us, DEPARTMENT OF JUSTICE UnitedStatesAttorney EasternDistrictofCalifornia Lawrence G.Brown. Acting UnitedStatesAttorney Robert T. Matsui United Stat-es Courthouse Phone916/554:2·700 501IStreet, Suite10-100 Fax 91615$4..2900 Sacramento, CA95814 lTD 916/554-2855· April 29, 2009 Kenneth W. Kaiser, Esq. Chair, Integrity Committee 4 Counsel ofthe Inspectors General on Integrity and Efficiency c/o Criminal Investigative Division Federal Bureau ofInvestigation, Department ofJustice 935 Pennsylvania Avenue, NW Washington, DC 205-35-0000 Re: United States v. 81. HOPE A~ademy, Kevin Johnson & Dana Gonzalez DearMr. Kaiser: I am the Acting United States Attorney for the Eastern District ofCalifornia I am writing to express my Office's coneems about the conduct ofthe Corporation for National and Community Service (CNCS) Inspector General, Gerald Walpin, and his staffin the handling ofUnited States v. S1. HOPEAcademy, Kevin Johnson & DanaGonzalez. In. our experience, the role of an Inspector General is to conduct an unbiased investigation, and then forward that investigation to my Officefor a determinationas to whetherthe factswarrant a criminalprosecution, civil suit or declination. Similarly, I understand that afterconducting suchan unbiased investigation, the-InspectorGeneralis not.intended to act as ail advocate for suspension or debarment. However, in this case Mr. Walpin viewed his role very differently. He soughtto act as the investigator, advocate, judge,jury and town crier. Very briefly~ this matter resulted from the alleged misuse ofAmeriC.orps grant funds by St. HOPE Academy, and the involvement in the alleged misuse by 81. HOPE's then ChiefExecutive ·Officer Kevin Johnson, and Executive DirectorDana Gonzalez, KevinJohnson is a former NBA basketball player, and was a Sacramento mayoral candidate,. subsequently elected Mayor, when this matterfirstcameto light during fall2008. Thus, this. matter received significant local press coverage. 1 United States v. St. HOPEAcademy. et a!. Apri129,2009 This matter was referredto our Officeon August7, 2008. However, even before our Office officiallyreceivedthis matter, we learnedabout it in Apriland June 2008 though articles in the Sacramento Bee newspaper, includingcommentsfrom an IG spokesperson. Moreover, we consideredthe IG referralsomewhatunusualin that it wasaccompanied by a letter from Mr. Walpin (enclosed)explainingthat he viewedthe conductin this case as egregiousand warrantedour pursuing the mattercriminally and civilly. Within a few weeks thereafter, on August25-tb, we met with Mr. Walpin and 2 investigators from his office.. W'e expressedour concernsthat the conclusionsin theirreport seemedoverstated and did not accuratelyreflectall oftheInformation gatheredin their investigation. We'also highlightednumerousquestionsand furtherinvestigation they neededto conduct? includingthe fact . that they had not done an audit to establishhow much AmeriCorps money was actuallymisspent. Despite our expressedconcernsandthe need for further analysis, the next we.learned of this matterwas again through the Sacramento Bee newspaper. First, on September5,2008, an IG spokespersoninformedthe newspaper that the matterhad been referredto our Office,but also added that a "referral means that it's our opinion that there is sometruth to the initial allegations...'" Second, Mr. Walpinapparentlyadvocatedto have St. HOPE'. Johnson and Gonzalezimmediately placed on a list. ofpartiessuspendedfrom'receiving federal funds, We learnedofthat determination through Sacramento Bee articles quoting extensively from apress releaseissued by Mr. Walpin's office on September 25,2008. Not only was it extremely questionable for Mr. Walpin to issue a press release, it containedstatementssuch as: "[ijfwe find really egregiousstuffand we want to stop the bleeding, we seek immediatesuspension..." Moreover, the 10 publicallyreleasedthe fmdings of his. investigation. On September 26, 2008, Iparticipated in a conferencecall in which then U.S. Attorney McGregorScott emphaticallyinformed Mr. Walpinthat under no circumstancewas he to communicate with the media abouta matterunder investigation. We also informedMr. Walpinthat his actionswere hinderingour investigation and handlingofthis matter. In fact, as a resultofMr. Walpin~"S public pronouncements on the eve ofthe mayoral election,McGregorScott felt compelled to informthe media that our Officedid not intendto file any criminalcharges. Duringthe followingmonths our Officewas involved in activelypursuinga'potential civil case in this matter, workingwith investigators in the IG~'s office, obtainingadditionaldiscovery, and negotiatinga possible resolution. On March24, 2009, the Sacramento Bee publishedan editorial (enclosed)that this matter'needed prompt resolution. On