Following a federal investigation can be a lot like tracking a submarine, always beneath the surface except for periodic moments when a periscope peeks at its target.
It seems the government has Commissioner Larry Langford in its sights. In recent months various federal agencies have subpoenaed documents from Jefferson County and they will soon take depositions from three current and two former county commissioners — Langford, Shelia Smoot, Bettye Fine Collins, Mary Buckelew and Gary White.
But a new turn this week seems to indicate that Langford is Target No. 1.
Until this week the investigation seemed to be focused exclusively on a series of complex and convoluted bond swaps. When the deals were struck, then-Commission President Langford promised that they would save the county millions in interest rates, but so far the deals have yielded exactly the opposite. An analysis by the Birmingham News last month revealed the deals have so far cost the county more than $150 million excess interest payments, in addition to the millions of dollars in fees received by the politically connected investment bankers who coordinated the swaps. Meanwhile, the county’s finance director has retained one of Birmingham’s most high-profile defense attorneys, Tommy Spina, to represent him during the federal investigation.
On Wednesday, The Birmingham News reported that the Internal Revenue Service has subpoenaed records from the county related to Computer Help for Kids, a non-profit organization set up by former county commissioner and former city councilor John Katapodis. Board members at Computer Help for Kids have included fired HealthSouth CEO Richard Scrushy, other former HealthSouth executives and Langford.
During Scrushy’s accounting fraud trial in 2005, Computer Help for Kids was mentioned during the testimony of former HealthSouth vice president Ken Livesay.
By 2002, Livesay thought he had extricated himself from the $4 billion accounting fraud at HealthSouth. He had been reassigned to the company’s information technology division, when Scrushy asked him to serve on the board for Computer Help for Kids. The intention of the non-profit, Livesay said, was to refurbish old computers and then give them to underprivileged families and community institutions. HealthSouth had thousands of non-Y2K compliant computers to donate to the program. The partnership seemed a logical fit.
However in 2002, the non-profit had taken an odd turn, according to Livesay’s testimony. The executive director had been dismissed by “a volunteer,” he said. Throughout his testimony, Livesay referred to this individual cryptically as “the volunteer,” but it is now know this person he was Katapodis.
“The foundation had hired an executive director, and it also had a volunteer that was responsible for the day-to-day activities,” Livesay testified. “Once it got up and running and the computers were coming in, and there was a process in place to get them refurbished and get them in place, I sort of stepped back because I wasn't expected to be involved day to day.”
Livesay served as treasurer of Computer Help for Kids. In that role, one of his responsibilities was to prepare the records for the organization so it could maintain its tax-exempt status. When Livesay attempted this in 2002, he discovered something irregular was happening there. The executive director was no longer working there, and it appeared it was being run by the “volunteer,” Katapodis.
The accounting system for Computer Help for Kids was rather simple, Livesay testified. Basically it was just a checkbook. When Livesay asked Katapodis for that checkbook, Katapodis was reluctant to give it to him, Livesay said on the stand.
After several attempts, Livesay finally received a “version of the checkbook.” From that information, Livesay said he determined that Computers Help for Kids was commingling funds with another non-profit organization run by Katapodis.
“I started getting concerned that the funds were not being used for their intended purpose, and I pressed this individual to give me more information,” Livesay testified. “He was reluctant to do it. Some of the information that I did get from him, it was clear to me that the funds were not being used for its intended purpose. They were being used for political or personal interests.”
Having recently extricated himself from one tremendous fraud, Livesay worried that he was becoming entangled in another. HealthSouth had donated large sums of money to Computer Help for Kids. Livesay told Scrushy that he was no comfortable with what was happening at Computer Help for Kids and that he did not want to serve on the board anymore. One of Scrushy’s assistants told him that he did need to serve on that board any longer.
“After what I had been through before, and this was going to require me to actually sign a document that would go to the government, to the IRS, I was just -- I decided I'm going to nip this one in the bud,” Livesay said on the stand.
Langford, Katapodis and Scrushy were co-founders of the non-profit. Since Langford was elected to the commission in 2002, the county has given $765,000 to the non-profit. Computer Help for Kids also shares an address with another non-profit, the Holy Family Foundation, which is headed by Langford’s wife.
That address is a building adjacent to the Southside hospital formerly owned and run by HealthSouth. HealthSouth owned the building, but Katapodis has claimed that Scrushy gave it to him through an oral agreement. HealthSouth disputes that, and the issue is currently the subject of a lawsuit.
— Kyle Whitmire
For more on this story, check out the April 5 issue of the Birmingham Weekly.