Wednesday, May 19, 2021

News Sue Accountants

Did the Families First welfare scandal occur because the green eyeshades were greenhorns? Nancy New and her son Zach accused their former accountants, Williams, Weiss, Hester, & Company of negligence in a lawsuit filed in Hinds County Circuit Court on May 3.  A Hinds County grand jury indicted the News last year for embezzling federal and state welfare funds. 

The complaint states DHS issued RFP's for various programs until 2015.  Ms. New's non-profit organization, Mississippi Community Education Center competed and won DHS contracts over the years.  However, DHS Director John Davis consolidated several programs into one master contract and abolished the bidding process. The complaint states:

20.       Along with its expansion  of Families First, MDHS instituted new rules. The most impactful of these changes, from MCEC's perspective, was discontinuing the RFP process. Instead of continuing to issue RFPs, Davis and MDHS selected two entities, Families Resource Center of North  Mississippi  ("FRC")  and  MCEC  to  handle  the  northern  and southern  parts  of  the state, respectively.  Interestingly, MDHS and Davis initially offered MCEC all of Mississippi, but Nancy declined believing that it would be too much for one organization to handle.

21.       As  a  result   of   MDHS's   Families   First   expansion,   MCEC's  annual   budget skyrocketed  from  less  than  $2  million  per  fiscal  year  prior  to  approximately  $14.2  million  by September 2017; approximately$ I 8.8 million by June 2018; and $14.6 million by May 2019.

22.       MCEC's   influx   of  funding   coincided   with   MCEC's   engagement   of  a  new accounting  firm. In 2015,  MCEC  engaged  WWH  and John  Eric Hester ("Hester") as its public accountants. See Engagement Letters, attached as Ex. A.

 The News blamed DHS as well: 

24.       As  the  money  flowed   to  MCEC,  MDHS  essentially  abdicated  its  budgetary responsibility. MDHS put the responsibility on MCEC to provide a budget for accomplishing  the Families First and other programs each year, and then MDHS would simply request the funding from the state legislature or federal government, as applicable.

The complaint gets real interesting at #26: 

26.       Nancy again expressed  concern to Davis and MDHS staff regarding the lack of an RFP process.  Nancy  and  MCEC  were  uncomfortable  without  the protections  the  RFP  process afforded  in  the  form  of  specific  guidance  for  specific  grants  awarded.  Nevertheless,  the  RFP process remained shelved by MDHS.

 The laying of blame continues as the News charge DHS and "other public officials": 

29.       Under  this  new  flexibility,  MDHS  and  other  public  officials  began  submitting "special  projects"  (i.e.,  unfunded  "side  programs")  requiring  MCEC  to  carry  out  unbudgeted projects from funds within Families First or other grants. This overload created shortfalls and made accounting for these programs, the funds associated with them, and the ways in which those funds could be spent, increasingly  complex.  Examples  of these special  projects assigned  to MCEC by MDHS and other public officials include, but are not limited to: Priceless Ventures, LLC; Lobaki Foundation; Victory Sports Foundation; Rise Malibu; City Centre Lease; Jason Crabb Ministries; Prevacus; Heart of David; and Law of 16.* At all times relevant hereto, WWH and Hester knew, or

 The lawsuit argues the accountants should have known of the increased "complications" arising from the ever-growing load of new projects and funding.  WWH allegedly concealed its lack of qualifications and competence to audit the federal welfare funds received by MCEC.  The complaint cites (#36) a peer review report that states the firm did not have the required background to perform audits of federal funds.  WWH green-flagged MCEC's spending.  

The 2017 audit stated MCEC had $6.6 million in cash and only $247,590 in "temporarily restricted net assets."  Almost all of MCEC's cash balance was TANF funds but the accountants was "woefully wrong" in reporting the cash balance.  The 2018 audit stated MCEC had $8.2 million in "unrestricted net assets" and $157,068 in "temporarily restricted net assets."  Cash on hand was $6.7 million. Each audit said MCEC's books were in order and no violations occurred. 

The News argued their company's internal accounting was overwhelmed by the "increased-funding and lump sum distribution" of DHS funds.  MCEC relied on WWH to provide accurate audits and ensure compliance with state and federal laws, which the firm allegedly failed to do. 

The complaint charges WWH with professional negligence, gross negligence,  and breach of contract.  The suit seeks compensatory and punitive damages as well as attorney's fees.  

Attorney Mark Carroll represents the News.  The case is assigned to Judge Adrienne Wooten. 

* These are the companies mentioned in paragraph #29

Lobaki Foundation is operated by Vince Jordan.  Lobaki received $160,000 from MCEC.

Victory Sports Foundation.  Owned by Paul Lacoste.  MCEC gave $1.2 million to VSF. 

Priceless Ventures. Owned by Ted Dibiase, Jr.  MCEC gave $1.6 million to PV.

