MDHS Embezzlement Part 2: Key Players

Edited 6-2 to include full audit report PDF and page citations in body of post:

New Albany, MS – There’s an old story about the wino accused of smoking in bed and thus setting fire to the cheap flophouse where he dwelled. Charged and dragged into court, the wino spoke powerfully in his own defense: “Judge,” he pleaded. “That damned bed was on fire when I got in it!”

Tate Reeves, Mississippi’s 65^th governor, might make a similar plea.

Reeves was sworn in, Tuesday, January 15, 2020, knowing he was not the first choice of most Mississippians.

Although he had been accumulating money and running for governor for more than a decade, Reeves failed to win a majority when he faced two less known and underfinanced challengers in the Republican primary.He won a narrow victory in the runoff. Then in the November general election his margin over a Democrat with little money and no statewide ground game was even slimmer.

Reeves settled into the big chair in the governor’s office with considerably less than a clear mandate.

Imagine his distress a mere 22 days later when one of his most prominent political supporters, a major contributor of money, was arrested on felony charges of stealing millions of dollars in public money.

“A multi-million-dollar embezzlement scheme”

On Wednesday, Feb. 5, agents for Mississippi State Auditor Shad White arrested six individuals and charged them with stealing Mississippi Department of Human Services (MDHS) funds. The money stolen was from the federal Temporary Assistance for Needy Families (TANF) program, money intended for the poorest of the poor in Mississippi.

Auditor White said the six had been arrested and charged “in connection with a multi-million-dollar embezzlement scheme.”

Those arrested included John Davis, former head of MDHS; Brett DiBiase, a former professional wrestler and close friend of Davis; Nancy New, owner and director of the Mississippi Community Education Center (MCEC) and New Learning, Inc.; New’s son, Zach New, assistant director of MCEC; Anne McGrew, identified as an accountant for MCEC, and Gregory Latimer Smith, a former employee of MDHS.White called it “the largest public embezzlement case in state history.”

Most directly embarrassing for Reeves were the charges against Nancy New. She was known as a strong supporter of Reeves, having given substantial money to his campaigns and having been conspicuously associated with the fledgling governor. Reeves, known not to be a strong supporter of public education, had openly advocated programs that would divert public funds to private schools. Among his favored projects were private schools owned and operated by New. A television commercial for the Reeves gubernatorial campaign, in which he touted his plan to improve the pay of Mississippi public school teachers, was even filmed at one of New’s privately owned schools.

Reeves tried to distance himself from New, promising to return her campaign donations or to donate the money he’d received from her to an unspecified charity.

Astonishing charges brought against MDHS employees

The charges against New were among the most shocking:

• They included the allegations that she had acquired three different $50,000 motor vehicles for the personal use of herself and her sons using TANF money, dispensed to her by Davis. (audit pg 40)
• The auditor charged that an organization controlled by New had spent millions of dollars of TANF money on a variety of personal, business and “philanthropic” projects, in violation of the federal guidelines directing that the money should be spent for needy Mississippians.
• Included in the misspent money was over a million dollars New’s organization had paid to former NFL football player Brett Favre for public appearances he never made. (audit pg 18)

John Davis, a veteran employee of MDHS, had been appointed head of the department by Governor Phil Bryant, Reeves’s immediate predecessor.

• White charged that Davis had spent hundreds of thousands of TANF dollars on big salaries for his friends and relatives. (audit pg 12)
• One such expenditure was over a hundred thousand dollars in TANF money spent at an exclusive California drug rehabilitation treatment clinic Brett Dibiase, a close friend of Davis, whom he had also hired at a high salary at MDHS. (audit pg 28)
• Many millions in TANF money, said the auditor, had gone in payments to hundreds of individuals and organizations for purposes not allowed by the federal guidelines on how TANF money was to be spent to help poor people.

White promised a “full forensic audit” of MDHS. U.S. Attorney Mike Hurst pledged a vigorous federal investigation of the misspent money. White delivered his evidence to the FBI.

Public attention fades as coronavirus dominates the news

Public outrage swept the state. It was the principle topic of statewide news for the next month. What Auditor White called “the largest public embezzlement case in state history” dominated conversations in offices and factory lunchrooms and beauty salons and at church gatherings.

