Corruption in Cleveland

by Jillian Kay Melchior
More than half a billion in taxpayer dollars went to a Cleveland agency, despite many red flags.

A prominent Ohio not-for-profit agency that offered help to low-income Americans received more than half a billion in taxpayer dollars over the past 15 years. But its president and CEO was awarding publicly funded contracts in exchange for kickbacks, home-renovation work, and other pay-offs, the U.S. Attorney for the Northern District of Ohio alleged last week.

Jacqueline Middleton, who led the Council of Economic Opportunities of Greater Cleveland (CEOGC) from 1993 until last April, now faces two charges of honest-services fraud, one count of bribery in a federally funded program, and one count of Hobbs Act conspiracy for her alleged misdeeds.

Under Middleton’s tenure, CEOGC received more than $636 million in taxpayer funds between 1999 and 2012 alone, according to 990 forms filed with the Internal Revenue Service. During those years, CEOGC relied on public dollars for up to 99.99 percent of its total annual funding, and private sources never accounted for more than 5 percent of its budget.

But for the past decade, Ohio media outlets have repeatedly raised red flags about Middleton, publishing investigative reports that detailed her questionable spending habits, apparent nepotism, and other alleged misdeeds.

Regardless, public funding never tapered off, with CEOGC receiving an average of $43.8 million between 2007 and 2012 from a variety of state and federal sources, including the Home Energy Assistance Program, Head Start, the Community Services Block Grant, the U.S. Department of Agriculture, and other programs designed to serve low-income Americans.

In 2004, Ohio’s biggest Head Start program, managed by Middleton, blew its budget by $1.2 million, according to the Cleveland Plain Dealer. Later, when the Department of Health and Human Services (HHS) asked for an explanation for this “major failure,” Middleton pointed a finger at state budget cuts. To address the shortfall, Middleton said in the summer of 2005, CEOGC was considering selling off one of its Head Start Centers, and it had already laid off several employees.

But an HHS Office of Inspector General report published in January 2005 found that for years, “compensation for CEOGC’s key executives appeared unreasonable compared to top-level executive compensation at other Head Start programs.” Middleton, it noted, earned $221,742 in 2002 alone — over $88,000 more than her counterparts made on average nationwide.

In 2005, local journalists reviewed CEOGC records and wrote about Middleton’s big-spending habits, “particularly on travel and gifts,” reporter Susan Vinella noted. The Cleveland Plain Dealer detailed Middleton’s spending of agency funds on a $190 gong to decorate her office, luxury car rentals, Coach tote bags, and Tiffany gifts. And while on agency trips to anti-poverty conferences, Middleton had also spent big on spa services and exorbitant meals, charged to the CEOGC credit card, the Plain Dealer reported. Ultimately, Middleton reimbursed the agency for around $4,000.

In the wake of this news, Cleveland mayor Jane Campbell and Cuyahoga commissioner Tim Hagan called for Middleton to step down; she declined to do so. But Ohio representative Stephanie Tubbs Jones — who received $775 in campaign donations from Middleton between 2005 and 2006 — held a press conference in support of Middleton and praised her for “do[ing] a commendable job” and offering “dedicated service.”

Despite the scrutiny, Middleton managed to stay on with CEOGC, and scandals continued to follow her.

Beginning in 2008, the U.S. Attorney said last week, “Middleton used her official position to enrich herself by soliciting and accepting gifts, payments, and other things of value from contractors who did business with CEOGC.”

Through August 7, 2012, the news release from the U.S. Attorney’s Office claims, “These gifts and payments were made in exchange for favorable action from Middleton for the payers and their companies,” including authorizing consulting-services contracts for one contractor, and parking lot and construction work for another.

Meanwhile, in 2009, the CEOGC board gave Middleton a $7,000 loan, “a big red flag, according to experts,” WKYC-TV Channel 3 News reported. As late as 2011, CEOGC wasn’t answering questions about whether Middleton ever repaid it.

And in November 2011, WKYC-TV reported that Middleton had again engaged in more questionable spending. CEOGC incurred expenses of around $50,000 sending 13 employees to Las Vegas for a conference on federal regulations. According to one WKYC-TV source, CEOGC also paid for one top staffer’s mother to come along.

Middleton herself had left three days before the beginning of the Las Vegas conference, WKYC-TV reported, lodging at the ritzy Cosmopolitan hotel. “With time to kill, Middleton racked up $400 on clothes at Saks Fifth Avenue,” WKYC-TV wrote. “She also plunked down $175 at a fancy restaurant. And she rented a car, at the cost of almost $1,000 for the week. It all went on the CEOGC credit card.” Middleton later said that CEOGC hadn’t paid for her purchases at Saks; it’s unclear why they ended up on the agency’s credit card.

On December 13, 2011, WKYC-TV reporters described their inspection of Head Start playgrounds Middleton was responsible for maintaining. At one, they found “broken glass on the playground and two drainage culverts accessible to children with two feet of standing water.”

The next day, WKYC-TV’s Tom Meyer wrote about apparent nepotism at CEOGC. Middleton hired her longtime friend Arlene Wynn, as well as Wynn’s husband — and together, the couple earned $208,000. Arlene Wynn worked as vice president of information technology, “even though [her] degree is in French education,” Meyer wrote, and her husband managed CEOGC’s human resources. According to Meyer, Middleton had also hired another friend, as well as a relative.

The chair of the CEOGC board of directors did not return National Review Online’s phone call by deadline. The Ohio Development Services Agency did not responded to NRO’s inquiries about why, given Middleton’s plagued record, CEOGC continued to receive such significant public funding. An HHS spokesperson said the agency was unable to answer the same questions by NRO’s deadline. According to the U.S. Attorney’s office, the charges against Middleton followed the investigation by the HHS OIG and the Federal Bureau of Investigation.

As the U.S. Attorney’s news release about Middleton noted, “a charge is not evidence of guilt.” But as Middleton awaits trial, taxpayers would be justified in asking why state and federal officials repeatedly dished out taxpayer money to CEOGC, given the repeated and disturbing reports about misuse of funds and other misconduct.

— Jillian Kay Melchior writes for National Review as a Thomas L. Rhodes Fellow for the Franklin Center. She is also a Senior Fellow at the Independent Women’s Forum.