The $600,000 headquarters of an embattled education nonprofit, which once served more than 10,000 students across three states, is in the process of foreclosure and could be sold as early as June, according to the Orleans Parish Sheriff’s Office.
The nonprofit, Operation REACH, and its affiliates are now banned from receiving federal dollars pending an investigation into how it has spent previous grants, according to the federal database of approved contractors. Last year the Corporation for National and Community Service, the federal agency that runs the AmeriCorps service program, pulled its funding from Operation REACH after officials noticed “irregularities” in the organization’s books.
Operation REACH took out a mortgage on two properties in 2008, according to court records. In February the bank, J.P. Morgan Chase, initiated foreclosure proceedings for the two properties: Operation REACH’s Josephine Street facility and one on South Dupre Street. The Josephine property has a market value of about $606,000; the one on South Dupre is valued at about $19,000. The bank claims Operation REACH owes close to $1.4 million on both properties, according to the Sheriff’s Office.
The foreclosure is the latest sign of Operation REACH’s financial struggles. A Lens investigation revealed that the nonprofit had spent thousands of dollars at resorts, restaurants, and clothing stores in a three-year period. Former employees raised concerns about what they called extravagant spending by former Chief Executive Officer Kyshun Webster; he responded that he was not the only employee with access to the organization’s accounts.
In an audit, the Office of the Inspector General for the Corporation for National and Community Service said Operation REACH had misspent or didn’t have sufficient documentation for nearly $900,000 in federal grants.
The Corporation is still working with Operation REACH to find out what happened to that money, a spokeswoman confirmed last month.
“Given the nature of the findings and level of questioned costs, CNCS [Corporation for National and Community Service] anticipates it may take additional time to reach a final resolution,” Samantha Jo Warfield said in an email.
In a response to an Inspector General report for the period ended Sept. 30, which mentioned the Operation REACH probe, Corporation officials said that they had asked the nonprofit to provide documentation showing that it had properly spent grant money. They reiterated their decision to stop funding the organization “pending the completion of debarment proceedings.”
According to federal law, an organization can be barred from receiving federal money due to fraud or a criminal offense, embezzlement, theft, forgery, or failure to perform as indicated by the contract. The length of such a ban depends on the cause, but it usually doesn’t exceed three years.
Operation REACH is considered preliminarily ineligible for federal funding. The federal contractor database says such a ruling is “based on adequate evidence of conduct indicating a lack of business honesty or integrity … pending completion of an investigation and/or legal proceedings.”
The Lens tried to reach Webster by phone and email to inquire about the foreclosures and Operation REACH’s federal grant debarment, but he didn’t respond to the questions.
Nicole Payne-Jack, the nonprofit’s former chief administrative officer and one of the former employees who first raised concerns about Webster, said this week that the foreclosures didn’t surprise her.
The size of the Joesphine Street building was “totally unnecessary,” she said. “Of course, when there’s no more funding coming through, you can’t afford to pay for all of that stuff.”
According to the Sheriff’s Office, the properties are scheduled to be sold June 27, though that could be delayed if the foreclosure proceedings aren’t completed by then.