Opinion ID: 220729
Heading Depth: 2
Heading Rank: 2

Heading: The financial mismanagement

Text: In 2003, the Tribe received a three-year, $350,000-per-year grant from SAMHSA to fund its HIV and substance abuse program, known as the Wonahkik program. The Wonahkik program ramped up slowly. Roger Paul, the Wonahkik program coordinator, testified at trial that the program did not get a staff to start getting things actually done until January of 2004. As of October of 2003, the program had only spent $86,354 of the $350,000 grant. In September, Newell and Elizabeth Neptune, the director of the health center, wrote to SAMHSA requesting permission to carry over the remainder into the next fiscal year. In October, Faye Socobasin, the Tribe's SAMHSA bookkeeper, filed a 269 form with SAMHSA showing that the Tribe had $236,645 in unspent grant funds. Lewey, the Tribe's federal grant compliance officer, signed off on the form. Parisi was hired at around this time. In February 2004, before SAMHSA had responded to the request, Newell directed that the unspent funds be used to reimburse the Tribe for salaries it had paid to three tribal councilors despite the fact that they did not actually work for the Wonahkik program. [4] Newell insisted that the grant money had to be spent, and that if the Wonahkik program wasn't going to spend it, the Tribe would. Socobasin, at Lewey's instruction, then prepared a journal entry form for the Tribe's records indicating that the three individuals had been paid out of the SAMHSA grant on or before September 30, 2003, the last day of the fiscal year. Parisi signed the journal entry. When SAMHSA notified the Tribe in April 2004 that it would not permit the unused funds to be rolled over, Newell wrote back, stating, among other things, that the Tribe's initial 269 report had been in error, and that the Tribe had spent an additional $129,044 of the SAMHSA grant in salary expenditures in FY 2003. Subsequently, Socobasin prepared a revised 269 form reflecting the additional $129,044 expenditures, again dated to appear as if they had occurred in September of 2003. Socobasin refused to backdate the charges unless either Parisi or Newell approved it. Parisi, rather than Lewey, subsequently signed the revised 269 form. Newell told Socobasin that Parisi should sign the revised 269 so we can blame it all on him. In June 2004, SAMHSA relented, and approved the Tribe's request to roll over the unused grant funds. It was during this time that the tribal council learned that the Tribe's budget had been overspent to the tune of $1.6 million. At a contentious council meeting, Newell admitted he had been using SAMHSA funds to pay council members, but insisted he had the authority to do so. The council voted to strip Newell of administrative authority, but backtracked when it came out that this meant they would no longer receive general assistance payments. The council insisted that subsequent checks, with the exception of payroll and housing authority checks, be signed by two council members. Undeterred and largely unimpeded, Newell was able to secure the cooperation of sympathetic council members or, in other cases, circumvent the council entirely by transferring funds through online or wire transfers. The Tribe continued to pay the salaries of council members and other non-health center ghost employees with the health center's funds throughout FY 2004. Wonahkik was not the only program that saw its budget raided. Funds were loaned to the tribal government from the Indian Health Services (IHS) contract, state Medicaid payments, and EPA and BIA grants. Several of the tribal health services administrators objected, but Newell and Parisi continued to authorize the payments. Parisi promised that the non-employees would be taken off the health center's payroll, and that the funds would be restored. When pressed by Paul about the missing funds, Parisi replied that it was normal for Tribes to use incoming grant money to pay pressing non-grant related bills, and to replenish the funds later with other income, an explanation that Paul conceded he found reasonable. Despite the earlier troubles, SAMHSA approved funding for the Wonahkik grant for a second year. This time around, however, SAMHSA required that the Tribe submit itemized claims for approved expenses. Thus, when Parisi requested $81,779 in reimbursement from SAMHSA in February of 2005, the claim was denied because it was not correctly itemized. Parisi resubmitted correctly itemized forms to SAMHSA in March, but because the requested amount included the salaries of individuals who did not work for Wonahkik, SAMHSA ultimately refused to pay for those claims. Neither Newell nor Parisi was accused of lining their own pockets. (Parisi appears to have been motivated mostly by a desire to retain his employment with the Tribe). Newell, however, did improperly redirect federal grant money to help friends and family. For instance, shortly after Newell took office in the fall of 2002, he refused to release funds that the BIA had awarded the Tribe through its Housing Improvement Program. Instead, he spent the money on his friends, family, and tribal council members and their families, including William Nicholas, the Tribe's current governor. Similarly, in June of 2004, Newell had Carol Roehrich, the Tribe's BIA bookkeeper, issue his son, Roger, a check for $1020, ostensibly to reimburse Roger for the costs of attending training in Boston. Alex Nichols, Roger's supervisor, knew that Roger did not attend training in Boston and asked Roger to return the money. Newell insisted that Roger needed help, and the funds were never repaid. On other occasions, Newell dipped into Housing Authority funds for wedding donations, unspecified small loans, travel reimbursement for his son, Eric, and general assistance for two other Tribe members. Despite his efforts to keep the political wheels well-greased, by