Zach New, left, and his mother Nancy New exit the Cochran federal courthouse on March 18, 2021, in Jackson. Credit: Vickie D. King/Mississippi Today

When agents arrested Nancy New and her son Zach New last year on charges they allegedly stole $4 million in Mississippi welfare dollars, onlookers speculated how the popular private schools they ran, New Summit, may be implicated.

Now, the federal government is alleging the News also defrauded the Mississippi Department of Education out of $2 million they secured by filing fraudulent claims, sometimes on behalf of kids who didn’t attend the school, people who didn’t work at the school or teachers who had a lower certification level than they claimed.

Nancy New allegedly used at least $76,889 of the public school money to purchase her house in northeast Jackson, according to a series of bank transactions outlined in the indictment against her.

The U.S. Attorneys Office alleges the money came from the Mississippi Adequate Education Program, which is the name for the state’s public school funding formula. An education department spokesperson explained in a statement to Mississippi Today that “eligible accredited nonpublic schools may request MAEP add-on funds” to pay for special teacher teams to serve students with learning disabilities.

In a 12-page federal indictment unsealed Thursday morning, the News are accused of conspiracy to commit wire fraud, eight counts of wire fraud, five counts of aggravated identify theft, money laundering conspiracy and one count each of monetary transactions with proceeds of specified unlawful activity.

The News were arraigned in front of Magistrate Judge F. Keith Ball Thursday afternoon and released on a $10,000 bond. Both pleaded not guilty and trial was set for May in front of U.S. District Court Judge Carlton Reeves. If convicted on all counts, the U.S. Attorneys Office said the News could each face up to 210 years in federal prison and up to $4 million in fines.

Nancy New did not return a call or text message from Mississippi Today on Thursday. Her attorney Cynthia Speetjens and Zach New’s attorney Tom Fortner did not respond to specific questions or offer information contradicting the indictments, but said that their clients look forward to presenting their side in court.

“The allegations listed in today’s indictment are deeply troubling, and the Mississippi Department of Education is committed to continue to assist with this investigation to its conclusion,” State Superintendent of Education Carey Wright said in a statement Thursday afternoon.

New Learning Resources Inc., the for-profit umbrella school district over the New Summit Schools, was able to secure its taxpayer support in part by using high-powered lobbyists, Mississippi Today reported. But, according to a state audit, the News paid the lobbyists with federal welfare dollars that the state gave to their nonprofit, Mississippi Community Education Center, to run programs to help impoverished families.

New Learnings Resources Inc. has 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.

New Learning Resources and the New-affiliated Mississippi Autism Center each also 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. Inside Capital lobbyist Will Longwitz, who received the most money from the News — nearly $320,000 — told Mississippi Today he was hired to secure funding for autism and dyslexia therapists.

Nancy New and her son Zach New after they were arrested on Feb. 5, 2020, on charges they allegedly stole $4 million in welfare dollars.

Nancy New long had the support of state leaders. During his 2019 campaign for governor, Gov. Tate Reeves filmed an ad at New Summit School in Jackson, where he touted his proposed $4,300 pay raise for public school teachers. The News donated a total of $5,000 to Reeves in the past, money he later said he would return or donate.

Former Gov. Phil Bryant, who led the state during the scheme, lauded the work of Nancy New’s nonprofit, Mississippi Community Education Center, which ran a state-sanctioned program called Families First for Mississippi.

In 2018, Bryant gave Nancy New the Mississippi Meritorious Civilian Service Award, the second highest honor the governor grants.

In 2016, Bryant and his wife, Deborah, stood shoulder-to-shoulder with Nancy New and Davis, a Bryant appointee, at the ribbon cutting ceremony for the original Families First office in Jackson.

“The Families First platform has become a model of success for thousands of Mississippians and one that is being emulated all across America,” Bryant said in his final State of the State address in January 2019.

Meanwhile, the nonprofit was actually allegedly funneling millions of federal dollars intended for the state’s neediest citizens to their cronies and programs with little evidence they helped the poor.

The former Families First State Street office sits empty, much of the furnishings still intact from a year ago, on Mar. 18, 2021. The office, which was supposed to assist needy families, shut down shortly after the owner, Nancy New, of the nonprofit that ran it, Mississippi Community Education Center, was arrested on embezzlement charges. A Mississippi Department of Human Services spokesperson said the agency is planning to utilize the space for early childhood development programs in the future.

