Welfare agency settles with eight defendants in fraud lawsuit

More than two years into the litigation, the state of Mississippi has agreed to settle with eight defendants in the ongoing welfare fraud civil case for a total of about $750,000.

That’s roughly half as much as the state has spent on legal fees in the case so far.

The eight defendants, who allegedly illegally received or were liable for the misspending of a total of $1.7 million, did not admit to wrongdoing. Their settlements represent some of the smaller components of the overall welfare fraud scheme. The future repayments amount to less than 1% of the total $79 million in federal welfare funds that Mississippi Department of Human Services’ lawsuit claims were lost to malfeasance.

The defendants, date and amount of settlement, and total alleged damages are as follows:

• Chase Computer Services , August 2024, $1,000 out of $375,750
• Southtec , August 2024, $10,000 out of $19,000
• Lobaki , April 2024, $300,000 out of $795,000
• Williams, Weiss, Hester & Company , April 2024, $220,000 out of an undetermined amount
• William Longwitz and Inside Capitol , March 2024, $318,325 out of $318,325
• Rise Luxury Rehab , October 2023, $105,000 out of $160,000
• Warren Washington Issaquena Sharkey Community Action Agency , January 2023, $49,190.06 out of $49,190.06

Each of these companies received funds from the federal Temporary Assistance for Needy Families block grant, or TANF, from the two private nonprofits – Mississippi Community Education Center and Family Resource Center of North Mississippi – running a program called Families First for Mississippi. The program operators, who received as much as $40 million a year, were supposed to channel resources to help stabilize poor families and prevent child neglect but instead frittered the funds away on contracts with politically connected companies.

Mississippi Department of Human Services said it could not comment on the settlements due to Hinds County Circuit Court Judge Faye Peterson’s suppression order in the case, which has prevented parties from discussing the situation publicly. Defendants who have been released from the case are no longer bound by the gag order, and representatives of virtual reality tech firm Lobaki agreed to share their story with Mississippi Today in a piece published in April.

“We didn’t know the difference between TANF and a frickin’ turnip patch, you know?” Lobaki President Kevin Loud said at the time.

Will Longwitz, a former Madison County Court Judge, state senator and legislative lobbyist currently working as a personal injury lawyer in New Orleans, settled with MDHS in March for the total amount of TANF funds auditors say he received – $318,325.

The lawsuit alleged the nonprofits hired Longwitz’s firm Inside Capitol to lobby lawmakers on behalf of Families First, though federal regulations prohibit the use of TANF funds for lobbying activities. He registered as a lobbyist for MCEC in 2018 but reported receiving no compensation from the nonprofit, despite the six-figure income. He also reported spending zero on food, gifts or entertainment for public officials.

MCEC hired four other lobbyists during the time of the scandal, but it paid Longwitz by far the most – nearly $320,000 compared to between $21,000 and $72,000 for each of the others. The lawsuit alleged Longwitz knew the money he received came from the welfare fund.

Longwitz, who represented himself in the litigation, denied the allegations, repeating legalese and referring to himself as a releasee in an email to Mississippi Today Monday. “Releasees specifically and categorically deny any and all liability with regard to all claims and allegations, and settle the claims only to buy their peace and avoid further cost of defense,” he wrote.

Longwitz agreed to a monthly payment schedule and will have until 2033 to pay the entire amount.

Only one other defendant, Warren Washington Issaquena Sharkey Community Action Agency (WWISCAA) settled for the total amount of damages, $49,190.06, that MDHS alleges it caused. The original May 2022 lawsuit accused the nonprofit of failing to perform the services, such as academic tutoring and career skills development, it was hired to provide. Emails Mississippi Today previously obtained suggested that the organization’s partnership with Families First was a sham.

“They were absolutely doing nothing in either center,” said a social worker who was employed under the program, according to an email.

WWISCAA’s January 2023 settlement denied any wrongdoing and its director Jannis Williams declined to comment.

