Our investigative team uncovered tens of millions of dollars in federal payments to fake day care centers in the 1990s. But our corporate ownership killed the story to protect its interests.
A major American city.
A network of immigrants linked in conspiracy to defraud the government.
Enforcement either nonexistent or ordered to look away… as tens of millions of taxpayer dollars are stolen.
Sound familiar? It’s been making headlines.
But it’s not today in Minneapolis.
***
Houston, Texas. 1995.
That’s when video journalist Charles Duckworth and I worked to expose the fact that the U.S. Department of Agriculture (USDA) program designed to feed children in day care centers was being defrauded on a massive scale by organized criminal networks. As KPRC-TV’s investigative unit, Charlie and I documented millions of taxpayer dollars going to more than a thousand non-existent day care facilities across the Houston Metro and Southeast Texas.
One such scheme was made up exclusively of Vietnamese immigrants. The fraud was run out of a tailoring/dry cleaning facility in Houston’s sprawling Vietnamese district. The matron who ran the scheme recruited newly arrived immigrants. She told them she would give them money every month… all they had to do was sign papers stating that they cared for children. Then she listed their apartments as “day care centers” in her extensive network of daycares. But there were no children. And, of course, she kept most of the money for herself.
Going through the list of USDA payments to her organization we noticed something unusual about the addresses. Almost all of them were consecutive. A drive through the neighborhood confirmed our suspicion: the funding recipients were units in apartment complexes. Hundreds of units, in dozens of apartment complexes. In some cases, nearly every unit in a sprawling South Houston apartment complex was receiving federal funds every month – all of that taxpayer money sent to the matron’s registered “non-profit” operating out of her dry-cleaning establishment.
Charlie and I had help in our investigation. One individual who came to us was a former USDA inspector who had tried to fight the fraud for years, only to be told by her supervisors to look the other way and “not make waves.”
Another person who agreed to help us – as long as we protected his identity – was at the time currently employed as a USDA inspector. He too was frustrated by the fact that his bureaucratic superiors refused to refer for prosecution, remove from the funding list – or address in any way – the fraudulent care day operations that he discovered nearly every single day of his job. What hurt him most – cut him to the core – was that he was himself a Vietnamese immigrant. It tore at his very soul that one of his own would stoop so low as to take advantage of those newly arrived on our shores and lure them into a life of crime against the nation taking them in.
Our reporting was built on a solid base of government documents obtained through record requests. Lists of USDA approved day cares. Registers of federal payments. Non-profit corporation filings showing income, dispersals, and officer salaries of the organizations behind the fraud schemes. The rest was legwork, visiting scores of registered day care facilities receiving federal funds and knocking on doors, finding there were no children in care. That there never had been.
***
The scene was like a painting. A whitewashed, one room clapboard church sitting abandoned in a wind-swept field of blooming Texas blue bonnets, steeple thrust into an azure Lone Star sky.
This was the St. Johns United Methodist Church. Tiny. Pastoral. No assigned minister. In fact, no congregation to speak of. Yet the St. Johns United Methodist Church’s network of day cares center was – on paper at least – extensive. The St. Johns UMC Day Care Program was receiving several hundred thousand dollars a year from the USDA’s Day Care Food Program.
The St. Johns UMC Day Care operation ran out of a suite in one of Houston’s ubiquitous freeway-fronting office buildings.
The “pastor” in charge of the program assiduously avoided our efforts to interview him.
But the archbishop of the Methodist Archdiocese of Galveston-Houston did not. He was, in fact, stunned beyond belief to learn that there was any such thing as a St. Johns UMC Day Care Program. Yet there it was, in black and white, on the U.S. government records Charlie and I showed him. Lists of day care addresses, registers of hundreds of thousands of dollars in government payments, the organization’s non-profit filings.
We presented the bishop with other documentation, too. Proof that the addresses for which the church received money for feeding children did not, in fact, care for any children. In many cases there were no buildings on the addressed properties, much less day care centers.
The bishop was aghast. The United Methodist Church was entirely unaware of the fraud being perpetrated in its name. The man named on federal records as the head of the church day care operation had been a lay pastor for the church for a brief time, but had not, the bishop said, been associated with the church for years.
But that hadn’t stopped him. Using the church’s name he’d created an entire network of Potemkin day care centers, billing the USDA for hundreds of imaginary children, and defrauding taxpayers of over a million dollars in the course of his scheme.
***
Examining records, Charlie and I realized that the only way such massive fraud schemes could continue was if federal, state, and local government bureaucrats and politicians were looking the other way, ignoring the scams. Could such a thing be true? Our sources told us it was. And sadly, it wouldn’t have been unusual. (Aside: In a prior investigation we obtained sworn affidavits from sources willing to testify in court that a certain state senator – who today is a preeminent Houston political figure – was accepting payoffs for a proposed transportation project through a mail slot in his garage door… but that’s another story…)
***
It’s one thing for government bureaucrats and crooked politicians to cover up fraud.
It’s something else for an ostensibly respected national media organization to do it.
But that’s precisely what happened to this story in 1995. And it’s one of the nails in the coffin that led to my departure from the world of corporate journalism.
Because our employer, the (Washington) Post-Newsweek company, spiked most of this story.
Why?
Managers of the Washington Post and its then co-owned weekly national magazine, Newsweek, feared embarrassment and potential political consequences. Because they had unknowingly supported the fraud.
