It sounded like a healthy menu. Milk, wheat toast, bananas and warm oatmeal; milk, carrot sticks, green beans, rice and baked chicken; and milk and peanut butter sandwiches for an afternoon snack.
"Children must get nutritious, healthful meals if they are to grow into healthy, productive adults." So goes the motto of the Child and Adult Care Food Program funded by the U.S. Department of Agriculture. Now close to two decades old, the little-known program was begun in order to get selections of food such as the one promised in the menu above, created by a Harris County day-care operator, into the mouths of poor children across America. Unfortunately, by the time the program reached Houston, con men and scam artists had learned that the laxly administered operation could easily be transformed from a method of providing federally funded food to the needy into a welfare program for the greedy. Recent investigations, in fact, have revealed that:
* In perhaps as many as half of the CACFP food programs set up in Harris County, menus detailing meals supposedly created and served in fact existed on paper only. No food was ever bought, no children were ever fed.
* Reimbursements for the phantom meals may have cost taxpayers hundreds of thousands, and perhaps even millions, of dollars.
* The Texas Department of Human Services, though informed of possible abuses in the system, conducted investigations that were so sloppy and ill-conceived that they may have made prosecuting many people involved in the food scams impossible.
* Even when investigations turned up possible malfeasance, people avoided prosecution because state officials didn't consider the rip-offs worth dealing with.
* And Harris County may well have been the center of food fraud for the state of Texas.
One of those accused of accepting funds for a fraudulent food operation is Sabrina Carter, a 29-year-old woman recently brought up before Judge George Godwin. Carter was in the Harris County Courthouse a few weeks back to arrange repayment of thousands of the dollars she received for, it's alleged, falsely claiming to feed 12 children two meals a day plus a snack. Court records indicate that for seven months in 1992, Carter received up to $3,000 a month for participating in the Child and Adult Care Food Program. Carter's was the first of 17 CACFP-related fraud cases winding their way through the Harris County court system, cases in which the alleged fraud totals close to $200,000. While it lasted, it was undoubtedly a gravy train, particularly in Carter's case: while drawing her CACFP check she was also receiving food stamps and Aid to Families with Dependent Children benefits.
Carter would probably still have her lucrative taxpayer-paid position if, two years ago, a concerned resident of Harris County hadn't written a letter to Lieutenant Governor Bob Bullock that detailed widespread fraud in the obscure federally funded child nutrition program administered by the Texas Department of Human Services.
The writer (acting as cover for a DHS worker wishing to avoid the trouble whistleblowers often encounter) outlined allegations that eventually resulted in the 17 pending indictments, exposed Harris County as a hotbed of welfare-type fraud and forced DHS -- at the continual prodding of Bullock -- to correct its seemingly casual attitude toward ferreting fraud from CACFP. Although regulations for participating in CACFP have recently been made more strict, some state officials remain dismayed over what they see as foot-dragging and sloppy investigations by DHS and have called for state Senate hearings with subpoena power this summer to investigate the way food, and food funds, are handed out in Harris County.
The USDA program under fire was designed to provide healthful meals and snacks to children and adults in day-care facilities. The food program was supposed to ensure that children and adults in day-care receive healthful meals by reimbursing participating day-care operators for their meal costs and providing them with USDA commodity food. Traditionally, the program operates in child-care centers, after-school-care centers, family- and group-care homes and some adult day-care centers. Day-care providers are required to serve meals that meet federal nutrition guidelines, and they must offer free or reduced-price meals to eligible people. Meal plans must include at least one serving of milk, meat, vegetables, bread and fruit.
First authorized as a pilot project in 1975, the program began as a community outreach child-care food program. The reimbursement plan was designed to allow for neighborhood groups that would feed their surrounding communities. Congress made the program permanent in 1978, and in 1989 adult care was added, prompting the current name. Today, the program is administered at the federal level by the Food and Nutrition Service, an agency of the USDA. The money is allocated to the various states, which then administer it or turn over administration to USDA regional offices. In Texas, the program is administered by the state's Department of Human Services.