People were angry and eager to know how elected officials could have allowed such an outrageous abuse of public money – especially money intended for the neediest people in Mississippi.

Then the coronavirus pandemic struck Mississippi, and all other stories seemed to fall out of the news for two months. There were no angry conversations in offices, factories, beauty salon and church gatherings about money stolen from the poor. All those places were closed while people huddled in their homes trying to avoid the deadly new virus.

However, the state auditor’s investigators and accountants continued their work and did a comprehensive audit of how money had been spent at MDHS during John Davis’s time as director of the department.

The auditor completed and published his MDHS audit about a month ago. The results revealed even more theft and malfeasance than most people imagined when those first few arrests were made in February.

NEMISS.NEWS published last Thursday the entire 104-page audit. The details of it will shock those who take the time to read it carefully, or even skim the highlights included in the post. (http://newalbanyunionco.com/mdhs-embezzlement-part-1-charges-and-evidence/) It leaves no doubt that White was justified in calling it the worst embezzlement of public money in Mississippi history.

Who are the key figures in this sordid tale?

Questions remain:

• How on earth did Mississippi’s elected officials allow this colossal abuse of public money – money intended for the poorest Mississippians?
• Who else should be indicted and jailed?

We are likely to wait months, even years, for the answers to those questions. It will be up to prosecutors, judges and juries to determine who is guilty and what punishment will be meted out.

However, it is not too early to learn a little more about who were the players on the stage when the crimes were committed. Who were the public officials in charge when this unprecedented corruption was thriving? What people are known to have been involved, directly or indirectly? Who must be held accountable for allowing this to happen?

NEMISS.NEWS has assembled information, mostly from the public record, about the cast of characters:

Who is Phil Bryant?

 Phil Bryant, Mississippi’s 64^th governor, had held statewide elective office for 23 years when Tate Reeves succeeded him four months ago. That included 11 years as state auditor, four as lieutenant-governor and eight years as governor. This is not to say Phil Bryant is guilty of any crime. He has not been charged with any crime.

It is simply to observe that Bryant held positions of financial oversight responsibility in state government when the fraud was carried out and for a long time before. And Bryant moved the key player into the position from which he began the scheme.

Dewey Phillip Bryant was born in Moorhead in Sunflower County on Thursday, December 9, 1954. Moorhead is at the intersection of the Southern and Yazoo Delta (“Yellow Dog”) railroads of blues fame. Moorhead had 1,750 residents when Phil Bryant was born and has grown to about 2,400 today. About 82 percent of its population are black and 16 percent are white.

Phil Bryant was not to the manor born. His parents were Dewey C. Bryant, a diesel engine mechanic and Estelle R. Bryant, a housewife. He grew up with two brothers.

He has spoken movingly about being poor and the anxiety in his childhood home when his father lost a job. He has been candid about having had to repeat the third grade because he couldn’t read. He has referred to the problem as dyslexia.

Bryant’s family left Sunflower County and moved to Jackson during his childhood. His father took a job as a mechanic with a Hinds County Mack truck dealership and later became its service manager.

The family became prosperous enough in Jackson that Bryant attended private Council McCluer High School at 4060 South Siwell Road in Jackson, his junior and senior years. Council McCluer was founded in 1970 and is now known as Hillcrest Christian School. It was a private, racially segregated school, one of dozens founded around Mississippi, after the federal courts ordered public schools integrated. Council McCleur was one of 12 Jackson area schools founded and run by the White Citizens Council.

Phil Bryant worked his way through college at a variety of jobs. He attended Hinds Community College for two years. He then attended and graduated from The University of Southern Mississippi (USM) in Hattiesburg. He later completed a master’s degree at Mississippi College.

Bryant takes up politics

He worked as a parts man in a motor vehicle dealership, as a Hinds County deputy sheriff and as an insurance investigator. In 1991, about a month before his 37^th birthday, Bryant was elected to his first political office, a seat in the Mississippi House of Representatives. He served about five years in the legislature.

Then in 1996 Democrat State Auditor Steve Patterson was forced to resign as auditor after pleading guilty to the misdemeanor charge of filing a false affidavit to keep from paying county taxes through the purchase of a car tag.

Governor Kirk Fordice appointed Phil Bryant as Patterson’s replacement in November of 1996. He served a little more than three years remaining of the term to which Patterson had been re-elected in 1995. Bryant was elected in his own right as state auditor in 1999 and re-elected to another four-year term in 2003.

