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Glaring Lack of Oversight, Contempt for Poor People, Delivers Biggest Scam in State History

Mississippi is fostering a queasy reputation for corruption, and gaping holes in its oversight and sunshine laws are making that reputation deserved.

The steady crank of court filings in the state’s expanding Temporary Assistance for Needy Families (TANF) money racketeering and bribery scam is uncovering new revelations every week. At the heart of the suspected $100 million scandal is the fact that federal TANF money, which is intended to help families and children in poverty, instead went to millionaire sports figures, retired wrestlers, GOP-aligned non-profits, wealthy drug companies, and charter school hawkers.

Critics say the theft was inevitable considering the state’s impenetrable freedom of information policies and secretive dealings with non-government entities. U.S. Rep. Bennie Thompson said he’d voted against converting the federal Aid to Families with Dependent Children (AFDC) program to TANF in 1996 specifically because changing the federal program into a TANF block grant gave too much control to shadowy Mississippi leadership.

“I voted against my Democratic president—Clinton—because I said it wouldn’t work,” Thompson said. “Many of the people in charge of those agencies saw this as an opportunity to get all this money and create new organizations, make new friends, help family, and get invited to all kinds of parties, but you’re using money for poor folk. I hate to say, ‘I told you so,’ but I voted against it because of that concern.”

Thompson’s anticipation of theft by government officials and their well-connected friends panned out when Nancy New, founder of New Summit charter school and darling of the conservative radio circuit, pleaded guilty in Hinds County Circuit Court to a long list of charges including wire fraud, racketeering, money laundering, bribing a public official, and fraud against the government. New’s government connections are particularly extensive. She is a close friend of former Miss. Gov. Phil Bryant and a campaign donor to Miss. Gov. Tate Reeves. Her Jackson charter school even hosted Reeves in a campaign ad. Her son Zachary New, who works with his mom at New Learning Resources Inc., pleaded guilty in connection to the same crimes. Additionally, both pleaded guilty to identical charges from federal prosecutors, sans racketeering. Even more recent surprises from a civil suit filed by the Mississippi Department of Human Services against News’ nonprofit, Mississippi Community Education Center, delivered a windfall of court documents uncovering text messages showing how retired-NFL star Brett Favre, former Mississippi Gov. Phil Bryant and New seemingly conspired to spend welfare money on an $8 million volleyball stadium.

New likely agreed to work with prosecutors on expanding their investigation against other suspects as part of her plea agreement, so it is not surprising that incriminating texts from her phone began showing up in court submissions after her April plea. Her texts reveal damning correspondence between Favre and herself while discussing the ease of hiding Favre’s $1.1 million payment, financed with TANF money.

Favre has denied knowing his payment was welfare money intended for impoverished children and families, but texts show he was leery of the source of his payment reaching the press.

“If you were to pay me is there anyway [sic] the media can find out where it came from and how much?” Favre texted Nancy New on Aug. 3, 2017.

“No, we never have had that information publicized,” New responded. “I understand you being uneasy about that though. Let’s see what happens on Monday with the conversation with some of the folks at Southern (USM). Maybe it will click with them. Hopefully.”

“Exhibit 7” in Case: 25CI1:22-cv-00286-EFP Document #: 131-1. Filed: 09/12/2022 with the Hinds County Circuit Clerk

New went on to claim in the same text that then-Gov. Phil Bryant had approved paying the millionaire sports figure a chunk of welfare money.

“Wow, just got off the phone with Phil Bryant! He is on board with us! We will get this done!” New wrote.

They Don’t Have To Tell Us Anything

New’s assurance of secrecy to Favre goes straight to the heart of Mississippi’s problem with welfare money: a colossal lack of oversight. Former U.S. Attorney Brad Pigott says New’s sneaky promise was made possible by massive holes in Mississippi’s rules regarding its business partnerships.

The reality is that Mississippi media watchdogs have very few resources for detecting racketeering, bribery, and embezzlement by nonprofits that are grantees of state contracts, including greedy money sops like Nancy New’s Mississippi Community Education Center.

“There was very little expectation of accountability and reporting on results,” Pigott told The Lighthouse. “It’s a problem when you defer so much to a private entity […] and you require that private entity to do so little to communicate reports and results back to the state agency. The state agency is subject to the Open Records Act, but the private entity is not. If the grantee is handing out all the money and has all the information about what’s happening with that money and is not subject to the sunshine effect of the Open Records Act because it’s a private entity, you have a profound problem. When the state agency doesn’t have the information about how the money is being used it doesn’t have an obligation to give out that information.”

The state’s shadowy no-man’s land of contractor information means reporters’ Freedom of Information Act (FOIA) Requests for budget and spending info turns up pages and pages of blank space or one or two-paragraph non-answers.

It doesn’t help that Mississippi leaders are only too happy to run interference for contractors, who are often political allies or business associates. Until recently, the state had contracted Pigott to oversee the Mississippi Department of Human Services’ civil suit against 38 individuals and companies caught up in the Nancy New scandal. Pigott was working to recover some of the $77 million squandered by New and her affiliates, particularly a $5 million payment to the University of Southern Mississippi Athletic Foundation for the construction of Favre’s volleyball stadium.