In December of last year, CACFP reports indicate, meals were served to 1.8 million children and 35,000 adults nationwide. In 1993, the nutrition program had a budget of $1.3 billion; for 1994, Congress appropriated $1.6 billion for use by CACFP. Texas received $102.4 million in 1993 and, at least as far as records are concerned, served 97,104,313 meals. In 1994, the state is slated to spend $122.8 million and anticipates serving 101,881,874 meals.
The program was designed with a minimum of the red tape usually associated with billion-dollar government projects. Sponsoring organizations were asked only for a promise to feed children and impaired adults healthful meals in return for reimbursement of their food and operating costs. At the end of every month, the CACFP organizations were asked to submit forms detailing the number of meals served and the menus for those meals.
Organizations eligible for the reimbursements fit into four categories: child-care centers, family day-care homes, adult day-care centers and approved homeless shelters. Child-care centers included licensed non-residential, public or private nonprofit child-care centers; Head Start centers; settlement houses; and neighborhood centers. For-profit centers were also allowed to participate if they met certain criteria for serving low-income children. Adult day-care centers that are operated for functionally impaired adults were invited along as well.
In theory, it was a good idea. Home caregivers were required to sign up with a sponsoring nonprofit organization such as a neighborhood church or charity organization. The sponsor would submit a single claim for its monthly food costs and its administrative expenses, which were based on the number of homes the sponsor oversaw. Sponsors would, in turn, pay the home caregivers for their meal costs. Sponsors were allowed to sign up an unlimited number of home providers, and records now show that some sponsors contracted with as many as 1,000 private home caregivers.
CACFP guidelines required that at child and adult day-care centers, participants could either pay full price for their meals or try to qualify for free or reduced-price meals. Children or adults from families with incomes at or below 130 percent of the poverty level qualified for free meals; those from families with incomes between 130 percent and 185 percent of the poverty level qualified for reduced-price meals; and those from families with incomes above 185 percent of the poverty level were required to pay full price. Currently, for a family of four, 130 percent of the poverty level is $18,655 a year; 185 percent is $26,548 a year.
Surprisingly, there was no income test for children who received meals in a home food program, as opposed to a day-care food program, although children of the home caregiver weren't allowed to receive reimbursed meals unless the family income was at or below $26,548. What that meant in Houston, for example, was that children who lived in River Oaks could qualify the same as children in the Fifth Ward, as long as they were fed in a private home.
Reimbursement rates for meals were set at 82 cents for breakfast, 44 cents for snacks and $1.48 for lunch or supper. Sponsoring organizations were paid administrative costs at $67 per home for the first 50 homes they supervised, $51 each for the next 51 to 200 homes, $40 each for 201 to 1,000 homes and, for each home over 1,000, the sponsor received $35 a month.
Where the program's problems appeared was in the family home section, where guidelines and requirements were surprisingly lax. Sponsoring organizations were required only to have a nonprofit status, and the private home providers had only to be registered, as opposed to licensed. The registered homes had to meet few health-code or insurance requirements and were allowed to provide meals for up to 12 children per home. The guidelines were simple: serve healthful meals and schedule organized activities such as homework or outside play. Then, at the end of every month, just fill out a simple meal plan and attendance sheet, turn it in and wait for the check to arrive.
While blessedly straightforward for the people who actually served meals in their homes, the requirements also made it easy for those whose sole activity was filling out meal plans and attendance sheets. A caregiver who served, or who just claimed to serve, breakfast, a snack and supper to 12 children with perfect attendance could claim close to $1,200 a month. No receipts were required. Since this money was seen as reimbursement and not income, providers could also receive other government assistance such as food stamps or AFDC. They were likewise allowed to have outside employment while receiving the monthly meal stipend.
The USDA required the administering state to audit the organizations that claimed to sponsor home food providers only once every three years; the sponsoring organizations themselves were required to check on their home providers once every two years. Additionally, states were not allowed to impose geographic restrictions on sponsors. What that meant was that sponsoring organizations could have home food providers spread across Texas: a sponsoring organization in Harris County, for example, could receive funds for monitoring a home program in El Paso. Given that a DHS office in Houston could hardly tell if a home over 700 miles away in El Paso was actually serving meals, and given that, since the records for a home were kept by the sponsoring agency, a DHS office in El Paso might well not know that a food-providing home was even supposed to exist, effective supervision was almost impossible.
