Political Donors Took Millions From Public Ed Coffers for Private School, Feds Allege

Nancy New shakes hands with Phil Bryant while John Davis stands behind them
New Learning Resources founder Nancy New (left), and her son, Zach New (not pictured), pleaded not guilty to 17 federal charges today related to allegations that they "fraudulently" obtained more than $2 million in public education funds for their private school in Jackson. Last year, state prosecutors indicted both News and former Mississippi Department of Human Services head John Davis (center) on charges related to what prosecutors called a "sprawling conspiracy" to embezzle money from DHS. Before the indictments, the News maintained close relationships with state political leaders, including former Gov. Phil Bryant (right) and donated thousands to state leaders' campaigns. Photo courtesy Families First for Mississippi

Two wealthy Mississippi political donors “conspired” to “fraudulently” obtain more than $2 million in public education funds and used it to pay for teachers’ salaries at their private school in Jackson, federal prosecutors allege. 

Zachary New, 38, appeared in federal court on March 19 with his mother Nancy New, both shackled from the waist down. They pleaded not guilty before Magistrate Judge Keith Ball.

A March 16, 2021, indictment, which the U.S. District Court for the Southern District of Mississippi’s Northern Division unsealed today, charges mother-and-son duo Nancy New and Zachary New with 17 counts, including wire fraud, identity theft and money laundering. The allegedly unlawful activities began in 2016 and continued into 2020, the indictment says. 

“According to the indictment, Nancy New and Zachary New submitted fraudulent reimbursement claims for the salaries of teachers at New Summit School in Jackson to the Mississippi Department of Education under the Mississippi Adequate Education Program,” the U.S. Department of Justice U.S. Attorney’s Office for the Southern District of Mississippi said in a statement today. 

“As a result, New Learning Resources, Inc., a for-profit company owned by Nancy New and Zachary New, fraudulently obtained in excess of two million dollars ($2,000,000) to which it was not entitled.  Nancy W. New and Zachary W. New personally benefited from this scheme to defraud.”

WAPT reports that the two pleaded “not guilty” before Magistrate Judge Keith Ball during an appearance in federal court in Jackson today and that the court released them on a $10,000 bond.

Another ‘Sprawling Conspiracy’?

Nancy New is the former president and founder of New Learning Resources, Inc., and her son, Zachary New, was the company’s vice president. Since 1997, the for-profit corporation has operated multiple private schools for children with special needs, including the New Summit School in Jackson. 

499327051-New-Indictment-031621

screen shot of first page of New indictment
Click the thumbnail to read the indictment in United States v. Nancy W. New and Zachary W. New

The indictment claims that the private-school operators obtained the money after making “false claims that individuals who no longer worked at (New Summit School) had continued to work there as teachers”; “false claims that the experience levels and certification levels of teachers at NSS were higher than they actually were, resulting in reimbursement at an artificially high level”; “false claims that students who no longer attend NSS continued to attend school there”; and “false claims that individuals who had never attended NSS in Jackson were full-time students attending school at NSS.”

The News used the names and Social Security numbers of multiple “victims” in 2017, 2018 and 2019 “without lawful authority,” the charging document alleges.

To receive the funds from the State of Mississippi, the charging document says, they used an out-of-state company, “knowing that the transactions were designed in whole and in part to conceal and disguise the nature, location, source, ownership, and control of the proceeds of the specified unlawful activity.”

“The indictment alleges that, in one instance, Nancy New and Zachary New laundered approximately $250,000 of the fraudulently obtained reimbursement money through different bank accounts they controlled before finally using the proceeds to purchase a house,” the Southern District of Mississippi said in its statement today.

The federal charges are separate from charges state prosecutors announced last year, but stem from the same investigation. As he announced a slew of federal charges last year, Mississippi State Auditor Shad White described a “sprawling conspiracy,” alleging that Nancy and Zachary New were part of a scheme to embezzle at least $4 million from the Mississippi Department of Human Services. 

Those DHS funds, prosecutors said, were meant to provide food and other assistance for Mississippi’s poorest families through the Temporary Assistance for Needy Families program.

Payments Continued After 2020 Indictments

The new federal charges alleging the News also improperly obtained money from the Mississippi Department of Education allege that those activities continued even after the February 2020 state indictments.

On March 12, 2020, around the time public schools began to close as the novel coronavirus pandemic arrived in the state, New Learning Resources obtained $737,881.21 in interstate wire transfers in MAEP funds, the indictment says. Their corporation received another transfer of $737,881.21 from the state on May 7, 2020, the document says.

