TU's piece on Reggie Gaffney

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“I think, I always in my mind thought she could have done more.”

Reginald Gaffney: A story of machine politics, money and Corrine Brown

By Christopher Hong, Steve Patterson and Nate Monroe Sat, Jun 25, 2016 @ 1:27 pm | updated Sun, Jun 26, 2016 @ 11:13 am

For decades, Reginald Gaffney has shown a remarkable ability to survive the kind of trouble that can wreck businesses and political careers, and to keep afloat a ragtag nonprofit for people with mental illnesses and drug addictions who have nowhere else to turn.

These days, a year into a tumultuous first term as a Jacksonville city councilman, the heaviest cloud over Gaffney seems to concern his years-long ties to U.S. Rep. Corrine Brown, once an ally and patron saint of sorts for Gaffney’s nonprofit, the Community Rehabilitation Center Inc.

The nonprofit was subpoenaed in February to hand over financial information in connection with a federal criminal investigation of Brown.

It was another shoe to drop after what had already been a punishing first year in office that included being sued by a taxpayer group over Sunshine Law violations; almost $12,000 in costs for an illegal tax break on a second home; and public shaming for accepting Jaguars game passes to owner Shad Khan’s suite while Khan sought city help upgrading EverBank Field.

Reflecting on the turmoil surrounding him, Gaffney echoes the Old Testament, reprising a fundamental question raised in the Book of Job: Why do the righteous suffer?

“Why, God? Why me?” Gaffney asked during an interview. “I’ve never stolen anything from nobody. All I try to do is help folks.”

But peeling back the layers on the murkier business side of Community Rehabilitation Center — a review the Times-Union began after the nonprofit called CRC was subpoenaed — shows Gaffney’s concerns could go beyond his connections with Brown or unflattering headlines.

[ MORE: Gaffney's work with JTA mired in financial troubles, shoddy work ]

Gaffney has for years turned work at the nonprofit where he’s executive director into a cash cow for private businesses he runs, records show.

And, much like Gaffney himself, those businesses have shown a pattern of surviving despite perpetual money trouble and sometimes spotty work records. Consider:

■ The nonprofit has directed more than $800,000 to for-profit businesses involving Gaffney, creating a potential to violate conflict-of-interest rules in federal grants that financed some of the work, according to records reviewed by the Times-Union. A Gaffney aide has said nothing improper occurred, but hasn’t produced evidence showing that.

■ Some of that spending paid for improvements at a shopping center where Gaffney invested, and where CRC leased space.

■ Gaffney himself ended up owing CRC about $268,000 for a set of loans the nonprofit made to a transportation company he owns.

Gaffney’s advocates insist CRC deals were transparent and aboveboard, although veterans of the nonprofit industry said the number of questions the arrangements raise is troubling by itself.

Whatever warts his business dealings show, Gaffney has admirers, some of them friends in important places who appreciate his work with a needy but sometimes unlovable caste.

“He has a great heart, I can tell you that, to work with this population. I just can’t imagine,” said former state Sen. Steve Wise.

“ ... They don’t look normal. They don’t act normal. Some of them are crying,” said Wise, who talked about Gaffney’s persistence in helping CRC clients. “Whatever it is, Reggie takes care of them... It takes a special person to do that.”

ALWAYS DIFFERENT

By some measures, being different is standard for Gaffney.

The fourth of five brothers in one of the city’s most well-known Northside political families, he was the only one who wasn’t a football star at the University of Florida, instead playing baseball for Florida A&M University.

He built clout and relationships over decades with big names in Republican circles as well as the city’s heavily Democratic African-American political world. Gaffney speaks proudly about his past role as a middleman connecting would-be politicians to highly sought-after black figures like Brown and local pastors, often courted for their ability to mobilize voters, and having used CRC’s clients — Gaffney calls them “consumers” — to help put out campaign signs and pass out candidate flyers.

Gaffney spent five years on the Jacksonville Port Authority, sometimes clashing with its executive director. He left in 2013 because, for two years in a row, the Florida Senate didn’t vote on his reappointment by Gov. Rick Scott.

Ending his more traditional behind-the-scenes role, he was elected last year to the City Council seat previously held by his brother Johnny. Another brother, Don, represented some of the same neighborhoods on the council in the 1980s before his political career was ruined by a conviction on federal mail fraud charges.

Always, Reginald Gaffney’s identity has been paired with CRC. A former day-treatment coordinator at another mental health center, he launched and grew the nonprofit from a three-person startup in 1993 into a center with dozens of employees serving hundreds daily — often financed with public grant money.

CRC offers primary care, drug and mental health counseling, and services for AIDS patients in a Northside market where low incomes, bad health and entrenched substance abuse reinforce demand for its work.

Payments from Medicaid, which compensates the center for medical and mental health work with poor and disabled clients, have been CRC’s biggest consistent chunk of revenue, totaling about $2 million during a budget year that ended in 2015, according to annual financial reports it filed to meet a local requirement for city funding.

CRC’s income has averaged $5 million yearly in revenue and grants since 2006, the reports show.