It's not surprising, then, that the few requirements coupled with the lax enforcement guidelines and the potential to claim large monthly reimbursements have made the family day-care home component of the nutrition program inviting to rip-off artists. False documentation and overbilling have been common in the program. Indeed, in the late 1970s the USDA banned private homes from receiving reimbursements because of the potential for fraud. That ban lasted three years, before Congress voted to put family day homes back on the program. The problems continued, but government officials, although aware of the inherent problems, apparently chose to ignore much of the fraud. Texas DHS officials were among those turning a blind eye to the problem until the 1992 letter arrived alerting Bullock to the runaway program in Harris County.
The original letter, plus a follow-up, spelled out what had previously been well-kept bureaucratic secrets. "The problem is that a huge majority of [registered family homes] do not actually take care of children and have no intention of taking care of children," the letter writer said. "A high percent of these home people 'sign up' their nieces, nephews, grandchildren, etc. They then claim that they are providing these children with child-care services and meals and snacks, when in fact they are not. Many claim they are feeding neighborhood children. In other words, they are not providing child-care services, just claiming to feed children. Many of the sponsors are aware of these homes taking care of few or no children. Some of the sponsors not only know of these non-existing children but promote the fraud."
"This fraud is totally out of control in Houston and Harris County and surrounding counties," one of the letters continued. "Applicants crowd into the licensing offices to 'get on the feeding program.' " The letters concluded by charging that the DHS was turning its head at the sight of fraud by virtue of its sloppy investigative techniques, techniques that included announcing "investigative" visits beforehand and taking food providers at their word as to the whereabouts of claimed children. The letters further charged that child-care program monitors rarely saw children in the homes, yet seldom questioned monthly forms that claimed perfect attendance for up to 12 children. The letters concluded by pointing out that the Houston area had more organizations sponsoring home food programs in the area -- 45 at the time -- than the rest of Texas combined. "Food sponsors from as far away as El Paso operate in the Houston area because it seems to be a well-known fact that Houston is 'wide open' to do whatever one wants to do regarding the food program," the letter writer alleged. "No one is doing very much about the abuse of the program and the fraud."
A few weeks after receiving the letters, Bullock fired off a directive to Burton Raiford, commissioner of the Texas Department of Human Services, requesting an immediate formal audit of the CACFP. The lieutenant governor urged DHS to take "appropriate action to eliminate any fraud identified." This was the first of a series of memos Raiford and Bullock would trade over the next two years. DHS's initial response to Bullock's prodding was to send ten DHS staffers to Houston to conduct the audit. Reviewers from the USDA were also invited to join in.
It didn't take the investigators long to find that fraud was as widespread as claimed. In fact, the schemes were almost embarrassingly blatant, something that suggested there wasn't much fear of discovery. One sponsoring organization that was eventually dropped from the food program was Zee's Cares About Kids, an organization operated by Marie Hill that began its CACFP contract in September 1991 with an on-paper roster of 13 homes that served regular meals to 130 children. Most of the home providers under Zee's received in excess of $1,100 a month. Until it was audited, Zee's looked to be the model sponsor. Only one complaint marred Hill's record, and that complaint was from a parent who allegedly reported that at one of Zee's homes pizza was served all day without milk or juice.
But the audit suggested that there were more problems than excess pizza. A closer look revealed one provider who continually claimed 12 children for two meals plus a snack with no absences, but allegedly only occasionally had a few neighborhood children drop by and eat. Other providers were found to not live at the address given, although every week they claimed to be feeding children at the false addresses. Particularly egregious was the home where two providers claimed to be keeping 24 children. The two registered at the same address turned out to be mother and daughter; the mother was employed outside the home. "Zee's recommended two licenses in order to keep more children," the daughter told the investigator. The young woman could never produce more than five children at a time. The investigator's notes indicate that the woman said the remaining 18 would return sometime after 4 p.m.; the investigator then wrote, in capital letters, "SURE!" In an additional note, the investigator added that when asked to produce her records, the provider claimed that her baby had torn them up two days earlier. By the time Zee's was barred from further participation in the food program, Hill was purportedly overseeing 55 day homes with an administrative allowance of close to $40,000 annually.
