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John Davis worked his way up to executive director of the Mississippi Department of Human Services after nearly thirty years with the welfare agency and had begun publicly crafting a new vision for how the state helps the poor.

But by the time he took the helm of an agency that administers over $1 billion in public assistance program in 2016, “he saw it as an opportunity to build a kingdom over there,” State Auditor Shad White said Monday just before releasing a 104-page letter outlining the ways the agency misspent millions.

Under the Davis administration, federal funds intended to serve the poor instead enriched his family and friends and paid for lobbyists, luxury vehicles, religious concerts, expensive getaways, publicity events with famous athletes and even a speeding ticket, the state audit published on Monday reveals.

“Once you talk yourself into ignoring the laws and the regs around how to spend the money, it’s easy to talk yourself into increasingly absurd expenditures over time,” White said.

The new report covering fiscal year 2019 officially questions $94 million in Human Services spending, some from previous years. The state auditor’s single audit, conducted every year on behalf of the federal government, sheds new light on the misspending that led to six arrests in early February.

Human Services recently announced it has revised its internal policies and will require welfare subgrantees to submit more comprehensive financial records moving forward. The new executive director Bob Anderson — whom Gov. Tate Reeves appointed earlier this year to replace interim director Jacob Black, Davis’ former deputy — is overseeing an internal investigation to determine if any current employees were involved in the alleged scheme and make any necessary personnel changes. The agency also plans to hire an accounting firm to conduct a forensic audit of the department.

But the agency could still face consequences from the U.S. Department of Health and Human Services, which has the option to cut the state’s grant funding in future years, impose hefty fines or require the state to increase its match to make up for the misspent funds.

When Davis, who is now awaiting trial in the largest public embezzlement case in state history, became director in 2016, the agency was serving a record low number of families through the cash assistance program. The welfare caseload continued to plummet as the state reported spending more money on programming, such as parenting classes and skills training, than on direct payments to poor families. But the department didn’t keep track of who these programs served, and in many cases did not require that the recipients meet income requirements.

“No one ever took the time to see if any of the people were actually eligible or needed the money,” said Stephanie Palmertree, financial and compliance audit director for the state auditor’s office. “And that’s the biggest concern here is, when you’re funding things like baseball fields for select softball teams, obviously that money is going to people who don’t need the money and individuals who actually need that assistance … they’re missing out because you’re choosing to fund services for people who aren’t eligible.”

After taking charge, Davis first dismantled the agency’s competitive bid process for contracts, the auditor said. He directed the agency to make upfront, multi-million dollar payments to Mississippi Community Education Center and Family Resource Center of North Mississippi to run a program they called Families First of Mississippi.

Over less than four years, the Human Services gave the nonprofits about $65 million and $45 million, respectively, according to a review of state expenditures.

Typically, subgrantees for the welfare program submit claims for reimbursement as opposed to receiving upfront payments, several subgrantees told Mississippi Today, making the arrangement with the two nonprofits all the more unusual.

Davis encouraged the nonprofits to pay large sums to retired professional wrestlers Ted Dibiase, Ted Dibiase, Jr., and Brett Dibiase for work they didn’t do or that didn’t help the needy, the auditor said.

Davis was close to the DiBiase family; his agency awarded more than $2 millions in grants to Heart of David Ministry owned by the patriarch, Ted DiBiase Sr., dubbed the “Million Dollar Man.” The director heavily involved both DiBiase brothers Brett and Ted in official department matters and taxpayer funded, out-of-state trips.

Emails suggest Davis and Ted DiBiase Jr. had gone into business together, developing a motivational training program called Law of 16 that they delivered to public agencies on the nonprofit’s dime. Ted DiBiase Jr.’s companies Priceless Ventures LLC and Familiae Orientem received more than $3 million from the nonprofits between 2017 and 2019, but the audit does not show that Davis financially benefited. Davis was even trying to help the wrestler with an autobiography.

A Hinds County grand jury indicted Davis and Brett DiBiase in February for allegedly using welfare funds to pay for Brett’s drug treatment at a Malibu facility. They’ve pleaded not guilty. Davis’ attorney Merrida Coxwell did not return calls to Mississippi Today Monday.