Besides Medicaid, that funding has included shifting levels of local, state and federal payments and grants, parts of it shepherded along by Brown. But Brown’s support has carried its own costs, both tangible and in gossip.

For years, CRC paid for lobbying by Brown’s daughter, Shantrel Brown, and her employer, the powerhouse firm Alcalde & Fay. During the same time, Brown requested money for the group regularly in a now-embargoed congressional budgeting process known as earmarking.

Over several years, Brown requested about $3 million in earmarks to CRC, the Times-Union reported in 2010. That year, U.S. Sen. Bill Nelson, D-Fla., agreed to jointly sponsor a $750,000 earmark with Brown, but withdrew after learning Shantrel Brown lobbied for CRC, the Washington Post reported.

Shantrel Brown stopped lobbying for CRC at the end of 2010.

Earmarks Brown championed before then included $147,000 for streetscape improvements for Pearl Plaza, a shopping center where Gaffney housed several companies and has held a financial interest in the past.

While he and the congresswoman have recently had a falling out, Gaffney’s connection to Brown, a 23-year member of the U.S. House of Representatives, was well-known for many years.

When Brown was subpoenaed in January inside a Northside barbecue restaurant, gossip ascribed a role to Gaffney weeks before federal agents actually served CRC with a demand for records and documents related to donations Brown made.

Gaffney maintains he’s not a focus of the investigation and said he “can’t wait” to explain what happened — as soon as his lawyer gives him permission to speak.

CRC has been under scrutiny before. In 2013, the state accused it of overbilling Medicaid by $1.4 million, although Gaffney later settled the claim by agreeing to repay just $336,000. Prosecutors also filed paperwork to charge CRC with Medicaid provider fraud in 2002, but dropped the case the next year after the nonprofit, which denied any wrongdoing, agreed to pay a $55,083 settlement.

Despite working hard to build a “special relationship” with Brown, Gaffney said she never became the type of advocate for his cause that he hoped she would be. When asked if he believed his own reputation had been sullied by his close association with Brown, who has attracted many high-profile controversies of her own, he said yes.

“People seem to think I know lots of things about the Congresswoman, or that I know everything. We just had a relationship,” Gaffney said.

“I think, I always in my mind thought she could have done more.”

Through a spokesman, Brown declined to comment.

On the council, Gaffney’s reputation has suffered from his own doing. Last month, he raised eyebrows by reneging on a pledge to support colleague Doyle Carter in his bid to be next year’s vice president. On the day of the vote — and without giving any notice to Carter — Gaffney instead supported Carter’s opponent.

Carter lost by one vote.

When asked how he felt about Gaffney, Carter offered a question of his own: “If you can’t trust somebody for their word, then what can you trust?”

GROWING SPINOFFS

These days are tougher ones for CRC, Gaffney explains as he gives a tour of the non-profit’s rundown offices inside a former phone company building north of Gateway Town Center, a result of grants expiring and a scarcity of donations.

From a handful of workers at its beginning, the nonprofit grew to have 93 employees by 2013, though the count had fallen to 53 when the latest tax form was filed in November.

To buffer dips in government support and put clients to work, Gaffney long ago spun off related companies that earned revenue running a thrift shop, a shirt-printing store and other businesses.

Some were set up as nonprofits explicitly to support CRC.

But Gaffney also incorporated for-profit companies whose stated purpose was simply to do business. While Community Rehabilitation Center Transportation Inc.’s connection was obvious, seeing a link between CRC and Northwest Support Services, Inc. would depend on whose paperwork a person read.

When CRC proposed a workforce training program in a 2011 grant request, the plan called Northwest “a thriving and developing for-profit enterprise of CRC.”

But when he incorporated the company in 2000, listing himself as the only officer and his home as its address, Gaffney wrote simply the company was “organized to provide services to the public for profit.”

Financial reports that CRC filed with the city said only that the nonprofit contracted Northwest to perform some work, and that Gaffney had top roles in both organizations.

Some of that work was expensive.

When the nonprofit was awarded a $765,000 grant from the U.S. Department of Health and Human Services to set up a revolving loan fund for small businesses, it agreed to pay Northwest a $10,000-per-month “management fee” to oversee the project, according to those reports.

That added up to $360,000, almost half the grant amount, over the project’s three-year life.

Gaffney’s assistant and problem-solver at CRC, Jill Kestner, said calling the payment a management fee — as the financial reports do — understates the work Northwest did, from vetting applicants for “micro loans” of $10,000 or less and helping them refine business plans to tracking the companies’ progress.

Kestner said CRC explained Gaffney’s role with the nonprofit and Northwest in an application to HHS before the grant was issued. She said the paperwork that created Northwest was relatively unsophisticated and might have affected whether an outside observer could see its connection to the nonprofit. She said the grant really reimbursed CRC expenses, and that paperwork CRC sent to the federal government showed clearly what the nonprofit and Northwest were doing.

But Kestner didn’t have that application or the paperwork with her when she met with reporters Tuesday to talk about issues including the grant, and hadn’t provided any by the end of the week. The Times-Union first contacted Kestner and Gaffney about the payments to Northwest on June 15.

