JASPER, TX (KTRE) - The indictment against DETCOG Executive Director Walter Diggles and his wife and daughter alleges several schemes carried out by the trio since 2006, all in the name of keeping a church he pastored alive.
The 51-page document was unsealed Tuesday morning following the arraignment in federal court on Monday.
The trio has pleaded not guilty to the charges.
The indictment explains how Walter Diggles was the pastor of New Lighthouse Church of God in Christ in Jasper, as well as the registered agent of the Deep East Texas Foundation. The offices of the Foundation were located in the church. The indictment alleges it was his position and authority in these entities which allowed the conspiracy to succeed.
The indictment alleges four other people aided in the conspiracy but have not been indicted.
The Foundation received funding almost entirely from DETCOG through federal Social Services Block Grant funding and received $4.4 million in funds from 2007-2012, according to the indictment.
According to the indictment, "Walter Diggles was not only the executive director of DETCOG, but had extensive involvement in the affairs of the Foundation. In fact, Walter Diggles had direct input into the agenda of the Foundation; sometimes participated in Foundation meetings, and would sometimes refer persons to the Foundation for services. Additionally, he had the authority to decide who would receive money from or services paid for by the Foundation and who did not."
The indictment explains how Lighthouse Church had fewer than 40 active members and the majority of funds received by the church during that five-year period were SSBG funds that flowed from the federal treasury, to DETCOG, to the Foundation, then to Lighthouse Church.
"In most months during this period, the church would have been unable to pay its mortgage, gas, electric, and insurance bills without the SSBG funds," the indictment states.
DETCOG distributed SSBG funds to the Foundation and were to be used as part of the disaster recovery following Hurricanes Rita, Katrina, Ike and Dolly. DETCOG entered into a contract with the state and were limited to reimburse entities that spent money providing goods and services for specific purposes.
Diggles then hired someone to work at the Foundation to prepare the Foundation's application for grant funds from DETCOG. On Nov. 7, 2006, the Foundation submitted a request in $865,000 from DETCOG. The DETCOG board then approved $500,000 in SSBG funds.
The indictment states DETCOG and the Foundation entered into two vendor agreements in which the Foundation would provide services to the public and request SSBG fund reimbursement. It was an agreement signed by the unindicted co-conspirator on behalf of the Foundation and by Diggles on behalf of the Foundation, according to the indictment.
"A substantial amount of the SSBG funding that flowed from the Foundation to the Lighthouse Church was used to keep the church functioning or for personal purposes and expenses by the conspirators, as opposed to providing services and goods to person who had been adversely affected by the hurricanes.
The indictment then lists different schemes the three indicted Diggles and four unindicted co-conspirators used to get funding. The indictment's allegations are summarized below:
The Afterschool Program
From 2006 to 2012, the Lighthouse Church operated an after-school program called the "Century 21 Program." It was designed to help troubled adults with little education to get their GED and find housing and jobs and to help at-risk teens and younger children by providing mentors and tutors to help them with class work and to provide after-school activities.
Tutors in the program were paid by the hour. Diggles told them that if anyone should ask, they were to say they were volunteers and not paid wages. But workers were paid with checks drawn on the Lighthouse church account and later from the Foundation.
Though teachers in the program were paid from $15 to $17 per hour, the Foundation would request payment for teachers at the rate of $110 to $144 per hour. Rosie and Anita Diggles would draw up the requests. A co-conspirator would then review the packet and either approve it or make adjustments to the requested amounts. Another co-conspirator would code the request and forward it to Walter Diggles, who was the only one who had authority to authorize payments in excess of $300.
Case Management Services Program
The Foundation also operated a case management services program (CMS). This allowed people living in Deep East Texas to apply for assistance with home repairs. Co-conspirators would consider applications then request reimbursement from DETCOG. But the requests were inflated far beyond their actual amount of expenses for the program by use of a unit-billing scheme. Though the CMS counselors were paid between $8 and $10, the requests stated they were being paid between $80 and $144 per hour.
The funds were again approved by Walter Diggles and then the Foundation would use the funds to pay the CMS managers or pay expenses on behalf of the Foundation or Lighthouse Church.
Summer 2010 Program
From June 7, 2010, to July 29, 2010, the church hosted a summer activity program. The Foundation then submitted requests off SSBG funds to DETCOG. These requests were filled out by Rosie and Anita Diggles. They claimed reimbursable expenses in the amount of $20 per day per child, along with transportation fees in the amount of $10 per child per day. Diggles approved and DETCOG paid the sum of $109,865 to the Foundation, but the actual costs were mo more than $74,704.76.
