Feds come after Lansing for $250K in mismanaged grant cash

Allegations against Joan Jackson Johnson lead to federal penalties

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TUESDAY, Nov. 10 — The city of Lansing must repay nearly $250,000 to the U.S. Department of Housing and Urban Development after federal officials confirmed several conflicting interests and mismanaged financial controls within the city’s Department of Human Relations and Community Services.  

Despite recent attempts from city officials to appeal the decision, a letter from HUD last month confirmed that the city of Lansing will eventually be required to return $234,000 in “questioned costs” related to federal Continuum of Care grant funds designed to rehome the homeless — either by immediate wire transfer or through a 36-month repayment agreement with HUD.  

Lansing Mayor Andy Schor said he was “disappointed” to see the fine after the city had quietly appealed the decision earlier this year. Still, city officials plan to continue working with federal regulators to address any lingering concerns, Schor said in a statement on Tuesday. 

The city also requested an extension until January to pay back the six-figure penalty, Schor said. 

The issue, officials explained, stems from Joan Jackson Johnson’s several-year stint as the department’s director before she was placed on administrative leave and eventually retired last year amid allegations of conflicting interest, financial improprieties and misspent federal grants.  

“The consequences of her conflicts resulted in unethical behavior, a lack of integrity and mistrust, misuse of power in an official business capacity; profiting from governmental resources; perceived favoritism with select sub-awardees; and a conscious decision to choose private interests over her employee obligations,” according to an Oct. 22 letter from HUD.  

Federal and state authorities for several months have kept open an investigation into the alleged financial missteps that enabled city officials to push Jackson Johnson out of a job and into early retirement this year. As of this week, no criminal charges have surfaced against her.  

The results of that investigation have yet to be seen, but federal officials still found issues.  

Among HUD’s concerns: Federal grant cash flowed directly from Jackson Johnson’s department to One Church One Family, a housing-focused nonprofit in which she had been heavily involved and that also directly administered portions of the city’s federal grant funding.  

“Jackson-Johnson failed to disclose her relationships to the City Council, federal funders, and to nonprofit organizations that she was serving in dual roles as both the sponsor and the receiver of local, state, and federal funds,” according to HUD’s findings. “She was biased in the award selection process and in the administration of federal contracts ...  and failed to recuse herself.”  

The conflict was enough to suspend Jackson Johnson while city officials handed off the unfinished probe to law enforcement. Jackson Johnson has since retired and remains involved in community volunteer work. She again called the investigation a “witch hunt” this week.  

“It seems this city is set on doing anything they can to bury me,” she told City Pulse on Tuesday. “In the end, I followed the process. I signed those grants, but so did the city attorney and the mayor. It seems if a person of color is involved, there’s just this automatic rush to judgement.”  

Federal officials first notified city officials of “issues with contracts” that prompted them to place Jackson Johnson on leave last year. A subsequent audit report showed that at least $1.38 million in city funds under Jackson Johnson’s oversight had been funneled into various nonprofit groups in which she or her family was either involved or directly led the organization.  

The nonprofit group that received the bulk of those funds has since been placed into a court-ordered receivership to take over its assets following a petition from the city of Lansing.  

The penalty was initially levied in June and appealed by the city in September, according to the letter. Though the city argued that funds were used for allowable costs to rehouse the homeless, federal officials decided otherwise in upholding the six-figure penalty in its letter late last month.  

“Immediate steps were taken as soon as these issues were discovered,” Schor explained in response to questions this week. “We filed an appeal and provided information documenting actions taken to report the former director’s potential conflict of interest to the proper authorities, and ordinance updates were provided to City Council in order to strengthen controls.” 

A $50 penalty for “mistrust and abuse” was also increased to reflect the severity of the violations, officials wrote. Several other conflicts were also listed in the letter. Among them:  

  • Jackson-Johnson, her husband and her daughter have been directly or directly involved in the governing boards of several area non-profits that received payment from HRCS.  
  • No evidence — including during a third-party audit — was discovered that these relationships were disclosed to the City Council, as required by the city policies.   
  • Forensic auditors discovered at least one instance where a grant request was signed by Jackson Johnson as both president of the organization and as departmental director.   
  • Multiple audits found that Jackson-Johnson and her family profited from the very funds she was entrusted to oversee as both nonprofit director and as departmental official.

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