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JOVE Probe Reveals New Discrepancies

Times Staff Writer

After following a massive “paper trail,” state investigators said they have discovered new discrepancies regarding money given San Diego-based Project JOVE under government contracts.

As JOVE’s attorney was preparing to file new papers with federal bankruptcy authorities outlining the beleaguered social service outfit’s financial predicament, state auditors this week were discovering new evidence of financial mismanagement while perusing records of program expenditures.

Although that probe was incomplete, the deputy director of the state Office of Economic Opportunity (OEO) said auditors had already uncovered evidence that $470,000 in state and federal funds paid to JOVE under OEO contracts had been misspent.

Included in the preliminary findings, OEO Deputy Director Don Reetz said, is JOVE’s claim to have made more than $300,000 in payments to San Diego Gas and Electric Co., when in fact only $74,000 had been transferred to the utility.

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“There may be nothing criminal here. I’m hoping there is nothing criminal,” said Reetz. “But there has been gross financial mismanagement.”

Reetz said the organization, which filed a Chapter 11 bankruptcy petition earlier this month, “may be robbing Peter to pay Paul.”

“We have no indication of anyone flying the coop with any of the money,” he added.

Reetz said OEO auditors probably would need another 10 days to complete their probe.

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The new discrepancies, however, could broaden a scandal over the private agency’s handling of up to $6 million in government money for its programs, which include job training and other projects to assist ex-offenders, veterans and the unemployed.

The state Employment Training Panel (ETP), another state agency, touched off that scandal when it claimed that JOVE owes it $264,820 because of mishandled funds and falsified documents.

Because of what state officials now say was a communications breakdown, OEO was making payments and entering into new contracts with JOVE even after ETP had suspended payments under its contracts and asked the attorney general’s office to investigate improprieties.

Reetz said his agency would not have made those payments to JOVE had he known about the investigation.

JOVE officials, including Executive Director Thomas Wornham, had told state officials and others that two former JOVE employees who have since left for Spain were responsible for falsifying records to ETP. Wornham said top JOVE officials were not aware of what those employees were doing until ETP officials questioned some records of wages supposedly paid JOVE trainees after comparing them with state tax records.

State investigators have so far been unable to locate and question the former JOVE employees, and Reetz said some of the new discrepancies involving his agency occurred long after those people had reportedly left the organization.

“We started this a month ago thinking it was just a small problem,” said Deputy Atty. Gen. Peter DeMauro, who is now coordinating a series of inquiries and investigations regarding JOVE contracts with ETP, OEO, the state Employment Development Department (EDD), San Diego County and others.

DeMauro said the parameters of JOVE’s problems are not clear at this time.

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“Right now, what we are doing primarily is following a paper trail,” he said.

James Boyden, who is heading the investigation on behalf of EDD and its agencies, refused to comment except to say that the investigation is under way.

Wornham, who has received political appointments by former Govs. Ronald Reagan and Edmund G. Brown Jr. and was recently reappointed to the state Board of Corrections by Gov. George Deukmejian, served 19 months at the California Institution for Men in Chino after he was convicted in 1972 of grand theft for illegally funneling investors’ funds into other ventures.

Wornham has blamed ETP’s decision to withhold payments for forcing the 14-year-old social service organization into bankruptcy.

JOVE is seeking court protection from creditors, and permission to reorganize its debts, under the Chapter 11 petition, which was filed May 1.

Richard Peterson, JOVE’s bankruptcy attorney, said the organization’s required “statement of affairs” would be filed with the federal bankruptcy court today or Thursday.

Meanwhile, Reetz said OEO’s home winterization and emergency energy assistance programs are in limbo now, although its contracts with JOVE are still officially in force. He said OEO officials are trying work out a plan to restore those services for low-income residents in San Diego.

Steve Duscha, executive director of ETP, said its job training programs that are contracted through JOVE are still in operation. But he said ETP officials are also working on contingency plans for continuing those training programs should JOVE be forced to shut down temporarily or permanently.

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