MEDIA: State files lawsuit to recoup $24 million in welfare funds from Brett Favre, former WWE wrestlers and 34 other people or companies (WLOX..com)


Posted on 5/10/122 by Mike Informer



The Mississippi Department of Human Services is suing 38
people or companies for squandering welfare money that was
supposed to address poverty in the poorest state in the
nation.

The long awaited civil lawsuit, which intends to claw back
roughly $24 million in federal funds misused in a sprawling
scandal officials began to unravel almost three years ago,
targets famous athletes Brett Favre, former running back
Marcus Dupree, former linebacker Paul Lacoste, retired WWE
wrestler Ted "The Million Dollar Man" DiBiase Sr. and his
two sons, among others.

The lawsuit details bold disregard from officials and
contractors for either effective public spending or for the
people they were supposed to be assisting — actions
indicative of a state government with a cynical approach to
anti-poverty programs.

“I do not understand these people,” attorney Brad Pigott,
who wrote the lawsuit, told Mississippi Today by email.
“What kind of person would decide that money the law
required to be spent helping the poorest people in the
poorest state would be better spent being doled out by them
to their own families, their own pet projects, and their own
favorite celebrities?”

But two entities who received welfare funds through
activities referenced in recent criminal pleas — University
of Southern Miss Athletic Foundation and tech company Lobaki
Inc. — do not appear as defendants in the May 9 filing.

[Editor's note: A full list of defendants and a copy of the
full lawsuit appears near the bottom of this story.]

Nancy New and her son Zach New, who ran a nonprofit that
received tens of millions under contracts with the
Mississippi Department of Human Services, pleaded guilty in
April to several charges bribery and fraud charges related
to how they used their nonprofit's public funding. Much of
the money was illegally funneled to other nonprofits or
contractors, which were considered "second tier" recipients
of the welfare department. The latest civil lawsuit pursues
some, but not all of these recipients.

Nancy New admitted to defrauding the government when she
paid Lobaki $365,000 to run a virtual reality program. Her
son and the nonprofit's assistant director, Zach New,
pleaded guilty to wire fraud for transferring $500,000 to
the construction of the physical virtual reality center. He
disguised the expenditures as "lease" payments. Zach New
also admitted to defrauding the government by transferring
$4 million for the construction of the volleyball stadium at
University of Southern Mississippi, which was also disguised
as a lease.

MDHS originally told WLBT last October that its lawsuit
would include the Southern Miss athletic foundation and
Lobaki.

And yet, they were apparently removed during the drafting
phase, because these recipients do not appear among the
defendants in the civil suit filed Monday.

Pigott, the former U.S. Attorney who was hired by MDHS to
craft the lawsuit, and the Mississippi Attorney General's
Office, who is also on the suit, have not discussed their
process for choosing which welfare recipients to pursue in
the case. Many, but not all, of the defendants received
demand letters last year from the State Auditor's Office,
the agency that originally investigated the case. The
athletic foundation and Lobaki did not.

MDHS was ready to file this lawsuit over six months ago,
shortly after independent auditors completed a forensic
audit of the welfare program, according to media reports.
But the attorney general's office, which has authority over
lawsuits filed on behalf of the state, had to give the
agency the green light.

"We wanted this suit to be the best possible suit for the
people of Mississippi and we weren't going to work on any
artificial timelines to get a final product," Michelle
Williams, a spokesperson the attorney general's office, told
Mississippi Today last week.

At the center of the welfare scandal is the state's decision
to contract with New's nonprofit Mississippi Community
Education Center and another nonprofit called Family
Resource Center of North Mississippi to run a state-
sanctioned program called Families First for Mississippi.
John Davis was the director of the Mississippi Department of
Human Services at the time, answering to the governor who
appointed him, Phil Bryant. Christi Webb ran the nonprofit
in the north.

By 2017, the second year of Davis' administration, the state
was making unprecedented up-front, multi-million dollar
payments to the two nonprofits. Most of the money came from
a flexible federal block grant called Temporary Assistance
for Needy Families or TANF.

The lawsuit seeks to establish that Davis and Nancy New
agreed together to disregard federal laws that stipulate how
states may spend federal welfare dollars. Davis would push
millions to the two nonprofits, which used the funds on pet
projects, and in exchange, the nonprofits would pay for
things that Davis wanted, such as hundreds of thousands of
dollars worth of contracts to his family members and
wrestler friends and luxury travel arrangements for himself,
the lawsuit says.

"That illegal quid pro quo agreement and conspiracy between
Davis and New resulted in all of the transfers of TANF funds
for non-TANF purposes," the lawsuit reads.

Mississippi Department of Human Services is asking the court
for damages of $23.3 million from Davis and $19.4 million
from Nancy New and her nonprofit. These figures represent
many of the same expenditures.

