Mississippi Today’s Anna Wolfe explains sprawling welfare fraud case

by Mississippi Today, Mississippi Today
December 23, 2021

Nearly two years after officers from the Mississippi state auditor’s office made arrests in a sprawling welfare fraud scheme and turned their investigative files over to federal agents, four people still await trial and the FBI has made no arrests.

A Hinds County grand jury indicted six people, including former welfare director John Davis and prominent nonprofit founder Nancy New, in February of 2020. Two of the six, a nonprofit accountant and retired WWE wrestler Brett DiBiase, have pleaded guilty. Prosecutors alleged they conspired to steal a total of more than $4 million from a federal program called Temporary Assistance for Needy Families.

But as soon as agents made the arrests, it was apparent the scheme was much more sprawling. A forensic audit conducted by independent accountants and released in October found nearly $70 million improperly spent.

Most of the wasted money ran through two nonprofits who were supposed to be running a now-defunct initiative called Families First for Mississippi, which was supposed to help poor families move off government assistance.

On Dec. 16, Mississippi Today reporter Anna Wolfe visited with former U.S. Congressman Ronnie Shows on his radio program to discuss the case, what led Mississippi here and what questions should be answered next.

Below is their conversation, edited for length and clarity.

Shows: This is Anna Wolfe, investigative reporter from Mississippi Today. And before we get started, I’d like for you to give the people just a little background about how you got on this story.

Wolfe: Sure. Just to recap what’s happened so far in the case: The state auditor’s investigation into the Department of Human Services began in mid-2019, and in February of 2020, agents from the office arrested six people for allegedly defrauding the government, stealing a total of over $4 million federal funds. Back up several years before this.

Back in 2017, I was working for the Clarion Ledger when my colleague Jimmie Gates, who I’m sure you know, wrote a story about the state rejecting up to 99% of people who were applying for cash welfare assistance.

I was just starting to take over the health beat at the paper, and I knew that I wanted to find out why that was. And if they had been approving so few applicants for welfare, what were they spending the rest of the money on? So I knew I wanted to keep a close eye on the welfare agency. Over the next two or three years, I filed dozens of public records requests, kind of fought the agency while they put up big walls, big barriers to getting information — lots of secrecy.

And it’s really funny to think back, you know, you think about the little ironies and coincidences that happen along the way. But I can remember in the summer of 2017, I had just been taking over this new beat and I was fresh on the story. And I remember I attended the Sports Hall of Fame induction ceremony, and I met for the first time there the spokesperson for the Department of Human Services at the time that I would be working with on this story.

And I remember telling him, you know, “I’m really interested in what your agency is doing. It’s been in the news lately, so I’ll be looking forward to working with you.”

And Marcus Dupree was actually one of the athletes who was getting inducted at that time. I wouldn’t know for another three years that Marcus Dupree was actually one of the biggest recipients of welfare funding because he was actually employed by the Family’s First agency through which most of this misspending occurred. So it’s really funny to think back.

Shows: Would you explain the Mississippi Families First and how that kind of plays into this? And, folks, again, this is the department of welfare in the state of Mississippi to serve the underserved. Go ahead.

Wolfe: So, actually, can I back up a little bit before that to the legislation that prompted all of this? So, one thing I really want followers of this story to know — and there was up to $70 million in welfare money that was misspent in this sprawling scheme, so the criminal charges only account for a small amount of the money that we’re talking about.

And one thing I really want people to know about this story is that this misspending didn’t happen in a vacuum. Mississippi is probably not the only state where something like this has happened, because the TANF program — that’s Temporary Assistance for Needy Families, that’s the federal fund that we’re talking about, which is supposed to help poor families — is essentially a slush fund in any state that wants to use it that way.

And it has to do with welfare reform — which, actually, Ronnie, you should remember because you came into Congress just a couple of years after that legislation passed, right?

Shows: Mhm. Yeah.

Wolfe: Do you remember that?

Shows: That was during Clinton’s administration, I believe, correct?

Wolfe: It was. Yeah. 1996.

Shows: I came in the last two of Clinton and first two years of Bush.

Wolfe: So, before the mid-90s, cash welfare used to be an entitlement, which means that if you applied for it and you qualified for it under federal law, then you got it. But welfare reform, which you remember passed in ‘96 under Clinton, did away with that program and replaced it with a block grant, which gave states almost free rein to spend the money how they wanted, however they saw fit to help poor people.

And the main idea behind this legislation is that giving people direct assistance makes people dependent on the government, traps and in poverty. So instead, we should help people out of poverty, help them get jobs and become self-sufficient, which is a noble goal, right? I mean, no one I’ve ever talked to has wanted to be dependent on the government, and that other type of assistance, like job placement, etcetera, should be there for folks who have barriers to economic mobility.

