosecutors and testify against their co-defendants. Both state and federal criminal investigations are ongoing and could result in charges against additional people, sources close to the probes say.

Under the state plea deal, the will serve whatever sentence they receive in federal prison, instead of Mississippi’s state prisons with notoriously barbaric conditions.

The News, who could also pay more than $3.6 million in restitution as part of the plea deal, are changing their plea earlier than he was required since their state trial was not set to take place for at least three months. Their petitions filed Friday include new details about their role in the bribery and of funds from the Mississippi Department of Human Services, the state’s safety net agency.

In these cases, the News separately scammed both the Mississippi Department of Human Services out of welfare funds and the Mississippi Department of Education out of public education dollars. The News ran the nonprofit Mississippi Community Education Center, which received tens of millions of federal grant funds as a subgrantee of the Mississippi Department of Human during the administration of then-welfare director John Davis.

Three of the wire fraud charges relate to financial transfers they made from the nonprofit to the private, for-profit school district called New Learning Resources, then to a drug company in Florida called Prevacus, as well as transfers they made directly from the nonprofit to Prevacus.

Text messages published earlier this month in Mississippi Today’s “The Backchannel” investigation reveal that right before the News agreed to funnel welfare money to Prevacus, the company’s owner and former NFL quarterback Brett Favre offered former Gov. Phil Bryant company stock in exchange for help Bryant provided when he was governor. Bryant appeared to agree by text to accept that offer after he left office, Mississippi Today reported. Favre even referenced in texts to Bryant the public funding that the company was receiving from the state and Nancy New. Bryant responded positively.

The News were accused also of funneling embezzled funds to an affiliate of Prevacus, called PreSolMD, but those transfers were not included in the counts to which the News recently pleaded guilty. The companies allegedly received $2.15 million in stolen federal grant funds.

READ MORE: Phil Bryant had his sights on a payout as welfare funds flowed to Brett Favre

In 2017, the News also made an “off the books” purchase of a black GMC Yukon for Davis, the state welfare agency director, and two of his senior executives at their request to incentivize them to keep agency funds flowing to the nonprofit. Davis is also facing charges, to which he’s pleaded not guilty, related to the scheme.

The News also hired WWE wrestler Brett DiBiase on a salary of $250,000 and Davis’ nephew Austin Smith, knowing that they weren’t qualified for the jobs, and gave Davis unrestricted access to the nonprofit’s credit card.

They also defrauded the state by transferring $1.2 million to Victory Sports Foundation, run by local former football player Paul Lacoste, knowing the foundation was not eligible for the funds and by paying $4 million to build a volleyball stadium, a payment he and others disguised as a “lease.”

Another count of wire fraud relates to the construction of a virtual reality center in downtown Jackson, which the News also helped disguise as a lease.

The nonprofit also at one point transmitted $3,000 to Davis, which he distributed to attendees of “Law of 16,” a professional development presentation conducted by retired WWE wrestler Ted “Teddy” DiBiase Jr., who himself collected more than $3 million in welfare funds.

Nancy New’s racketeering charge, which is not included on Zach New’s guilty plea, relates to her and Davis transferring money from her nonprofit to a rehab facility in California, where Brett DiBiase was receiving treatment.

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

Phil Bryant turned to welfare officials to rescue troubled nephew

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Family first: Gov. Phil Bryant turned to welfare officials to rescue troubled nephew

Noah McRae was the kind of kid who, if you said the sky is blue, would argue it is red until he was ready to fight.

Growing up in the Jackson suburbs, McRae had problems with authority and his temper. His parents divorced. He bounced from school to school, and he eventually started using drugs.

But he had at least one thing going for him that other young men didn’t: His great-uncle is Phil Bryant, Mississippi’s governor from 2012 to 2020.

And the governor had two things: A friend named Nancy New and a welfare department with millions in flexible cash and free rein to hire whomever it wanted. Both came in handy when McRae needed some help.

Bryant’s subordinates and friends helped McRae secure a spot at an exclusive school, a job after he was expelled and specialized supervision.

And according to records recently obtained by Mississippi Today, federal investigators have been told New even paid for McRae to go to rehab.

An early assist came when McRae was having difficulty in school. His family eventually linked up with Nancy New’s private New Summit School in Jackson. New was a campaign contributor to Phil Bryant and worked closely with his wife, Deborah, the sister of McRae’s grandmother.

Bryant had previously praised New’s private school district. He said it was an example of what should look like.

Mississippi’s current governor Tate Reeves even used the Jackson school as a film location for his campaign advertisement, which aired in 2019 while New was under state investigation for fraud and related to the massive contracts her nonprofit received from the welfare department under Bryant’s administration.

