Mississippi welfare agency attempts to sue USM Athletic Foundation over TANF funds
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Dec. 5—JACKSON — Mississippi's welfare agency announced on Monday that it will try to sue the University of Southern Mississippi Athletic Foundation and a virtual reality company as part of ongoing civil litigation to recover misspent federal welfare dollars.
The Mississippi Department of Human Services in May filed a suit against 38 organizations and people to reclaim $25 million in Temporary Assistance for Needy Families funds that were allegedly misspent amid the state's ever-growing welfare scandal.
Now, the state agency wants to add 10 more defendants to the lawsuit.
Bob Anderson, the director of MDHS, said in a statement that the agency is working to restore trust in the agency while also ensuring that such misspending does not occur again.
"The rest of the task involves recovering and returning to the taxpayers the millions of dollars in misspent funds which were intended to benefit Mississippi's needy families," Anderson said. "We continue that task with this motion to file an amended civil complaint."
A key target now in the agency's legal sights is the University of Southern Mississippi Athletic Foundation, which used around $5 million in TANF funds to construct a new volleyball stadium.
Court documents filed on Monday accused former NFL quarterback Brett Favre, an alumnus of the college, of reaching a "handshake deal" with the foundation to provide necessary funds to build the new volleyball facility.
But Favre, according to the documents, could not get enough donations from his athletics connections to cover the full cost of building the new facility.
The former NFL hall of fame quarterback instead turned to John Davis, the former MDHS director, and Nancy New, the director of the Mississippi Community Education Center, for funding.
Favre met with New, Davis and then-USM Athletic Director Jon Gilbert in 2017 to discuss the possibility of the welfare agency funding the volleyball center's construction. New, Favre and Gilbert all sat on the foundation's board at the time.
"The Foundation, Nancy New, Zachary New, and Brett Favre all agreed for John Davis to direct funds to MCEC so that MCEC could provide the funds to the Foundation under the guise of a 'sublease' which was in fact intended to finance the brick-and-mortar construction of the volleyball facility," the amended lawsuit claims.
TANF regulations prohibit the federal dollars from being used to build brick-and-mortar facilities.
A representative of the athletic foundation referred the Daily Journal to the university's legal and communications departments, which did not respond to a request for comment.
Favre has asked a judge to dismiss the complaint filed against him, and he's claimed state officials have never actually alleged he committed wrongdoing.
Both New and Davis have pleaded guilty to criminal charges in connection to the welfare scandal.
MDHS also wants to sue Lobaki, a Jackson-based virtual reality company formed in 2018, according to business documents filed with the Mississippi Secretary of State's Office. Court documents allege that MCEC and the Tupelo-based nonprofit Family Resource Center collectively provided the virtual reality company with $635,000 in TANF funds to "deploy and operate a virtual reality academy."
MCEC also paid the organization an additional $160,000 to expand its scope of work.
Lobaki, according to the complaint, asked MCEC and FRC what kind of federal grant was funding the contract, but it received no response. The Lobaki Foundation still agreed to receiving grant funds.
"Providing virtual reality training is not a lawful TANF purpose, particularly in the absence of any determination of the neediness of the participants," the amended lawsuit reads.
Representatives from Lobaki did not respond to a request for comment.
Monday's court filing mirrors similar claims made by a forensic audit commissioned by the welfare agency. This audit concluded that providing virtual reality training could fall into TANF's scope of providing job-training skills to needy people, but there was no documentation showing that the people who took part in the training were eligible.
Glenn McCullough, former Tupelo mayor and former director of the Mississippi Development Authority, the state's economic development agency, previously served as chair of the Lobaki board of directors. He told the Daily Journal that the organization received the TANF money before he joined the Lobaki board, and he voluntarily resigned from the board around a month ago.
Jim Waide, a Tupelo-based attorney representing one defendant in the civil suit, filed a subpoena with former Gov. Phil Bryant to obtain documents in his possession that mention Lobaki, among other things.
Bryant has objected to the subpoena and asked a judge to quash it. If a judge forces the former governor to comply with the subpoena, he's asked the judge to shield his documents from public view.
Prosecutors have not alleged that Lobaki or the university athletic foundation committed any criminal wrongdoing.
The other people and organizations MDHS is attempting to add to its lawsuit include:
— N3 Holdings
— JTS Enterprises
— William Longwitz
— Jacob Black
— Garrig Shields
— Inside Capitol, LLC
— William, Weiss, Hester and Co., PLLC
Hinds County Circuit Judge Faye Peterson is presiding over the civil suit, and she must approve of the motion to add the parties to the litigation.