The News were two of six people agents from the state auditor’s office arrested on Feb. 5, 2020, alleging they conspired to steal more than $4 million in federal block grant funds intended to help Mississippians escape poverty.

Prosecutors filed those charges, related to Mississippi Department of Human Services and the Temporary Assistance for Needy Families federal block grant, in Hinds County Circuit Court. This week’s newly revealed charges related to the alleged Mississippi Department of Education scheme appear in the U.S. District Court for the Southern District of Mississippi.

“I am proud of the joint work we have done with federal investigators that led to this indictment,” State Auditor Shad White said in a statement Thursday regarding the federal charges. “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.”

About half — $2 million — of the allegedly stolen money outlined in the Hinds County indictment went to the News personally, with $2.15 million going to concussion-research firms, Prevacus and PreSolMD, companies that state leaders were trying to lure to Mississippi.

A state audit showed that money the New organizations received from government sources was often comingled between the nonprofit and for-profit entities.

From 2016-2019, the auditor found, Mississippi Community Education Center transferred a total of $6.5 million to New Learning Resources. Some employees were listed as staff members of both the nonprofit and the school.

The nonprofit paid for a New Summit School employee’s counselor license expenses, for example, and paid $42,750 to turn a lot into a baseball field next to New Summit School, which the private New Summit Academy utilized.

Several million more in questioned spending has not appeared in criminal charges.

Mississippi Today first reported that the New nonprofit paid $5 million for the construction of a new volleyball stadium at University of Southern Mississippi; covered the $9,500-a-month mortgage on former football star Marcus Dupree’s ranch in a gated Flora community; and funded a high-profile boot camp-style fitness program offered by former linebacker Paul Lacoste. A state audit released in May included each of these purchases as a finding.

One of the more headline-grabbing findings was that the New nonprofit had paid famed NFL quarterback Brett Favre’s business Favre Enterprises $1.1 million between 2017 and 2018 “to appear at several events, record promotions, and provide autographs for marketing materials.” He didn’t attend the events, the state auditor said. After the news broke, Favre promised to pay back the funds, starting with $500,000 he paid to the auditor’s office. No additional payment has been made, the office confirmed Thursday.

Besides the six arrested, no one else who received roughly $94 million in questionably spent welfare funds has been charged with a crime. It’s possible that if they had no knowledge of the overarching scheme or the source of the funds, they may not be accused of wrongdoing, officials have explained to Mississippi Today.

Former professional wrestler Brett DiBiase, who allegedly went to drug rehab on the TANF program’s dime, pleaded guilty in December to his part in the scheme. The New nonprofit’s accountant, Ann McGrew, tried to plead guilty but a judge rejected the deal in January.

The remaining four — Nancy New, Zach New, former Mississippi Department of Human Services director John Davis and agency employee Gregory “Latimer” Smith — remain innocent until proven guilty. Trials are set for coming months, but additional delays are likely.

This story will be updated. View a timeline of events associated with the welfare fraud scheme here.

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Anna Wolfe is a Pulitzer Prize-winning investigative reporter who covers inequity and corruption in government safety net programs, nonprofit service providers and institutions affecting the marginalized. She began reporting for Mississippi Today in 2018, after she approached the editor with the idea of starting a poverty beat, the first of its kind in the state. Wolfe has received national recognition for her years-long coverage of Mississippi’s welfare program, in which she exposed new details about how officials funneled tens of millions of federal public assistance funds away from needy families and instead to their friends, families and the pet projects of famous athletes. Since joining Mississippi Today, she has received several national honors including the Pulitzer Prize for Local Reporting, the Livingston Award, two Goldsmith Prizes for Investigative Reporting, the Collier Prize for State Government Accountability, the Sacred Cat Award, the Nellie Bly Award, the John Jay/Harry Frank Guggenheim Excellence in Criminal Justice Reporting Award, the Al Neuharth Innovation in Investigative Journalism Award, the Sidney Award, the National Press Foundation’s Poverty and Inequality Award and others. Previously, Wolfe worked for three years at Clarion Ledger, Mississippi’s statewide newspaper, where she covered city hall, health care, and wrote stories about hunger and medical billing, earning the Bill Minor Prize for Investigative Journalism two years in a row. Born and raised on the Puget Sound in Washington State, Wolfe moved to Mississippi in 2012 to attend Mississippi State University, where she currently serves on the Digital Journalism Advisory Board. She has lived in Jackson, Mississippi since graduating in 2014.