Agents from the state auditor’s office arrested New, her son Zach New and Bryant’s former welfare director John Davis in early 2020 in what officials have called the largest public embezzlement scheme in state history. Each of them pleaded not guilty and still await trial while the governor, despite his involvement with the players in the case, appears to have coasted.

But at the time, New was well-known in political circles. Prominent state figures touted her school for its work in educating children with intellectual disabilities and for taking students with behavioral problems.

McRae had been diagnosed with ADD, anxiety and a visual processing disorder called Irlen Syndrome, according to court documents, so his family felt fortunate that he landed a spot at the school.

“The governor pulled strings to get him in there,” said Darin Cooper, McRae’s stepfather.

Because of Noah McRae’s relationship to the governor, Cooper said the family paid a discounted tuition at New Summit.

It didn’t work out as hoped, but McRae still managed to get a safety net.

“He got expelled from there,” Cooper said, and then the school “turned around and hired him as a groundskeeper.”

The New Summit School in Jackson, formerly run by Nancy New and her son Zach New. Both were arrested in 2020 on charges they allegedly stole $4 million in Mississippi welfare dollars.

Things were not quite what they seemed at the school, either. Federal prosecutors say that for four years the filed fraudulent claims to illegally collect millions in public school dollars typically reserved for kids who have mental health disorders and need hospitalization. Nancy and Zach New also pleaded not guilty and still await trial in that separate federal case.

Cooper said the family believes McRae was one of the students whose names the News used to draw down the funds.

“We had a lot of hope in that school,” Cooper said. “It was real big for the family when he got admitted to that school. They were promising to fix everything, you know, and turn him around.”

McRae never made it past 10th grade. Shortly after in April of 2017, in neighboring Madison arrested the 18-year-old McRae after he and his friends broke into several vehicles, stealing guns and other items.

McRae pleaded guilty in June of 2017 to three counts of auto burglary, according to the court file obtained by Mississippi Today. McRae agreed to be a sheriff’s trusty, which kept him out of the penitentiary. But after just shy of a year, officials terminated him from the program for cause. He sat in jail for five months until his sentencing. By then, he’d been locked up for about a year-and-a-half.

Madison County Circuit Court Judge Steve Ratcliff sentenced McRae to seven years in prison, four years suspended, meaning he only had to serve three years. With credit for the 18 months he had already been incarcerated, McRae had served half of his sentence and was parole eligible. The Mississippi Department of Corrections released him about a month later.

A few weeks after leaving prison, New’s nonprofit began paying the 19-year-old small, sporadic payments, records obtained by Mississippi Today show. He was paid under a welfare-funded program called Families First for Mississippi, according to the ledger of purchases.

While New’s nonprofit claimed to provide reentry services to people leaving the correctional system, New stressed to Mississippi Today in 2018 that Families First did not provide direct assistance to clients.

So it’s not clear what McRae may have been doing in exchange for the payments, but it wasn’t long until an exchange of text messages indicated that something was amiss with the young man. State employed welfare officials were spending work hours trying to keep an eye on him.

Eventually, Gov. Bryant would take concerns about McRae to his appointed welfare director John Davis, according to text messages Mississippi Today obtained and have reprinted here as they appear without correction.

“The boy needs help quickly or he is going to fall badly. Thanks for all your have done,” Bryant said in a text to Davis on April 1, 2019.

The request brought the combined resources and interests of the state’s welfare department and New’s nonprofit together for another attempt to help McRae. It’s unclear how far that help went.

Former Gov. Phil Bryant

“I’m sure I told John at some point, ‘This is a tragedy and we’re worried about his health,’ and John would have said, ‘Let me help you with him,’” Bryant said in a recent interview with Mississippi Today when asked about the connection between McRae and the welfare agency.

According to the texts, Bryant was specifically asking Davis for information about how to get his great-nephew into a treatment program, but an individual with close ties to the welfare scandal says McRae received much more than a referral.

In a transcript from a 2021 interview with federal investigators, the person told agents that New said she paid for McRae to go to rehab.

Bryant told Mississippi Today in a recent interview that he did not recall New paying for his great-nephew to go to rehab, but that he felt it might be an appropriate use of her resources.

“I don’t know all the guidelines, but for an agency that works with the Department of Human Services and I don’t remember her doing it, but saying, ‘We think we can pay for a rehab of this very fragile indigent child. We think that’s the right thing to do,’ would not have shocked me,” Bryant said. “I would not have said, ‘Whoa, wait a minute, let me go read the code books and make sure we can do all of that.’”