that same day, anattorney in my Office telephonedMr. Walpinconcerningthe ongoing efforts. to attempt to resolvethe matter. First, although.Mr. Walpin stated that he did not make debarmentdeterminations, he made it clear that he would advocateand seek to control theoutcome so that S1. HOPEand MayorJohnsonweredebarred for 3 years. Second,he stated that he had senta letter to the editorto the Sacramento Bee. I promptlycalled Mr. Walpin and asked him to retract the letter, and remindedhim about OUfprevious admonitionthat'he should not be communicating with the press, I advisedMr. Walpinthat Kevin Johnson's status as Mayor did not entitle him to a "free pass", but the matter merited a certain level of sensitivity.. Needlessto say, my comments fellon deaf ears, and the Sacramento Bee gladly ran Mr. Walpin's letteras a.specialeditorial(enclosed). 2 United States v. St. HOPE Academy, et a1. April 29·~ 2009 Negotiations continued betweenmy Officeand counsel for S1. HOPE and MayorJohnson. As part ofthat process, St. HOPE's counsel provided evidence that they asserted helped establishthat a .significantportion ofthe AmeriCorpsgrant funds were appropriately expended.. For example,the referral from the. IG expresslyconcludedthat St. HOPE"AmeriCorpsMembers PerformedNo Tutoring.." However,the evidence St. HOPEprovided includeda statement from HerinderPegany, the Principal of an elementary school, statingthat St.HOPE AmeriCorpsmembers had performed after-school tutoring athis school, When asked to review thismaterial,membersofMr. Walpin's office revealedthat CNCS investigators had interviewed Mr. Pegany and had obtaineda similar statementfrom him, but did not include it in theirreport or disclose it to my Office. Whenconfrontedby the non-disclosure, Mr. Walpinsoughtto defend-why his office had not includedall ofthe relevant materialin their referral. Moreover, Mr. Walpinadvised an attorneyin my office that once again he waswriting to the Sacramento Bee(enclosed). Only by calling upon GeneralCounsel for CNCSwere we ableto convinceMr. Walpinnot to send his letter to the newspaper. Ultimately, despitethe hindranceof Mr. Walpin,due to the extraordinary assistanceofC·Nes GeneralCounselFlank Trinity and Associate GeneralCounsel Irshad Abdal-Haqq, we were able to negotiatea resolutionof this matter very favorable to the interestsofthe UnitedStates.AlthoughI have stated repeatedly in this letter that our Office does not believe in trying a matter in the media, it is worth noting that in a column in the Sacramento Bee newspaper the day after the settlement was announced,.the columnist concluded: "Johnson and his nonprofitwill repayhalf'ofthe $847,673 in grants. Johnson Will take. an online courseon federal grants, And Sacramento is clear to tap millions . in federal dollars....The conclusionwasn't a slap on the wrist or fraud. It was the system rising above. those who cheapened it.n Insummary, the 16 should be a fact-finding impartial investigative ann ofthe CNCS agency. Although I recognize that a strong IG is necessary to ensure that allegations of·wrongdoing are investigated, I believe that Mr. Walpin overstepped hisauthorityby electing to .provide myOffice with selectiveinformationand withholdingother potentially significantinformationat the expenseof determining the truth. I believethat rather than ensuringprotectionofa respectedfederal agericy, he tarnished its reputation. Please contact me ifyou need additional information, Sincerely, LAWRENCE G. BROWN ActingUnitedStates Attomey Enclosure cc: Alan Solomont, Chairman CNCS Stephen Goldsmith, Vice Chairman CNCS' Nicola Goren, Acting CEO CNCS 3 NATioNAL& COMMUNITY SERVICErnx: OFFICE OF INSPECTOR GENE.RAL August 7,2008 Lawrence G. Brown" Esq. First Assistant United States Attorney John Vincent, Esq. Chiefofthe Criminal Division Kendall J. Newman, Esq. Chiefof the CivilAffirmative Section Office of the United State's Attorney for the Eastern District ofCalifornia 501 I Street Suite 10-100 .Sacramento, CA 95814 Re: Kevin Johnson and DanaGonzalez Via FederalExpress Dear Messrs. Brown, Vincent, and Newman: I am forwarding to each ofyou herewith our referralto your office for criminal and civil prosecution of Kevin Johnson and; Dana Gonzalez, respectively President/CEO and Executive Directorofthe St. HOP.E Academy(USHA"), for false and fraudulentconductin connectionwith $845,018.75 in Federal funds, disbursed to and for S~ under a grantto SHA covering grant years 2004-05~ 2005-06, and 2006-07. Accompanying the 30 page referral are two binders of . supporting documents referenced in the referral providingevidentiary support for the statements in the referral. (1 have not burdened Mr. Brown with the evidentiary binders, but; if I am incorrect in my assumption that he would. prefernotto receive