Five plead not guilty in MDHS embezzlement scheme

Five of the six people accused in what could be the largest embezzlement scheme on record in Mississippi pleaded not guilty on Friday.

The scheme came to light earlier this month when investigators with the State Auditor’s Office arrested six Mississippians for allegedly defrauding the state’s welfare system of at least $4.15 million. Auditor Shad White called the scheme unprecedented.

Among those pleading not guilty is Nancy New, 67, who founded the Mississippi Community Education Center, the nonprofit at the heart of the scandal. New ran several private schools across the state, but she has since stepped down from those positions.

Her son Zachary New, 36, who worked with MCEC, also pleaded not guilty.

John Davis, 51, former director of the Mississippi Department of Human Services, pleaded not guilty as well. MDHS is the agency that oversees welfare programs for the state. Davis stands accused of funneling millions to the News and others while denying up to 98 percent of individual applications.

Davis abruptly resigned from MDHS in July, about the time the state auditor began his investigation.

Also pleading not guilty were Ann McGrew, 63, and Brett DiBiase, 36.

McGrew was an accountant for MCEC.

DiBiase’s nonprofit wrestling ministry received $2.1 million in welfare funds from Mississippi through MDHS, the Clarion Ledger reports.

The sixth defendant in the case, G. Latimer Smith, 26, has not been arraigned. He is a former MDHS employee.

At the request of the auditor’s office, a judge has unfrozen a bank account of the MCEC, which was frozen after the indictments. Attorneys for the nonprofit argued that without access to the funds, it could not pay its employees and that services would be disrupted in 42 Mississippi counties.

White called on the state legislature to fund a forensic audit of DHS after the arrests “by a competent private CPA firm.” Over the years, his office repeatedly called out the agency after routine audits for mismanaging federal block grant funds intended to benefit Mississippi’s neediest families.

The state auditor has also indicated that more indictments could be made in the case.