The Greenville-based Community Action Agency was founded in 1972 as one of the local nonprofits across the nation tasked with administering federal anti-poverty funds, primarily the Community Services Block Grant. Throughout its recent legal battle, WWISCAA seems to have maintained its normal partnership with Mississippi Department of Human Services, receiving roughly $5 million a year from the welfare agency.

In the settlements so far, Chase Computer Services, owned by Christopher Scott Chase, received the best deal by dollar amount.

MDHS claimed the nonprofits hired the tech company to develop software to track outputs and performance of the Families First program, but that it never provided the service, and it should repay the agency $375,750.

The company denied the allegations. The parties settled for just $1,000 last week. According to his LinkedIn page, Chase has worked as a senior developer at the Tupelo-based American Family Association since 2023, and the Chase Computer Services website says it is no longer accepting new clients. Chase did not respond to an email from Mississippi Today.

The lawsuit similarly accused Southtec of not completing all of the work – installing internet network and phone systems in Families First offices – that it was prepaid to conduct. MDHS claimed Southtec caused $19,000 in damages related to overages on a hotspot that it was using on Family Resource Center’s dime. They settled for $10,000 this month.

The vendor whose welfare payments raised some of the first red flags in the welfare fraud investigation – Rise Luxury Rehab – settled with MDHS back in October. For four months in 2019, former MDHS Director John Davis instructed Mississippi Community Education Center to pay $40,000 a month for his friend Brett DiBiase to be treated at the luxury rehab facility in Malibu. The company agreed to pay back $105,000 of the total $160,000 it received. Its lawyer did not return an email.

MDHS had alleged in the lawsuit that Williams, Weiss, Hester & Company, the accounting firm in charge of auditing Mississippi Community Education Center’s finances, had completed a “bogus” audit in 2017 that concealed the nonprofit’s use of TANF funds.

The lawsuit asked for damages, which would have been determined at trial, totaling the amount of the nonprofit’s misspending that the agency would have allegedly caught if the firm had performed a proper audit. MDHS settled with the accounting firm in April for $220,000.

In an emailed statement to Mississippi Today, firm owner Doug Hester maintained that his company had not committed professional malpractice.

“Unfortunately, obtaining vindication in a lawsuit of this magnitude with this many parties is extremely expensive and time consuming, so WWH made a business decision to settle the case and buy its peace rather than continue with a lengthy and expensive court battle,” Hester wrote.

Mississippi Community Education Center, its founder Nancy New, and her son Zach New also filed their own lawsuit against Williams, Weiss, Hester & Company in 2021 claiming that they relied on the accounting firm to ensure the nonprofit was spending its funds properly and that the accounting errors caused the News to be charged criminally. The News dropped the case in February.

Judge Peterson signed orders dismissing Chase Computer Services and Southtec from the case last week. She dismissed Lobaki and Williams, Weiss, Hester & Company from the case in April. Warren Washington Issaquena Sharkey Community Action Agency was removed from the lawsuit when the state filed its amended version in December of 2022. The court file does not yet contain orders of dismissal for William Longwitz, Inside Capitol, or Rise Luxury Rehab.

Mississippi Department of Human Services has paid Jones Walker, the law firm bringing the litigation, nearly $1.5 million in TANF funds since 2022, according to the state’s public accounting database. The stated purpose of the lawsuit is to clawback the misspent TANF funds.

Thirty-eight defendants remain, including Brett Favre and the University of Southern Mississippi Athletic Foundation, who together allegedly worked to channel $5 million in welfare funds to build a volleyball stadium on the college campus. They’ve also denied wrongdoing.

MDHS claims Favre is also on the hook for $2.1 million that the New nonprofit funneled to pharmaceutical companies that he sponsored. An alleged co-conspirator in that scheme, Jake Vanlandingham, pleaded guilty to a federal wire fraud charge last month.

Some of the defendants facing the biggest alleged damages, such as Davis and nonprofit operators Nancy New and Christi Webb, have already pleaded guilty to criminal charges related to the scheme and will likely have to pay restitution for their crimes.

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