During the 2007 election cycle, two-term Lieutenant-Governor Amy Tuck was term limited and could not run again.

Phil Bryant, having been state auditor for 11 years, was the most senior Republican in the line-up of statewide office holders. He ran for lieutenant-governor winning 57% of the vote in the Republican Primary and then easily won the general election with a 17 percentage point margin over the Democratic nominee, Jamie Franks, Jr.

Haley Barbour finished his second-term as governor in 2007 and was term-limited from seeking the office again. Phil Bryant had by then had held statewide elective office for 15 years, 11 as auditor and four as lieutenant-governor. Few can recall any major accomplishments in his long service as a Republican office holder, except one: he had made no enemies.

Bryant had embraced the Tea Party, then a major fad in American politics, and made it clear his politics were considerable to the right of Barbour, who was considered more a Republican centrist.

He filed for the Republican nomination for Mississippi governor. He had faced no strong, well-financed challengers the three times he’d sought statewide office, nor did he draw a strong opponent when he ran for governor.

Bryant faced four unknown Republicans, none of whom had any real money, in the 2011 Republican primary. He won 59.46 percent of the vote in the primary. The runner up got 26 percent. In the 2011 gubernatorial general election, Bryant defeated Democrat Johnny DuPree, the first African-American mayor of Hattiesburg, by a margin of 61 percent to 39 percent in the general election.

Bryant easily won re-election in 2015 with 92% of the vote in the Republican primary. In the general election he coasted to victory over Democratic candidate Robert Gray, a truck driver, and Reform candidate Shawn O’Hara, a perennially unsuccessful office seeker for over three decades.

Dismantling health insurance and rejecting Medicaid expansion

A poor boy from Sunflower County, who had never faced a strong election opponent, had reached the top of the heap in Mississippi politics. He was sworn in as governor on January 10, 2011. The Tea Party hailed Bryant as its first Tea Party governor, and he gladly embraced the accolade.

During Governor Barbour’s second term, he became interested in what was then considered a conservative approach to making health insurance available to more Americans. It was then known as “Romneycare,” because Republican Massachusetts Governor Mitt Romney had signed it into law in that state on April 12, 2006.

Barbour, a politician who always preferred practicality over ideology, asked Mississippi Insurance Commissioner Mike Chaney to take steps to set up a similar health insurance plan for uninsured Mississippians. Barbour saw it as an economic development opportunity, since it would assist small businesses and support the state’s healthcare industry.

The Tea Party’s foremost Mississippi apostle for several years before and during Bryant’s governorship was Chris McDaniel, a lawyer, conservative radio orator and state senator from Jones County. While Bryant lacked McDaniel’s rhetorical skills, he embraced most of the Ellisville legislator’s views, including opposition to welfare and a visceral dislike for then U.S. Senator Barak Obama, of Illinois.

Meanwhile, the U.S. Congress passed the Affordable Care Act (ACA), a variation of Romneycare, during President Barak Obama’s first administration.

Early in 2011, Barbour wrote to Kathleen Sebelius, Obama’s Secretary of Health and Human Services, designating Chaney and the Mississippi Insurance Department as the proper authority build an Affordable Care Act exchange for Mississippi. Chaney got to work and had it ready to go. By late 2011, however, what had been originally known as “Romneycare” was rebranded as “Obamacare,” making it a red flag for Tea Party ultraconservatives like McDaniel – and Phil Bryant.

In an interview in the October 29, 2014, edition of the Kaiser Foundation’s “Kaiser Health News,” Mike Chaney, still today the Republican Insurance Commissioner of Mississippi, described how Phil Bryant, during his first year as governor, killed the plan for implementing the Affordable Care Act in Mississippi. Chaney said that before Bryant became governor, “We had no elected officials who were against what we were doing.”

As a result of Bryant killing the ready-to-go Affordable Care Act plan for Mississippi, fewer Mississippians ended up with health insurance than before ACA became available to most other Americans.

Likewise, Bryant also vigorously opposed expanding Medicaid coverage for Mississippians. Although a Mississippi economist predicted that expanding Medicaid in the state would bring Mississippi $1.2 billion in federal funding and 9,000 new jobs, at a cost to the state of $159 million, by 2025, Bryant said no.