But what welfare reform did, instead of actually investing in workforce training and other studied, proven ways to interrupt generational poverty, it just gave the states the money to do whatever they wanted with it. The federal government never required states to show how what they were doing with the money was actually reducing poverty. Not once did they require any kind of outcome measurements, outcome reporting, things like that.

So, what Mississippi did was it started imposing these harsh rules on getting cash assistance so that fewer people are qualified for it. And the welfare rolls just began to drop dramatically. Like, in 1996, there were 33,000 adults on the program. And in 10 years, that number dropped to around 8,500.

Can you guess how many adults are on the program today? Or at least the last time I checked?

208.

Shows: 208.

Wolfe: 208 adults. So, the state had to find some way to spend the money. Right? And it started spending the money on things like fatherhood or two parent family formation, these kinds of family-stabilizing programs.

And, actually, when I analyze the federal data, the best that I can tell, during the years of this scandal, DHS labeled nearly all of the money that it was spending through Families First, the money that was misspent, as “fatherhood” programs.

So that’s how someone like Marcus Dupree, the football star, was getting paid — to demonstrate fatherhood. And I say this because any time he did anything for Families First, which is this initiative I’ll get to, he would post about it on Facebook with the hashtag “#fatherhood.”

And they were also paying religious organizations, like the ministry started by the former WWE wrestler Ted DiBiase. And his son was actually one of the folks indicted in the scheme. And he (Ted) actually did an interview in 2018 where he said that Mississippi’s governor actually selected him to be the “face of his faith-based initiative.”

And Ronnie, I wanted to ask you too, if you remembered, in your time in Congress, I think TANF, the federal legislation, was being altered in the years that you were there in the late nineties. Do you remember this about fatherhood and—?

Shows: Yeah. And it’s been over 20 years now. But I got there in 1999 and 2000, and then I served until 2003. So, I remember that coming up — fatherhood. It might have been in ’98. It could have. I would have to go back and look. Because I was there from 1999 to 2003.

Editor’s note: Shows voted in 1999 to amend the TANF legislation to establish programs to “promote more responsible fatherhood” and “give grants to state agencies and nonprofit groups, including faith-based institutions.”

Wolfe: I mean, I think you probably would have supported giving money to these kinds of programs, you know, promoting fatherhood, promoting families. But I’m wondering if you could have ever imagined that this is what would come of that?

Shows: Tell some of the people what this money was given to that shouldn’t have been. Give them some examples of where they were spending this money.

Wolfe: So, in the fatherhood program, they hired Marcus Dupree, for example, that’s one of the characters in this story, and paid him a six-figure salary to essentially promote the program. So, he would go around to different schools and talk about, you know, why you should do right in school and why you should make good decisions as a teenager or a kid. And then, they also purchased a horse ranch for him, which is, by all measurements, his private residence, where the program purported to provide quote “equestrian services for children.” So he would teach children how to ride horses, but there’s really no evidence that those programs took place, or if they did, they weren’t very robust, they didn’t serve a lot of kids.

So things like that where the Families First initiative could kind of get away with giving money to people it wanted to have money, but they didn’t really perform any robust or measurable programs. Another example is $1 million that the entity paid Brett Favre to essentially promote the Families First program, or multimillion dollar contracts for professional development, things like that.

Shows: Who ran the Mississippi First for Families. Was it Nancy?

Wolfe: Families First was a state-sanctioned initiative. It was a program of the Department of Human Services. But to run it, the department contracted with two nonprofits, who would then spend the money and give the money to other subgrantees. And those nonprofits were Mississippi Community Education Center, which is primarily the nonprofit at the center of the scheme that we’re talking about, and the Family Resource Center of North Mississippi. So, Nancy New is the founder of Mississippi Community Education Center. She was one of the people indicted in the scheme.

Shows: So how much money do you evaluate, or you estimate was wasted with the welfare dollars that were supposed to go to the needy?

Wolfe: I can only really go on what the numbers show in the independent audits that have been conducted. So, I think it’s safe to say that $70 million was spent in a way that we can’t tell what happened to it, or was spent outside of what federal law would have allowed it to be spent on. And that number is coming from the forensic audit that was just released last October and conducted by independent third-party auditors.

Shows: So, I want to make sure everybody’s following. I want all of the listeners out there listening. And just think about what’s happening. You have a state agency that gets approximately $86 million a year — probably goes up and down — to this fund. And then approximately $70 million was spent in helping get somebody a job. It’s not like they needed the money or the help. It just that, they were taking care of their friends, is what it looks like to me. You know, I don’t know, I don’t like to accuse somebody unless I have all the facts. But all I can tell you is, if you only got 208 people that qualify for this assistance, and it came down from 10,000, is that correct?

Wolfe: It was 33,000 adults in 1996 when it started.

Shows: Now there’s 208.

Wolfe: Yeah.