Separate from the micro loans, CRC also loaned progressively larger sums to CRC Transportation, with the debt mounting from $110,000 in 2011 to $293,000 in 2013.

The following year, Gaffney signed a personal promissory note pledging, as the company’s owner, to pay about $3,000 each month for 15 years to retire the debt, plus nearly 11 percent interest charges.

That’s not how nonprofits usually work, and deals like that might violate federal conflict-of-interest rules in some cases.

Descriptions of the deals — presented without paperwork documenting exactly what happened — raised flags for some people who work with nonprofits but aren’t familiar with CRC.

“These appear to be clear and egregious conflicts of interest,” said Peggy Morrison Outon, executive director of the Bayer Center for Nonprofit Management at Robert Morris University in Pittsburgh. “…This whole thing sounds like a lot of self-dealing.”

An HHS spokesman didn’t return messages left by phone and email asking about conflict-of-interest rules on the grant his agency awarded CRC.

It’s not uncommon or wrong for nonprofits to start companies to bolster their budgets, said Rena Coughlin, CEO of the Nonprofit Center of Northeast Florida, who said doing that means nonprofits can accomplish more and rely less on handouts.

But Coughlin said that makes it important for nonprofits to say clearly when their executives have conflicting interests, and how boards will handle those when they come up. CRC says on its tax forms it has a written policy on conflicts and requires its officials to annually report financial interests that might become conflicts. The Times-Union has requested copies of CRC’s conflict policies and statements of interests since the first week of June, with no response.

There can be big consequences for CRC and its leaders if conflicts of interest aren’t handled right.

A nonprofit in theory could lose its tax-exempt status for extreme violations, but lesser wrongs can still have “reputational costs” that make it harder to land grants again, said Marc J. Lane, a Chicago business and tax attorney who has written about nonprofits for decades. Civil or criminal court fights can follow.

Lane doesn’t know anything about CRC, but talked generally with a reporter about issues nonprofits can face.

Nonprofit boards commonly avoid making business deals with people inside their organization, and Lane said it’s normal for them to ask leaders to disclose ties they have to outside businesses, especially when leaders are involved in making purchases or signing contracts.

For Gaffney, a policy like that might mean explaining his relationship to Pearl Plaza Partners, LLC, a company that until February owned the shopping center where CRC leases storefront space in the 1950s-vintage complex a few blocks north of CRC’s property on Beechwood Street.

Gaffney’s 2012 tax forms, part of which was included in an application for state certification as a disadvantaged business, reported he earned about $15,000 from Pearl Plaza Partners in “passive income,” a kind of earning that can include rent payments.

Kestner said Gaffney didn’t own a part of the shopping center. She said instead that he had loaned money to the center’s owners to motivate them to accept leases involving CRC and its clients. Kestner said she didn’t know when the loan was made and didn’t have documentation of it being made.

The year before the passive income was reported, Gaffney signed a city contract to receive block grant funding that budgeted about $120,000 to create a 2,000-square-foot addition to a training center at Pearl Plaza called the CRC Institute.

Money for CRC’s upgrades came from the U.S. Department of Housing and Urban Development, whose rules don’t allow grant recipients to use the money on businesses where they have a financial interest without getting HUD’s permission.

A budget for operating CRC Institute, which was included in a separate contract with the city signed in 2012, listed a $2,000-per-month rent charge. CRC Institute is still at Pearl Plaza, which was sold in February to a St. Petersburg company for $2.5 million.

It’s not clear how much rent CRC and its affiliates paid in total, but the $2,000 monthly rate would have totaled $98,000 to Pearl Plaza Partners before the property changed hands.

Even if deals might be legal, there can be good reasons to avoid agreements that look like conflicts of interest, said Regina Birdsell, president of the Center for Nonprofit Management of Southern California, which she said works with about 4,000 nonprofits yearly.

“If you think that it wouldn’t pass that smell test … just avoid it,” Birdsell said.

Passing up some of his deals would have helped Gaffney financially, too, Kestner said, but said that only showed he was focused on expanding CRC at his own expense. Gaffney, who is divorced, lives in a tidy, gated subdivision off Dunn Avenue, but it’s unclear what cash he has available after covering room and board.

Until recently, he also owned a second house where his children had been raised, but in November he was sued by the homeowners association there, which said a $138 annual assessment had gone unpaid for months. The next month, though, he paid $11,980 in taxes and penalties the same day Duval County Property Appraiser Jerry Holland said Gaffney had wrongly claimed homestead tax exemptions on both properties. Gaffney deeded the second home to his son in April.

From the transportation company’s losses to a willingness to lend his own cash, Kestner argued Gaffney has put himself in the hole trying to do good. People looking for ill-gotten riches, she said, won’t find any.

“This is someone that has not hit the lottery,” she said.

christopher.hong@jacksonville.com, (904) 359-4272

steve.patterson@jacksonville.com, (904) 359-4263

http://jacksonville.com/news/metro/2016-06-25/story/reginald-gaffney-story-machine-politics-money-and-corrine-brown?utm_medium=social&utm_source=facebook_The_Florida_Times-Union
nate.monroe@jacksonville.com, (904) 359-4289