The grand jury also indicted Mississippi Community Education Center’s founder Nancy New and her son Zach New for allegedly embezzling over $4 million for their personal use. They’ve pleaded not guilty. The New nonprofit represents the most egregious misspending, according to the audit: It transferred over $6 million to private schools owned by Nancy New, such as New Summit School, bought luxury vehicles for New family members and paid expensive rents on property owned by the News, only for them to sit empty. Zach New used welfare funds to pay back a loan on his retirement account, the audit says.

The auditor discovered many millions in misspent funds, but he did not specify a dollar amount out of the $94 million that rose to the level of misspending. Many more questioned costs resulted from a lack of documentation showing where the money went.

The money in question came from Temporary Assistance for Needy Families, a federal block grant that states have wide latitude to use to help lower income families, including through cash assistance for very poor families formerly known as the “welfare check.”

Mississippi receives about $86.5 million in TANF from U.S. Department of Health and Human Services each year and must match the grant with state funds. But in any given year, the state is usually also spending federal grant money from previous years, complicating the accounting. The agency had caught heat for failing to spend millions in TANF funds, carrying over a large unobligated balance from year to year, and it began spending down the fund in 2017.

In 2018, the most recent year in which federal reports are available, Mississippi spent about 5 percent of $135 million TANF dollars on direct assistance for families. The state reported spending most of the rest on programming categorized as education and training, supportive services, child welfare and “Fatherhood and Two Parent Family Formation,” on which it spent about $40 million.

While the federal government requires states to provide documentation about the families that receive cash assistance — such as the number of families that meet work requirements — it does not require states to report what it buys with the rest of the money, only how much it used on vague categories.

The department was often cited in previous audits for failing to properly monitor the spending of federal funds. In the single audit released last year, shortly after the auditor’s office began its investigation into Human Services’ TANF spending, the agency was among the most cited, responsible for 10 of the 63 total findings identified in fiscal year 2018. They found management errors associated with $30 million in human services spending, but identified within TANF just over $3,100 in actual questioned costs, which were payments to low-income families that may not have met all requirements to receive benefits.

These annual audits, which focus on an agency’s internal controls, are not effective at identifying fraud, White explained Monday; that kind of revelation usually requires a tip from the inside. The auditor’s office said it began investigating the TANF scheme in June of 2019 after agency employees took information about misspending to then-Gov. Phil Bryant, who turned the information over to White.

When auditor agents arrested the six defendants in early February before the investigation had concluded, White explained that his office moved forward in obtaining the initial indictments in order to prevent any more misspending or theft.

Mississippi Today first reported that the New nonprofit paid $5 million for the construction of a new volleyball stadium at University of Southern Mississippi; covered the $9,500-a-month mortgage on former football star Marcus Dupree’s ranch in a gated Flora community; and funded a high-profile boot camp-style fitness program offered by former linebacker Paul Lacoste. The audit included each of these purchases as a finding.

The nonprofit paid for the volleyball center through a lease agreement that it utilized one time for a Healthy Teens Rally in 2018. The auditor found that in substance, the payment was a donation, not a lease.

Dupree, who declined to talk to Mississippi Today when visited at the ranch in March, was on payroll at both Mississippi Community Education Center and Family Resource Center of North Mississippi, where he earned hundreds of thousands to travel the state and lecture school children.

The nonprofit funded the Lacoste boot camp with TANF money through a contract with his company Victory Sports Foundation, but the program was not geared toward the poor, the audit says; many professionals and state lawmakers participated free of charge. While Lacoste did not return several phone calls from Mississippi Today, and publicly threatened the publication with legal action, he told Clarion Ledger he did not know he had been paid with welfare funds. The nonprofit paid Victory Sports $1.3 million of its $1.4 million contract and Clarion Ledger reported some of the money paid for expensive dinners at steakhouses.

While the volleyball center, the Dupree ranch and the Lacoste boot camp are questioned in the audit, none of these expenditures are the subject of criminal charges.

The largest fraudulent purchase outlined in the indictments is a $2.15 personal investment the News allegedly made using welfare funds into a medical device company called Prevacus, which is developing a treatment for concussions.

