Welfare recipients got lemons; used-car dealers got millions
Edith Holbrook was driving home from the repair shop when her car's engine erupted in flames.
"I'm going to blow up with this car right now if I don't stop," Holbrook remembered thinking to herself one night last May. "I thought I was going to die."
Holbrook stopped on a curve along Coal River Road and ran from the car. Firefighters doused the blaze. The car was towed to the junkyard.
Holbrook, a former welfare recipient, leased the 1993 Toyota Tercel for $2,000 through the state's Wheels-to-Work program. After two years, she would own the car.
The car had broken down four times before, but she needed it to drive from her Lincoln County home to her job at a South Hills convenience store. She had paid $1,800 on the lease before the fire.
A month later, Holbrook received a note in the mail: "Dear Client: We regret to inform you, your lease-to-own agreement will be terminated." The letter said she abused the car and neglected maintenance.
Without a car, Holbrook had to quit her job. Instead of making her life easier, she said the program gave her a dangerous car, then blamed her when the engine burned up.
"It was hell," she said.
Holbrook wasn't the only low-income West Virginian taken for a ride by the welfare car program.
For the past three years, nonprofit groups have sold clunker cars to welfare recipients while used-car dealers made millions on sales and repairs, records show.
The agencies bought the cars with $23 million in federal welfare money administered by the state Department of Health and Human Resources.
The state's poorest citizens received cars with seat belts that didn't latch, mufflers that dropped off and steering wheels that fell into their laps.
A Southern West Virginia woman complained that she leased seven cars before she got one she could drive. One of the cars caught fire in her driveway.
"It's an outrage a program like this went in the direction it did," said Delegate Mike Hall, R-Putnam, who sits on the Health and Human Resources oversight committee. "It was an idea that sounded good, but the devil is in the details."
State officials promised welfare recipients safe, reliable cars so they could get to work or job-training programs, and get off welfare.
Wheels participants signed two-year leases, paid off in monthly installments. The state paid for liability insurance and major repairs, a big expense for the program.
"They gave me a piece of crap," said Michelle Clere of West Hamlin, who leased a Chevy Astro van through the Wheels program. "For me, it screwed me more than it helped me. Every time I would get a good job or go to school, my van would break down, and I'd lose my job."
Some agencies delivered, however. They ran clean programs. They cite success stories about people who turned their lives around.
About 2,900 welfare recipients got cars.
"We couldn't provide everybody with a Volvo, but we tried to make sure they got adequate, dependable cars," said Fred Boothe, commissioner of the state's Bureau of Children and Families. "Overall, we put a lot of people to work. It's been very successful."
But a Sunday Gazette-Mail review of state records and interviews with Wheels participants, used-car dealers, social-service workers, and former and current agency officials who run Wheels programs found:
Nathan Belcher, who owns Belcher's Auto Sales in Bluefield, received nearly $1 million from the Wheels program.
Belcher said he worked 14-hour days, seven days a week buying and selling and repairing cars for nonprofit Community Action of South Eastern West Virginia, better known as CASE. He provided many services for free, he said. And he said he even loaned the agency $250,000 so it could buy cars and meet its yearly state quota.
The group severed ties with Belcher last December after a state review raised questions about the relationship.
"I was never appreciated, and they dumped me like they dumped me," Belcher said last week. "I should have charged them another $200,000."
"We felt the program
CASE wrote the blueprint for car-lease programs for welfare recipients.
The nonprofit received a $4,000 grant from the state to write a 50-page booklet, which established guidelines for lease-to-own programs. CASE's executive director, Oraetta Kennedy Hubbard, called herself the "Mom" of the Wheels-to-Work program in a grant proposal.
So it wasn't surprising that the state selected CASE as one of four agencies to supervise Wheels programs across the state. The group's territory included 12 counties, stretching from McDowell to Webster counties.
But like other community agencies responsible for Wheels programs, CASE stumbled at the start.
Overnight, Wheels became the agency's most costly program, at more than $2 million a year. The organization had "cash flow" problems, and said the DHHR did not provide grant money on time. It fell behind on paying vendors.
CASE needed to purchase 500 cars by the end of the fiscal year to satisfy its state contract.
Belcher was happy to help.
He owned the dealership and a repair shop. He'd been selling cars in Mercer County since 1957. And he knew Tommy Carroll, a CASE employee responsible for buying and selling welfare cars.
"We hadn't bought all the cars, so we had to show DHHR we bought them," Carroll said. "Nathan saw there was a possibility of making a little bit of money. Nobody wanted to put up the money like he did."
Belcher said he loaned $250,000 to CASE to buy cars. CASE officials dispute Belcher's recollection. They said it wasn't a loan; rather, they ordered and received the cars, but didn't pay him on time.
CASE bought cars from Belcher, stored cars on Belcher's lot, sent clients' cars for repairs to Belcher's garage, called on Belcher to tow cars throughout Southern West Virginia and sold vehicles back to Belcher.
Business was good — for a year.
Someone complained to the governor's office, and the DHHR sent a team to investigate. Months later, they issued a report that found:
In one year, Belcher received $914,412 from CASE.
A month after the DHHR released the monitoring report, CASE fired Carroll and another employee who worked in the Wheels program. The agency stopped doing business with Belcher.
CASE also challenged the DHHR's findings in a 24-page rebuttal report.
