Madigan sues human services vendor to recoup $8M in state funds
BY DAVE MCKINNEY Springfield Bureau Chief December 9, 2013 8:47PM
Illinois Attorney General Lisa Madigan | Sun-Times files
- State senator tied to target of ‘large-scale fraud’ investigation
- Ex-DCFS director’s friend accused of ‘large-scale’ fraud of state funds
- Scholarships went to students outside legislator’s district
- Feds probe tuition waivers awarded by state Sen. Annazette Collins
Updated: January 11, 2014 6:33AM
SPRINGFIELD — Attorney General Lisa Madigan Monday sued the founder of a South Side human services provider in a bid to collect more than $8 million in state funds allegedly misspent on sports tickets, trips, concerts and payments to himself and a former Illinois legislator.
Madigan’s office targeted George E. Smith for “rampant misuse” of state funds he secured between 2005 and 2011 through his nonprofit, Diversified Behavioral Comprehensive Care, and other affiliates he controlled.
“George Smith enriched himself at the expense of taxpayers and children who were supposed to receive the critical services he was obligated to provide,” Madigan said in a prepared statement.
Among the allegedly misappropriated funds were $18,000 Smith paid in consulting fees to former state Rep. Annazette Collins, D-Chicago, when she represented a West Side House district between late 2008 and early 2009. Collins did not disclose those payments, as she would have been required to do, on state economic-interest forms.
Defeated in a bid for state Senate in 2012, Collins was under federal investigation that year for a series of legislative scholarships she granted, including to five students who listed her childhood home as their official residence to qualify for the tuition waivers despite living outside her district — an oddity first reported by the Chicago Sun-Times.
No charges have been lodged against Collins, who could not be reached Monday to respond to the new disclosure by Madigan.
In October, Collins began lobbying on behalf of Office Depot and Zurich American Insurance Company, two firms that have sought state tax breaks from the General Assembly this fall to locate their headquarters in Illinois and to help facilitate a move in the suburbs, respectively. That legislative bid has stalled.
Smith is alleged by Madigan to have used state funds — earmarked for mental health, education and other services for at-risk children and their families — for tickets to the 2009 NBA All-Star game; Cubs, White Sox and Bulls games; travel to Reno, Nev., and other out-of-state locations; and the purchase of artwork from a Massachusetts company.
Some of the allegations against Smith were outlined in a sprawling 2011 report by state Executive Inspector General Ricardo Meza.
Smith’s lawyer, Victor Henderson, vouched for his client Monday evening.
“The documentation I have seen doesn’t support it,” Henderson told the Chicago Sun-Times when asked whether Smith disputes Madigan’s allegations. “And secondarily, I think that’s a question more appropriate for whomever is responsible for overseeing the use of grant money.”
“A lot of people in the community think very highly of his work,” Henderson said.
Smith’s non-profit declared bankruptcy in 2012. But the federal judge overseeing that case last month lifted a stay on efforts by the state to recoup its losses, enabling Madigan to file her lawsuit in Cook County Circuit Court on behalf of five state agencies, including the Department of Children and Family Services, that issued grants to Diversified Behavioral Comprehensive Care.
In late 2011, the Sun-Times reported about ties between Smith and state Sen. Mattie Hunter, D-Chicago, who helped steer a $500,000 state grant to Smith’s nonprofit in 2008 after she sold real estate to him three years earlier.
The executive director of Smith’s nonprofit organization circulated nominating petitions for Hunter’s campaign, to which Smith and one of his businesses made $3,700 in contributions between 2005 and 2010.
Additionally, one of Hunter’s sisters worked as a receptionist for Smith until she died in 2010 at age 52.
Hunter, chairwoman of the Senate Human Services Committee, has denied engaging in any wrongdoing.