Shows: Well, you know what scares me about that? You probably have the same thing in Medicaid, too. You know, it just infuriates me.

Wolfe: Yeah, I think where our attention has to be is in the funds that have very little accountability in them. Right? Like this isn’t a federal entitlement, like some of the other federal programs that we have, like food stamps or the SNAP program. And so, if states have the ability to do what they want with it, I feel like those are the pots of money that we need to keep a really close eye on.

And, you know, this Temporary Assistance for Needy Families is most commonly known for providing the welfare check to very poor families.

But it hasn’t done that; that hasn’t been in the primary function of the program, for a long, long time — a lot more historical than just this most recent scandal.

So, I think a lot of people would say that you’d find similarly weird purchases or purchases that don’t seem to help people, dating back to ‘96, you know, not just in these most recent years. And of course, Mississippi is one of the poorest states in the nation so it’s kind of especially tragic that this is occurring here.

Shows: Well, you know, I just hope that people are listening and start asking their state legislators about this, because this is not right. It’s just not right for people who need this. Who was the director of the welfare department at the time this happened? Was it Davis you said?

Wolfe: Yeah, it’s John Davis. He was the former director. He was the director from 2016 when he was appointed by Governor Bryant to 2019 when he was pushed out of office because of the investigation.

And I think it’s also important to think about the people who right now have the power to go after the major players in this scheme, because certainly there are people involved with the spending of these funds who have not been held accountable. And there are people who have the power — the FBI and the U.S. Attorney’s office — who have the power to potentially, you know, topple these statewide systems and the secrecy that perpetuates this kind of corruption, but the likeliness that the people who have this power are actually going to expose this — the likeliness is not that great. I mean, these people were arrested two years ago by state officers. And there hasn’t been any public federal charges against anyone in this scheme.

I just think listeners should be asking themselves not just about what state leaders are going to do to correct this, but also are the people who have the power to go after everybody: Are they doing that? Are they following up on every piece of information that could lead to a revelation of someone else’s involvement and someone else needing to be held accountable?

Shows: What you’re saying when this thing was first operating, first got started, you’re talking about going back to Governor Bryant and his administration? The present administration? Cause are we still doing this same practice now?

Wolfe: Yeah, absolutely. I mean, I realize that there are two different things we’re talking about, which, one is just: Good government or bad government, right? Is the money being spent in a way that actually works? And just because the state is spending its money on stupid stuff doesn’t mean that that’s criminal. But as far as the alleged criminal activity that took place during the 2018, 2019 timeframe, there were a lot more people involved in setting up that structure of Families First, where the money would flow through, and essentially once it got to Families First, it wasn’t labeled as TANF money anymore. So no one knew which kind of dollar they were getting. You know, it was a lot more than six people who were involved with that. And I think you gotta go up as high as you can.

Shows: You know, there used to be accountability for elected officials and state agency heads. And it seems like prior administrations … they just don’t seem to have any accountability. How hard was it for you to get a hold of records from these agencies? How long did it take you? I think you mentioned a while ago, but I’d like for people to understand, you know, we have a sunshine — open meetings law, we got that. But they did stall you for how long?

Wolfe: It’s hard to say because the first request that I did for TANF records was in 2017, almost three years before any arrests were made. And I requested documents showing how the money was spent, like expenditure reports, etcetera. And there was a lot that the agency had that I just didn’t know what it looked like, but they would send me these very meager, vague reports that they sent to the federal government about how they were spending the money. And it didn’t show which entities were actually receiving funds or what they were doing with the money. And so, it was just a constant fight for years of just trying to get better records than I had. But you know, it takes, even now, it takes weeks to get even something simple.

Shows: Let me ask you this. The state auditor, he did issue a demand letter for repayment against Brett Favre but is there somebody else, I thought you said Marcus Dupree. Who is the state auditor investigating?

Wolfe: Okay. So, the state auditor’s office arrested six people back in February of 2020. That was John Davis, Nancy New, Nancy’s son Zach New, a couple employees of the agency and nonprofit and the wrestler, Brett DiBiase. But as far as the other people who got money, like Brett Favre or Marcus Dupree or other people, even who received demand letters, these people have not been charged with anything.

There’s been no civil suit filed yet. The Department of Human Services is the one planning to do that. But these folks haven’t faced any kind of charges, like criminal charges or anything like that.

Shows: Do you think they were not knowledgeable about where the money was actually coming from?

Wolfe: Well, they were promoting the Families First program, Families First being totally connected to DHS. I mean, it’s just hard for me to say that they didn’t know that the money was supposed to be for the purpose that they were advertising it for. Right? Like, they were getting paid to advertise to poor people to come to Families First. So where did they think the money was coming from? But, besides that, it’s a nonprofit, so how do you get a million dollars from a nonprofit? I mean, nonprofits are charities. So whether they knew it was improper, there’s kind of a difference between whether it was improper and whether it was just a reasonable thing to do to take money from a charity like that.

