Families First for Mississippi in Hattiesburg, Miss., February 21, 2020. Credit: Eric J. Shelton/Mississippi Today, Report For America

A Hinds County judge has finally accepted a plea deal from a nonprofit accountant at the center of a multi-million dollar embezzlement scheme.

Ann McGrew, head financial officer for Mississippi Community Education Center and a potential star witness against the nonprofit’s owner, has pleaded guilty to one of her two original charges with one still pending.

McGrew first agreed to a deal with prosecutors more than eight months ago for her role in the “sprawling” scheme uncovered in February of 2020. But in a very rare occurrence, Hinds County Circuit Court Judge Adrienne Wooten rejected her guilty plea.

Details of that initial agreement were not public, but while another defendant in the scheme got his charges cut, McGrew is still saddled with both conspiracy to commit embezzlement and making fraudulent statements.

In exchange for her cooperation and testimony against co-defendants, the state will recommend remanding the count of making fraudulent statements at sentencing. McGrew faces up to five years in prison and $5,000 in fines on the first charge. Or, if Wooten does not take the state’s recommendation, she could face up to 10 years and $15,000 in fines. Wooten won’t sentence McGrew until after the other cases conclude.

In February of 2020, a Hinds County grand jury indicted McGrew, Nancy New, the owner of Mississippi Community Education Center, her son Zach New, John Davis, former director of the Mississippi Department of Human Services, agency employee Gregory “Latimer” Smith and retired WWE wrestler Brett DiBiase within an alleged scheme to embezzle a total of $4.15 million from a federal program intended to help the poor.

As the accountant, McGrew would have some of the most direct knowledge about who directed funds to which sources, so she’s an important witness for the state’s case.

Under McGrew’s financial watch, at least $2 million federal dollars flowed from Mississippi Community Education Center to Nancy New’s for-profit education company New Learning Resources Inc., where McGrew was also bookkeeper. McGrew falsified documents, invoices and ledgers to hide Nancy and Zach New’s theft, according to the indictment against her.

Nowhere have auditors or prosecutors shown how McGrew may have personally benefited from the scheme she aided.

McGrew’s attorney Joe Holloman and Hinds County District Attorney Jody Owens could not share further details with Mississippi Today because of gag orders surrounding the cases: Hinds County Circuit Court Judge Faye Peterson initially prohibited parties to her cases from speaking to the media after Nancy New spoke with reporters last November. Wooten also filed a suppression order in McGrew’s case the day after Mississippi Today reported the rejected plea deal.

McGrew is the second person to plead guilty within the scheme, more than a year and a half after the arrests.

Brett DiBiase pleaded guilty to making fraudulent statements last December but not to an original conspiracy charge. 

Investigators caught DiBiase for accepting a $48,000 contract from the agency for work he was unable to perform because he was staying in a luxury rehab facility in Malibu, California, at the time. A judge won’t sentence him until after the other cases conclude. His crime carries a maximum sentence of five years in prison and a fine of up to $10,000.

Though McGrew is now cooperating with state prosecutors, she and her colleagues at the nonprofit did not comply with requests from accountants during a recent independent forensic audit of the Mississippi Department of Human Services. 

As a result, the audit, for which the state has paid $324,000, could not parse out what happened to over $40 million of the nonprofit’s spending.

The report did not analyze payments from New’s nonprofit, Mississippi Community Education Center, to:

Most of the money in question came from a block grant called Temporary Assistance for Needy Families, a few-strings-attached federal fund which states can use to provide cash assistance, formerly known as the welfare check, to very low-income families or on a number of other programs.

The Mississippi Department of Human Services had offered small contracts to New’s nonprofit and another nonprofit called Family Resource Center of North Mississippi over the years. But in 2017, the agency began funneling tens of millions to the two organizations under the guise of a family-stabilizing initiative called Families First for Mississippi. 

The two organizations then subgranted with dozens of other people and organizations but kept very poor track of the spending or what the recipients were supposed to be accomplishing. But only officials from New’s nonprofit have been accused of a crime.

In the summer of 2019, once the auditor’s office caught wind of the scheme, McGrew emailed a ledger to the welfare agency outlining how “Families First” had spent about $14 million, Clarion Ledger reported.

A former agency spokesperson told Mississippi Today that the agency had never received a similar detailed accounting of Families First before that.

The spreadsheet the agency did get at that time, which showed egregious spending such as expensive travel, dinners, advertising and lobbying, wasn’t even accurate or reliable, auditors found. The nonprofit often failed to properly delineate the sources of its funds. The way McGrew pooled money in their records made it difficult to identify who actually received TANF dollars.

The criminal charges against the six defendants address just a sliver of the overall misspending that occurred at the welfare agency under the leadership of Davis, and his boss, Gov. Phil Bryant.

The $2 million in theft that McGrew covered up represents less than 3% of the $76 million in misspending identified by the most recent independent audit. 

The amount Brett DiBiase fraudulently obtained represents an even smaller fraction.

Charges against Brett DiBiase didn’t address the salary he was making at Mississippi Community Education Center or the $160,000 the nonprofit paid for his rehab stay.

Prosecutors haven’t brought any charges against his father, Ted DiBiase, whose organization received $2 million in welfare dollars from the agency or his brother, Ted DiBiase Jr., who may have profited more than any other individual from the welfare misspending after receiving more than $3 million from the nonprofit. The latest audit said all payments to the DiBiase family were indicative of fraud, waste or abuse.

CORRECTION: A previous version of this story misstated the amount Mississippi Department of Human Services paid for its forensic audit. The contract award was $2.1 million, but the agency had paid the firm $324,264.05 by the time of this report. We regret the error.

Reporter Julia James contributed to this report.

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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.