Thursday, January 18, 2007

Former Fairbanks Mayor Jim Hayes Indicted For Diverting $450,000 Of Federal Grant Money To His Church

Update: Jim Hayes was convicted on 16 counts on February 11th, 2008. Click HERE for updated post. Additional Update: On May 2nd, 2008, a federal judge sentenced Jim Hayes to 5 1/2 years and Chris Hayes to 3 years imprisonment. They have been directed to report to prison within six weeks. Stories by the Anchorage Daily News and the Fairbanks Daily News-Miner.

TNB doesn't always come dressed in a hooded sweatshirt and baggy pants. Former Fairbanks Mayor Jim Hayes and his wife, Chris Hayes, were indicted by a Federal grand jury in Anchorage on Wednesday January 17th, 2007 for allegedly funneling more than $450,000 in government grants into construction of a church where he is the pastor. Some funds were also used to buy a plasma T.V. for the couple's home, to pay for a family member's wedding reception in 2004, and to cover personal bills, including $37,000 in credit card debts and a pair of plane tickets to London. Primary story reported in the Anchorage Daily News, and two stories published in the Fairbanks Daily News-Miner, one about the indictment, and the other about Senator Ted Stevens' unwitting role.

The couple face multiple criminal charges, including money laundering and illegal application of government grants. The multiple-count indictment alleges the couple diverted government funds awarded to a Fairbanks charitable organization run by Chris Hayes to pay for construction and furnishings for the church. Chris Hayes was charged with 92 counts; Jim Hayes with 23 counts. The charges came a year after Federal agents searched the Hayes home, the Lily of the Valley Church of God in Christ and the LOVE Social Services Center. The church was founded by Chris Hayes' parents. Hayes will continue as the church's pastor for the time being.

Click HERE to view the 27-page indictment in PDF format.

Assistant U.S. Attorney Karen Loeffler said the couple had not been arrested. Loeffler is seeking a court summons for them, saying they are not considered a flight risk. "They're longtime residents of Fairbanks," she said. "They've known about the investigation." Jim Hayes, 61, is a member of the University of Alaska Board of Regents and was the city's mayor from 1992 to 2001. He also has served on the Fairbanks City Council and the Fairbanks North Star Borough Board of Education. There are no plans to ask Hayes to step down from the Board of Regents at this time. His eight-year term expires in 2011.

According to the indictment, LOVE Social Services Center received more than $2.7 million in federal grants between 2001 and 2005, according to the indictment. The tax-exempt organization was set up in 2000 to provide social and educational services to low-income youths in the Fairbanks area.

The indictment further states the organization used the original grant money to buy the old Lily of the Valley Church building. A larger church was built across the street. However, when the construction cost for the new church exceeded its funding sources, the couple diverted government grant funds to pay construction bills, provide furnishings, and to cover operating expenses for the new church. In addition, Chris Hayes, 56, allegedly had her organization write checks for cash that she then used to purchase money orders and cashier's checks.

The maximum penalty for each count of misusing government funds is 10 years in prison and a $250,000 fine. For money laundering, the maximum penalty is 20 years and $500,000 per count, and the maximum for conspiracy is another five years or $250,000, according to the attorney’s office.

The grants came at the direction of U.S. Senator Ted Stevens (R-AK). Aaron Saunders, a spokesman for Stevens, said the senator has known the Hayes family for a long time and "was saddened to hear the news of the indictments."

Wednesday’s indictment does not mention Stevens or the earmarks. The indictment describes the money as grants from the two federal agencies through which Stevens directed the money — the Department of Housing and Urban Development and the Department of Justice.

The U.S. attorney announced the indictment a day after the Senate voted to rewrite its rules governing how such earmarks are delivered and disclosed. Stevens voted for the changes. Most of the reforms passed in the House and Senate this month aim to make information on earmarks more public, but Stevens never hid the LOVE Social Services money. He announced it in news releases after each stage in the appropriations process over five years.

Stevens also briefly described the targeted program in news releases and discussed his relationship with the Hayes family in interviews with Alaska reporters. In a 2004 interview, Stevens said Jim Hayes proposed the youth program. Stevens provided the first earmark, for $1 million, a month after LOVE Social Services incorporated in 2000.

He had an idea to develop a center to assist some in the black community, and I helped get some money to do that,” Stevens said in 2004. “There’s nothing personal in it. They don’t get any personal gain out of it. It’s part of a cultural, social thing in the area. I don’t see anything wrong with that.” Stevens also said he understood that the LOVE Social Services money would help kids from low-income families, particularly those in the military.

Stevens said he had known Jim Hayes for many years, predating Hayes’ time as mayor of Fairbanks. “He has a very good reputation as far as I’m concerned,” Stevens said last year after the FBI action.

Stevens said his wife, Catherine, first met Jim Hayes while they worked together for the state Department of Law. Jim Hayes was an investigator for the attorney general’s office in Fairbanks. Hayes’ son, James, went to work for Stevens in his Fairbanks office in the 1990s. Stevens then hired him as an aide in Washington, D.C., in 1999. The younger Hayes stayed at Stevens’ home for a time after arriving. He earned his law degree while working as a Senate Appropriations Committee aide, but left Stevens’ staff when the Alaska senator stepped down from the chairmanship of that committee in early 2005. Stevens’ spokeswoman at the time said the younger Hayes did not help secure the LOVE Social Services money. Staff members are not allowed to work on spending items that might affect family members, she said.

Stevens said he didn’t see a potential conflict of interest in giving money to a friend’s program while also employing the friend’s son.

Analysis: Based on Senator Stevens' comments, this is a recent development. There are no reports of any earlier corruption on Hayes' part during either his service as Mayor, the City Council, or the Board of Education.

What's interesting is that despite 115 counts against them, the Hayes haven't been arrested, because the Feds believe they are so well-established in the community that they don't constitute a flight risk. Yet when former Alaska State Representative Tom Anderson (pictured at left, courtesy of, married to State Senator Lesil McGuire, just as well-established in his community, and just as little of a flight risk, was indicted in December on ONLY seven felony counts of money laundering, extortion, and bribery, the Feds wasted no time in slapping the bracelets on him and frog-marching him off to stir. Look at the two pictures. You don't suppose that the difference in PIGMENTATION had anything to do with it, do you? You think maybe the Feds decided to slip Hayes a little bit of that "affirmative action" on the sly?

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