Shows: Well, most of the time when we hear people do that, they end up being indicted. Nonprofits are a very good way of getting in trouble if you’re not doing it right. So, do you know how many other states are doing what Mississippi is doing?

Wolfe: I think that there would have to be a person like Shad White or a reporter in each state to really know what was going on with the funds. The reports to the federal government of how they spend the money, besides what they spend on cash assistance, and only about 20%, about 20 or 25%, I’m not looking at the number right now, of welfare money nationally goes to cash assistance for poor families. And the reporting that the federal government requires for the other money is very vague. They don’t have to send in receipts or expenditure reports that are detailed to the federal government.

They do report vague spending categories, so you can tell if they spent a lot of money on quote-unquote “fatherhood.” Right? And there are a lot of states that spend the money very similarly, where that’s concerned, to Mississippi. So, who knows what they’re doing with it?

Shows: Do you know if Shad White is going to go after these other individuals?

Wolfe: He sent out those demand letters to people that improperly received funds. And it’s the Department of Human Services that has actually hired an attorney to file civil litigation to claw that money back. So, it won’t be Shad’s office doing that. He just sent out the demand letters. But I know that they’re all working together to file civil litigation, hopefully sometime soon. I know they were hoping to get it filed a couple of months ago, but it’s just taking a while. But at that time, there will be depositions. People will be forced to come to court and explain themselves.

Shows: Well, I tell you, I was in politics a long time. I ran for highway commissioner and my two predecessors went to jail, and we had a couple of public service commissioners who went to jail for misusing public funds. So a vendor, or whoever it is, the executive director of the welfare department, those people ought to be held accountable, because I can assure you, if it had been me, they would have come after me. It’s not fair to the people. They’re taking money from people.

And we all know that everybody who gets welfare probably doesn’t need it, but the majority of them do, and you don’t punish everyone for a few bad apples. You just don’t do away with it. And that’s always been my concept about how it: Not everybody’s going to do right. But you don’t need to take the program away from people who are doing right. You just got to have accountability.

Wolfe: Right. And it’s kind of mind boggling to me, too, that the folks who rail against these social safety net programs so much are often the same people who are making their careers at the government trough, privatizing these programs and getting cushy jobs for their family members.

Shows: Well, they’re taking care of their contributors. I can tell you what they’re doing. They want some more campaign contributions. How do you think a guy raises $8 million in Mississippi to run for governor or something like that? Why are the franchisees or out-of-state companies costing the state treasury about $200 million a year, going out of the state to these companies that don’t even have a store here, or they may have a store, but they don’t have any workers here. I’m also concerned about Medicaid. Is it being run right? Because they’ve got private contracts all over the place at Medicaid.

Wolfe: And if you didn’t know any better, you would think that our social safety net programs, of all things, would be protected from that kind of political influence. But, in this case, it’s ripe for it.

Shows: You know what they say, “Don’t do as I do, do as I say,” and that seems to be what’s going on right now. And I think the people deserve to know about this. Because you don’t get anything over the — I mean, you might hear something about the indictments, but that’s all you hear. And what I’m interested in is going back to the last administration who you said allowed this to happen.

Wolfe: Right.

Shows: You can’t understand why they’re not questioning the former governor and everybody else.

Wolfe: Exactly.

Shows: Like they say, follow the money. Follow the money and you’ll find out.

Well, Anna, what’s your next step in your story? Are you going to keep staying on top of it or what?

Wolfe: Oh yeah. I think the big questions that I have now that I’m trying to answer are the big questions that everyone has about how far up the chain this is going to go. And if the people that are investigating this and have the power to do something about it, if they’re really going to go after everyone that they should, and everyone who should be held accountable, namely the former governor Phil Bryant.

Shows: Well, I try not to be too one-sided on the politics on this show, but it’s hard for me not to. But all these guys like to talk about family values, family values. I don’t see many family values on this concept they’ve got today.

Wolfe: Yeah, if “family values” means getting cushy government jobs for your family, then I guess that makes sense.

Shows: That seems to be the trend. That seems to be the trend. Under the current leadership.

So, what’s your next story coming out?

Wolfe: I don’t think I’m quite ready to share what that is quite yet, but I urge you all to stay tuned. I think that, as far as the updates in the case, there’s going to be civil litigation filed soon. The feds are obviously poking around, so they move very slowly and quietly. So, who knows when that might come, if it is going to come. But again, I think my stories that I’m most focused on right now are getting to the bottom of the former governor’s involvement.

Shows: Well, I think you ought to get a reward for this and bringing it to people’s attention. It’s a good thing to do and that’s what good reporters do.

Wolfe: Well, thank you. Thank you for shining a light on it and calling attention to it too. It’s an important story.

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