Nonprofit officials spent $400,000 in welfare dollars to lobby state government. Public education funding flowed their way.

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Eric J. Shelton, Mississippi Today/ Report for America

Lawmakers and lobbyists gather in the Capitol during a recess of the special session of the Legislature in Jackson Tuesday, August 28, 2018.

Prominent special education figure Nancy New spent hundreds of thousands of welfare dollars her nonprofit had received from the state to cull favor and lobby state government for her private school interests, according to interviews and documents.

The nonprofit, at the center of what is now called the largest alleged public embezzlement scheme in state history, spent at least $400,000 in welfare funds to “maintain governmental revenue streams or to lobby on behalf of their organization” from 2017 to 2019, the state auditor reported.

In those three years, she and her son’s separate private school companies quietly received nearly $1.3 million from direct legislative appropriations in the public education budget.

But as is the case with many of the purchases her nonprofit Mississippi Community Education Center made, investigators have found, little public documentation exists to show what influence their efforts may have had. 

Most of the lobbying payments in the audit — nearly $320,000 —went to lobbyist Will Longwitz, a former state senator and attorney who told Mississippi Today he was hired to secure funding for autism and dyslexia therapists. But his filings at the secretary of state’s office said he received $0 from the nonprofit.

The auditor also cited payments to lobbyists Serena Flowers, who told Mississippi Today she performed general counsel work, not lobbying, for the nonprofit, and a D.C.-based policy consulting firm Lucas Compton.

In Mississippi, entities often secure big government contracts or legislative appropriations by hiring well-connected consultants to make the case for why they should be funded. These lobbyists frequently fail to submit accurate reports to the secretary of state’s office showing how much they received, how much they earned and how much they spent on gifts for officials. State law provides little enforcement and penalty for lobbyists who do not comply with reporting rules.

Mississippi Community Education Center, founded by Nancy New, was able to hire many expensive lobbyists and attorneys to represent the organization in powerful circles because of a windfall of cash it began to receive from Mississippi Department of Human Services in 2016. The agency awarded the nonprofit a $1 million Temporary Assistance for Needy Families (TANF) grant in fiscal years 2015 and 2016. By 2017, that amount spiked to more than $14 million. In 2018, the agency awarded the organization $21.5 million.

According to interviews with several lobbyists, New, also owner of a well-regarded private school called New Summit School, was primarily lobbying for support of private education programs. Over the years, her for-profit private education company New Learning Resources Inc. and affiliated Mississippi Autism Center received nearly $3 million through direct appropriations from the Legislature through the Mississippi Department of Education budget.

The schools, which charge students tuition, have received a total of about $28 million in public school money since 2006 through direct appropriations, education scholarship accounts and other funds state-accredited non public schools may receive for special needs programs, the department found in an internal review.  

The Department of Human Services had contracted the separate New nonprofit to run a program called Families First for Mississippi, which was supposed to be using welfare money to help low-income families secure employment to support their families through wages instead of public assistance. Mississippi Community Education Center partnered with Family Resource Center of North Mississippi, which also misspent welfare money, the audit revealed, to run the program.

Under former agency director John Davis’ leadership, Families First for Mississippi essentially privatized the state’s anti-poverty plan called “gen+” or “generation plus” in 2016.

“The problem with this is there was no accountability,” said Lynn Evans, a retired public interest lobbyist. “Contracting everything out with private companies obscured the accountability so that when John Davis went down there (to the Capitol)… he would go down and talk about, ‘Oh this is so great. I’m sending all of the responsibilities to these private companies and aren’t you happy about that?'”

Evans continued: “It somehow escaped him that it was his responsibility to make sure that money was being used wisely.”

As New lobbied, several lawmakers grew skeptical of the bump in funding for the obscure Families First for Mississippi program. Officials from the two nonprofits hosted lunches and presented their mission to legislative caucuses, vaguely describing their “free” services, but were unable to quantify specific accomplishments, lawmakers said.

“They couldn’t answer any questions from me when I asked about exactly what were they doing with the money,” said Rep. Jarvis Dortch, D-Raymond.

One legislator with questions turned to the legislative watchdog group called the Joint Committee of Performance Evaluation and Expenditure Review (PEER). 

“It was such a dramatic increase (of grant funding),” said James Barber, executive director of PEER.

“The legislator who asked us to gather information had concerns about Families First and the type of services they provided and the fact that really there didn’t seem to be a lot of brick and mortar that you could point to as being the program,” Barber said. “The legislator thought that there was something not quite right and kept asking questions about it.”

