Memphis couple face multiple charges in alleged day care fraud

The trial follows a sweeping federal investigation that began with the deaths of two toddlers left in day care vans during the hot summer months in 1999, and eventually reached all the way to the governor’s office.

The investigation found evidence suggesting a tight circle of nonprofit day care executives in Memphis had diverted money intended for children to Caribbean vacations, gold watches, fancy cars and other perks for themselves.

The Madisons go in trial Monday in U.S. District Court on 29 charges.

Prosecutors allege WillieAnn Madison misappropriated $881,000 while running government-funded Cherokee Children and Family Services. For a decade, the now-defunct nonprofit agency held an exclusive contract controlling the flow of millions of state and federal child-care dollars into Memphis.

In addition to the federal charges, Tennessee Attorney General Paul Summers identified several million dollars in squandered assets, persuading civil court judges to place Cherokee and six related day care operations in receivership.

State prosecutors have brought charges against four Madison associates, netting two convictions, including one in February against WillieAnn Madison’s sister, Phyllis Herring, who is serving a three-year sentence for stealing more than $10,000 from a nonprofit day care.

Defense lawyer Tony Axam says the Madisons may be guilty of some big mistakes, but insists they are hardly criminals.

John Madison, 59, serves as presiding elder for the African Methodist Episcopal Church’s South Memphis district, overseeing 21 AME churches throughout West Tennessee.

As the district’s “First Lady,” WillieAnn Madison, 63, is active in social and charitable functions. A building allegedly acquired by the couple through ill-gotten gains now is a Christian bookstore.

“They’re the kind of people you’d like to have as neighbors,” Axam said.

The trial, expected to last four weeks, will involve complex government evidence — 36,000 documents contained in 36 boxes — pitted against the Madisons’ character, reputation and history of community service.

Cherokee came under scrutiny after the July 21, 1999, heat-stroke deaths of two toddlers forgotten in separate day care vans.

Two-year-old Brandon Mann died outside a Pee Wee Wisdom Learning center, run by Cherokee board member Vivian Braxton. Darnecia Slater, 22 months, died outside a Children’s Palace center run by the late county commissioner James Ford.

Within weeks, a federal grand jury began examining Cherokee’s political connections and its long hold on the state day care broker contract in Shelby County. As broker, Cherokee received up to $2.4 million a year from the state to screen poor families seeking government day care subsidies.

Competing day care operators had long alleged that Cherokee steered families — and large shares of Shelby County’s $75 million annual day care subsidy — to centers owned by Madison’s friends and associates.

Cherokee won the broker contract in 1990, five months after it was founded, and held onto it in successive bidding despite receiving lower scores than competitors. In 1999, after Cherokee finished third yet again and received the contract, the grand jury summoned several prominent officials including state Sen. John Ford, D-Memphis; Hardy Mays, then-Gov. Don Sundquist’s chief of staff and now a federal judge; and John Ferguson, Sundquist’s finance commissioner.

The men said Ford reviewed applications in the governor’s office before the disqualification of two top-ranked competitors, yet maintained they’d done nothing improper.

The investigation took a turn in May 2000 after The Commercial Appeal newspaper of Memphis reported that taxpayer-funded Cherokee had paid executive director WillieAnn Madison more than $1 million for a building she owned and rented to the agency.

The payments were based on a lease that charged by the square foot and asserted that her building was more than twice its actual size. Madison later admitted receiving $502,000 in overpayments and made repayment, yet government lawyers maintain she never fully repaid the debt.

Twenty-two of the 29 federal charges stem from Cherokee’s lease with WillieAnn Madison and the alleged rent scheme. Overall, WillieAnn Madison faces 25 counts of embezzlement, money laundering, making false statements in official reports to the government, making fraudulent claims for payment and income tax evasion.

John Madison, a certified public accountant who served as Cherokee’s bookkeeper, is charged jointly with his wife in four tax evasion counts and faces four separate allegations of making false statements.