The federal investigation into nonprofit Safety Net of Oregon for mismanaging its clients’ disability benefits is closed and no criminal charges will be filed, the U.S. Attorney’s Office has announced.
After the 19-month investigation, officials determined neither Safety Net nor any of its employees were to be held liable for significant shortages in its collective account, said Ann Mohageri, a Social Security Administration spokesperson. Linda Chapman (formerly Linda Stelling) and Mark Stelling ran Safety Net as CEO and president, respectively. The couple ended their 20-year marriage in January.
More than 300 beneficiaries were owed a total of $1.4 million that, according to the nonprofit’s ledgers, should have been in its account but wasn’t. All the misused funds were Title 2 and Title 16 Social Security disability benefits.
The U.S. Attorney’s Office stated in a press release Oct. 16 that investigators determined the shortage was the result of “accounting and bookkeeping errors.” Chapman had previously told investigators she believed the funds were missing due to a software problem.
Safety Net, based in Portland, was Oregon’s largest payee service. It handled federal disability benefits for more than a thousand clients who were unable to manage their finances independently because of physical or mental disabilities. Safety Net received Social Security benefit payments on behalf of its clients and was responsible for paying their rent, utilities and other bills and making sure there was money left over to meet their basic needs.
On March 6, 2014, as previously reported by Street Roots, Safety Net was served with a federal search warrant following allegations it was mismanaging client funds. Investigators initially believed $600,000 had been mismanaged. Less than one month later, Safety Net permanently closed, leaving many of its clients financially insecure.
Over the next year, many former Safety Net clients struggled to find new payee services and retrieve funds the defunct nonprofit owed to them.
This summer, as word spread that all the money in Safety Net’s account had been paid out, former clients who were still owed money became concerned.
“Social Security has been telling people ‘Safety Net’s out of money,’” Kathy Wilde, litigation director at Disability Rights Oregon, told Street Roots in mid-July. “A lot of people have been told they’re S.O.L.”
Worried they wouldn’t get their money back, former Safety Net clients contacted Sen. Jeff Merkley’s office in July. His staff worked with Disability Rights Oregon to alert the Social Security Administration of its responsibility under the law to repay beneficiaries if the payee organization is unable to do so, according to the senator’s spokesperson, Courtney Crowell.
When Street Roots asked the Social Security Administration if it would be repaying Safety Net’s former clients later that month, Mohageri said, “The only beneficiaries whom we are not paying that had their funds misused are those whom we cannot locate and those who are deceased.”
The estates of the deceased are owed $185,000 that was mismanaged by Safety Net and $62,000 that was recovered from its accounts.
Mohageri told Street Roots her office would seek restitution from Safety Net to repay the estates of deceased beneficiaries still owed. When asked if those estates would go unpaid if no restitution is collected, she said the “issue is still under consideration.”
The administration has since changed its stance, and Mohageri said this month that her agency is “developing estates for payment.”
To date, the Social Security Administration has reimbursed 216 beneficiaries who were owed money out of the mismanaged $1.4 million – at a cost of $1.05 million to taxpayers. More than 700 clients received funds recovered from Safety Net.
Many clients waited more than a year after Safety Net closed to receive funds they were owed. Ninety of the clients whose money was mismanaged have not been paid for varying reasons, such as incarceration, the suspension of benefits or death, Mohageri said.
The Social Security Administration has drawn criticism from the outset of its handling of the Safety Net debacle.
In March, 2014, just days before Safety Net’s closure, Disability Rights Oregon, Oregon Law Center and National Senior Citizens Law Center filed a complaint against the federal agency for not assigning Safety Net’s clients new payee services to ensure their benefits would not be interrupted.
Shannon Singleton, executive director at JOIN, a nonprofit transitioning people living on the streets into housing, said many of her agency’s clients who had been receiving benefits through Safety Net became responsible for managing their own money after the closure.
“There were a lot of people who really could use and needed that support that became their own payees,” she said. “It wasn’t necessarily what was best for them in the long term.”
More than 200 of Safety Net’s clients who were owed money are now deceased. As of Nov. 3, only five of their estates had been paid, Mohageri said.
The deaths of clients for whom Safety Net still held money had occurred prior to 2008 up until July 2015. Safety Net retained funds belonging to estates of some deceased individuals long after they died.
Mohageri said Social Security has been unable to locate 158 estates of deceased beneficiaries owed money that was retrieved from Safety Net’s bank account.
While hundreds of client deaths may seem unusual, the mortality rate among former Saftey Net clients is consistent with a rate of death determined in a 2013 report from the Center on Budget and Policy Priorities. It found that people who receive disability benefits experience a high rate of death for various reasons – from poor health to socioeconomic disadvantages.
The report also noted that “an unknown, but significant, number die during the five-month waiting period, when (disability) benefits are unavailable.”
It is unclear whether Safety Net’s closure and the ensuing difficulty in receiving benefits many of its former clients faced as a result played a role in any of these deaths.
Inquiries about where the money went and the nature of the accounting errors have gone unanswered. The U.S. Attorney’s Office referred requests to the Social Security Administration, which referred back to the U.S. Attorney’s Office’s vague press release. A records request by Street Roots is currently pending with the Social Security Administration.
Instances of payee services mismanaging their clients’ money isn’t common, Mohageri said.
But on Nov. 5, the executive director of another payee service was sentenced in a Portland courtroom after he pleaded guilty to stealing nearly $100,000 in disability benefits he was managing for clients in Idaho Falls, The Oregonian reported. Golden Barrett was sentenced to five years’ probation and ordered to pay back the money