Knowledgeable Mississippians, including many Republicans, believe that Bryant’s opposition to Obamacare and Medicaid expansion arose from his Tea Party ideology and not from a practical analysis of the economic facts.

He evidenced little consideration for the impact that those refusals would have on the lives of poor people, including low income working people, in Mississippi. The rejection of Barbour’s plan to enable the Affordable Care Act was also a blow to small entrepreneurs. Both refusals were catastrophic for the healthcare industry in Mississippi.

“Imaginative” thinking about how to help the poor backfires bigtime

Since Bryant refused federal funds for Medicaid expansion in 2013, five rural hospitals in the state have closed and many more are considered likely to fail financially.

Phil Bryant’s ideological opposition to providing health care for poor Mississippians was an early clue to his hostility toward programs to assist the needy.

Bryant encouraged the kind of “imaginative” thinking about how to help the poor that directly influenced the MDHS policies and practices, leading to the massive fraud revealed by the arrests made in February. The full audit of MDHS shows the embezzlement to be of far greater magnitude that was known when the first arrests were made.

Governor Phil Bryant appointed John Davis as head of the Mississippi Department of Human Services. Bryant was Davis’s direct supervisor during the time the corruption described in Auditor White’s investigation occurred.

Based on his public utterances and actions and on the opinions of those who know him well, Phil Bryant clearly sees himself as a poor boy who “pulled himself up by his bootstraps” and did well. He seems to believe every other poor person should be able to do as well. He received his college education at a taxpayer subsidized community college and his degree from the University of Southern Mississippi, an institution supported by tax money.

Phil Bryant is a true believer in his own righteousness and proof positive that good hair, white skin, hard work, an amiable personality and a nearly-free public education can put an average fellow on top of the heap.

Another Mississippian named Jim Buck Ross, himself a graduate of a publicly subsidized state university, also did well in Mississippi politics. He served as mayor of Pelahatchie, as a state senator and as Mississippi’s Commissioner of Agriculture for 28 years. Ross had a realistic view of how a man becomes successful. Among Jim Buck’s several colorful aphorisms was this one: “If you see a terrapin sitting on top of a fence post, he didn’t get there by himself.”

One wonders if that bit of irrefutable wisdom ever passed through the head under all of Phil Bryant’s nice hair. 

Who is John Davis?

Johnny Gerald (John) Davis was born on Saturday, March 2, 1968. He was raised in Brookhaven in Lincoln County and graduated from high school there.

Davis enrolled at the University of Southern Mississippi in Hattiesburg and completed an undergraduate degree there. He earned a master’s degree from Belhaven University. He became a social worker.

In 1998 Governor Kirk Fordice appointed Davis the Director of Human Services in his home county, Lincoln County.

He advanced through the ranks of MDHS serving as a deputy administrator for programs, office director for the division of economic assistance, and direct of the division of aging and adult services.

Davis reached the top rung of his career on January 11, 2016. when Phil Bryant appointed him Executive Director of the Mississippi Department of Human Services. Among Phil Bryant’s first acts of his second term as Governor was John Davis’s appointment as Executive Director of the Mississippi Department of Human Services. He began serving Feb. 1^st,2016.

Of course, Bryant’s appointment of Davis as Executive Director had to be confirmed by the State Senate. Two and a half months later, Lieutenant-Governor Tate Reeves, the presiding officer of the senate, assigned Bryant’s appointment of Davis to the Senate’s Public Health and Welfare Committee on April 14, 2020. A longtime member of the Public Health Committee told NEMISS.NEWS that the committee’s inquiry into Davis’s fitness for service consisted of a check of his record at MDHS and a casual background check. “I don’t recall that we did any more than that,” he said.

What? Leaving so soon?

John Davis had worked for the Mississippi Department of Human Services (MDHS) for 28 years when he suddenly “retired” as MDHS Executive Director on July 8, 2019.

story the next day in Davis’s hometown newspaper, the Brookhaven Daily Leader, made it sound like a happy event: a public employee joyfully retiring after decades of noble service to the grateful people of Mississippi.

It quoted then Governor Phil Bryant, Davis’s immediate superior, who praised the retiree. “I appreciate John Davis’s 28 years of service to the Department of Human Services,” Bryant said. “John has dedicated his life to serving others and has been a tremendous advocate for Mississippi’s children and families. We will begin a search for a new executive director immediately.”