But the lawsuit also asserts that the people and
organizations who received funding from the nonprofits, who
are named as defendants, are also liable because they knew
they were receiving payment indirectly from MDHS, "which was
not designed or authorized to donate public funds for the
private enrichment of wealthy individuals or organizations."

The lawsuit also says none of the recipients possessed
special skills that would allow them to be paid as a
contractor for the state's anti-poverty program, and that
they knew they were selected despite lacking experience or
qualifications in TANF programming and without a competitive
selection process.

The civil complaint represents just the first step of the
state's pursuit of repayment, and attorneys may amend the
filing to add defendants when the discovery process is
underway.

Circumstances outlined in the lawsuit echo Mississippi
Today’s reporting in its investigative series, “The
Backchannel,” including Brett Favre’s involvement in the use
of MDHS funds to purchase personal investments in the
pharmaceutical start-up Prevacus, which was developing a
treatment for concussions.

Favre already knew that Nancy New had access to millions in
few-strings-attached federal grant funds because he got her
to pay $5 million towards the new volleyball stadium that
the quarterback was credited with helping build at their
alma mater University of Southern Mississippi, texts show.

Favre encouraged his business partner, Prevacus founder Jake
Vanlandingham, “to solicit Nancy New to use MDHS grant
proceeds to invest in the stock of Prevacus,” the lawsuit
reads.

“She has strong connections and gave me 5 million for Vball
facility via grant money. Offer her whatever you feel like,”
Favre wrote Vanlandingham by text, Mississippi Today first
reported.

This text came just two days after the two men met with
then-Gov. Phil Bryant to discuss how to elevate and find
funding for the company.

While the lawsuit highlights the Prevacus payments — which
are also the subject of criminal charges against New and
Davis — it does not scrutinize the role of the former
governor Phil Bryant, who was also offered stock in the
company.

During his last year in office, Bryant used his political
influence to help advance Prevacus’ interests. The governor
was set to accept the stock after he left office, texts
show, but arrests derailed his arrangement.

These details do not appear in the initial civil complaint
filed Monday.

The lawsuit describes the Jan. 2, 2019, meeting at Favre’s
home, during which he, Vanlandingham, Davis and Nancy and
Zach New discussed the deal. On paper, the parties agreed
that the News would pay Prevacus $1.7 million in exchange
for the promise that Prevacus would locate its clinical
trial sites in Mississippi. Later, the News would funnel
more money into an offshoot called PreSolMD, which
Vanlandingham said was developing a preventative cream.

“That representation of that motive or purpose, for
investing $1.7 million of TANF funds into Prevacus and/or
PreSolMD, was false,” the lawsuit reads. “The written
Agreement was a sham, as it concealed the material fact that
the actual purpose of the transaction was financially to
benefit Defendants Nancy New, Zach New, Jesse New, Jacob
Vanlandingham, Brett Favre, Prevacus and PreSolMD.”

The New nonprofit also paid Favre individually $1.1 million
under a contract with Favre Enterprises that required the
athlete to “speak at three different public events, and one
‘keynote address,’ and that Favre sign autographs at events
promoting MCEC itself.”

Neither Favre nor his company, the lawsuit reads, “ever
performed any such speaking or autograph ‘services.’
Certainly no services were performed by Favre that had
anything to do with the pursuit of lawful TANF purposes.”

The lawsuit asks for a $3.2 million judgement against Favre
and $1.1 million against his company. It also asks for $2.1
million from Vanlandingham and his companies.

The civil complaint also chronicles how Davis' brother-in-
law Brian Smith and his nephew Austin Smith, the DiBiase
wrestlers, friends of the wrestlers, Brett Favre and his
pharmaceutical venture, and other football players came to
receive millions in welfare funds.

While Davis was living at the same residence as the Smiths,
he got the nonprofits to pay his sister’s husband Brian
Smith or his companies over $600,000 in a nine-month span,
including a $150,000 lump sum on his first pretend day of
employment and $365,050 through a fake “lease” on a building
that did not exist. Davis also arranged for the nonprofits
to pay his 24-year-old nephew Austin Smith, who also lived
at the same house, $426,397 over 17 months. They said he was
teaching coding skills to needy students.

“He was not,” the lawsuit reads.

A Hinds County grand jury reindicted Davis in late March on
new bribery and conspiracy charges. The new indictment says
he acted in concert with or aided, among others, his sister,
Twyla Smith, and her husband, the brother-in-law Brian
Smith, but officials have not charged any of the Smiths.