Beta Ed Services Child Care had many of the same troubles as Zee's. According to DHS investigations, they began in late November 1991 operating four homes. Robert Williams Jr. -- whose father was a former regional director at DHS -- was listed as Beta Ed Services director, and he paid himself a salary of $19,880. His wife received $9,360 as assistant director and his daughter was paid $5,765 to monitor the four homes.
Beta's records indicate problems with loose administration from the beginning. Records collected by DHS investigators document that there were missing enrollment forms on claimed children, that some homes were claiming 15 children (three more than allowed) and that meals were claimed for children who had received their meals from their parents. Last year, when Williams was barred from further participation in CACFP, he was overseeing 22 day homes.
He was also clearly upset that his funds were cut off. In the wake of being dropped from the program, he fired off a letter to Suzanne Kofron, who oversaw CACFP contracts in Harris County, blaming DHS for his troubles.
"We feel we were not treated fairly this year ... due to a one-day pick [up] of all records [by DHS]," he wrote Kofron. "I feel this was very unprofessional and rude on your behalf. My personal respect for everyone involved in this investigative process has been lost. I have no respect for this system of investigating and I have no respect for the people involved."
While Williams' objectivity might be called into question, it appears that he was dead right about one thing in his letter: despite being handed information about abuses of CACFP on what amounted to a silver platter, the Texas DHS had added amateurish investigations of suspicious sponsors to what had already proven to be sloppy contract monitoring. In at least one instance, and maybe more, the inefficiency of DHS meant that questionable sponsors could be neither cut from the program nor prosecuted.
Consider the case of a well-known northeast Houston minister, the Reverend Harold Wilcox, who presides over the Greater Progressive Tabernacle Baptist Church. In 1991, Wilcox, who recently ran unsuccessfully for the Texas Legislature, used his church connection to enter into a contract with the state's child food-care program. He promised to provide meals in 32 day homes for an annual budget of $37,800 plus meal costs. Reimbursements for the meals served there averaged close to $16,000 a month. Wilcox's wife, Louvicy, his campaign treasurer, Florida Stoot, and many church members operated the network of northeast Houston homes that Wilcox claimed to monitor. Month after month, Wilcox turned in documents showing that nearly 7,000 free meals had been served, with many homes reporting the maximum of 12 children. That the menus from these various homes were frequently filled out in what looked like a single person's handwriting raised the suspicion of DHS investigators that only one person was filling out all the forms. Additionally, rarely were any children marked absent from the homes, menus were flawlessly completed, as if done in a single sitting,\and disallowed foods were hardly ever deducted.
Milk, spaghetti and meat sauce, seasoned green peas, garden salad, dinner roll; milk, chicken fried steak, steamed cabbage, fruit cocktail and French roll; milk, fish sticks, tossed salad, fruit cup, buttered toast. Menu after menu rang as nutritionally true as any daily school lunch menu. In fact, many mirrored a typical school lunch menu. It could, admittedly, have been the product of good dietitians. Or it could have been the product of good copying. DHS never worried about which was more likely until Harold Wilcox became part of the extensive review ordered by Bullock.
Initially, DHS ran a spot check of Wilcox's group. Investigators chose to review a sample of seven of the group's 32 day home providers. That spot check rendered a 100 percent "unsatisfactory" rating. DHS documents indicate investigators failed to find a single instance in which children were actually being cared for or fed. The managers of apartments where food providers allegedly lived and cared for children told investigators in more than one case that the party had moved or worked elsewhere. One manager is quoted in a report as saying, "They better not be keeping children here." Two of Wilcox's caregivers, both of whom claimed the maximum of 12 children, were confirmed to have jobs at the veteran's hospital and a Wal-mart. A total of 14 visits made by state investigators turned up such things as providers who had moved from given addresses years before and abandoned homes listed as current locations of food distribution. One DHS investigator who was checking at a provider's home found no one home, but a Lincoln Continental, a Lincoln Towncar and a Mercedes were parked in the driveway. The investigator scrawled on his paperwork, "Looks like a drug dealer convention. Very fishy! Prosecute!" The investigator also found mail at the address for three unrelated people.
