Former Gov. Phil Bryant should be sued over misspent welfare funds, civil defendant argues to court

by Anna Wolfe, Mississippi Today
June 28, 2022

A civil defendant in Mississippi’s massive welfare misspending scandal is arguing that if he’s being sued, so should former Gov. Phil Bryant.

That is just one explosive nugget included in a Friday court filing from Austin Smith, nephew to the now disgraced former welfare director John Davis and a former contractor of Nancy New’s nonprofit. The state is suing Smith for nearly half a million dollars.

Smith, in the filing, also alleges:

• That he was directed by members of Bryant’s inner circle to expend federal grant funds on an expensive advertising contract with the company that owns Supertalk Radio, the conservative network that spans the entire state and touts Republican leaders.

• That Nancy New, who has pleaded guilty to misspending millions in federal grant money including for celebrity rehab stints, told Smith she also paid for rehab for the son of Supertalk CEO Kim Dillon. Kim Dillon denied this allegation on Tuesday.

• That Smith was wrongfully accused of calling his uncle and welfare agency director John Davis gay — a falsehood, Smith says, that isolated him from his family.

• That the state of Mississippi has protected other entities that were involved in misspending of welfare funds, including the University of Southern Mississippi Athletic Foundation and members of the Board of Trustees of State Institutions of Higher Learning, which allowed for the use of $5 million in federal public assistance funds to build a new volleyball stadium.

Bryant consulted concussion drug company Prevacus, one of the civil defendants that received stolen welfare funds, and the former governor was even poised to accept stock in the company after he left office — a deal only made public after Mississippi Today obtained text messages between Bryant and former NFL legend Brett Favre. Smith’s recent filing uses Mississippi Today’s reporting to criticize the state for failing to name Bryant as a defendant, considering what the news organization found about the former governor’s role in the scandal.

FULL COVERAGE: Mississippi Today’s “The Backchannel” investigation

Through a written statement Tuesday, Bryant rejected the notion that he should be held civilly responsible in the scheme.

Independent forensic auditors found that at least $77 million in federal welfare funds were misspent or stolen from Mississippi Department of Human Services during Bryant’s last four years in office. The agency filed a lawsuit in May seeking about $24 million from 38 individuals or organizations, but Bryant — who had the sole, statutory responsibility to oversee the spending of the state’s welfare agency — was not among the defendants.

The latest filing aims to demonstrate that Bryant had a close relationship with Davis and New and is just as responsible for the scheme. Without a bid or application process, Mississippi Department of Human Services, a department under the governor’s office, selected New’s nonprofit to receive tens of millions of welfare dollars, which they spent with little oversight.

“The most plausible reason for this massive transfer to New and her companies is the friendship between Bryant and New. There was no ‘full and open competition’ for this massive federal funding as required,” the filing reads.

New pleaded guilty to bribery, fraud and racketeering while Davis is still pleading not guilty to several similar charges. Much of the case deals with the fact that funds from a federal program called Temporary Assistance for Needy Families, or TANF, which is supposed to provide assistance to needy families, were used in ways that didn’t help the poor.

“Governor Bryant’s personal involvement in these misexpenditures would have communicated to Governor Bryant’s immediate subordinate, John Davis, and to Governor Bryant’s long-time, personal friend, Nancy New, that Bryant did not require TANF funds to be used exclusively for the benefit of needy families, but that the governor ratified and approved use of TANF funds for non-TANF purposes,” the filing reads. “Thus, to the extent that Governor Bryant’s immediate subordinate, John Davis, and close personal friend, Nancy New, were expending TANF funds for non-TANF purposes without ‘full and open competition,’ Governor Bryant is jointly responsible.”

Denton Gibbes, a spokesperson for Bryant, defended the former governor in a fiery retort Tuesday.

“The ‘Answer’ filed by Austin Smith’s attorney is truly a work of fiction and an attempt to draw attention away from his client,” Gibbes wrote in an email. “Fortunately, the justice system requires more than hearsay, political jabs, and baseless conclusions. The only thing that doesn’t appear to be a complete fabrication or distortion of the truth is the fact that Governor Bryant was the whistle blower who turned the evidence over to the state auditor, the state watchdog over state agencies that traditionally investigates allegations of fraud and misspending.”