The audit explains that the New nonprofit entered a $1.7 million contract with Prevacus in 2019. Mississippi Today also first reported that football legend Brett Favre had promoted, and discussed with then-Gov. Bryant, according to emails Mississippi Today obtained, two of the projects funded by welfare money: the investment in Prevacus, a company the athlete endorsed, and the new center at Southern Miss where his daughter played volleyball.

The audit reveals more about Favre’s relationship with the News: The nonprofit also paid Favre Enterprises, his business, $1.1 million between 2017 and 2018 “to appear at several events, record promotions, and provide autographs for marketing materials.”

“MCEC provided a list of dates and events that fulfilled the contract terms; however, upon a cursory review of those dates, auditors were able to determine that the individual contracted did not speak nor was he present for those events,” the audit said.

Favre did not return calls or text messages Monday afternoon.

Mississippi Community Education Center also paid Davis’ brother-in-law $150,000 to serve as the department’s “Leadership Outreach Coordinator” and $365,050 through a business lease on a piece of property in Brookhaven. It paid Davis’ nephew $140,809 to develop a coding academy and website design program and $67,769 in salary. Family Resource Center also paid the Davis family members.

Meanwhile, the Families First for Mississippi nonprofits, which received over $100 million since 2017, would not provide any cash assistance to people living in poverty.

“As an agency head, it’s not like I’m sitting back saying, ‘Oh, I don’t want to help these people,’” Davis told Mississippi Today in 2019 just a few months before the investigation began. “My job is to help people. I don’t get paid any more not to help people.”

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Eric J. Shelton/Mississippi Today, Report For America

Gov. Tate Reeves answers questions during a press conference concerning the coronavirus pandemic.

Despite two of the last four days showing the highest daily COVID-19 case counts to date, Gov. Tate Reeves announced Monday he is further reopening the Mississippi economy.

Restaurants can begin Thursday serving in-house meals under strict guidelines, Reeves announced Monday afternoon during his daily news conference. The governor also is re-opening state and local parks.

The governor said Friday that he had planned to announce further reopenings that day, but opted not to after the Department of Health reported 397 coronavirus cases and 20 deaths on Friday. Those numbers represent the most cases on a single day since the coronavirus arrived in the state.

Then on Saturday and Sunday the number of new cases reported were significantly lower. On Monday, though, the Department of Health reported  327 new cases – the second most ever on a single day – and seven deaths.

Just before the Reeves news conference on Monday, on social media LouAnn Wodward, vice chancellor for the University of Mississippi and head of the University of Mississippi Medical Center, said, “The number of COVID-19 positive patients, hospitalizations and deaths are increasing. We have not hit our peak. We are not on the other side of this. Stay safe Mississippi.”

State Health Officer Thomas Dobbs, who participated in the news conference with Reeves, said looking at data over a period of time it appears the state’s cases and hospitalization rates are no longer increasing and that a plateau had been reached. The daily reports are impacted in part by the number of tests performed and when those test results are reported, Reeves said.

But while some metrics, like ICU and ventilator use have been stable, overall hospitalizations have been steadily growing, both daily and when looked at it on a rolling weekly average.

Dobbs and Reeves stressed that Mississippians still must practice social distancing, wear a mask in public, stay six feet apart and avoid groups of more than 10.

Reeves said he is trying to balance the safety of the state’s citizens with the state’s economy. He said the closure of businesses also is having a devastating impact on the state.

“I don’t want to wait if there are steps that we believe we can safely take now to ease the burden on Mississippians fighting this virus,” Reeves said. “There are thousands around the state that are set to close their doors for good. They cannot hold on much longer. I hope that this will not only be some much-needed relief for those restaurant employees but also provide for some joy for the people of Mississippi.”

Under the new order, which goes into effect Thursday, Reeves said he unfortunately could not reopen barbershops and hair salons because he said health care experts could not find a safe way to do so. While Reeves did not address the issue at the news conference, it appears the order also does not allow for the reopening of gyms, theaters, other entertainment venues and some other activities like nail salons.

The order Reeves announced Monday amends an April 24 “safer-at-home order” that opened most retail establishments within the restraints of social distancing and other limitations, but did not reopen in-house dining at restaurants. Under the amendment Reeves announced Monday, restaurant capacity will be limited to 50 percent of maximum capacity and employees must wear masks and undergo safety training.

