The State of Mississippi has used nearly $2 million in federal Temporary Assistance For Needy Families welfare funds to pay auditors and lawyers as part of its effort to recover millions in misspent TANF funds since 2021, state records show. Federal law says states can use TANF funds to pay for “accounting” and “litigation” services in some instances related to the program.
The State hired the New Orleans-based Jones Walker law firm last year to take over its civil lawsuit in an effort to claw back tens of millions in welfare dollars that investigators allege the Mississippi Department of Human Services misspent under its former director. Since then, Mississippi has paid the firm $376,803.81 using TANF welfare funds for its services.
The lawsuit names dozens of defendants, including former Mississippi Department of Human Services Director John Davis, former MDHS Deputy Director Jacob Black, nonprofit operator Nancy New, retired NFL quarterback Brett Favre and others. Davis and New have pleaded guilty to crimes related to the welfare scandal; officials have not accused Black or Favre of crimes. In total, the State is seeking $94 million from all defendants.
Included among the many incidents of alleged misspending the State cited in its lawsuit last year are instances in which Davis directed millions to friends, family and causes championed by wealthy sports celebrities. Officials say Davis and New directed millions to a volleyball stadium at Favre’s alma mater and toward a concussion drug company the football star had invested in.
Favre has repeatedly denied knowing federal welfare funds were involved. He asked the Mississippi Supreme Court to remove him from the case in a filing Monday.
An attorney for one of the civil defendants, Davis’ nephew Austin Smith, argued in court filings that Mississippi Gov. Tate Reeves should not be paying lawyers using TANF funds.
“Quite literally, Reeves is misspending public funds to control a suit to recover misspent public funds,” Smith’s attorney Jim Waide of Tupelo said in a May 11 filing in Hinds County Circuit Court. Reeves’ office did not respond to a request for comment.
The State is suing Smith for $426,397, alleging that Davis paid him that amount in TANF funds, including to teach “coding skills” that he did not have the knowledge to teach. Smith has not repaid any of those funds and has denied knowing the money was illegally paid to him and is fighting the lawsuit; officials have not accused him of a crime.
Mississippi’s government transparency website, transparency.ms.gov, shows that the State has used “TANF Work Program” grant funds from MDHS to pay Jones Walker LLP seven times starting on Dec. 6, 2022, in amounts ranging from $27,697.04 to $75,300.18. The most recent payment was on May 4 for $61,238.76. An employee for the firm told the Mississippi Free Press on Wednesday morning that they do not comment on ongoing litigation.
Federal Law Allows TANF Use For ‘Litigation, Audits’
Last year, Reeves ordered the firing of Brad Pigott, the Democratic lawyer who originally handled the civil lawsuit. The Republican governor said he had concerns that Pigott was too focused on the “political” side of the case after he issued subpoenas for information on the volleyball stadium. MDHS leadership said at the time that the case required a “full-service” law firm that could handle more extensive tasks.
The State then hired the New Orleans, La.-based Jones Walker law firm in Pigott’s place. The transparency website shows that MDHS paid Pigott’s law firm $73,500 using TANF funds. Pigott did not respond to a request for comment for this story.
“Filing a lawsuit alleging fraud is not among the four (4) purposes allowable for the use of TANF funds,” Austin Smith’s attorney wrote in the May 11 filing.
Jim Waide’s filing noted that federal law says TANF can be used to “provide assistance to needy families so that children may be cared for in their own homes or in the homes of relatives”; “end the dependence of needy parents on government benefits by promoting job preparation, work, and marriage”; “prevent and reduce the incidence of out-of-wedlock pregnancies and establish annual numerical goals for preventing and reducing the incidence of these pregnancies”; and to “encourage the formation and maintenance of two-parent families.”
The Mississippi Free Press asked the Mississippi Department of Human Services for comment on why the State is using TANF funds to pay lawyers, but Chief Communications Officer Mark Jones said he could not comment on case specifics due to a gag order the Hinds Circuit Court judge issued earlier this month.
Jones did, however, confirm that the State previously used TANF funds to conduct a forensic audit of the department’s TANF spending after the state auditor and Hinds County district attorney broke the news of the welfare scandal in February 2020.
The transparency website shows that MDHS used TANF Work Program funds to pay the Minneapolis, Minn.-based CliftonLarsonAllen LLP accountancy firm $1,441,288.67 between the 2021 and 2022 budget years.
Those payments for the forensic audit, Jones said, were based on a set of federal regulations for TANF spending that allow expenses for “administrative costs” necessary “for the proper administration of the TANF program or separate State programs,” including for “services related to accounting, litigation, audits, management of property, payroll, and personnel.”