Barber sent a letter to the Department Human Services in October of 2017 asking three questions: What is Families First and what benefits do participants in the program receive; which organizations were contracted to run Families First and how much did they receive; and were any other state agencies involved?

Davis responded with a nine page letter explaining the services and outcomes provided by Families First for Mississippi: “employability, literacy, family financial stability, graduation rates, parenting education positive youth development, at risk youth and senior citizens.” Attached to the letter were exhibits, dozens of pages of agency communications, PowerPoint presentations, directories and blank assessments for Families First clients that explained what the agency was doing.

Davis did not include in his response the outcomes data the agency required the nonprofits to submit to record how many people they served. The reports contained nonsensical figures, Mississippi Today later revealed.

Barber followed up again in 2019 shortly before the investigation began, but lawmakers never took further action to compel the agency to prove how the nonprofits spent the money or who they had helped.

A Hinds County grand jury indicted Davis, another agency employee and three officers from the New nonprofit on embezzlement charges in early February; they’ve pleaded not guilty.

None of the lobbyists Mississippi Today reached said they lobbied Human Services for funds; instead, Nancy New’s lobbying efforts were more focused on her other for-profit ventures, including programs under the umbrella of her corporation New Learning Resources Inc.

MCEC or New Learning Resources hired the following lobbyists or government relations consultants:

  • Clare Hester, Capitol Resources, represented MCEC 2019-2020, $67,500
  • Sidney Allen, Butler Snow, represented NLR 2019-2020, $36,000
  • Caroline Sims and Kathryn Stewart, Butler Snow, represented NLR 2019-2020, $0
  • Will Longwitz, Inside Capital, represented NLR 2017-2019, $12,000; represented MCEC 2018, $318,325 from 2017-2019, according to auditor’s report.
  • Serena Flowers, AvantGarde Strategies, represented MCEC 2019, $21,000 according to auditor’s report; she said she was hired as an attorney, not a lobbyist
  • Lucas Compton, represented MCEC 2018-2019, $72,000, according to auditor’s report
  • Alice Mitchell, represented MCEC 2011-2012 & 2014-2017, $24,200; represented NLR 2018-2019, $0

Longwitz represented New Learning Resources at the Capitol in the 2017, 2018 and 2019 sessions, according to his filings at the Secretary of State’s office.

“During my time in the Senate, I worked to get insurance and therapy coverage for kids with dyslexia and autism,” he said in an email in early February. “After I left office, I was asked by New Learning Resources to help explain the legislative process and to help them get funding to help pay for dyslexia and autism therapists.”

Longwitz filed paperwork with the Secretary of State’s office showing the New private school company, not the nonprofit, paid him a total of $12,000 from 2017 to 2019. He also reported representing Mississippi Community Education Center in 2018 and reported $0 compensation.

But the state auditor’s report says Mississippi Community Education Center paid his firm, Inside Capital LLC, $318,325 those three years. Longwitz did not return calls or emails to Mississippi Today for this story.

Similarly, Secretary of State filings show Alice Mitchell lobbied for Mississippi Community Education Center in 2011-2012 and 2014-2017, for which she received a total of $24,200, but she told Mississippi Today in February that she represented New Summit School. She also filed on behalf of New Learning Resources in 2018 and 2019 but reported $0 compensation.

“I’m not sure when MCEC came about,” Mitchell said in a text message. “I worked with them to seek funding for an exercise program for school age children. Then just monitored legislation for them. I was not involved in any of their other programs. My only focus was the school.”

Sidney Allen, Caroline Sims and Kathryn Stewart, lobbyists at the powerful firm Butler Snow, registered as lobbyists for New Learning Resources, under the name NLR Inc. and affiliates, in 2019 and 2020. Sidney reported receiving $36,000 in fees in 2019 and the other two reported $0. Allen did not appear in the audit, which only dealt with Mississippi Community Education Center’s purchases.

Allen said New Learning hired him to educate lawmakers about the educational services they provided, such as programs at New Summit’s Spectrum Academy, which specializes in services for children with autism and developmental delays. 

“There are many parents and students who benefit from the Legislature’s support of these programs,” Allen said in an email.