After developing a close relationship with Teddy DiBiase
Jr., Davis elevated the wrestler within the department and
arranged for him and his companies to receive payment from
the nonprofits, the lawsuit says. The wrestler received over
$3 million in anti-poverty funds to, among other things,
“address the multiple needs of inner-city youth,” the
lawsuit reads, though he possessed no qualifications to
provide TANF services. He received duplicate payments of
$700,000 from each nonprofit, “but not in exchange for
services actually performed by Teddy DiBiase,” the lawsuit
reads.

“Teddy DiBiase, who spent most of his workday hours
accompanying John Davis at MDHS offices and on trips, made
no substantial effort to supply any such contractual
services, either as an individual or through any
organization or entity,” the lawsuit reads.

The lawsuit says Nancy New’s other son Jess New, an attorney
and director of the Mississippi State Oil and Gas Board,
helped arrange legal entities for Teddy DiBiase so the
wrestler could receive more welfare funds.

Davis also directed New to transfer $30,000 in TANF funds to
the Northeast Mississippi Football Coaches Association, the
lawsuit says, as a reward for the organization selecting
Teddy DiBiase as its 2018 banquet speaker.

Teddy DiBiase’s brother Brett DiBiase also received
duplicate payments from each of the nonprofits totaling
$600,000 and “never performed services of any significance
which served any lawful TANF purpose.” Brett DiBiase, who
also went to a luxury rehab clinic in Malibu on the
nonprofit’s dime and was paid as a contractor while he was
there, is the only TANF subrecipient to face criminal
charges. He pleaded guilty to fraud in 2020 and agreed to
cooperate with prosecutors.

The lawsuit also alleges the luxury treatment center, Rise
in Malibu, knew or should have known they were receiving
funds illegally, and names the facility as a defendant.

Davis got the nonprofit to pay for his travel, including
first class flights, a luxury hotel suite and a chauffeured
limousine, to visit Brett DiBiase in California while he was
in treatment.

The lawsuit says Teddy DiBiase urged Davis to divert $1.7
million in TANF funds to his father Ted DiBiase Sr.’s
ministry called Heart of David. The department contracted
directly with the ministry to provide services for eligible
needy people. “After receiving TANF funds pursuant to those
contracts, however, they substantially ignored all lawful
TANF purposes (and all of the interests of all potential
beneficiaries or lawful TANF services).”

Ted DiBiase Sr. used some of the money for his personal
expenses, did not maintain any personnel files or a
financial management system, and while his organization
maintained a website, one of the only visible, public facing
products of the program, “the website content was entirely
created at MDHS expense by an employee of MDHS, as ordered
by John Davis,” the lawsuit reads. Davis, Webb and Family
Resource Center employee Amy Harris also arranged for the
nonprofit to pay Ted DiBiase Sr. a lump sum of $250,000 for
motivational speaking.

When he received the check, Ted DiBiase Sr. emailed his
sons, “Look what I got today!” the lawsuit says.

The lawsuit asks for almost $2.9 million in damages from
Teddy DiBiase and the same from his companies, almost $2
million from Ted DiBiase Sr., $1.7 million from Heart of
David, $824,258 from Brett DiBiase, $48,000 from his company
Restore2 LLC, and $160,000 from Rise in Malibu.

The lawsuit says Teddy DiBiase Jr. also urged Davis to
divert TANF funds to a consulting and management services
contractor Adam Such. Davis got Webb to pay Such $250,000,
the lawsuit says, to pretend to operate a “Center for
Excellence” and a “referral network,” though “nothing of
substance was expected of or delivered by Such.”

Davis similarly arranged for TANF money to go to Teddy
DiBiase’s business associate Nick Coughlin, an aspiring
actor and reality TV contestant who worked for powerful law
firm Butler Snow and in the Mississippi Attorney General’s
Office in 2020, though he is not an attorney. His degree is
in business and marketing from Mississippi College,
according to his resume. His resume says his skills are in
marketing, brand management, economic development and
motivational speaking.

Coughlin received almost $169,000 “to perform vague tasks
such as having ‘conversations with industry leaders,’” the
lawsuit reads, though he and his company “never engaged in
any substantial activity … much less did they do anything
toward pursuing lawful TANF purposes.”

Former linebacker and Jackson native Lacoste, described as
“active in political affairs in Mississippi,” the lawsuit
says, knew or should have known that Davis ran a government
agency charged with assisting the disadvantaged when the
athlete proposed the director divert money to his fitness
program. His company Victory Sports Foundation received $1.3
million to conduct “fitness boot camps” in Flowood, Madison
and Pascagoula, the lawsuit says, which were not lawful
under TANF guidelines.

The lawsuit asks for $1.3 million in damages from Lacoste
and his company.

