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Wang writes: "The money was supposed to go toward feeding the most vulnerable children in Arkansas. Instead, authorities say a small group deliberately defrauded the system and pocketed at least $10 million in federal funds intended to feed at-risk youths in a place with one of the highest rates of child hunger in the United States."

Children grabbing lunch at school. (photo: Reuters)
Children grabbing lunch at school. (photo: Reuters)


'Mortified': Inside a $10 Million Scheme to Steal Federal Funds Intended to Feed Hungry Children

By Amy B Wang, The Washington Post

09 September 16

 

he money was supposed to go toward feeding the most vulnerable children in Arkansas: Kids in low-income areas who relied on after-school programs for dinner or visited community centers during the summer because they might not get to eat otherwise.

Instead, authorities say a small group deliberately defrauded the system and pocketed at least $10 million in federal funds intended to feed at-risk youths in a place with one of the highest rates of child hunger in the United States.

The scheme unfolded over about 2½ years, and officials considered it “to be the equivalent of taking food directly from children,” said Chris Givens, a U.S. Attorney’s Office spokesman.

At least 12 people in Arkansas have been charged with crimes including wire fraud, bribery and money laundering in an ongoing investigation of misused funds related to federal feeding programs, according to government prosecutors.

Moreover, investigators said they could trace all of the corrupt activity back to internal sources, which state officials called a troubling and “extremely disappointing” matter. Of those charged, three were employees of the Arkansas Department of Human Services, the state agency that oversees the distribution of such funds from the U.S. Agriculture Department.

The unraveling of what turned out to be a staggering level of fraud began in mid-2013, when the state DHS received what it considered a suspicious claim from Jacqueline Mills, the sponsor of meal sites in rural eastern Arkansas. The site in question was in Helena-West Helena, a small city with a low population density; the claim amount was high enough to raise a red flag.

“The amount was almost a million dollars,” said Tonya Williams, a state DHS division director. “It was just like, ‘Wait a minute — that just doesn’t seem right.’ ”

The stage agency reported it to the USDA inspector general’s office. Soon the Internal Revenue Service, the FBI and other federal agencies joined the investigation.

What they found shocked the Arkansas DHS. More than a year after the investigation began, Mills was arrested on fraud and bribery charges, and so were two longtime DHS employees — Gladys King and Tonique Hatton.

“I was pretty mortified,” Williams said.

Investigators found that Hatton had accepted bribes — some directly, others made through payments to her relatives — in exchange for approving the maximum number of children who would be fed at Mills’s site in eastern Arkansas.

Mills, in turn, allegedly submitted inflated claims for reimbursement to the state DHS.

Because her sites had already been approved for a certain number of children, the DHS approved and paid out the claims. Authorities estimate Mills’s sites received more than $2.5 million in federal funds through the state agency.

Investigators said that in exchange for bribes, King approved other sites knowing their administrators would submit similarly inflated claims.

King had worked at the DHS since 2009 and most recently served as a special nutrition-unit program coordinator; she voluntarily left the agency in December 2013, after the investigation began. Hatton began working at the agency in 2001 and was still employed there at the time of her arrest. The DHS fired her immediately.

“It’s extremely disappointing to learn that people were reportedly cheating a program that feeds hungry children, especially in a state that has one of the highest rates of childhood hunger in the country,” then-DHS Director John Selig said in a statement released the morning of the first arrests, in 2014. “We appreciate all the work to help us root out the bad actors so other providers can continue to ensure kids have adequate food when they aren’t in school.”

Over the following year, the investigation continued to turn up sobering discoveries of fraud and bribery.

In one case, a provider named Christopher Nichols submitted a claim to open two meal sites through an organization called “A Vision for Success.” Both locations were approved by King, his aunt.

One site was discovered to be an auto repair shop in North Little Rock owned by Nichols’s uncle Anthony Waits. The other address was nonexistent.

According to authorities, Waits was married to King.

In February, DHS administrator Mark Speight told KARK News that it was not unheard of for a feeding program to be run from an auto shop.

“When you’re feeding children, you might find some places you would never think would be a feeding site,” Speight told the station. “If there were children and there was an apartment complex right next to it and it had facilities to be able to serve, it could possibly happen.”

In March, another defendant, Reuben Nims, pleaded guilty to conspiracy to commit mail fraud. According to the Justice Department, Nims admitted he was recruited by Waits to sponsor a meal program through an organization called “Blessed Thru Success.”

Nims had one approved site in Little Rock that he claimed fed up to 300 children per day.

It was all a lie, investigators found.

“No children were ever actually fed there,” the Justice Department said after Nims’s guilty plea.

In all, 12 people have been charged. This week, Hatton became the ninth person to plead guilty to crimes surrounding theft of federal feeding-program funds.

Three defendants have pleaded not guilty; their trials begin Oct. 17.

Only one defendant has been sentenced. In March, Kattie Jordan was sentenced to more than five years in federal prison. A judge also ordered her to pay joint restitution of $3.6 million.

The defendants face a maximum of 20 years in prison and up to a $250,000 fine for the charges of conspiracy to commit wire fraud. The punishment for accepting bribes is up to 10 years in prison and a $250,000 maximum fine.

“Regardless of these statutory penalties, we feel these are very serious crimes,” said Givens, the U.S. Attorney’s Office spokesman.

It is unclear how many children in Arkansas rely on free or reduced meals outside of school, but nearly 289,000 of the state’s students (about 61 percent) qualified for free or reduced school lunches in the 2015-2016 academic year.

A 2010 Feeding America report said Arkansas had the highest level of child food insecurity in the country, at 24.4 percent.

“There’s hungry kids all over Arkansas,” Givens said. He added that it is unclear whether any children in Arkansas were not fed as a result of the fraud.

But based on USDA reimbursement rates — about $3.07 to $3.69 per lunch — the $10 million that was siphoned off from the programs in Arkansas could have meant anywhere from 2.7 million to 3.2 million meals for children, according to a USDA spokeswoman.

The stolen funds came through two USDA programs: the Summer Food Service Program, which feeds low-income children when school is out, and the Child and Adult Care Food Program.

The Arkansas DHS receives about $70 million per year through the programs, an official said. With the funds, the agency served nearly 35 million meals and snacks to needy Arkansans in 2015.

“All of the defendants are connected through the DHS employees in some way, although not all defendants know each other,” Givens said in an email. “Tonique Hatton began her scheme, and the others at DHS followed. It could be considered the same fraud ring, in a sense, because the fraud was made possible through the same means, that is, with the help of the DHS employees.”

One way or another, most of the defendants took advantage of a relatively basic system: In Arkansas, local sponsors who want to participate in the feeding programs must get training and then submit an application to the state DHS.

Once approved, they can provide meals to qualifying children in the community, then submit claims for reimbursement based on the number of eligible meals they serve. An approved site also appears on the state agency’s website for participants in the Arkansas Special Nutrition Program.

Until recently, a single state DHS employee could be the one approving, visiting and reimbursing sites, said Williams, the division director.

“We have restructured completely, as you can imagine,” she said.

The agency has compartmentalized duties so that no one employee is responsible for approving and reimbursing sites “from beginning to end,” Williams said.

Moreover, Williams said, she uses the findings of fraud as a cautionary tale.

“It’s just part of training now,” she said, noting that she tells DHS employees, “You do not want to be on the front page.”

“When I do new-employee orientation,” she said, “it’s like: ‘You’re going to read about it. We’re not going to hide this elephant.’ ”

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