Prior to our investigation, the Washington Post and Newsweek Magazine ran a series of feature articles on what then-President George Bush called his “Thousand Points of Light” – individuals and community organizations across America performing outstanding acts of volunteerism. Bush promoted his Thousand Points throughout his presidency, seeking to inspire a national movement of civic engagement.
But our investigation revealed that one of the “Thousand Points” featured in a Newsweek Magazine cover story was perpetrating perhaps the most outrageous fraud scheme in Southeast Texas, raking in millions of dollars by defrauding the USDA Day Care Food Program through hundreds of fake day cares across the Houston metro.
Not only would this have embarrassed Newsweek Magazine and the Washington Post, but it would also have embarrassed the Bush administration. In fact, our sources inside the USDA’s audit and investigation branch suspected this was one reason they were repeatedly told to back off efforts to investigate fraud, for “there could be no such fraud in the President’s hometown”.
But there was.
The worst offender we found scamming the government day care food program was a Bush administration/Washington Post “Point of Light”, who had registered two separate ‘non-profit’ organizations. The first non-profit received millions of dollars in payments for feeding non-existent children in scores of non-existent day care centers. The second non-profit provided free lunches to the indigent in Houston.
Because of her program that gave free lunches to the poor, the woman behind the scheme was a darling of the Houston community. High profile, feted by the city elite.
But this “Point of Light” was literally ‘robbing Peter to pay Paul’… paying for her free-lunch operation with taxpayer funds stolen by gaming the USDA Day Care Food Program.
This could possibly have been seen by some as noble; one might see her as a modern-day Robin Hood, finding a way to beat a system that failed to address the needs of the poor. Except that when her sham non-profit day care organization transferred the stolen taxpayer funds into her indigent lunch program, this particular “Point of Light” skimmed hundreds of thousands of dollars off the top as a personal salary for herself, and a just slightly smaller amount for her husband.
When apprised of the findings of our investigation, our Washington Post manager was aghast and terrified. Recently appointed, green-around-the-gills, and frightened of her own shadow, she’d been tentative about investigative journalism since her arrival, preferring instead to focus on “softer, more audience appealing” feature coverage. The idea of exposing the Bush administration and our corporate overlords as suckers who’d been taken in by a fraudster mortified her.
Charlie and I looked at it in an entirely different way: that her kind of thinking is precisely how these fraudsters got away with stealing tens of millions of taxpayer dollars each year in Houston alone. The schemes were protected by a bureaucracy unwilling to rock the boat. Our sources among federal auditors and investigators were begging to be given free rein to expose these criminal scams – and those who perpetrated them – and refer them for prosecution.
Eventually, a very much watered-down version of our findings was run. Some of the information about fraudulent day cares in the Vietnamese community and the fake St. Johns UMC program was presented, although much pertinent information was cut out (for instance, we were not allowed to show video of the supposed “pastor” behind the St. John’s scam, because he happened to be a minority, and our Washington Post management was terrified it might upset elements in Houston’s minority community). As the story was presented, the incidence of such fraud was made to appear much, much smaller than the reality, almost a curiosity.
The “Thousand Points of Light” portion of the story was cut entirely. It never aired.
Deleted, too, were our interviews with the USDA investigator and the former auditor who – at great risk – had agreed to come forward with information and internal documents, along with their claims that bureaucrats and politicians were protecting the fraudsters and refusing to approve expanded investigations or referrals for prosecution.
Thus, the Washington Post and Newsweek Magazine were shielded from embarrassment. The fraud was allowed to continue unabated.
***
I left that news organization a few months later, after I was ordered by management to do something that I found appallingly unethical. (Again… another story for another time.)
I’d been in that newsroom more than eight years. For most of that time – right up until our purchase by the Post-Newsweek corporation – it was hands down one of the finest news organizations in America, filled with journalists of talent, grit, fearless integrity, and the very highest journalistic standards, and led by managers of unwavering principle and community commitment.
Corporate control under Post-Newsweek destroyed all of that.
***
If any lesson can be learned by my experience and the current expose of day care fraud coming out of Minneapolis, it’s this: corporate news organizations and the toadies they put in charge of newsrooms serve only to stifle real journalism. In the never-ending quest for profit and administration approbation they protect the establishment and prevent the revelation of wrongs that are regularly inflicted upon the American public.
The future, for now, lies with independent citizen journalists, armed with iPhones, YouTube sites, blogs, and the relentless urge to uncover the truth.
Imagine how many hundreds of millions – potentially billions – of dollars might have been saved from fraudsters scamming the USDA Day Care Food Program if Charlie Duckworth and I had simply uploaded our findings to modern-day YouTube or X instead of having to go through Post-Newsweek’s sycophantic bootlickers.
***
Am I bitter?
You bet…
Not so much for me. I went on to have a rewarding, multifaceted career.
I am bitter for the sources inside the USDA who trusted us, who believed that we could expose wrongdoing, and thought media would help them to correct crimes that were being covered up.
I’m bitter for the people of Houston – and in a broader sense the American taxpayers, who have lost billions to fraudsters because corporate media and their toadies are too cowardly to expose fraud.
I’m bitter that incompetent, sybaritic corporate management would find it more important to protect corporate interests and present false or censored information to the American public rather than stand up for the truth.
But sadly, over the last thirty years, I’ve come to realize that’s the state of journalism in the modern world. And it will remain so until the American public demands a change.
Endnote: I wrote this article from memory, more than thirty years from the months of work Charlie and I (and others on our news staff who assisted) put in documenting organized fraud schemes pilfering the USDA day care food program in Houston. All of the details are correct to the best of my recollection.