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Auditor says more than $4 million stolen from Mississippi welfare funds

JACKSON, Miss. (AP) — Mississippi’s state auditor said Thursday that investigators believe at least $4 million in federal welfare money was stolen by the former head of the state welfare agency and others in the nation’s poorest state.

At least $48,000 of that paid for a luxury drug rehabilitation program for a former pro wrestler, according to indictments issued Wednesday, which also alleged a politically connected nonprofit administrator and her son took more than $4 million, including more than $2 million invested in two Florida medical companies.

Republican Auditor Shad White said his office is still seeking to determine the scope of the suspected public embezzlement, expanding its audit of the Department of Human Services to a wider time frame.

“This is a sprawling conspiracy,” White said. “We’re going to continue to look to find additional monies that have been lost or stolen.”
Those indicted and arrested are the department’s former director, John Davis; the ex-wrestler, Brett DiBiase; former Department of Human Services employee Latimer Smith; Nancy New, who is the director of the Mississippi Community Education Center and New Learning Resources; her son Zach New, who is assistant executive director of the education center; and Anne McGrew, an accountant for the education center.

It’s unclear if any of them have lawyers representing them. All were released from jail Wednesday without having to post bail.

Mississippi Gov. Tate Reeves praised the auditor Thursday, saying the investigation has uncovered “what appears to be a truly disgusting abuse of power.”

“It makes me sick to think that resources for people in poverty were being embezzled by a powerful government official,” said Reeves, who became governor in January after eight years as lieutenant governor.

Federal welfare money was once spent mostly on cash assistance to poor families, but after changes in the 1990s the Temporary Assistance to Needy Families money is given to states in block grants, and states can use the money on other activities meant to help people. The liberal-leaning Center for Budget and Policy Priorities found Mississippi spent about $120 million in state and federal money on the assistance program in 2017, with only $9 million going to cash assistance.

WATCH: Why it’s so hard to get off welfare

DiBiase, 36, is the son of former pro wrestler Ted DiBiase, who was known as the “Million Dollar Man.” Indictments allege Davis conspired with Nancy New to send $48,000 in block grant money to pay for Brett DiBiase’s drug rehabilitation in Malibu, California, in early 2019. Payments were made to a company owned by Brett DiBiase supposedly for his teaching classes about drug abuse, with Davis and Smith falsifying invoices and other records, prosecutors say.

The News are associated with a series of nonprofits and schools. Mississippi Community Education Center, operating as Families First for Mississippi, received more than $44 million in government grants from mid-2014 to mid-2018, according to nonprofit tax filings. Amounts spiked to $12.9 million and $26.7 million in the last two years, as Davis outsourced a large portion of Mississippi’s Temporary Assistance to Needy Families spending to the group.

The money was intended to provide youth development, parenting education, workforce readiness, literacy promotion, addiction education and obesity education. Then-Gov. Phil Bryant appeared at the ribbon-cutting of the Jackson office in 2016 with Davis and New. In his last State of the State address in 2019, Republican Bryant called the group “a model of success for thousands of Mississippians and one that is being emulated all across America.”

Reeves said he has received campaign contributions from some of those indicted in this case, and he acknowledged that one of his 2019 campaign commercials was filmed inside a school Nancy New owns. Reeves didn’t have a total for the contributions Thursday but said his campaign will put the money into a separate account. Reeves said if the donors are convicted, he will give the campaign contributions to the state to cover some of the cost of lost welfare money. Otherwise, he said his campaign will give the money to a charity.

Nancy New and Zach New are alleged to have transferred $2.15 million from the center’s accounts to make investments in medical companies Prevacus and PresolMD during 2019. Indictments allege they transferred more than $2 million from the center’s bank accounts to accounts of a for-profit company they control.

Davis stepped down in July and Bryant replaced him on an interim basis with Christopher Freeze, former leader of the FBI in Mississippi.

In most recent large public corruption cases in Mississippi, criminal charges have come in federal court, but these charges came in state court.

U.S. Attorney Mike Hurst said although federal money was allegedly stolen, his office had been kept in the dark until Hinds County District Attorney Jody Owens met with him just before indictments were issued.

Owens and White said state court indictments were a faster path to stopping ongoing embezzlement.

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