Ann Gerner, a lawyer for the Texas Department of Housing and Community Affairs, and Brian Montgomery, its department spokesman, say the FBI has been investigating the Dallas anti-poverty agency, which the state is trying to close because of misappropriation, nepotism, and a host of other irregularities that were detailed in the Dallas Observer ["Family First," July 31, 1997, and "Poor Relations," August 31, 1997].
Although FBI spokesperson Marjorie Poche refuses to confirm or deny the existence of a federal investigation, state officials are less circumspect about it. "There could be some criminal stuff ...There is a federal inquiry, the FBI out of Dallas," Montgomery says, adding that the state agency has been in contact with FBI agents.
Anthony Bond, who joined the DCCAC board and became its president after the problems surfaced, also confirms that the FBI is looking into the nonprofit organization. "We don't have anything to hide," he says.
News of a criminal investigation came with the release of a judge's opinion in Austin supporting the state's decision to cut off DCCAC's government money--a decision that would shutter the agency. It receives about $1.7 million a year in federal tax money to provide emergency housing and utility assistance, bus tickets, job counseling, and other services to some of the city's poorest residents. It has closed five neighborhood offices and laid off 17 people--half its staff--since the state probe began in 1997.
Among the many items in the judge's 52-page finding are a host relating to a family member of executive director Cleo Sims, who has remained in her $60,000-a-year post despite the state's fault-finding.
The judge found, in the ledger part of his report, "Improper use of (federal tax) funds to pay personal collect telephone-call charges from a prison where Ms. Sims' son is incarcerated--$904.93.
"Improper use of (federal tax) funds to pay for personal cellular telephone calls made by Mrs. Sims--$586.68.
"Improperly permitting [Sims' son] Harvey Scott use of DCCAC's Home Depot charge account--amount unknown." Scott, the Observer previously reported, was paid $42,000 in 1996 to do maintenance work for DCCAC.
Senior Administrative Law Judge Michael O'Malley pegged the amount of "mishandled funds" at the independent, nonprofit agency for 1996 and 1997 alone at $668,430. And that was for only one government program, the so-called Community Services Block Grant. The agency has been getting money from various housing programs as well.
The process might make Monicagate look positively fast-track, but DCCAC is moving ever so close to having the plug pulled. It would be the first community action agency in Texas in 14 years to receive the governmental equivalent of the NCAA's "death penalty."
But the end of this bureaucratic death march might not come this century. Bond, the DCCAC board chairman, says the agency will appeal the ruling to the U.S. secretary of Health and Human Services, who by law has three months to rule on the case. DCCAC has also filed suit directly against the state of Texas.
But the Austin judge's finding does move things along. It supports all the charges leveled against DCCAC by state regulators during the past 20 months and concludes that "causes exist to terminate" the agency's federal contract.
For those sorting through the muck, the finding provides new details of agency misdeeds, including one that might be called "six degrees of separation in South Dallas crookery."
The judge found that former DCCAC board member Jasper Baccus, after learning that the state had begun its investigation and was monitoring agency books, went back and countersigned checks for more than $500 after they had been returned from the bank. The agency also created backdated performance reviews.
Baccus, however, won't be around to worry about petty breaches of management rules. Last year, the dry cleaner was convicted of federal bank fraud and sentenced to two years in prison for his role in a fake-check scheme cooked up by the militia-like Republic of Texas. Baccus was found to have deposited $3 million of the bogus checks in his accounts in several Dallas banks.
State officials say they tried to sit down with DCCAC and reach some sort of plan for saving the agency last summer.
"We postponed the hearing and tried to find out if there was a way to keep this alive and clean up the act. But after going through this hearing process, the litany of things that were wrong was pretty overwhelming," says attorney Ann Gerner, who believes it is clear that Sims "knew about things that were wrong, and the board was not willing to do anything about it." The hiring of a new financial director was "too little too late," she says.
Bond, who concedes that the agency has had problems in the past, says the state has pushed in not-so-subtle terms for Sims' removal. "It's illegal for them to tell us that we are the worst [community action] agency, and that they will overlook all that is illegal and horrible and miserable if we get rid of Cleo. They have told our attorneys this whole thing would go away if we got rid of Cleo Sims."
Montgomery insists the state has not made that request and does not have the power to tell the agency's board whom to hire.
Bond says the state housing agency is "the pot calling the kettle black."In trying to make its case, DCCAC complained that the state is operating the Community Service Block Grant program in violation of federal law. The judge ruled that DCCAC brought no evidence to support its claim.
Now, with an FBI investigation, the embattled DCCAC may have the opportunity to make the same argument again. But if federal indictments are the result, agency officials may be facing more than the closing of its doors.