In response, Jim Waide, the Tupelo attorney representing Smith, noted that some lawyers take the approach that if you “deny something strongly enough, people will believe it.”

“I don’t see how he’s going to deny what he said in his own text messages,” Waide said.

Smith alleges in his filing that Bryant had promised Davis a position in the consulting firm Bryant established after he left office.

Instead, Davis explained to his family members, Bryant told him he was going to “fucking jail,” the lawsuit states, because Davis had allowed an agency contractor, retired professional wrestler Brett DiBiase, to use Davis’ own P.O. Box to receive payment of $48,000 from the agency.

This comparatively small suspected instance of fraud — not information related to the Nancy New nonprofit, the volleyball stadium or Prevacus, projects of which Bryant was aware — is the tip Bryant took to State Auditor Shad White in 2019.

“Governor Bryant apparently believed this check was a kickback,” the filing reads.

But in reality, the filing alleges, Brett DiBiase used his boss’ address to retrieve payment because he was in the middle of a divorce and wanted to hide the income from his wife. In a 2019 polygraph interview, in which state auditor’s investigators tried to discern whether Davis had received a kickback, Brett DiBiase explained that he used the money to lavish his girlfriend, not on Davis.

Davis helped direct over $5 million in welfare funds to organizations owned by the DiBiases. The state is also suing the DiBiases for repayment. If Davis received something of monetary value from the DiBiases in exchange for contracts, which would be a clear crime, officials have yet to describe what it was.

The recent filing touches on another wrinkle in the case that hasn’t become public thus far: Davis’ sexuality. Smith, in the filing, alleges that Brett DiBiase told Davis that Smith told DiBiase that Davis is gay. Smith said both Davis and his own parents became hostile towards Smith as a result.

Smith denies telling Brett DiBiase that Davis is gay, but much speculation has swirled around this case because of the flagrant favoritism the welfare director showed to Brett DiBiase and his brother Ted “Teddy” DiBiase Jr. and the closeness of their relationships.

Davis and Teddy DiBiase swapped Christian devotionals, traveled out of state and exercised at the gym together, Mississippi Today first reported in its investigative series, “The Backchannel.” 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.” Davis directed New to use nonprofit funds to pay for Brett DiBiase’s rebab stint, text messages obtained by Mississippi Today show, resulting in criminal charges against New and Davis. When not together, Davis and Brett DiBiase shared long, late-night phone calls, phone records show.

Ties between the DiBiases and the welfare department are central to both criminal and civil cases against several defendants. Brett and Teddy are the sons of famous retired WWE wrestler Ted DiBiase, known as “The Million Dollar Man.” Smith’s filing alleges that Davis said Bryant was in on the welfare program’s partnership with the wrestlers — something the former governor has publicly denied.

“John Davis told Austin Smith that Governor Bryant wanted money received from a federal program called a ‘faith-based initiative,’ to be administered by the Heart of David Ministries, Inc., run by Ted DiBiase, Sr., ‘The Million Dollar Man,’” the filing reads. “According to what John Davis told Austin Smith, Governor Bryant claimed that Heart of David Ministries, Inc., and Ted DiBiase, Sr., would bring movies to the State of Mississippi.”

“Assuming that the ‘faith-based initiative’ actually means TANF funds,” the filing continues, “Governor Bryant could not have actually believed that Heart of David Ministries, Inc., operated by the DiBiases (a professional wrestling family), had a ‘special skill’ to expend welfare money for the benefit of needy families. Ted DiBiase, Sr., ‘The Million Dollar Man,’ was a champion in professional wrestling, a pseudosport, in which the champions are determined by fixed matches. According to a post about him on Wikipedia, ‘The Million Dollar Man’ repeatedly bragged that he was paying bribes for his championship belts.”

Michael Dawkins, the attorney for Ted DiBiase Sr. and Heart of David, said his client “acted in good faith reliance on the direction that was given to them by the state” and that the state monitored their work.