CASE officials maintain that the findings were false or were a "miscommunication" between CASE and DHHR staff members. They say they bought vehicles at "blue book" value, used multiple vendors and distributed dependable cars to clients quickly.
"Over the first 18 months, we had to work the bugs out," said Sandra Graham, director of CASE's Wheels program. "We felt the program was strong. It did tremendous amounts of good. It was of great value to the people it was intended to help."
Belcher said he nearly lost his business after he dropped local customers to help CASE.
"They were in trouble," Belcher said. "They had no money. I took the money out of my own pocket and bought cars.
"Then they dumped me. I thought they'd take care of me, but they didn't. They said I was getting too much of their money."
Belcher said he saved CASE thousands of dollars by monitoring unscrupulous mechanics who inflated prices and tried to perform unnecessary repairs on CASE cars at garages across Southern West Virginia.
"They would tell them they needed this and that done," Belcher said. "I told [CASE] there's no problem with those cars."
CASE and another Wheels program agency received extra money in June 2002 because of unexpected repair costs. CASE got an extra $400,000.
State officials confirmed that mechanics were overcharging the program across West Virginia.
"Repair costs for both of these contractors have continued to increase," wrote DHHR program manager Diane Crump, "as mechanics and garages have begun to recognize this program as a source of income, particularly in rural areas of the state where there are few garages available."
Belcher and Carroll said "welfare cars" depreciated so quickly because program participants abused them. They burned out motors, ripped up transmissions and crashed vehicles, they said.
"They did not screen the people," Belcher said. "They put people in cars who got their driver's licenses yesterday."
State scraps leasing program
State officials praise the three-year Wheels-to-Work program.
But in July, they quietly decided to scrap it for "a more efficient and cost-effective" model in which a single agency will collect donated cars and give them to welfare recipients.
The donated-car program will cost about $1 million a year, versus the $8 million-a-year Wheels program.
Some people questioned from the beginning whether the Wheels program cost too much.
Two years ago, the state's Temporary Assistance for Needy Families program, which receives about $110 million in federal funds every year, was facing a budget shortfall. An independent panel met to recommend spending cuts.
Panel members called the transportation money for welfare recipients "essential." West Virginia is the second-most rural state, and few counties have public transportation. In surveys, welfare recipients identified transportation and child care as their two biggest hurdles.
Still, the panel recommended slashing $4 million from the Wheels program. They determined the cuts wouldn't have much of an effect on low-income residents.
"There seemed to be a lot of overhead and administrative costs," said Susan Sobkoviak, a panel member and a state lobbyist for the National Association of Social Workers. "There didn't seem to be anyone who said the $4 million had to stay there."
The Wheels-to-Work program officially ends Dec. 31. People who made lease payments through the end of August received titles to the vehicles, even if the lease term hadn't expired.
In recent weeks, state legislators have started asking questions about the new donated-car contract. But they've paid scant attention to the lease program, after hearing positive reports about Wheels-to-Work from top state officials.
The DHHR audited each of the four nonprofits, but those reports never left the department's downtown Charleston office.
Two agencies weren't reviewed until after the DHHR decided to abandon the leasing program.
And the department didn't conclude one of those reports until last week. The report for the Human Resources Development Foundation, a nonprofit division of the AFL-CIO, was released just days after the Sunday Gazette-Mail requested it, and after the agency was awarded the $1 million grant for a new program.
When DHHR officials gathered information for their reports, they didn't interview a single Wheels participant about the program and cars.
The CASE monitoring report wasn't shared with legislators, and the DHHR continued to distribute millions of dollars to the Mercer County group.
In an interview with the Sunday Gazette-Mail last week, department officials defended their oversight. They noted that they ordered CASE to "cease and desist" its relationship with Belcher. They also directed CASE to follow a "corrective-action" plan.
DHHR officials said they didn't turn over their findings to legislators because auditors "didn't believe there was any fraud."
Taking cars, jobs away
Seven months have passed since Edith Holbrook's car caught fire on a winding Lincoln County road. She never got another car. She never got another job.
Last week, she sat with her two children at the kitchen table inside her half-built, particleboard house.
Holbrook no longer receives welfare. She doesn't qualify because she got married in September to a man who works for the Lincoln County Public Service District. Still, she and her three kids struggle to make ends meet with her husband's paycheck.
"Sometimes we give up food to pay bills, sometimes we skip bills to eat," she said.
She kept the documents related to her Tercel and the Wheels program. She still has the repair bills, the fire department report, the lease-termination letter. She's even called the governor's office to complain.
A Wheels program official responded that Holbrook's complaint is "basically accurate," according to a memo obtained by the Sunday Gazette-Mail. "However, it appears that at least part of the damage to her original vehicle was due to abuse or neglect" and that she must "make arrangements to pay for the damages."
Holbrook said she wouldn't pay a dime more into the program. She already lost $1,800, and a job. She's trying to find a lawyer.
"It's a program that was supposed to keep people in cars and jobs," Holbrook said. "Not take them away from them."
MONDAY IN THE CHARLESTON GAZETTE: JUNKED CARS, LOST JOBS: Other agencies continued to follow CASE's questionable spending practices. One was rewarded with a new $1 million grant.
To contact staff writers Eric Eyre and Scott Finn, call 346-8964 or 357-4323.