That regulation “was used as the legal reference for just authorization of the forensic audit,” Jones said. Due to the judge’s gag order in MDHS’s civil case, he could not comment on how that regulation relates to the lawsuit, however.
The State’s August 2022 contract with Jones Walker was for $400,000 through July 31, 2023. During a State Personnel Board meeting on Thursday morning, Special Assistant Attorney General Heather Deaton requested and the board approved another $500,000 through July 31, 2024.
Mississippi Department of Human Services Director Bob Anderson told the board that his department has “regular contact with the Department of Justice” over criminal investigations into the welfare scandal. He praised Jones Walker’s work on the civil case.
“I will say they have been doing a fine job handling a case that has 46 defendants. It’s not a small matter,” he said. “And there’s been no shortage of motions and arguments and public attention to this case. Jones Walker has been very professional in keeping everything they do confined to the pleadings that they file in the court documents. As executive director, I’ve been very pleased with the quality of representation we’re getting. We would like to see this case move a little quicker, but with that many defendants and so many arguments, it’s going to take a little longer.”
Defendants Point Fingers at Bryant
After news of the welfare scandal broke in March 2020, Gov. Reeves appointed Bob Anderson as the agency’s new permanent executive director. The forensic audit was part of an initiative the new director launched called “Operation Restore Trust” with the goal of assuring Mississippians the department is serious about preventing future abuses.
Nevertheless, in his May 11 filing, Jim Waide accused Gov. Tate Reeves of “funding this lawsuit in violation of state and federal law in order to maintain control over these proceedings and steer liability away from himself and his political allies.”
He specifically cited former Gov. Phil Bryant, the Republican who appointed Davis as MDHS director in 2016 and presided over the State until January 2020. Before leaving office, the former governor turned over information to State Auditor Shad White about possible corruption at MDHS in mid-2019 and fired Davis. White credited Bryant as the “whistleblower” whose tip kicked off the investigation that unraveled the welfare scandal.
Jim Waide, along with attorneys for other defendants like Nancy New, has suggested former Gov. Bryant may have played a role in the welfare scandal. But to date, neither state nor federal investigators have publicly pegged Bryant as a suspect or accused him of any crimes; he is not named as a defendant in the civil suit.
In response to a subpoena from New’s attorneys and a filing from three media outlets including this one, Bryant released hundreds of pages of text messages and emails related to the welfare scandal earlier this month. The texts do not indicate that the former governor knew Davis was using TANF welfare funds on projects like the volleyball stadium or the concussion drug company Prevacus. They do show that Bryant offered to help Favre raise private funds for the volleyball stadium and to help find investors for the drug company.
Bryant complied with the subpoena and also published the texts on a website, bryanttexts.com, on May 4, but his lawyers noted on the site that they had been unable to find some relevant texts in his phone. The missing texts included leaked ones Mississippi Today’s Anna Wolfe had previously reported on, such as ones she reported showing that Bryant asked Davis to fund a Starkville program that helps children with dyslexia learn to read and another in Jackson that serves adults and children with intellectual disabilities.
Other apparently missing texts include ones Wolfe reported in which Bryant asked Davis for help for a “troubled” nephew. The Mississippi Free Press has not been able to review or verify those previously reported text conversations.
‘Ridiculed Throughout the State’
Jim Waide’s May 11 filing for Austin Smith argues that “both Reeves and Bryant appear in text messages relating to federal grant funds at issue in this lawsuit.” There is no publicly available evidence Reeves was involved in efforts to use TANF funds for any of the Favre-related projects. The Mississippi Free Press did obtain text messages via a public-records request late last year showing that the retired quarterback sought Reeves’ help in getting the Legislature to appropriate regular state funds for the volleyball project, but there is no indication the current governor followed through on the request.
Jim Waide’s filing cites another defendant in the welfare case, Reeves’ longtime personal trainer Paul Lacoste, who claimed in a March 31 filing that he received TANF funds after meeting with Davis, Bryant and others.
After the state auditor and Hinds County district attorney announced the first arrests in the welfare scandal in early February 2020, Mississippi Today’s Anna Wolfe reported a story on Feb. 27, 2023, that detailed how Nancy New’s nonprofit Mississippi Center directed TANF funds to projects like the volleyball stadium. A single paragraph in the story said that “New’s nonprofit did not give direct assistance to working folks …, but offered parenting and fatherhood classes, motivational speaking events with retired athletes and health and wellness programs such as boot camp-style fitness classes run by Paul Lacoste.”