Investigators did not immediately ask follow-up questions about the alleged payment, moving on to other topics, according to the transcript. The interviewee said they didn’t know which facility McRae went to, but that he was in treatment around the same time that New and Davis allegedly sent professional wrestler Brett DiBiase to a luxury rehab clinic on the taxpayer’s dime. That began in February 2019. DiBiase pleaded guilty to defrauding the state – collecting money for work he didn’t do while he was in rehab – in December 2020.

New had a strong motivation to keep Bryant and Davis happy. Under the two men’s leadership, the Mississippi Department of Human Services had started funneling tens of millions from the federal welfare program called Temporary Assistance for Needy Families to New’s nonprofit through a no-bid contract.

The idea was for her nonprofit, Mississippi Community Education Center, to run a state-sanctioned initiative called Families First for Mississippi, which Gov. Bryant frequently touted as part of his plan to help poor people get off welfare. Bryant has not been accused of misconduct and has denied any wrongdoing.

Drug rehab payments have played a key role in the welfare scandal.

It has been widely reported that Families First paid the $160,000 tab for retired wrestler Brett DiBiase to stay four months at the Rise in Malibu, Calif., which bills itself as a luxury rehab center with “private en suite rooms, majestic ocean views, world-class treatment and luxurious accommodations.” Prosecutors say the payments were made using welfare funds.

John Davis, former director of the Mississippi Department of Human Services

Brett DiBiase is the son of Ted DiBiase Sr., who WWE fans know as “The Million Dollar Man.” The dad also received welfare funding in his role as a Christian minister. Brett DiBiase was one of six people arrested in the welfare fraud case, and he’s since flipped to aid the prosecution.

Jackson attorney Scott Gilbert, who represented McRae in his 2017 car burglary case, currently represents the other son, Ted “Teddy” DiBiase Jr., another character in the scandal who received more than $3 million in federal funding to make motivational presentations to welfare department staffers and other state employees. Gilbert said his office does not comment on their client representation.

In the indictment against Davis, prosecutors allege the welfare director conspired with New to use the taxpayer money her nonprofit received to pay for Brett DiBiase’s drug treatment in Malibu.

States are allowed to use some Temporary Assistance for Needy Families funding to pay for substance abuse treatment for needy, qualified residents, a progressive policy focused on meeting the actual needs of families.

But in Families First’s many million-dollar promotional campaigns, brochures and thousands of dollars worth of spots on radio stations, the program did not advertise that families could receive drug treatment through the program.

In fact, Bryant previously signed and publicly lauded a new law that requires applicants and recipients of Temporary Assistance for Needy Families to take drug screenings and tests or face rejection from the program. The policy became a significant barrier to eligibility, even for people who don’t abuse substances, because applicants must find transportation to the testing clinic.

These days, Bryant is a spokesman for local rehab facility Mercy House Adult & Teen Challenge, part of a national Christian program that has received scrutiny recently for imposing harsh discipline and forcing residents into unpaid labor.

Throughout January and February of 2019, Mississippi Community Education Center paid Noah McRae several small, sporadic payments totaling about $1,500, ledgers obtained by Mississippi Today show. Officials have told Mississippi Today that these ledgers likely contain errors and omissions, especially since nonprofit officials had been transferring funds between several different bank accounts.

Nancy New, founder of Mississippi Community Education Center and owner of New Summit School

Under the Families First program, it was common for employees to appear as if they were working for the Mississippi Department of Human Services but receive their paycheck from the nonprofit, whose expenses were shielded from public view.

By March, McRae had stopped receiving funds from Families First, according to the ledger, but Davis and his communications director Lynne Myers were still discussing McRae as if he were a rogue agency employee.

“I’m needing your direction on how you would like me to handle Noah,” Myers messaged Davis in early March. “He has not been at work since last Wednesday … He hasn’t shown up at all this week and I can’t get him on his cell. How would you like me to proceed?”

It’s unclear what position McRae may have held at the nonprofit or welfare department or what qualifications he possessed for the job. Current MDHS leadership says there is no record of McRae’s employment at the agency.

In the weeks after Myers reached out, Davis sent McRae several text messages asking the governor’s great-nephew to meet with him or call him. It’s unclear why the director would have had a direct line to a Families First client or employee, let alone one at McRae’s level, as that kind of exchange was not common.

When asked why welfare officials would have been texting with McRae, Bryant responded, “because he was my great-nephew.”

Finally, Nancy New chimed in. In late March 2019, New messaged Davis and Myers, “I have an update on Noah McRae.”

“Is he okay?” Myers responded.

No texts on the group chat follow.

Less than a week later, Gov. Bryant himself messaged Davis about his great-nephew.

“Would you have a number for David at Region 8. Trying to get Noah into a treatment program,” Bryant wrote on April 1. “The boy needs help quickly or he is going to fall badly. Thanks for all your have done. He has to do some of this own his own but David can tell is what he thinks is best for him.”