And Davis was equally fulsome in his praise for his boss. “I have served under many leaders and Governor Phil Bryant has been the greatest. He knows the importance of MDHS and will continue to ensure it stays the course,” said Davis.

His hometown paper portrayed Davis as a happy guy, eager to enjoy his family and do even more for Mississippians. “I am looking forward to spending time with my family and pursuing a new career outside of state government to do even more for the great people of Mississippi,” he was quoted.

Bryant blew oversight responsibilities, then blew the whistle

However, all was not sweetness and light at the Mississippi Department of Human Services. While making nice and saying such sweet things about John Davis, Phil Bryant knew it was a mess. In fact, Auditor White said earlier this year that Bryant was the “whistleblower” (White’s word) who had first called the major fraud perpetrated under Davis’s leadership at MDHS to the auditor’s attention.

If Bryant was, indeed, the whistleblower, is there not therein a mountain of irony? Of all the incredible details that have been thus far revealed about this shameful case, the thought of Phil Bryant as the whistleblower is the corker. Bryant himself had appointed Davis and had been Davis’s direct supervisor for the entire 32 months Davis had operated his criminal enterprise.

Less than ten days before Davis’s retirement officially took effect on July 31, 2019, the state auditor had already issued preliminary findings that were damning to Davis’s reign at MDHS. The auditor published his initial report about skullduggery at MDHS on July 22, 2019

Bryant quickly appointed Christopher Freeze, a retired FBI agent, to succeed Davis as head of the MDHS.

Carol Burnett, formerly the administrator of the Child Care Development Fund for MDHS, said when Davis left the agency that, while state leaders had tried to give the impression that the Department of Human Services works independently of the governor’s office, “That is not the case,” Burnett said. “The Department of Human Services works as an arm of the governor’s office.”

Still a few missing audit details

Auditor White’s April 22, 2020, audit report ran to 104 pages. He said in an interview it could easily have run to a thousand pages if his investigators and auditors had included all the details.

One detail conspicuously absent is any mention of the name Phil Bryant, the Governor of Mississippi, who was directly responsible for the supervision and oversight of MDHS.

Back in early 2016, It had taken Lt. Governor Tate Reeves 2 1/2 months to send Bryant’s appointment of Davis’s to the Senate for approval. Once they got the appointment, it took the Mississippi State Senate six days to unanimously approved Bryant’s appointment of Davis as the head of MDHS on April 20, 2016.  Nothing NEMISS.NEWS has found in the public record indicates whether Davis waited for Senate confirmation before he started the wheeling and dealing which has brought him and the state infamy.

Nothing indicates Davis was bashful about it. “He saw it as an opportunity to build a kingdom over there,” State Auditor Shad White has said.

Also, nothing thus far on the record hints at the true nature of John Davis’s personal relationships with the DiBiases, the family of professional “ras’slers” turned self-ordained preachers, on whom he spent so lavishly from tax money intended for the poor. The state’s largesse for the DiBiases is among the more intriguing facets of this sordid drama.

Nancy New has jeopardized not just herself, but them (the children), too. Why would she do that?”–Tim Kalich Editor, The Greenwood Commonwealth

Who is Nancy New?

Nancy Whitten New was born in July, 1952, in Greenwood, Leflore County, Mississippi. Upon graduation from high school she enrolled at the University of Southern Mississippi (USM), where her sister had previously been a student.

Nancy Whitten graduated from USM with a bachelor’s degree in English education in 1974. She began her career as a teacher returned to USM to earn both a master’s degree and a doctorate.

She has remained an active supporter of USM and has served on university boards and committees including athletics, education and psychology. She served on the USM Athletic Foundation Board.

Her son, Jesse Steven New, graduated from USM in 2003, and her other son. Zachery Whitten New. graduated from USM in 2007.

She told a USM journalist in 2016 that she, her, sons, their wives and her grandchildren never miss the home games of the USM football and baseball Golden Eagles. “I never miss a home game,” New said, “unless it’s for a family emergency.”