Retired football quarterback Brett Favre and his two daughters, Breleigh and Brittany. Breleigh (left) was on USM Women’s Volleyball team at the time state officials allegedly spent welfare money on the university’s volleyball stadium. Photo via Twitter

New and her partners broke the law by trying to disguise the money as a lease rather than an illegal purchase for construction, which could incriminate university allies. Favre had his own personal motivation to push for the facility at his alma mater, particularly with his daughter being a USM student. In the middle of the investigation, however, Gov. Tate Reeves’ staff pressed Pigott to remove the USM athletic foundation from the suit, and then tossed Pigott from the case. Critics quickly pointed out that the USM board contains many of Reeve’s friends and campaign donors. The governor’s appointed MDHS director tried to waylay accusations of favoritism by claiming Pigott failed to consult with MDHS before filing a subpoena relating to the USM facility, but Mississippi Today reported Pigott informed MDHS of the subpoena 10 days before filing it. Jim Waide, an attorney for one of the defendants in the state’s suit, went as far as to implicate Reeves, arguing that “it is an abuse of power for Governor Reeves to direct litigation in which he is a necessary party defendant.”

Pigott says the federal government trusts places like Mississippi to determine what the words “needy families” in Temporary Assistance for Needy Families” means, but wrongdoers looking to exploit TANF as a slush fund effortlessly abuse the federal government’s confidence.

“Private grantees should long ago have been held strictly accountable,” Pigott said.

Reporter Anna Wolfe has labored to cover TANF corruption in her exhaustive “Backchannel” series for roughly two years, but the state was successful at dodging many of Wolfe’s more pivotal information requests, primarily because of its own poor record-keeping of business partners like New. A host of subpoenas from State Auditor Shad White and subsequent legal filings from federal and state civil and criminal prosecutors opened a floodgate of incriminating new information, however, which caught up countless suspects, sports figures, a former MDHS head and two Mississippi governors.

National news appears content to focus on the pop culture embarrassment of a sports celebrity and millionaire apparently going on welfare, but state critics say they’ve been screaming about Mississippi’s endemic potential for TANF corruption for decades.

“I’m outraged that this money got redirected to the well-connected and those who already had lots of money instead of going where it should have been used, but it feels like the same song, 97th verse. For people who are just now serious about this, where have ya’ll been? This is not the first time [TANF] money has gone awry,” said Mississippi Low-Income Child Care Initiative Director, Carol Burnett, who warned The Lighthouse two years ago that Mississippi officials were deliberately hoarding TANF money by denying it to needy families it is designed to help.

They Can Still Grow Their Slush Fund

The same state that imposes so few demands on business partners like Nancy New requires impossible quantities of accountability from the people who are intended to benefit from childcare and nutrition assistance. Burnett said she believes more than 100,000 Mississippi children are eligible to receive vouchers to help pay for childcare. However, MDHS officials—including MDHS former head, John Davis, who is also caught up in the TANF scandal and pled guilty for directing cash payouts to New and others—paid vouchers to less than 20,000 eligible families.

Mississippi is the nation’s most impoverished state, but eligible families can receive TANF for only a few months, and that cap lasts a lifetime. When you reach it, you are not eligible at any other time. Additionally, Mississippi beneficiaries must work a mandatory number of weekly hours. The program also comes with steep income limits: a family of three making more than $680 a month is too wealthy to get TANF in Mississippi. Even after news of Mississippi’s TANF scandal broke, state legislators in charge of the government were still trying to impose new restrictions on impoverished welfare applicants, not wealthy contractors like New.

Very few families qualify for help under these circumstances. Not surprisingly, the state invested just 5.4 percent of available TANF money on cash assistance to impoverished families in 2018. Burnett said the resulting bloat of cash is an enormous target for voracious people overseeing the program, and that it is the last thing that needs lax, single-governor oversight.

“The federal government is like ‘okay, here’s the TANF money,’ and as long as the state can make the argument that whatever they do with it falls under four purposes there seems to be very little if any oversight,” Burnett said. “The money flows through the governor’s office to the Department of Human services where the governor appoints the head of the DHS. So, the governor has a great deal of decision-making over how the money is used.”

Thompson said federal rules guiding the expenditure of TANF funds are lenient and easily subverted, likely by design. Outside of federal mandates against wire fraud, racketeering and bribery, like the kind facing John Davis, Nancy New and her son, the federal government demands states meet only four rules before enriching their wealthy friends and nonprofits. Those rules include (1) providing assistance to needy families so that children can be cared for in their own homes or in the homes of relatives; (2) preventing and reducing the incidence of out-of-wedlock pregnancies; (3) promoting job preparation, work, and marriage; and (4) encouraging the formation and maintenance of two-parent families.

These scanty guidelines read more like a 1950s brochure on traditional marriage than good fiscal policy, and Burnett said they are embarrassingly easy to manipulate in grant applications. Nancy New’s nonprofit used these same rules to suck down huge amounts of TANF cash while allegedly promoting two-person families and pro-marriage programs. John Davis also used them to embezzle millions of dollars for personal use and to finance drug rehab for retired professional wrestlers.

The state of Mississippi is now in its second year of the most massive case of TANF fraud in the state’s history, but legislators have yet to pass new, meaningful laws that would discourage TANF misappropriation. Pigott said Phil Bryant’s administration was able to defer too much to grantees on expenditures. Decisions were made, he says, “not by the passing of laws but through executive action.”

So far, state law still cedes TANF/contractor oversight almost exclusively to the governor’s office and its appointees, with little to no public oversight. Fresh, undiscovered fraud could be underway even now under such a system, tucked away in cooked account books and piecemeal FOIA responses.

Burnett said the situation will not change until state leaders stop treating both impoverished people and government watchdogs with contempt.

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