A little-noticed January report from the state Legislative Auditor’s Office provides more insight into disgraced City Councilman Jon Johnson’s illegal dealings, to which he pleaded guilty in federal court today.
The report shows that a nonprofit run by Johnson wrote checks to Johnson’s sister and a number of people who couldn’t be found to explain why the payments were made.
The Lens initially reported on Johnson’s connections to the nonprofit in January 2011. More recently, we reported that Johnson has not spent $166,000 from a taxpayer-financed loan to repair an unrelated blighted property he owns in the Lower 9th Ward.
Johnson admitted in court this morning that he used federal money, intended to rehab his house as well as a blighted property owned by a nonprofit he ran, to finance his Louisiana Senate campaign and to pay for his personal expenses from 2006 to 2008. U.S. Attorney Jim Letten’s office said Johnson also provided falsified invoices to the Small Business Administration for work that was never completed on his home.
The Legislative Auditor’s report reveals that Johnson submitted more false invoices to the federal government than Letten’s office charged him with.
The Legislative Auditor’s report examines the documentation submitted to FEMA by Johnson’s Ninth Ward Housing Development Corporation. The report examines several “anomalies” in the organization’s finances, at least one of which was mentioned in Letten’s bill of information. The report also provides more insight into how Johnson misspent the federal cash.
The nonprofit was supposed to use FEMA money to renovate the Semmes Building at 1008 Jourdan Ave. Highlights from the Legislative Auditor’s report:
1. FEMA gave Ninth Ward Housing $136,949 to gut the building after the nonprofit submitted proposals and invoices in 2007 from Myers & Son Enterprises. Owner Earl Myers later stated that the proposals and invoices were not his, even though they appeared to contain his signature, and that he did not do the work. Myers pleaded guilty in federal court in an unrelated case involving kickbacks to a city official.
- When the auditor’s office told Ninth Ward Housing property manager Roy Lewis that Myers said he didn’t do the work, Lewis said that Myers played an advisory role, but that other people actually performed the work on the building. Letten named Lewis as a co-conspirator in Johnson’s case at a press conference on Wednesday, though Lewis hasn’t been indicted.
- The auditor’s office later discovered that another company, DDL Construction, actually gutted the Semmes Building. But when the auditor’s office questioned Daniel Lopes, the owner of DDL about the work completed, Lopes said he only got between $30,000 and $40,000 for the work – not the $136,949. A search of Ninth Ward Housing’s bank statements discovered that 13 checks totaling $38,600 were written to Lopes.
- Another company, Richard’s Disposal, also did work at the Semmes Building, but only charged $3,425.
- The report concluded that $94,924 of the $136,949 grant intended for gutting was used for other purposes, in violation of FEMA Public Assistance Grant Guidelines.
2. In 2009, FEMA also gave Ninth Ward Housing a $62,356 architectural and engineering advance for repairs to the Semmes building based on a signed contract from Terry G. Schellhaas, Architect, LLC.
- Lewis provided the auditor’s office with three invoices, totaling $35,700, from Schellhaas that supposedly represented the total of the advanced federal cash. But when the auditor’s office double-checked with Schellhaas, he provided them with only two invoices, totaling $15,450. He then told the auditor that he created the last invoice, at Ninth Ward Housing’s request, along with the contract that FEMA used as proof of work to be completed. But he said that Ninth Ward Housing ultimately rejected the cost of the last invoice, and the contract cost – meaning although Ninth Ward Housing submitted that contract to FEMA, that work was never performed. What’s more, Schellhaas said the nonprofit didn’t even give him the full $15,450 – they instead only paid him $5,000.
- The report concluded the Ninth Ward Housing spent at least $56,862 of the $62,356 for other purposes, in violation of FEMA guidelines.
The misuse of federal funds allocated for the Semmes Building was one of Letten’s allegations against Johnson. Letten’s bill of information doesn’t mention the falsification of invoices and documents for the Semmes Building. The bill only mentions fake invoices for work done on Johnson’s residence.
What’s more, the auditor’s report says that Johnson’s actions made him ineligible to receive the full $2.8 million that FEMA obligated to rehab the nine properties that now sit blighted:
“Since there are issues about the use of FEMA funding that Ninth Ward has already received, GOHSEP’s [a state agency handling the money] practice is to not reimburse additional costs until the issues are resolved. Therefore, Ninth Ward cannot take advantage of the approximate $2.8 million FEMA has obligated,” the report reads.
The Lens reported on four of these nine blighted properties, and five other blighted properties Johnson was connected to in January 2011. Johnson said then that he no longer had a relationship with the nonprofit, and that he “was not in a position to speak” about the blighted properties it owns.
The auditor’s examination of Ninth Ward Housing’s bank statements also explains how Johnson misused the cash intended for the Semmes building:
- Twenty-eight Ninth Ward Housing checks were written to companies whose operations did not appear to related to the scope of work for gutting the building,
- Eleven checks were written to people the auditor’s office couldn’t locate,
- Six checks were written to Johnson’s sister, but as of the date of the report, she hadn’t provided an explanation or documentation to support the work she’d done on the building,
- One check was to an individual who claimed to have cleared debris from the Semmes building, but when questioned, he could not recall when he worked or who supervised his work.
Johnson was given until October 5, 2011 to respond to the auditor’s findings, and his lawyers requested an extension until Nov. 30. However, as of Jan. 4, 2012 – the date the report was released – Johnson had yet to respond.
The extension request reminded the auditor’s office of Johnson’s personal situation, including the death of his wife on Sept. 11, and Johnson’s struggle to take care of their daughter.
It also said that Johnson’s “primary motivation (for) his involvement in the Ninth Ward Housing Development Corporation was to assist in providing essential services” to New Orleans.
In discussing the Semmes Building, Johnson’s lawyers said the historical building was in a “great state of disrepair” and the $623,567 allocated to it by FEMA would not be enough to completely rehab it. Johnson’s lawyers estimated the actual cost to be more than $4 million. Johnson also claims to have paid Lopes from his personal account several times for work performed on the building.