On the basis of this limited review of Wilcox's operations, DHS included his file along with those of 14 other supervisors recommended for termination from CACFP. Of the 14 designated for being dumped, 11 requested an appeal of their cases. Three supervisors withdrew their appeals, three of the terminations were rescinded and the remaining terminations were upheld. Zee's Child Care and Beta Ed were among those who lost their appeals.
Wilcox, however, had his termination overturned because of what the court deemed a sloppy review by DHS. An internal memo shows that DHS officials were anxious about the quality of their evidence in Wilcox's case. The memo, from program operations manager Ron Thompson, informs Houston Special Nutrition Services supervisor Joy Keirnan of Wilcox's plans to appeal. "[DHS officials] were contacted yesterday by our friends at Greater Progressive Tabernacle," Thompson wrote. "Seems they were requesting a hearing or appeal. DHS has referred them back to us. Please get in contact with these folks ASAP. If there's need for dialogue, it needs to be with us or within DHS if at all possible. We've got nothing to gain by having this dealt with externally."
That nervousness about going public proved understandable. A judge who reviewed DHS procedures criticized the state investigators' failure to document times of visits, their failure to visit providers at a time when a meal or snack was scheduled to be served, and their failure to conduct further follow-ups. As a result, the judge ruled, the investigation was inconclusive and provided insufficient evidence to keep Wilcox's organization out of the program. Administrative law Judge Catherine Egan wrote in the opinion, "There is no requirement that providers keep the children inside at all times." And to an investigator's claim of visits to nine homes in one day, the judge penned, "It is clear [the reviewer] was traveling quickly." At his review hearing, Wilcox had a fellow Houston minister, the Reverend Jew Don Boney, represent him. Boney successfully argued that while Wilcox may have been lax in record-keeping, no serious deficiencies had been proven. Boney asked for, and was awarded, time for Wilcox to take corrective action. "Corrective action is reasonable and practical to remedy these problems," Boney argued. The opinion was issued in April 1993; Wilcox has yet to submit a corrective action plan and continues to be barred from participating in the food program.
Since the hearings, providers speaking confidentially have hinted that monthly $50 "kickbacks" were common from each of Wilcox's 32 caregivers, who averaged $500 to $600 a month in reimbursements.
Wilcox's failure to reapply is not surprising to DHS officials, but the judge's opinion was still a stinging one. Only 17 cases have been sufficiently developed for referral to District Attorney Johnny Holmes' office. Meanwhile, the DHS audit has resulted in the termination of nearly half of Harris County's sponsors, exposed hundreds of thousands of dollars in fraud and nearly wiped out the program in Harris County for the next two years. Currently, there are 39 sponsors operating in the Houston area. There are 103 sponsors statewide and over 12,000 family day homes participating in the nutrition program.
"As far as the program was concerned, there was a problem in Houston," admits the head of the state's special nutrition services, Sally Griffin. "For Houston, the number was high. After the audit was completed, we looked at other areas around the state and did not find the same kinds of things."
Griffin explains that the program regulations didn't pay sufficient attention to home providers and the children they allegedly served. She recites a lengthy list of improvements made as a result of the allegations made in the original letters to Bullock, including: audits will now be conducted at least once a year, day home providers will be checked more frequently, sponsors must submit a comprehensive financial statement showing all expenditures and sources of income for three consecutive years, sponsors must designate the physical location at which they can be contacted and the phone number of a representative who can always be reached during normal business hours, sponsors must demonstrate that they can be expected to sponsor at least 50 day-care homes with few exceptions, and sponsors may not pay on a "per unit" basis for either recruitment or monitoring activities. Griffin adds that sponsors must accept final administrative and financial responsibility for the day-care homes they supervise. "The program," she says, "depends on the integrity of the sponsors."