the spring of 2005, Newell was facing increasing opposition to his leadership. Several of the health center administratorsincluding Roger Paul, the head of Wonahkik, and Elizabeth Neptune, the health center's directorparticipated in an anti-Newell protest and went to federal investigators with their complaints. Newell responded by cleaning house, firing Paul, Neptune and three other health center administrators. Bookkeepers who protested the interfund loans found themselves suspended. Newell then reassured Don Payne, the new head of the health center, that although health center funds were being used for other purposes, the funds would be restored. The misapplication of funds continued apace, and the Tribe's financial situation deteriorated further. As of the fall of 2005, the Tribe owed $866,000 to the BIA and IHS grants. The Tribe had budgeted $621,000 in tribal assistance in FY 2005, but had spent nearly three times that amount. Newell continued to try to cover the Tribe's costs by borrowing money from the incoming federal grants, and Parisi continued to offer assurances to the affected programs that the funds would be repaid. Although some of the non-employees who had been drawing salaries from the grants were finally removed at this point, some remained, and others were added on. Newell and Parisi received multiple warnings at around this time that their conduct was of questionable legality. In early 2005, the Tribe's outside auditor warned them that pooling federal funds was permissible, but that the funds should only be used for allowable purposes, a point reiterated by Lewey, the federal grant compliance officer, and Roehrich, the BIA bookkeeper. [5] Harry Schade, a former finance director for the Tribe, was brought back in June of 2005 to help Newell and Parisi sort out the Tribe's increasingly desperate finances. However, Schade's repeated demands that non-approved employees be taken off the health center's payroll were ignored. Newell and Parisi were also put on notice by warnings from various federal officials. IHS officials confronted Newell and Parisi in August 2005 about delinquent audits and interfund transfers. Despite the fact that Schade and Payne had asked the IHS not to release the funds because Newell and Parisi were raiding the accounts, the IHS was satisfied with Newell and Parisi's assurances that the funds would not be misused and that they would conduct an audit. IHS then agreed to a lump sum wire transfer of $2,000,000 for FY 2006. Within a week, over $400,000 had been diverted to the tribal government at Newell's direction. Newell and Parisi directed the health center to loan the tribal government a further $200,000 over the next two months. In a by-now-familiar scene, Schade protested and was subsequently fired. IHS officials began inquiring as to why so little of the grant funds remained, but were rebuffed by Newell. One of the loans in question occurred in November of 2005. At this point in time, the Tribe, together with its sister Pleasant Point reservation, was engaged in an effort to place a referendum question on the 2007 ballot asking for approval of a combined race track and casino, otherwise known as a Racino. The Joint Tribal Council hired an outside firm to solicit the necessary signatures to ensure that the question was placed on the ballot. Newell realized that the Tribe lacked the funds to pay for its share of the expenses and so decided once again to dip into his federal slush fund, a/k/a the health center budget. Parisi transmitted Newell's request to Frances Neptune, the IHS bookkeeper, who drew up a check for $33,000. After the payment was approved by two tribal council members, it was picked up by Joseph Socobasin, the Tribe's lieutenant governor and delivered to the Joint Tribal Council. This money was never returned to the health center. As he neared the end of his term, Newell must have realized that the game was up, as the Tribe's financial situation had become increasingly precarious at the same time that federal investigators were closing in on him. In the spring of 2006, the situation had become so dire that in order to meet the Tribe's payroll obligations, Newell directed Parisi to transfer funds from the tribal employees' 401K account, and directed the account bookkeeper not to file the mandatory report with the company that managed the 401K program. Parisi also directed the payroll clerk to pay only net salaries, meaning that state and federal tax withholdings, 401K contributions, state garnishments for child support or back taxes, and rent (for those employees who lived in HUD housing) were not paid. Among the sources tapped to cover payroll was a DOJ COPS grant for the Tribe's police department. The grant's remaining $30,000 of unspent funds was pressed into service to meet the Tribe's payroll obligations. When Newell left office in September, after losing the election to William Nicholas, the Tribe only had enough money left to pay one person's salaryNewell's. When Newell stepped down as governor, the Tribe's employees had not been paid in two weeks, worker's compensation payments had not been made, vendors and programs were owed over $3 million, and the Tribe owed federal programs $1.7 to $1.8 million. In addition, the health centerregularly raided by Newellhad outstanding debts of approximately $850,000. An audit subsequently revealed that the Tribe had no cash available, owed other funds approximately $1.6 million, lost $2 million from its general fund, and had once again overspent its general assistance budget by approximately $1.1 million. In the spring of 2008, Newell and Parisi were charged by indictment with thirty counts of misapplying federal funds, making false statements to federal agencies, submitting false claims, and misapplying retirement, police, housing authority and other program funds, as well as conspiracy to defraud the United States. [6]