The safer-at-home order is set to expire at 8 a.m. Monday. Prior to the safer- at-home order, the state was under a much stricter shelter-in-place order for three weeks.

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Aallyah Wright, Mississippi Today

Minerva Clemon, 70, lives on the outskirts of Schlater, where she has been without running water since July.

SCHLATER — In November, reports of Minerva Clemon’s struggle to get safe drinking water awakened Mississippians to a water crisis that many communities around the state share: the lack of access to clean, running water.

“At this time in life, I’m too old to be trying to repair a pump every six months and I feel like we should be entitled to water like everyone else,” the 70-year-old Schlater resident told Mississippi Today in November.

Once news coverage of the families’ plight spread, government officials — local, state, and federal — worked in tandem to fix the problem, and families can finally get what they’ve been waiting nearly a year for: a new water well system.

Late last week, the Mississippi Department of Human Services announced receipt of a $63,000 grant from the U.S. Department of Health and Human Services to build a new well.

“It’s hard to imagine communities being without basic necessities, especially during the (coronavirus) pandemic we’re facing,” said Robert G. “Bob” Anderson, executive director of the state Department of Human Services in the release. “Hygiene is critical for the health and welfare of everyone right now.”

Mississippi Today reached out to Clemon after the news of well funding was released. What was once Clemon’s biggest concern — funding — is now trumped by a new obstacle: an ownership issue with the land. Clemon’s home is considered heirs’ property, or property passed down without a will.

“The problem is the land needs to be in my name,” Clemon told Mississippi Today. “The property was my grandfather’s and went to my mother. Basically, all of her siblings are gone and all of their children have a piece in this land. Black people don’t do wills and end up with heirs’ property.”

Joyce Chiles, of Mississippi Delta-based Chiles Law Firm PLLC,  said to move the process forward on a case like this, the court would need to partition the land. This means notifying all parties who may be property owners.

“Let’s assume you have five siblings and your parents leave without doing a will. According to the law of intestate and distribution, each sibling will take an equal share but will own the whole thing together,” Chiles said. “The property has not been divided. It means you and your siblings own the home. No one person owns one particular portion.” 

So far, 17 states have passed the Uniform Partition of Heirs Property Act, which “helps preserve family wealth in the form of real property.” Mississippi is one of the states that has not passed this legislation. However, Senate Bill 2553, which would establish procedures to partition heirs’ property, was passed by the Senate in the 2020 legislative session before it recessed due to the coronavirus pandemic. 

Schlater residents have been living without clean, running water since July as a result of broken water well pumps. After Mississippi Today’s initial report, Brandon Presley, Mississippi Public Service Commissioner for the Northern District, called to inquire about how his office could be of help. 

He conducted follow-up discussions with federal and local water agencies and local lawmakers to see what could be done to assist the families and established a two-phase plan.

Central Mississippi, Inc., a community action agency in Leflore County along with the Greenwood Fire Department provided thousands of gallons of water by a water tank and bottled water to residents, said Pam Gary, director of Central Mississippi. They also went to the state Department of Human Services to apply for the grant.

The cost of the water pump is between $45,000 and $50,000. The rest of the funds will be used to make residents “more sustainable in the future,” by assisting with utility bills, rent and mortgage, Gary said. 

“I’m just glad we were able to get this (grant),” Gary said. “… I’ll feel better once the property rights are resolved, get the grant completed and running water in homes.”

This effort in Leflore County served as a catalyst to spearhead similar efforts in other rural communities across the state, Presley said. In Tishomingo County, for instance, three families have been without water, but the Northeast Mississippi Community Action Agency, in conjunction with Presley’s office and other officials were able to solidify nearly $6,000 for those residents.

“We had folks who were 70-plus-years-old toting water (to their homes),” Presley told Mississippi Today in a phone call. “I think this is a great example of where the press highlighted this need and state government, federal government, local government, and nonprofits responded.”

Nailing down which communities are without water remains a challenge, but Presley said his office is working with the Mississippi Rural Water Association to do so. The PSC created an ongoing database to ask residents if they’re lacking water.