David Van is the director for Region 8, the Community Mental Health Center in the Jackson-metro area. The Community Mental Health Centers are a series of quasi-public-private clinics and treatment facilities that accept payment on a sliding scale depending on what a person can afford.

Van told Mississippi Today it was not unusual for the governor to call him, asking for help guiding constituents to services, but that he did not remember ever talking to John Davis or triaging someone named Noah McRae.

Davis and New are bound by gag orders which prevent them from speaking to the media about their cases. Their attorneys declined to answer questions for this series. Myers would not respond to Mississippi Today’s calls to offer further context about her involvement with McRae. Myers has not faced any charges, but agents from the auditor’s office did interview her early on in their investigation about why she moved merchandise purchased with taxpayer money from state property to the nonprofit after the state placed Davis on administrative leave in June 2019, according to a recording of the interview.

Myers took over the communications division in the fall of 2018 right after her predecessor, Paul Nelson, became the subject of a complaint for failing to release public records in a timely manner. The agency was soundproofing itself, forcing all agency communication with reporters to go through the ’s office. It also enacted a media policy that reporters must submit all questions for the agency in writing, which it would often not answer.

Davis and New’s involvement with McRae isn’t the only example of the welfare officials helping a colleague deal with a family member in addiction.

Texts show the assistant attorney general assigned to MDHS sought help from Davis and New for his coworker’s son, who was at the time checking into Pine Grove, an addiction treatment facility in Hattiesburg. The son worked for MDHS’s child support contractor before he passed away in 2021. “I will reach out to Dr. New,” the assistant attorney wrote in late June of 2019, after Bryant kicked the director out of office but before Davis announced his retirement publicly. “Again, thanks for all you have done.”

In general, Davis and New ran a government program rampant with nepotism, texts show.

The welfare-funded Families First program also hired Myers’ husband, Kevin Myers, former director of the Department of Public Safety’s administrative operations, as a community liaison. He pulled a salary of at least $86,000 from New’s nonprofit, according to its ledger. Text messages show that Davis also secured a job at Families First for their daughter Mason Myers, who was paid roughly $600 a week, the ledger shows.

“You have blessed our family greatly John, and I just needed to tell you you’re awesome and we are so grateful,” Lynne Myers texted Davis in mid-June of 2019, about a week before he would face his first polygraph test in connection with the audit of his department.

Myers previously served as the special projects coordinator for Bryant’s office. On LinkedIn, she described herself as a network account executive for TeleSouth Communications, also known as Supertalk radio, beginning in 2017. She was director of communications for MDHS in 2018 and 2019. SuperTalk radio is a hyper-conservative talk radio station that state agencies pay hundreds of thousands of taxpayer dollars each year in exchange for advertising and, in some cases, the luxury of soft-ball interviews for state bureaucrats.

New’s nonprofit funneled nearly $330,000 in MDHS funds to the station, a 2020 audit report shows.

Davis had close communication with Supertalk CEO Kim Dillon and the two would discuss the progress of her son Logan Dillon, who worked as a lobbyist for the welfare department.

“Everybody tells me how great Logan is doing,” Davis once texted the CEO. “I’m so proud of him.”

A couple months before Davis abruptly retired, Kim Dillon invited the welfare director out to dinner at Tico’s Steakhouse in Ridgeland.

“I talked with Logan last night and told him I had dinner with you. I didn’t go into what all we talked about but did let him know. I appreciate everything you have done for him!” Dillon texted Davis in early May of 2019.

While the good ole boy system in Mississippi’s government provided McRae opportunities and second-chances not enjoyed by most, the alleged scheme also exploited McRae.

Prosecutors say the News converted at least some of the public school funds they allegedly bilked in the name of students like McRae to their own personal use.

“From what we understand with the private school, they were receiving a bunch of state or federal funds and pocketing them,” Cooper, McRae’s stepdad, said. “None of them ever went to Noah. No help ever went to Noah from those people. They were just using his name as a shell to collect government funds.”

Despite gaining a spot at New’s private school, a job on the campus and Families First, and supervision from powerful bureaucrats, McRae didn’t achieve a better outcome.

After McRae’s time under the wing of the welfare department and Families First, he went back to breaking into cars in late 2019 and wound up convicted of conspiracy to commit auto burglary in neighboring Rankin County.

In February 2021, a couple months after the birth of his daughter, McRae pleaded guilty and a judge sentenced him to five years in prison, according to MDOC records.

He is currently incarcerated at Leake County Correctional Facility.

This is Part 5 in Mississippi Today’s series “The Backchannel,” which examines former Gov. Phil Bryant’s role in the running of his welfare department during what officials have called the largest public embezzlement scheme in state history.

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

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