Summer 2011 Program
Diggles approved $55,198.60 in SSBG funds to the Foundation for the summer 2011 program, when actual costs were no more than $38,000.
The Century 21 Program involved driving students in vans from their schools to the church and then driving them home. The Foundation requested reimbursement in the amount of $5 per student, per trip. The paperwork claimed that as many as 150 students were transported in a single day. During the period between Sept. 20, 2009, to May 2010, the Foundation requested DETCOG pay SSBG funds to the Foundation in the sum of $109,121, when the Foundation only paid out $8,337.30 for transportation costs.
East Texas Fellowship of Churches 2009 Conference
Lighthouse Church held meetings with an organization of churches called the East Texas Fellowship of Churches. They held a conference in July 2009. In November 2009, Walter Diggles asked a co-conspirator to secure SSBG funding of at least $5,000 to cover the cost of the conference. The paperwork noted a registration fee of $10 per person who attended.
DETCOG was able to reimburse the conference $8,928, but the check was deposited into the Lighthouse Church account. This came after the Foundation had already paid the church $12,000 for a conference sponsorship.
2010 Scheme for Payment of Fictitious Conference and Volunteer Expenses
On Dec. 13, 2010, Walter Diggles said in an email to DETCOG employees that he could recommend reimbursement of registration for conference sessions at $96 per unit and reimbursement of volunteer hours at $12.50 per unit. A co-conspirator signed a letter stating the Foundation had provided 2,500 volunteer hours to hurricane victims. The letter stated the services were provided from Oct. 1, 2008, to Sept. 30, 2009. But the documentation consisted of copies of the same sign-in sheets that DETCOG used for the July 2009 conference that the Foundation had already received payment.
East Texas Fellowship of Churches 2012 Conference
In July 2012, the church held another conference and provided basic health screenings. The actual total cost of the kits for all of the screening tests was $112. The Foundation then requested SSBG reimbursement of $50 as a registration fee for each of the 77 participants and an additional $144 per person for health screenings for 61 people. DETCOG received the funding from the state and on July 13, 2012, wrote a check payable to the Foundation for $12,746, despite that nothing close to this amount was spent by the Foundation.
A co-conspirator then wrote a check on the Foundation account for $7,500 payable to a health care business operated by Walter Diggles' sister, who worked as a nurse at the conference. This check never made it to her and instead Walter Diggles endorsed the back of the check with the name of his sister's business and "Lighthouse Church" and deposited in the church's account.
Diversion of SSBG Funds
Walter Diggles diverted SSBG federal funds payable to and meant for the Foundation. On Sept. 12, 2008, he presented a DETCOG check to the First National Bank in Jasper, in which he served as a board member. The check was in the amount of $62,683.60 and payable to the Foundation. Diggles had the check deposited and $32,683.60 went to the Foundation and the remaining $30,000 went to Lighthouse Church.
On April 18, 2009, Diggles had another check for the Foundation, but had $14,237.88 for the Foundation and the remaining $50,000 for the church.
On Aug. 17, 2009, Diggles had another check in the amount of $17,503.03 for the Foundation. He had the full amount deposited in the church's account.
Payments to the Benefit of DETCOG Employees
In October 2011, DETCOG used SSBG funds to pay tuition for a co-conspirator's step-daughter, even though these funds are not allowed to be used to pay college tuition.
In August 2009, DETCOG used SSBG funds to pay for funeral expenses for a co-conspirator's stepson, even though the stepson lived in Dallas County, which is far outside DETCOG's region.
In January 2012, DETCOG awarded SSBG funds for a job creation program for a co-conspirator's husband. The request was made as a line item to a Foundation request, but the packed did not include documentation that the Foundation had incurred any expense for a job creation program. A check for $10,000 was later paid from the Foundation to the employer.
The indictment alleges Walter Diggles benefited from the SSBG funds that were in the Lighthouse Church main account by drawing them out and paying credit card bills and paying personal cellphone bills. It also alleges Rosie Diggles used SSBG funds to pay her own cellphone bills in the amount of $12,500. It also alleges Anita Diggles used SSBG funds to make car payments and for medical expenses.
The Diggles' attorneys have claimed the indictment comes from a misunderstanding of the reimbursement system.