Although the problems with CACFP seem to have subsided somewhat in Harris County, and the new DHS regulations are only recently in place, Bullock continues to worry that nagging problems remain in the program. Rumors persist that the program is still fraught with fraud. Cases against alleged food fraud have been slow to come to court, and little explanation of why has been offered. A letter Bullock wrote a few months ago to DHS Commissioner Burton Raiford showed Bullock's impatience with the department's overall response to the program's problems. Writing by hand, Bullock noted at the bottom of a typewritten request for an update on the program's progress, "Burt! I hope you get this straightened out! Very important!"
As further indication of his concern, Bullock recently asked state Senator Judith Zaffirini, chairman of the Health and Human Services Committee, to conduct hearings on the matter this summer. Senate committees have subpoena power, and various state officials will likely be asked to testify. Zaffirini's staff has already started preliminary meetings with DHS officials.
During a recent meeting with Raiford and Gordon Hardy, the state's inspector general, a member of Zaffirini's staff raised a question: why had so few fraud cases actually made it to the criminal indictment stage? Camille Miller, a Zaffirini aide, expresses dismay at the answer she was given by Raiford and Hardy. "In the bigger scheme of fraud and who they are going after -- this is just small potatoes. It was hard to get [DHS] to focus," Miller remembers. "They seem to just want to talk philosophy, criminal justice issues. [DHS] keeps wanting everyone to understand why they don't think this is a big deal."
Carl Hobbs, the Harris County prosecutor overseeing the cases, takes a different attitude. Last year, Hobbs closed out a record 437 cases of welfare fraud that resulted in thousands of dollars in restitution to taxpayers. "It's just a question of how many I can keep up with," says Hobbs. "We probably prosecute them more here than any other place in the state."
Bullock's response to DHS officials' casual shrug-off of the food program as "small potatoes" sums up the real consequence of hundreds of thousands of available meals being kept from the mouths of growing children. "A penny's worth of government fraud or misuse is not acceptable," he says. "It's a double-edge sword because it wastes tax dollars and cheats those in real need."
Indeed, among those most concerned about the allegations of fraud in CACFP are the sponsors who actually feed the children they claim to feed. They're concerned that the food frauds could taint their actions and end up harming a program that, if used properly, can be of considerable help to the poor.
Carol and Hurt Porter, operators of the nonprofit organization Kid Care, are two such food providers. The Porters support themselves and their two children through their USDA contract as a sponsoring organization for CACFP, and for more than five years they have overseen the meal preparation of 80 day home providers. Carol Porter has kept a sterling record with DHS, and the USDA regularly calls on her to speak around Texas to potential sponsors and food providers.
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Porter is aware of the many problems with CACFP in Harris County. "If I chose to make [the food program] my personal gain, I certainly could," she says. "It is a gold mine if I choose it to be. It can be a lucrative venture. I know of some operators with 600, 700 or even 1,000 homes."
Porter says she has recommended that state and federal agencies give sponsors greater leverage in booting out dishonest home providers. She and a staff member make at least three unannounced visits a year at the homes they oversee. "It would be a better program if once we see fraud we could cut it off at the knees," she says. "But you have to go through so much bureaucracy to eliminate participants." Porter adds that lax guidelines and requirements allow virtually anyone to qualify as a program sponsor. "Everybody who fills out an application should not be a contractor. It could be a very effective program, but it starts with the integrity of the contractors."
Gladys Goffney, the attorney for Sabrina Carter -- the first provider asked to start refunding some money to the government -- finds that she agrees with much that people such as Porter and politicians such as Bullock have to say. But she's angry that her client, whom she describes as the small fish in the pond, has to take the punishment for sponsors, and for the state and federal governments, which failed and continue to fail to stand watch over the millions of dollars flowing through the program. Adds Goffney, a taxpayer, "I want to know who is responsible for this. Because I think somebody owes me money."
This summer, we may find out just who owes what to whom. Senate hearings are scheduled to begin later this month.