Heart of David Ministries & Law of 16.  Owned by former wrassler Ted Dibiase.  HDM received $2 million from MCEC.

Rise Malibu. California drug treatment facility.  DHS funds were used to pay for Brett Dibiase's drug rehab at the Rise Malibu.  The funds were $48,000. 

Jason Crabb Ministries. $85,000 for rock concerts performed by Mr. Crabb. 

Prevarcus is a Florida company conduction experimental research for concussions. MCEC invested $2.5 million in the company. 


Anonymous said...

It is always someone else's fault-

Anonymous said...

Gasps in the middle of death throes. Bye Nancy.

Unknown said...

The accountants are the culpable party. We didn't know that appropriating welfare funds for our own use was illegal.

Anonymous said...

Going to be interesting to hear who the "other public officials" who were steering cash to these 3rd parties.

It sounds like Families First was a slush fund for (R)eally whatever project the political leadership in Jackson deemed worthy.

Anonymous said...

State agencies were created to handle all of the programs. Why do they now hire outside entities to do all of the leg work? Sounds like the state agencies are no longer needed.

Anonymous said...

Slow clap for your exercise in correct but confusing subject-verb agreement in the headline here.

Anonymous said...

nothing like watching a circular firing squad form

Anonymous said...

sue everyone that "contributed to the success of their scheme". cleaners, neighbors, secretaries, wives, etc. thats the latest fashion. personal responsibility abdication

Anonymous said...

WhooHoo! Subpoena party!

Anonymous said...

Hey Nancy,
News Flash! You and your son are not under indictment because the accountants were allegedly unqualified to audit federal funds.

Anonymous said...

Stated another way: "We are dirty, stinky cheaters but it is our accountants fault for not finding it."

Anonymous said...

Aren't they accused of fraud?

An auditor is not a CFO or an employee of your company. An auditor can only verify the information you or your employee provides them.

My favorite line: "In order to understand [why we're blaming someone else], it is essential to understand Nancy's history...and reputation..."

Anonymous said...

Pour me another one! Nancy was hiding in her office at NLR today trying to plot yet another "whoa is me, I'm innocent, it's someone else's fault" as teachers, students and parents cried their eyes out leaving NSS for the last time. Nancy still refuses to sign the conservatorship! She is 110% about greed not children. Nancy hired the accountants, as owner it was her responsibility to know who she hired! Again, pour me another one!

Anonymous said...

This is an stupid lawsuit that has no basis. If you look at page 21 which is the engagement letter it clearly state that die to limitations an audit is not designed to detect violations of laws or gov't regulations. Then on page 23 it list managements responsible which one of those includes following laws and regulation, programs are administered in compliance with any requirements. Also what they have not included in a management representation letter that the client would sign before the audit report would be issued to ensure that management takes responsibility for the statements. This is just so they can find someone to sue and blame.

Anonymous said...

I'm interested to know where they came up with the money to pay an attorney to compose those 81 pages of BS when they can't even pay their employees.

Anonymous said...

"Nancy was diagnosed with dyslexia at an early age..." Really Nancy? Wow, Greenwood, MS has always been so ahead of the curve in terms of education so I guess it's no surprise that you got a dyslexia diagnosis there back in the fifties before anyone else.

Or maybe you invented that story somewhere along the way to add to the work of fantasy fiction that is this lawsuit.

Anonymous said...

Way to go, Nancy!! Maybe you can win this lawsuit and pay your teachers without having to transfer money from over seas accounts!

News that you can count on said...

It shouldn't be news to y'all that the best defense is a good offense.

Anonymous said...

So we get a glimpse inside the defense team's strategy - make Nancy the victim and cast blame on any and all. It is obvious from the other comments that this will not play well.

Anonymous said...

Sooooo.... it’s “their” fault that Nancy didn’t know spending TANF dollars on things such as curriculum for her privately owned school, a medical research company, and a ranch for a washed up athlete, among many other things was illegal? I guess I can tell the officer that the DUI is my fault Bc my bartender didn’t tell me it was illegal to drive drunk. Pour me another one..

Anonymous said...

Nancy, you owned MCEC. You received the award, " MCEC community distinguished service hall of fame -- way to go, Nancy-- you are your own hero

Anonymous said...

The real issue to me is who originally directed the payments to the questionable entities. Did Nancy New have a specific soft heart for DiBiase, Lacoste et al, or was she doing the bidding for someone else who did...

Anonymous said...

What is the latest on our ex fairgrounds director, was he ever convicted?

Anonymous said...

Heck they spent more money on Bingo than feeding the kids and other necessities! Will this go to Federal court or State first?

Anonymous said...

The News’ were well aware of what they should have been using the money for. They were involved in several planning meetings for grant programs. They received copies of federal guidance. JDs gen+ program was completely designed with the News organizations in mind. So many dollars funneled to them in the name of gen+ from various programs. Nancy was a part of, if not leading, every one of those planning meetings. The year end numbers for that program were made up. The News inflated the number of services provided to pull down dollars.