Auditor version: The New family had a lot of skin in the game

Nancy New, age 67, along with her son, Zachary, now age 37, were among the six individuals arrested by agents of Mississippi State Auditor Shad White on Feb. 5, 2020. They were charged with embezzling millions of dollars from federal Temporary Assistance for Needy Families (TANF) funds that had been allocated to help needy families in Mississippi.

Organizations directly or indirectly controlled by New, which the auditor said were involved in the misappropriation of money, included the Mississippi Community Education Center (MCEC), Families First for Mississippi (FFM) and the Family Resource Center of North Mississippi (FRCNM) of Tupelo.

• Those thefts and misallocations of as much as 90-million were detailed in the state auditor’s report published by NEMISS.NEWS last Friday, May 29.
• They included purchase of three motor vehicles with a total value of about $150-thousand for the use of Nancy New and her two sons. (auadit pg 40)
• New’s son Zack New borrowed against his pension and repaid it with TANF funds. (Audit pg 55)
• The New family leased real estate which they owned to MCEC at excessive prices and leased buildings for MCEC use that were actually occupied by businesses connected to New. All the leases were paid with TANF funds. (Audit pg 56-57)
• MCEC, in a very convoluted alleged scheme, basically provided an $800,000 plus home home for former football player Marcus Dupree with TANF funds, in addition to entering into a $300,000 contract with him for an “equine therapy” program and paying him a high salary as an MCEC employee.(Audit pg 38)

In October 2018, 16 months before her arrest earlier this year, Nancy New gave an interview to MississippiToday.org, in which she generally described the scope of the work these organizations were doing.

Nancy New’s version: only the highest aspirationse

“I’ve been part of Families First Resource Centers for 25 years,” New said,“from its inception. Actually when the federal money first flowed down to the states across the nation, Mississippi was one of them to receive monies to actually set up Family First Resource Centers to serve families, so I was fortunate then to have a small grant and to get services started in the Delta.

“So the whole concept of Families First for Mississippi and the services is to enhance and empower families through getting them stabilized through education, through services and so forth. It is also to reach the whole family. That’s called the Gen+ model.

“Where we have concentrated on helping that individual and perhaps the individual’s child or vice versa, what we want to do is learn about the whole family. Let’s reach every individual in the family. Let’s start changing families lives, instead of just one person in that family, because if we can impact the whole family, that’s going to be much more powerful and beneficial than just one individual.

“It hasn’t changed in the last 25 years. What’s happened is that it’s grown and where we were concentrated in just a few areas across the state, according to resources, financial and other resources, we were able to expand that through this greater effort now.

“You ask about the two organizations [MCEC and FRC], that’s just a matter of logistics. We divided the state so we could manage it better,” New said

Those words, claiming a noble purpose and describing a far-reaching philanthropic enterprise, were spoken by New while she was allegedly at the very center of what Auditor White calls the largest embezzlement of public money in the history of Mississippi.

Bryant, New and Favre and USM volly ball

New developed what was apparently a close relationship with Governor and Mrs. Bryant, who were frequently with her. Bryant appeared regularly at events at New’s schools and worked to raise private donations for them.

Governor Bryant was directly involved with New and former USM and NFL quarterback Brett Favre in the project that resulted in $5-million in welfare money going into a volley ball facility at their mutual alma mater, the University of Southern Mississippi.

There is no shortage of victims

Tim Kalich of the Greenwood Commonwealth newspaper said in a May 14^th column: “The Greenwood native [New] had been somewhat of a savior for families with special needs children. She started New Summit School in Jackson to provide a learning environment to help kids thrive who don’t fit in regular schools, either because they have learning difficulties or social anxieties.

“She expanded that concept, creating a handful of similar schools, including North New Summit in Greenwood. It’s been a great story here, not only because of its growth and success, but because it was created by someone who was giving back to the place where she grew up.”

Editor Kalich expressed the concern of parents who fear that the schools may not open back up to serve the children with special needs. He said, “…that would be sad for all those children and their families who found what they needed at New Summit, North New Summit and the others. Nancy New has jeopardized not just herself, but them, too. Why would she do that?”

Kalich’s question rings throughout Mississippi. Why indeed?

Was it always only about money, nothing but money?

More about Bryant’s destruction of MS’s Insurance program ( Long, but worth the effort): http://newalbanyunionco.com/mississippi-burned-again-3/

Full Auditor’s Report: MDHS-2019-1