A Santa Ana nonprofit has agreed to pay more than $600,000 to the U.S. government to settle a case in which prosecutors alleged that Hermandad Mexicana Nacional leader Nativo Lopez wrongly diverted grant money meant for English classes for immigrants, lawyers for both sides said Friday.
The settlement between the U.S. Attorney’s Office and Citizens in Action, an affiliate of Hermandad, came one day after the state Department of Education agreed to repay the federal government at least $2.5 million over its alleged failed oversight of millions of dollars intended for adult-education classes.
The charges revolve around a complicated transfer of money from Hermandad Mexicana Nacional Legal Center in Los Angeles, which now appears to be inactive, to Hermandad offices in Santa Ana, court records show.
Prosecutors alleged that Lopez, who runs the Santa Ana office and was on the legal center’s board in the 1990s, had wrongly used education grants to pay the mortgage on his headquarters in Santa Ana. He then transferred the building in 1998 to Citizens in Action, a nonprofit group he also helped found to create affordable housing and open a computer center.
In the settlement, neither Lopez nor Citizens in Action admitted wrongdoing. Lopez has not been charged in the case, though he faces a civil lawsuit from the Department of Education seeking more money. Lopez, who is also the subject of an attempt to recall him from the Santa Ana school board, declined to comment Friday, but his lawyer said he has done nothing wrong.
“He’s been named, but not charged with anything,” said Santa Ana lawyer Mark Rosen. “Nativo Lopez is a name that people like to throw around because he’s well-known in the community. It has a certain shock value. I have not seen anything showing that Nativo Lopez has done anything wrong at all.”
This week marked the first time that the federal government has managed to recover part of approximately $20 million in adult-education funding that was originally in dispute in 1997, state lawyers said. The settlement papers were unavailable at the clerk’s office in U.S. District Court in Los Angeles, but Assistant U.S. Attorney Steven Welk said he filed them Friday.
In court documents, prosecutors said they traced $6.5 million in government grants given to Hermandad Mexicana Nacional Legal Center in the mid-1990s and found that a significant amount was used to pay rent or mortgages on Hermandad properties, including the former Santa Ana headquarters.
The legal center gave about $1.7 million to Hermandad in Santa Ana, an offshoot that is run independently by Lopez, and about $1.1 million of that money was not used for classes, a violation of the grant guidelines, according to the complaint.
Prosecutors alleged that Lopez used the money to help pay for Hermandad’s building in Santa Ana. In 1998, after allegations of misuse surfaced, he helped to create Citizens in Action and transferred the Santa Ana property to the group later that year.
In December 1998, Citizens in Action took out a $1.6 million mortgage on the property from Fullerton Community Bank and sold it in early 2001, netting $1.1 million. In September 2001, federal agents seized nearly $1 million from the nonprofit group’s bank account, though prosecutors finally agreed to take $639,166.66 and return the rest.
The alleged misuse of funding for English classes exploded in the 1990s and led to finger-pointing between the state and federal education departments over the control of the money. The state says it has tightened controls over adult- education funding, but doesn’t admit any wrongdoing.
Last year the state filed a $17 million lawsuit against the Los Angeles-based Hermandad Mexicana Nacional Legal Center, Hermandad Mexicana Nacional of Santa Ana and Lopez, alleging that they misused the funds. Federal prosecutors later filed criminal charges against the legal center alone.
At the time, U.S. Attorney Lee Arian said it appeared that the criminal case would likely have little effect on Hermandad in Orange County. On Friday he said only that the investigation is ongoing.
“We traced the money we believed was improperly used,” Arian said. “There are clearly links out there and we’re looking at them.”
Rosen said he doesn’t believe the federal government will recover any more money related to Hermandad but that the state is still pursuing the civil suit against the Santa Ana office. Rosen said it was Bert Corona, the deceased head of the Los Angeles office, who handled the grant finances.
“The Department of Education is just trying to mix everything and throw the L.A. office and Santa Ana office all in one batch,” Rosen said. “We do have to delineate between the two.”