I believe there is a huge disservice to taxpayers in that John Davis is not being mentioned as much, anymore. The lack of knowledge about his role in all this, how these programs actually work, and what they are intended for raises the concern that it could all happen again in the future or is rampant in other agencies and no one is being held accountable. Dropping RFPs is a violation of public trust and it is surprising to me that he was able to get away with it for so long. Federal programs require it for third party contracts. Mississippi deserves better and I hope some good people will stick around and help make it better.

New Mess said...

The idea that any business owner would ask a state agency to bring back an RFP process is ludicrous. Really, Nancy? What a crock. Will the "blame the accountants" defense work when it comes to using federal dollars to pay for cell phones, iPads and vehicles for you, your sons, and their wives? When MDHS and other public officials began submitting "special projects" and it all became too much for you, did you consider being a responsible business owner and saying "no"? Maybe along the lines of "You want the program to pay for junior's drug rehab in Malibu? Seriously? We can't do that; we'll end up in jail!" If I were Anne McGrew or Latimer Smith I'd be spilling my guts as fast a possible.

Anonymous said...

This onion is finally getting peeled back....glad to see it.

Can’t wait to see who are the “other public officials”.....doubt we’re shocked there.

Anonymous said...

Im sure they'll walk just like the baker donaldson attorney and lobbyist--by way of the firm you like to mockingly criticize, yet half their ranks are your biggest fans. MS will always be held back because this is the way it works for about 15% of the populous.

Anonymous said...

These companies and foundations certainly should be audited and expected to pay back some, if not all of the TANF money used!

Anonymous said...

Everybody's got a price for the Million Dollar Man

Anonymous said...

nothing but a head fake trying to divert the attention from themselves. accountants only know what you tell em.

Anonymous said...

So let me get this right….News files a civil suit against their accountants and claim the News would not have been indicted had the accountants told the News that the News stealing federal / state dollars is potentially a crime?

Now Mark is a good lawyer and as you can see from the complaint he is very detailed. Mississippi is a “notice pleading” state which means you don’t have to get in the weeds to file a lawsuit. You just have to give enough info to put the defendant on notice of the allegations.

Now go a bit further. The News bear the burden of proof in such a case and have to prove their allegations with evidence. The News are now subject to a deposition. Remember the News are under criminal indictment. If the News as plaintiffs wish to proceed they have to give testimony under oath. That’s where this POS ends. The News cannot simultaneously volunteer to testify in the civil matter and then claim the 5th amendment at their criminal trial. Once the News start talking they waive their right to any protections provided for under the fifth amendment.

This case will likely be stayed pending the criminal case…..and that’s the best thing that could happen to it.

Anonymous said...

At the risk of disagreeing with all of the world class Barristers chiming in on this topic, I think you’re misreading the complaint. It seems to me that the claim is that had the accountants properly done their job and reconciled the funds correctly as either restricted/unrestricted, then some of these problems may not have occurred. It appears the claim is MCEC was spending money on projects when in fact the entity didn’t have the money to spend.

Auditors in this situation do have responsibility to review and confirm that funds are spent on proper projects. They also have a responsibility to properly reconcile the books and financials. Yes, the organization has responsibilities are well, so there is responsibility all around. But, I personally don’t think this lawsuit is a deflection. The Carrol Bufkin firm has some damn good lawyers and if this thing has been filed, I believe there’s more to it. I personally don’t think these folks stole money......some of these projects are random and it remains to be seen of these funds were properly spent on those projects, but I don’t think they stole. Also, I really hope the public officials referenced in this filing come to light. I agree with the comment above to that hopefully DHS is getting straightened out....that agency has been a dumpster fire for years.

Kingfish said...

I dunno. Even though there is no evidence, the seriousness of the charge is what matters. The seriousness of the charge mandates that this is investigated.

Anonymous said...

I do wish some of you “stone throwers” could wait until all the facts are out before you state asinine opinions.
I’m still waiting on indictments for the highest former state official. Why does the state keep pushing back the trial? Maybe it thinks they may lose? Just my thought.

Wow said...

What's the long term solution and how does this inform us moving forward in regards to public-private partnerships?

RFP process? == slow pace of business and development of ideas

No RFPs, direct contracting? = human bias and error and risk of politically / relationship-oriented choosing of partners solutions or worse, corruption

Anything out there about agile and nimble RFP processes?

Lou Pai said...

Arthur Andersen went down with Enron.

Anonymous said...

May 19, 2021 at 3:53 PM
Yep...betcha some squealing gonna squeeze PfEEL, Songy, Katie and Debbie...
can’t wait... with few friends left the Global Partners may have ‘splaining to do.’

Anonymous said...

PfEEL is both nimble and agile...

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