CDI Saga Heads to Federal Court: Employees File Suit
By: Marci Manley, KARK 4 News
Updated: April 3, 2012
"Some have maxed out credit cards, many of them have gotten shut off notices from utilities and none of them deserve it," he said describing his clients' situations.
Chip Welch is representing eight clients in a lawsuit filed in federal court, against their current and former employers that to this day have not paid them for work clocked back in January.
"It's the business I am in of representing people who get stomped on by the man, and we try to in our own small way stomp the man back a little bit," he said.
The lawsuit names federal Head Start and Early Head Start program providers Child Development, Inc. of Russellville and Community Development Institute, the federally-appointed takeover agency, from Colorado. That's in addition to former Executive Director Jo Ann Williams and former Fiscal Officer Lisa Barber who left the company shortly after the payroll problem.
"It always irritates me when the little people, like me get stepped on by government or government funded agencies that are just run amuck," Welch said.
Child Development realized it had a financial shortfall when it could not make payroll in late January.
It failed to pay employees and over the course of a month many of those workers received only three days worth of wages.
Child Development Board members claim that in monthly meetings, financial reports always showed the organization was on budget. However, in January it appeared over $400,000 was unaccounted for.
Child Development also failed to contribute to retirement plans or insurance premiums, despite withholding money since at least November. Staff notified employees any medical claims made within the period of the lapse in coverage would be covered. However, it's unclear if individuals have had success with that.
Jim Smith, a lawyer retained by CDI was not available for an on-camera interview, but tells us the corporation is working to wind down operations. It is taking inventory of its assets against debts he estimates at $360,000 without payroll, benefits, or taxes included in that debt owed. Efforts, he said, are being made to determine if the company's even solvent.
According to Smith, CDI's board, composed of several county judges, Arkansas Tech employees, lawyers and other professionals, have been working with a variety of agencies to find out what happened to the money that went missing.
According to him, The Division of Legislative Audit, Arkansas Department of Human Services, and the U.S. Office of Head Start have been gathering information from financial records, conducting audits of the bookkeeping to try and determine where hundreds of thousands of dollars in public money actually went.
"This is more than a 'Whoops!' event. The accounting is something that apparently has been going on for several months," Welch said. "It appears, to put it charitably, to be some creative accounting. And if somebody pocketed that money they need to be held accountable."
At this time, KARK is not aware of any criminal investigation being conducted on CDI. We placed calls with the U.S. Attorney for the Eastern District of Arkansas. Those calls have yet to be returned.
We have also requested information from the Arkansas Department of Human Services regarding the investigation into CDI. We are waiting for that request to be fulfilled. We've also requested similar information from the U.S. Head Start Office, similarly we are waiting for them to return our calls.
The eight employees are asking for the estimated $400,000 in lost wages for all of CDI's employees, requesting class action status during the suit.
They also ask for damages from lack of payment, like bank fees or repossession of automobiles and medical bills, as a result of what they say is CDI's lack of financial accountability. That's in addition to attorney and court fees stemming from the lawsuit.
CDI had an estimated 300 similar employees working in around 26 centers across the state. Some, like Welch's clients, continue to work for the take-over agency. Others opted to leave the company after the payroll problems arose and Community Development Institute took over.
"You figure in this economy, a government job isn't going to make you rich, but you'll at least get a paycheck." Welch said, summing up the situation.
Chip Welch is representing eight clients in a lawsuit filed in federal court, against their current and former employers that to this day have not paid them for work clocked back in January.
"It's the business I am in of representing people who get stomped on by the man, and we try to in our own small way stomp the man back a little bit," he said.
The lawsuit names federal Head Start and Early Head Start program providers Child Development, Inc. of Russellville and Community Development Institute, the federally-appointed takeover agency, from Colorado. That's in addition to former Executive Director Jo Ann Williams and former Fiscal Officer Lisa Barber who left the company shortly after the payroll problem.
"It always irritates me when the little people, like me get stepped on by government or government funded agencies that are just run amuck," Welch said.
Child Development realized it had a financial shortfall when it could not make payroll in late January.
It failed to pay employees and over the course of a month many of those workers received only three days worth of wages.
Child Development Board members claim that in monthly meetings, financial reports always showed the organization was on budget. However, in January it appeared over $400,000 was unaccounted for.
Child Development also failed to contribute to retirement plans or insurance premiums, despite withholding money since at least November. Staff notified employees any medical claims made within the period of the lapse in coverage would be covered. However, it's unclear if individuals have had success with that.
Jim Smith, a lawyer retained by CDI was not available for an on-camera interview, but tells us the corporation is working to wind down operations. It is taking inventory of its assets against debts he estimates at $360,000 without payroll, benefits, or taxes included in that debt owed. Efforts, he said, are being made to determine if the company's even solvent.
According to Smith, CDI's board, composed of several county judges, Arkansas Tech employees, lawyers and other professionals, have been working with a variety of agencies to find out what happened to the money that went missing.
According to him, The Division of Legislative Audit, Arkansas Department of Human Services, and the U.S. Office of Head Start have been gathering information from financial records, conducting audits of the bookkeeping to try and determine where hundreds of thousands of dollars in public money actually went.
"This is more than a 'Whoops!' event. The accounting is something that apparently has been going on for several months," Welch said. "It appears, to put it charitably, to be some creative accounting. And if somebody pocketed that money they need to be held accountable."
At this time, KARK is not aware of any criminal investigation being conducted on CDI. We placed calls with the U.S. Attorney for the Eastern District of Arkansas. Those calls have yet to be returned.
We have also requested information from the Arkansas Department of Human Services regarding the investigation into CDI. We are waiting for that request to be fulfilled. We've also requested similar information from the U.S. Head Start Office, similarly we are waiting for them to return our calls.
The eight employees are asking for the estimated $400,000 in lost wages for all of CDI's employees, requesting class action status during the suit.
They also ask for damages from lack of payment, like bank fees or repossession of automobiles and medical bills, as a result of what they say is CDI's lack of financial accountability. That's in addition to attorney and court fees stemming from the lawsuit.
CDI had an estimated 300 similar employees working in around 26 centers across the state. Some, like Welch's clients, continue to work for the take-over agency. Others opted to leave the company after the payroll problems arose and Community Development Institute took over.
"You figure in this economy, a government job isn't going to make you rich, but you'll at least get a paycheck." Welch said, summing up the situation.
