Non-profit resisted 2002 city audit
The FBI has subpoenaed from the city of Birmingham documents related to the non-profit organization Computer Help for Kids - a charity with ties to Mayor-elect Larry Langford, former Jefferson County Commissioner John Katopodis and former HealthSouth chief executive Richard Scrushy.
The Birmingham Weekly learned of the FBI probe this week after a public records request was delayed. The same documents have been given to the FBI, Mayor Bernard Kincaid said Tuesday. Kincaid asked the law department to review the request to determine whether the federal investigation prohibited the documents from being released to the public.
Last week, the Birmingham Weekly filed a public records request for several documents relating to the charity. Those documents included:
- a $200,000 check written from the city to Computer Help for Kids in 2001;
- a 2001 letter of agreement between Scrushy and then-Council President William Bell;
- a copy of the Birmingham City Council resolution authorizing the payment;
- a 2002 interoffice memorandum from then-Finance Director Folasade Olanipekun to City Attorney Tamara Johnson.
Previously, government agencies had subpoenaed documents from at least two other local governments. In March, The Birmingham News reported that the Internal Revenue Service had subpoenaed Jefferson County checks to Computer Help for Kids. Then in August, the News reported that the City of Fairfield had received a similar subpoena from federal investigators regarding a 2001 check for $20,000 to Computer Help for Kids.
However, this is the first time the FBI has been identified specifically as a federal agency making the request. After consulting again with the city attorney Tuesday, Kincaid confirmed that the FBI was the agency requesting the documents.
Court documents in a lawsuit between Katopodis and HealthSouth offer an interesting glimpse into Computer Help for Kids' origins. According to affidavits from Scrushy, Langford and Katopodis, Langford initially encouraged Scrushy to hire Katopodis as a consultant on various projects at HealthSouth. Later, Scrushy pledged a Southside building, commonly referred to as the "Pita Stop Building," to one of Katopodis' charities. In that building were a number of antiquated computers. In his affidavit, Langford says he encouraged Scrushy to donate the computers to be refurbished. Katopodis drafted a plan for a new non-profit that would rehab the computers and then distribute them to the needy. Court documents show that through 2000 and 2001, Katopodis, Scrushy and Langford and others established the non-profit eventually called Computer Help for Kids.
A month before Computer Help for Kids was certified as a non-profit organization, the City of Birmingham agreed to give the organization $200,000. In an agreement singed by Scrushy and then-Council President Bell, the organization agreed to open at least nine community centers in the city.
"The Program shall keep current and accurate financial records and maintain them in good order and available for public inspection," the agreement said.
However, less than a year later, the city could not access those records, if they were kept at all, according to a 2002 memo from the city finance director to the city attorney. That memo explains how the city attempted to audit the non-profit. The city routinely audits boards and agencies that receive city money.
Beginning in April 2002, the city sought financial records and other information from Computer Help for Kids, but the non-profit was evasive and ultimately obstructed the city's investigation, the memo said. Requests for specific documents were put directly to Katopodis, to no avail. The investigation continued at least until July 8, 2002. Ultimately, the city discontinued its efforts to audit Computer Help for Kids.
"The initial review of the records left many unanswered questions," Olanipekun wrote. "Without further review and supporting documentation of the questionable transactions, we do not feel we are able to form an opinion on whether the funds were used according to the City's agreement."
While the organization received $200,000 from Birmingham, it reported only $180,000 to the IRS. In a letter to the IRS dated March 15, 2002, the organization showed a $180,000-donation from Birmingham, in addition to $20,000 from the state and another $20,000 from the county. The sum of those numbers is consistent with the $220,000 of government contributions the non-profit reported in its 2001 Form 990, a return for tax-exempt organizations to the IRS. What happened to the $20,000 difference is not clear.
The city's frustration with Computer Help for Kids mirror those of a HealthSouth accountant, Kenneth Livesay, who testified in Scrushy's 2005 accounting fraud trial.
Livesay testified that Scrushy assigned him to prepare the non-profit's 2001 tax forms. Also, Livesay served on Computer Help for Kids' board of directors. Livesay asked Katopodis for the organization's financial records several times until he was finally given a "version of the checkbook," he testified. Livesay became concerned the organizations funds were being used for improper purposes, so he pushed Katopodis for more information.
"He was reluctant to do it," Livesay testified. "Some of the information that I did get from him - it was clear to me that the funds were not being used for its intended purpose. There were being used for political or personal interests."
Soon after, Livesay told Scrushy about his concerns and he resigned from the non-profit's board, he testified.
In 2002, Langford was elected to the Jefferson County Commission and he, too, resigned from the board, because of his "time consuming responsibilities," according to his affidavit with the circuit court. According to the non-profit's 2001 and 2002 tax records, Langford spent one hour per week on board business.
However, after Langford joined the commission, the county contributed generously to Computer Help for Kids - $765,000 since 2002 according to The Birmingham News.
Reached for comment Tuesday, Katopodis said he didn't know that it was Computer Help for Kids specifically that was under investigation.
"But we have already answered some questions, and if it is, I would be precluded from commenting to your newspaper," he said.
As is standard policy, the Justice Department could neither confirm nor deny any investigation.
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