The documents Bryant released show that Lacoste sent an email to his “(Paul Lacoste Sports) Family,” including the former governor, complaining that “Mississippi Today opted to include my name in an article about recent alleged improper acts by individuals associated with the Mississippi Department of Human Services (MDHS) and Mississippi Community Education Center (MCEC)/Families First Mississippi.”
“This action by Mississippi Today was both inappropriate and irresponsible,” the former SEC linebacker wrote. “My legal counsel has already contacted Mississippi Today to demand an immediate retraction and demand their organization cease any/all such references to me, Paul Lacoste Sports, and/or Victory Sports Foundation. Mississippi Today should have been aware that our Next Level Mississippi programs were health and wellness programs, provided to hundreds of individuals, pursuant to a fixed price contract with MCEC (i.e. it was not a TANF agreement).”
The retraction never came. A little over two years later, the Mississippi Department of Human Services named Lacoste as a defendant when Pigott filed the original complaint in the civil suit in May 2022. An amended version of the complaint, which Jones Walker updated in December 2022, alleges that Lacoste used third parties and “facilitated a meeting with Davis, during which Lacoste proposed to MDHS Executive Director John Davis that Davis steer substantial grant funds to Victory Sports (and thus to Lacoste) in exchange for Lacoste’s continuing provision of ‘fitness camps’ to elected officials, their political staffs, and fee-paying participants.”
“Upon information and belief, Davis directed Lacoste to (Nancy New’s son) Zach New and MCEC to discuss an arrangement under which Victory Sports could obtain TANF grant funds through MCEC for services that were not designed specifically to accomplish any TANF purpose,” the complaint says, adding that Lacoste’s program received $1.3 million in TANF funds.
No state or federal prosecutors have accused Lacoste of a crime, however. In March, Lacoste filed a counterclaim against MDHS in which he says that on April 8, 2018, he “was contacted concerning the interest of the State to hire (him) for the provision of active fitness camps in Mississippi as part of a statewide wellness program.”
“Lacoste was invited to a meeting to discuss the request by the State. Lacoste attended that meeting, which included Governor Phil Bryant, John Davis, as well as at least three other individuals who Lacoste understood were from the Federal government. Lacoste was informed that as part of the State’s initiative to reduce obesity and improve the wellness of Mississippians, the State wanted to provide access to fitness camps for interested citizens in Mississippi communities to attend,” the March 31 filing said.
“It was represented to Lacoste by all attendees at this meeting, including Governor Phil Bryant, that the State wished to employ Lacoste’s services for this purpose. At the conclusion of the meeting, the state and federal attendees in the meeting asked Lacoste if he would be interested in providing the services on a statewide basis. Ultimately, Governor Bryant instructed John Davis to work with Lacoste, and VSF ultimately was selected to provide the services.”
Even though Bryant is not a defendant in the civil suit, his attorney Billy Quin declined to comment due to the gag order out of an abundance of caution because the former governor has been the target of subpoenas by defendants in the case.
The documents Bryant released earlier this month do not include calendar entries showing meetings with Lacoste in 2018. They do show that then-Lt. Gov. Bryant held a meeting with Lacoste on Aug. 18, 2011, but the entry says only that it was about “Blue Cross Blue Shield.” The Jackson Free Press reported that year that Blue Cross Blue Shield of Mississippi Foundation was sponsoring the Paul Lacoste Sports Fit 4 Teaching Challenge, a fitness program.
Another Sept. 23, 2016, calendar entry lists a staff meeting between members of then-Gov. Bryant’s staff and the Governor’s Commission on Physical Fitness and Sports, which included Lacoste and others. Emails among members of the governor’s staff in 2018 and 2019 also show they promoted “Paul Lacoste’s free workout class for the legislature and governor’s office.” None of the documents or emails reference Lacoste receiving TANF funds.
Lacoste’s attorney said in the March 31 counterclaim filing that MDHS “failed to disclose to (Victory Sports Foundation) or Lacoste, directly or through MCEC … that MDHS had elected to pay VSF with TANF money.”
“As a result of MDHS’s acts and omissions, VSF and Lacoste have suffered damages to reputation and business,” the filing said. “Further, Lacoste has been ridiculed throughout the State as someone who knowingly took money from indigent people in Mississippi. He did no such thing. This damage has and continues to be suffered as the proximate result of the negligence by the State through MDHS when MDHS negligently paid for the fitness camps with TANF funds, unbeknownst to VSF and Lacoste.”
This story has been updated to note that the State Board of Personnel approved an additional $500,000 contract for Jones Walker LLP at its Thursday, May 18, 2023, meeting.