Both nonprofits paid Marcus Dupree large salaries to act as
a “celebrity endorser” and “motivational speaker,” and the
New nonprofit effectively purchased and paid the mortgage on
a 15-acre property in Flora in the name of Dupree’s
nonprofit, Marcus Dupree Foundation, but which the athlete
used as his private residence.

The lawsuit asks for $371,000 in damages from Dupree and his
foundation.

The lawsuit also attempts to recoup funds from four other
entities that it says illegally received TANF funds,
SouthTec, Inc., Chase Computer Services Inc., Warren
Washington Issaquena Sharkey Community Action Agency and
Soul City Hospitality. Mississippi Today first reported that
Jackson restauranteur Jeff Good’s nonprofit, Soul City
Hospitality, received federal funds through a sublease
agreement with the New nonprofit for a project that was
supposed to turn “ugly” produce into meals for poor
residents. The program fed no one.

The lawsuit asks for damages, plus additional awards for
legal fees, from the following defendants:

John Davis ($23,256,224)
Brian Smith ($615,894)
Austin Smith ($426,398)
Nancy New ($19,403,504)
Mississippi Community Education Center ($19,403,504)
New Learning Resources Foundation Inc. ($6,513,393)
Zachary New ($2,100,000)
Jesse New ($2,654,221)
Magnolia Strategies LLC ($554,221)
Family Resource Center of North Mississippi ($3,852,720)
Christi Webb ($3,852,710)
Amy Harris ($250,000)
Brett Favre ($3,200,000)
Favre Enterprises ($1,100,000)
Jake Vanlandingham ($2,100,000)
Prevacus, Inc. ($2,100,000)
PreSolMD, LLC ($2,100,000)
Ted DiBiase Sr. ($1,971,223)
Heart of David Ministries Inc. ($1,721,223)
Ted "Teddy" DiBiase Jr. ($2,897,487)
Priceless Ventures LLC ($2,197,487)
Familia Orientem LLC ($700,000)
Brett DiBiase ($824,258)
Restore2 LLC ($48,000)
Rise in Malibu ($160,000)
Adam Such ($250,000)
SBGI LLC ($250,000)
Nicholas Coughlin ($168,733)
NCC Ventures LLC ($168,733)
Paul LaCoste ($1,309,183)
Victory Sports Foundation, Inc. ($1,309,183)
Marcus Dupree ($371,000)
Marcus Dupree Foundation ($371,000)
SouthTec, Inc. ($137,935)
Chase Computer Services, Inc. ($375,750)
Soul City Hospitality LLC ($200,000)
Warren Washington Issaquena Sharkey Community Action Agency
($49,190)
Many of the dollar figures calculated in the lawsuit
represent overlapping debts, meaning the total the state
could recoup from all defendants is roughly $24 million.

For example, the amount owed by Brett Favre, $3.2 million,
includes the same $1.1 million owed by Favre Enterprises, so
the total that the state seeks to recoup from those two is
$3.2 million.

While Favre has returned $1.1 million to the state, the
money is sitting in an account at the State Auditor's
Office, which means, for purposes of the lawsuit, he still
owes the money to the welfare department.

Because the money flowed from Davis' department and most of
it through Nancy New's nonprofit, the lawsuit claims Davis
and Nancy New are jointly liable for the large amount that
they and others illegally spent. If any of the subrecipients
pay their damages, that would likely reduce the debts for
Davis and Nancy New.

If the court assesses damages, the welfare department can
force the defendants to disclose their assets and ability to
pay to ensure the state recoups as much as possible. In
cases where the court determines damages are owed due to
fraudulent actions, the defendants will not be able to get
rid of those debts by filing for bankruptcy.

The U.S. Department of Health and Human Services has
declined several interview requests from Mississippi Today
about the welfare scandal, but it said in a statement in
2020 that it was waiting for the state's investigation to
conclude before attempting itself to claw back misspent
funds.

John Davis and a young former procurement officer for the
agency, Gregory "Latimer" Smith, are now the only people
with pending criminal charges related to the welfare
scandal. Smith, who is facing conspiracy, embezzlement and
fraud charges, did not allegedly receive any of the funds
himself. Hinds County recently charged Davis in a
superseding indictment and the judge rescheduled his trial
for Sept. 26, 2022.

Nancy New and Zach New, who pleaded guilty to separate
federal charges for bilking public school funds for their
private school, recently received plea deals in the state
welfare fraud case. The deals ensured that they would
receive no additional time beyond their federal sentence for
their crimes in the welfare case. They agreed to cooperate
with the prosecution.

None of the other civil suit defendants have faced criminal
charges, which come with a higher burden of proof than civil
charges.

Federal authorities have also not brought any criminal
charges in the welfare scandal.

The U.S. Attorneys Office and FBI have declined to comment,
but recent plea deals indicate their investigation is
ongoing

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