FBI said to be probing Safe and Sound

The FBI is investigating a taxpayer-funded social-service agency with close ties to former Mayor John F. Street and his wife, according to several people familiar with the matter.

Philadelphia Safe and Sound, the decade-old nonprofit agency, disbanded in June after Mayor Nutter said he had widespread concerns about its expenditures and the quality of its programs.

Sources said federal investigators were examining whether the nonprofit had improperly disbursed tens of millions of city dollars it received throughout the Street administration to oversee after-school programs, anti-truancy efforts, and curfew centers, and to conduct violence-prevention research. The precise time period they are reviewing is not clear.

Street's wife, Naomi, was director of the nonprofit from its founding in 1998 until 2002. In interviews, former Safe and Sound employees said FBI investigators had asked them in November whether the former mayor and his wife tried to influence the disbursement of money after she left the agency.

The federal inquiry appears, according to sources, to be more focused on the work of specific providers - including Lucinda Post, who is Naomi Street's sister. For at least the last five years, Post managed Safe and Sound-funded programs that got millions of dollars. She also ran a community after-school program at Gillespie Middle School in North Philadelphia. For her work, she was paid between $100,000 and $135,000 a year, she said.

The former mayor did not return a call or e-mail Friday. Naomi Street, reached by phone, declined to comment.

In an interview, Post, who has a doctorate in education from Temple University, denied any wrongdoing and attributed the scrutiny to her familial ties.

"I, as a sister of the mayor's wife, have been seen as someone who got opportunities that maybe I shouldn't have," she said. "Actually, I have had to struggle doubly hard to show that I am capable and did good work."

The federal inquiry appears to have begun in the spring, shortly after Safe and Sound board members announced they would shut down the organization June 30.

J.J. Klaver, spokesman for the FBI office in Philadelphia, declined to comment.

The city's Inspector General Office, a watchdog for taxpayer dollars, also is reviewing Safe and Sound's finances, according to sources. Inspector General Amy Kurland would not comment Friday about whether any investigation was ongoing.

The federal inquiry is the latest controversy involving the nonprofit, which was primarily city-funded.

In late December, more than 60 social-service providers learned that Safe and Sound, which owed each of them money for services and programs provided before it disbanded, did not have enough money to pay them in full. Together, they absorbed a loss of nearly $1 million.

"To date, we are unclear as to the location of these public funds," said Cindy Ray, executive vice president and chief financial officer of the Greater Philadelphia Urban Affairs Coalition. One of Safe and Sound's largest contractors, GPUAC said it was still owed $358,000, nearly 10 percent of its total contract in the last fiscal year.

"This is a challenging financial setback for GPUAC," Ray said. While the organization is determining its next steps, she said, "GPUAC is not happy to have been put in this position."

Championed by Street, Safe and Sound grew considerably under his tenure, greatly expanding its role as a middleman used by the city to distribute millions in public dollars to more than 200 smaller providers.

Before leaving office at the end of 2007, Street attempted to have Safe and Sound continue its work, this time with a no-bid $75 million contract - though City Council had authorized just $54 million. While he told the nonprofit to begin disbursing the money - and it did - Council later refused to approve the transfer of the additional dollars.

At the end of his first month in office, Nutter announced at a news conference that Safe and Sound would not get Street's promised money, triggering confusion as dozens of providers that had started spending the extra money found their budgets reduced.

City officials later agreed to restore at least $4 million that had already been spent.

However, Stella Tsai, a lawyer for Safe and Sound, said last week that not enough dollars were put back, leading to the $1 million shortfall.

"There simply wasn't enough money to pay the outstanding invoices," Safe and Sound board chairman Michael Pearson said.

However, Donald Schwarz, deputy mayor for health and opportunities, said the nonprofit had assured him as late as August that it had the necessary money. "We don't know what they were doing," he said.

"But it became clear to us that they were not paying their bills," he said, referring to the money owed to providers.

After months of wrangling, a settlement was worked out in which the city created an escrow account with Safe and Sound, ensuring the money owed to providers would be distributed by U.S. Bank N.A.

The city deposited $1.2 million into the account, which represented money it owed Safe and Sound, while Safe and Sound deposited $533,000. That money came from a separate fund the board had opened years ago as part of a corporate fund-raising effort.

Still short about $1 million to repay the total debt of $2.7 million, the city and Safe and Sound agreed to pay each provider only two-thirds of its outstanding balance.

"It's shocking they didn't pay the money owed. It's unconscionable," said former board member Walter Clayton, who resigned just before Safe and Sound shut down.

Pearson defended the nonprofit's spending, saying that closing down the operation cost more than anticipated and that all of those expenses were paid for by the money that had been privately raised.

Among those expenses was $91,000 paid to Safe and Sound's president, Anne Shenberger, to stay on through Dec. 31 as the nonprofit wrapped up its business. As president, she had earned $169,000 annually.

Among the providers owed money are Catholic Social Services ($43,000), Lutheran Children and Family Service of Eastern Pennsylvania ($47,000), and Wordsworth Human Services ($60,000).

"The longer it took for them to close the books, the longer we worried we wouldn't get any money," said Angele Parker, president of Methodist Services for Children and Families, which is owed $60,000.

"There were a lot of questions by everyone about what happened to the money. We really don't know," Parker said.

What she is clear on, she said, is that "in the end, we - the providers - got burdened with the shortfall."

History: Founded in 1998 by then-Mayor Edward G. Rendell, who appointed Naomi Street as director. Street was married to then-City Council President John F. Street. In 2002, after John Street became mayor, Naomi Street resigned as director amid criticism about her role in directing city money while her husband was mayor.

What it did: Oversaw after-school programs, produced an annual report on the well-being of children in Philadelphia, and managed programs aimed at preventing truancy and teen violence.

Operations: Functioned as fiscal intermediary, channelling tax dollars to more than 200 community organizations.

Budget: Relied primarily on city funding. Grew from a $15 million organization in fiscal 2003 to $50 million in fiscal 2007.

Disbanded: June 30.

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