Smith’s filing also sheds new light on the state government’s relationship with conservative talk radio network SuperTalk.

In addition to working as a contractor for the Families First for Mississippi program, in which he was hired to develop a curriculum for an educational coding program, Smith also worked for the Mississippi Community College Board as a program manager for the state’s $10.6 million federal Preschool Development Grant (PDGB5). Smith alleges that a high level policy advisor in Bryant’s office, Laurie Smith, no relation to Austin Smith, called all the shots for how the grant would be spent.

“During his time with the Community College Board, Austin Smith refused to ‘sign off’ on only one expenditure,” the filing reads. “(Mississippi Community College Board President) Dr. (Andrea) Mayfield, in the presence of Dr. Laurie Smith, directed Austin Smith to sign an authorization for payment for advertising to TeleSouth Communications, a large media company which operates the well-known radio show ‘SuperTalk.’ Austin Smith declined to sign for this advertising because the time for making the expenditure under the terms of the grant had expired.”

SuperTalk heavily promoted the Families First for Mississippi program — through which most of the welfare funds were allegedly misspent or stolen. The parent company, TeleSouth Communications, received more than $630,000 from the two nonprofits running the welfare program, according to the state auditor.

“After the PDGB5 Grant expired, Austin Smith was the only grant employee whose  employment was terminated. Among the PDGB5 Grant employees retained were Austin Smith’s secretary, the niece of SuperTalk’s prominent host, Paul Gallo,” Austin Smith’s filing reads.

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, Mississippi Today first reported in April.

“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!” Kim Dillon texted Davis in 2019.

Austin Smith’s filing could provide context for their communication: “Nancy New informed Austin Smith that she was paying for treatment for Logan Dillon, the son of Kim Dillon, the chief executive officer of TeleSouth Communications,” the filing alleges. “Logan Dillon is also a former legislative liaison for Governor Bryant. The fact that such welfare department funds were likely used for the treatment of Logan Dillon is corroborated by Logan Dillon’s former wife, an acquaintance of Austin Smith, who informed Austin Smith that her ex-husband, Logan Dillon, in fact, was receiving treatment paid for by Nancy New’s nonprofit.”

“Such a misuse of money intended for TANF beneficiaries is especially egregious since State law establishes onerous requirements for needy families to receive benefits,” the filing reads.

Kim Dillon denied the allegation, saying to Mississippi Today in a text message Tuesday, “Any medical treatment received by my son is subject to HIPAA laws and regulations. Any allegation that Nancy New or one of her related organizations paid for any medical treatment for my son is categorically false.”

Waide, Smith’s attorney, responded that HIPAA laws prevent providers from sharing medical records, but does not apply to the source of payment for medical treatment. “If they want to check out the sources to show they didn’t pay for it, then that’s the way to go about it to clear it up,” Waide said.

Smith’s filing also criticizes the state for failing to include as defendants the University of Southern Mississippi Athletic Foundation, which received $5 million in welfare funds to build a new volleyball stadium at the school, and Lobaki Foundation, which received nearly $800,000 to run a virtual reality program forensic auditors determined did not serve the needy.

Nancy New admitted to defrauding the government related to her nonprofit’s payments of $365,000 to Lobaki and her son and the nonprofit’s assistant director, Zach New, pleaded guilty to defrauding the government by paying the USM athletic foundation $4 million, which was disguised as a lease.

In addition to Smith’s filing, three other answers to MDHS’s complaint have been filed on behalf of defendants Amy Harris, Adam Such and his company SBGI LLC, and Ted DiBiase Sr. and his ministry Heart of David. Each of them denies the allegations.

Austin Smith’s answer to the civil lawsuit ultimately argues that the state has denied him equal protection of the law since the state did not also name Bryant and others as defendants.

“Arbitrarily naming Austin Smith, who has no assets with which to pay a judgment, while not suing politically-influential entities, such as former Governor Phil Bryant,” the answer reads, “… represents arbitrary denial of equal protection of laws guaranteed by the Fourteenth Amendment of the United States Constitution.”

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