The audit shows Mississippi Community Education Center also paid AvantGarde Strategies, owned by Serena Flowers, $21,000 in 2019 and Lucas Compton $72,000 between 2018 and 2019. The nonprofit hired Compton, a D.C.-based firm, “for services including sustaining federal revenue streams and bipartisan advocacy,” according to the audit. Family Resource Center of North Mississippi also entered a lobbying contract with Lucas Compton for $84,000 in 2018, the audit said.

Flowers said she had a contract with the nonprofit for general counsel work, mostly related to labor laws, such as rewriting the organization’s handbook and renewing employment contracts, not for lobbying or government relations. This is why she did not register with the Secretary of State, she said. Flowers also said she offered her contract to the auditor’s office but it never retrieved it from her.

Expenditures revealed in the annual audit are not a full accounting of the nonprofit’s purchases; the report covers only fiscal year 2019 and a smattering of earlier purchases connected to those made in 2019, such as through a contract that spanned multiple years.

In the case of Inside Capital and AvantGarde Strategies, the audit said, the nonprofit did not provide the auditor a contract explaining the work they hired the firms to perform. Welfare funds may not be used to pay for “influencing activities,” the audit pointed out.

After the end of the 2019 session, just before the auditor’s investigation began, Mississippi Community Education Center hired high-powered lobbyist Clare Hester of Capitol Resources, who received $67,500 in the months after the legislative session had concluded. She does not appear in the audit. Hester also registered as the nonprofit’s lobbyist in 2020 but did not receive compensation.

The commingling of funds and the transfer of money between the welfare nonprofit and the for-profit private education company has confused the accounting and at times obscured exactly what the News were doing. 

This was the mechanism Nancy and Zach New used to embezzle $2 million in welfare funds for their personal use, according to the criminal indictments against them, and the audit revealed they also transferred at least $6 million to the private schools. The audit did not track where the money went after that. 

The New nonprofit was also using TANF funds to pay building costs for the for-profit Mississippi Dyslexia Center owned by Nancy’s sons Zach New and Jess New, the audit found. Jess New, an attorney and the executive director of the Mississippi State Oil and Gas Board, is the registered agent and is listed as an officer on many of the business filings for the New companies.

Mississippi Community Education Center had received most of its revenue from Human Services, plus several million from other agencies, such as the Mississippi State Health Department for anti-smoking education and other health programs and Mississippi Community College Board to run early childhood academies.

But the nonprofit and New Learning Resources Inc. also received a combined $28.9 million from Mississippi Department of Education since 2006 for programs for students with disabilities, through a combination of special needs scholarship account funds, dyslexia scholarships and other funding streams called Section 504 teacher units and educable child services.

“MDE was not lobbied to contract with MCEC or New Learning Resources, and MDE has no contacts with either entity,” the department said in an email.

New Learning Resources and the New-affiliated Mississippi Autism Center each received about $1.5 million since 2006 from “flow-through” grants from the Legislature in the education budget, most of which in recent years — a total of $550,000 in 2017, $360,000 in 2018 and $360,000 in 2019. Allen confirmed these were the funds he was hired to help secure in 2019.

In 2015, lawmakers passed legislation allowing the education department to set aside public school dollars for children with special needs to spend on private school tuition. In the years since, lawmakers have considered unsuccessful bills to expand the program to all children.

Gov. Tate Reeves, one of the strongest proponents, used Nancy New’s New Summit School as the location for one of his 2019 gubernatorial TV ads.

With Lt. Gov. Delbert Hosemann’s new leadership in the Senate, lawmakers must reauthorize the scholarship account bill this year and they’ve already drafted language that would provide increased accountability for the entire program, including which schools are eligible to participate. They’ve not progressed any legislation to increase accountability within grant funding at the Department of Human Services.

The News organizations’ influence began to dwindle after Davis abruptly resigned in July, investigators raided the nonprofit’s office, Human Services froze their funding and agents arrested Nancy and Zach New in early February.

Along with lobbyists, the nonprofit had hired several large law firms on retainer, according to interviews with people close to the situation, such as Bradley Arant and Watkins & Eager, mentioned in the audit, and Butler Snow, which still represents the nonprofit, its board members, as well as Zach New individually in his criminal case.

Elected officials who received donations from Nancy or Zach New over the last few years include Gov. Tate Reeves ($5,000), Lt. Gov. Delbert Hosemann ($5,500), U.S. Sen. Cindy Hyde Smith ($2,000) — all three of which said they would return or donate the money to charity — Secretary of State Michael Watson ($250), State Sen. Chris Johnson ($2,000) and 2019 gubernatorial candidate Bill Waller Jr. ($1,000).