The Mississippi Center for Justice is suing Mississippi State Auditor Shad White, seen here, on behalf of University of Mississippi Professor James Thomas, accusing him of “defamation” for saying Thomas violated the state’s anti-strike law for educators. Photo courtesy Auditor Shad White

“I am proud of the joint work we have done with federal investigators that led to this indictment. We are continuing to work shoulder-to-shoulder with our federal partners to advance this case, and today is another step toward justice for the taxpayers,” Mississippi State Auditor Shad White, a Republican, said in a statement today.

Darren J. Lamarca, the acting U.S. Attorney for the Southern District of Mississippi, signed the March 16, 2021, indictment and announced the charges today along with FBI in Mississippi Special-Agent-in-Charge Michelle A. Sutphin; U.S. Department of Health and Human Services Office of Inspector General Special-Agent-in-Charge Derrick Jackson; U.S. Department of Agriculture Office of Inspector General Acting Special-Agent-in-Charge Anthony Mohatt; U.S. Department of Labor Office of Inspector General Special Agent in Charge Rafiq Ahmad; and Auditor White.

New Summit Schools Received Voucher Funds

Since the 1990s, the News have expanded New Learning Resources’ across Mississippi, with New Learning Resources now operating five private schools across the state: New Summit School and The Spectrum Academy in Jackson; North New Summit School in Greenwood; South New Summit School in Hattiesburg; and Oxford University School in Oxford. The private schools are accredited through the Mississippi Association of Independent Schools and the Southern Association of Colleges and Schools.

Portrait of Derrick Jackson
U.S. Department of Health and Human Services Office of Inspector General Special-Agent-in-Charge Derrick Jackson was among a group of federal investigators who announced the News’ indictments today.

The three New Summit schools in Jackson, Hattiesburg and Greenwood each receive public education funds under the state’s Education Scholarship Accounts program. 

The ESA voucher program, which Gov. Tate Reeves helped create when he was lieutenant governor and the president of the Mississippi Senate, is supposed to use public-school dollars to pay for private-school tuition for children with special needs. But a December 2020 Joint Legislative Committee on Performance Evaluation and Expenditure Review found that the program paid for at least 117 students who did not qualify for the program to attend private schools.

“MDE did not require parents to submit documentation after three years of program enrollment showing that their child continues to have a disability. As a result, MDE allowed 117 students to continue participating in the program in FYs 2019 and 2020 who were not eligible according to state law,” the PEER report says. It does not say which schools those students attended.

Students at just six schools, including the three New Summit schools, accounted for 40% of all Mississippi students receiving ESA funds, the report says. Former Gov. Phil Bryant, who signed the ESA program into law, had a close working relationship with Nancy New and made multiple public appearances with her during his time as governor.

News Donated to Top Political Leaders

In 2019, when then-Lt. Gov. Tate Reeves was first running for governor, his Demcoratic opponent, then-Mississippi Attorney General Jim Hood, accused him of using the voucher program to reward donors like the News. Hood made those comments after Reeves released an ad touting his support for public schools, but using footage of himself meeting with educators on the New Summit School campus. Hood said Reeves should not have chosen a private school for the ad.

Campaign-finance records show that Nancy and Zach New collectively donated $6,000 to Reeves’ campaign committees from 2017 to 2019. Nancy New also gave $2,500 to U.S. Sen. Cindy Hyde-Smith, a Republican, in June 2018, federal campaign-finance reports show. But prosecutors have not claimed that Reeves, Hyde-Smith or any other recipients of the News’ political donations are tied to any of the alleged wrongdoing. Gov. Reeves condemned the News last year.

Jim Hood watches a Tate Reeves ad on TV
Former Democratic Mississippi Attorney General Jim Hood, seen here in 2019 watching an ad by his Republican opponent, criticized then-Lt. Gov. Reeves for filming the ad at New Summit School. Photo by Ashton Pittman

“I filmed an ad in a school that some of these people helped run. I can tell you, the teachers and students I met there didn’t deserve to be caught up in all this,” Reeves said during a press conference after state prosecutors first charged the News for the alleged DHS “conspiracy” last year. “It makes me sick to think that they will have to deal with the repercussions of a few selfish people in positions of power. I would consider them victims of these alleged actions as well.”

Assistant U.S. Attorney David Fulcher is prosecuting Nancy and Zachary New. If convicted, federal prosecutors said in today’s statement, the two “each face up to 210 years in federal prison and up to $4,000,000 in fines.” U.S. District Court Judge Carlton W. Reeves in Jackson will preside over the trial, which is set to begin on May 3.

“The public is reminded that an indictment is merely a charge and should not be considered as evidence of guilt. Every defendant is presumed innocent until proven guilty in a court of law,” federal prosecutors said in their statement today.

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