“We’re taking the playbook we used in this Leflore County case to meet a need more widespread. This particular case has given us the opportunity to put everyone in the room,” Presley added. “That is exactly what we did in Tishomingo County with your reporting, in a very short period.”

With the coronavirus still spreading across the county and throughout the state, construction and completion dates for the water well projects are up in the air. In spite of continuous roadblocks to get basic necessities like water, rural Mississippians like Clemon remain hopeful.

“Right now, I’m still saying my prayers and waiting because at this point it’s a waiting game to see,” Clemon said. 

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Eric J. Shelton/Mississippi Today, Report For America

Mississippi House Speaker Philip Gunn speaks during the Neshoba County Fair in Philadelphia, Miss., Thursday, Aug. 1, 2019.

Speaker of the House Philip Gunn blistered Gov. Tate Reeves in a seven-page letter sent on Monday, disputing statements Reeves has made concerning legislation passed last week that prevents the governor from spending $1.25 billion in federal coronavirus relief funds.

For weeks, Reeves had insisted he had sole spending authority over the Coronavirus Aid, Relief, and Economic Security (CARES) Act funds. But on Friday, the Legislature convened weeks ahead of schedule to pass a bill that would strip the governor of sole spending authority of the coronavirus stimulus funds.

Reeves has since criticized lawmakers in press conferences and in national television interviews, accusing legislators of engaging “in petty political difference” and saying under “the worse case scenario (because of the legislative action), people will die.”

Those comments from Reeves prompted Gunn, the third-term Republican speaker from Clinton, to send the Monday letter, which was obtained by Mississippi Today.

“Since the passage of Senate Bill 2772, you have made statements that are completely incorrect and/or misleading, and you have attacked my House members and the legislative process,” Gunn wrote to Reeves. “In your comments Friday, you portrayed legislators as thieves and killers. You said we ‘stole the money’ and people would die. Such cheap theatrics and false personal insults were beneath the dignity of your office. They were out of character for you personally.”

Speaker Letter to Gov 5 4 20 (Text)

The letter is the latest in a back-and-forth between Republican leaders over who should have the federal spending authority. Lt. Gov. Delbert Hosemann, who worked alongside Gunn to pass the legislation last week, defended the Legislature’s stance in a weekend op-ed.

In his letter, Gunn, the Republican from Clinton serving in his third term as speaker, details 12 separate points he disagrees with the governor on, ranging from the handling of unemployment benefits, who has the authority to spend these funds and whether the governor needs access to these dollars to address any emergencies that may arise.

Reeves has said the Legislature’s actions could cause people hired to handle unemployment claims to be laid off because they were going to be paid with federal funds, and the Legislature’s authority over those monies might mean there would not be enough money to pay unemployment claims. However, money meant to be used for unemployment claims is in a separate pot of money not impacted by the Legislature’s actions.

Gunn’s letter also rebuffed the notion that the Legislature’s actions were part of a political battle and encouraged Reeves to work with legislative leaders.

“We request that you stop attempting to sensationalize this situation and work with the Legislature to solve the issues before us,” Gunn wrote. “This is the spirit in which our government has worked since 1817 and it shouldn’t stop today. We invite you to put aside an all out media war with the legislative branch and to work with us to provide the checks and balances that the spending of $1.25 billion should require.”

When asked if he had a response to the letter during a Monday afternoon press conference, Reeves said: “I honestly don’t have any idea what you’re talking about… I haven’t read any letter from the Speaker or otherwise.”

The governor suggested he would veto the bill, but did not say that outright when asked whether he planned to.

“Wouldn’t you veto the bill?” Reeves said. “Wouldn’t you fight for the people of Mississippi to get them money not on May 18, but now?”

The governor has five days to veto a bill after it is passed when the Legislature is in session, but members can still override a veto with a two-thirds vote. 

“I’ve been around the legislative process long enough to know that the first vote doesn’t guarantee the second vote,” he said.

Reeves also suggested that a court battle was possible if the legislators voted to override his veto.

“I can’t tell you with certainty what we’re going to do…but we certainly feel like if (legislators) were successful at maintaining that this continues, then I would think that it’s possible that at some point the courts would weigh in and … break the tie.”

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