Sacramento mayor settles case involving nonprofit

April 9, 2009 12:00:00 AM PDT
Federal prosecutors on Thursday reached a settlement with Sacramento Mayor Kevin Johnson after an investigation into misspending by a nonprofit he started to help young people in his hometown. The settlement requires Johnson's St. HOPE Academy to repay nearly $424,000 in return for the government lifting its suspension on future federal grants.

The investigation led to Johnson's name being placed on a list of people unable to receive federal money. On Thursday, the mayor said the settlement ends the uncertainty over whether California's capital city is eligible to receive millions of dollars in stimulus money and other federal grants.

The former NBA All Star said the agreement "closes the chapter on this distraction."

"From the get-go, I said that federal funds to the city were never at risk, and that the suspension was unwarranted and unnecessary," Johnson said in a statement.

Under the settlement, St. HOPE must make an initial payment to the federal government of $73,836. Johnson has agreed to pay all but $1,000 of that amount and will be reimbursed by the nonprofit when it is able to pay him back. St. HOPE's former executive director, Dana Gonzalez, agreed to pay the $1,000.

The remaining $350,000 must be repaid over 10 years, plus 5 percent annual interest.

Johnson, Gonzalez and St. HOPE admit no liability or fault under the settlement but acknowledge St. HOPE "did not adequately document a portion of its expenditures," according to the settlement. Johnson and Gonzalez also agreed to take an online business management class within four months as part of the settlement.

Johnson started St. HOPE in 1989 to revive the neighborhood in which he was raised, one of Sacramento's roughest. It has since grown from a modest after-school program to include charter schools, art and community development programs, and an urban peace corps program called Hood Corps.

It is that program that was at the center of the federal investigation. Between 2004 and 2007, St. HOPE received nearly $848,000 from AmeriCorps, a federal program that gives college grants to people who volunteer for community service.

Hood Corps received nearly the entire amount, $807,000.

Johnson, a three-time All-Star guard for the Phoenix Suns who retired in 2000, was president and chief executive of St. HOPE during most of the period being investigated, according to the settlement.

Investigators from the Corporation for National and Community Service, which oversees AmeriCorps grants, said the volunteers were assigned cleaning duties and told to run personal errands for Johnson. Investigators said the volunteers also recruited students for St. HOPE Academy, engaged in political activities and traveled to New York to promote an academy Johnson opened in Harlem.

All those activities violated the terms of the federal grant, the investigators said before turning their findings over to the U.S. attorney's office in Sacramento.

St. HOPE is credited with turning the failing Sacramento High School into a successful charter school. It also helped bring businesses to Oak Park, one of the city's toughest neighborhoods.

Under the settlement, Johnson and St. HOPE will no longer be suspended from receiving federal money.

"The lifting of the suspension against all parties, including Mayor Johnson, removes any cloud whether the city of Sacramento will be prevented from receiving much-needed federal stimulus funds," acting U.S. Attorney Lawrence G. Brown said.

(Copyright 2009 by The Associated Press. All Rights Reserved.)

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