Priest's Charity Charges Immigrants Millions
Records Show Ministry Provided Him and Associates Cars, Loans
By Brooks Egerton
The Dallas Morning News
January 12, 2003
One in an occasional series
A Catholic priest's ministry to poor people has charged them millions for help while spending large sums on real estate, cars and other purchases that benefit him and his associates, a Dallas Morning News investigation shows.
Dallas Bishop Charles Grahmann assigned the Rev. Justin Lucio to the unsupervised ministry after deeming him unfit for parish work a decade ago. Father Lucio lost his last pastor's job in 1989 after accusations of sexual and financial misconduct, which he denied and the bishop says were unsubstantiated.
The priest then set up Casita Maria, or Little House of Mary, a tax-exempt corporation that has counseled thousands of undocumented immigrants.
But it also has loaned money to some board members, even though state law forbids such a practice. It charged no interest and allowed the borrowing, in one case, to exceed a director's annual salary as Casita's No. 2 staff member.
Furthermore, the charity has made inaccurate or incomplete sworn statements about its finances to the federal government. And Dallas police have named some staff members as suspects in the unsolved theft of about $50,000.
Father Lucio answered a few questions during early research for this story but later declined to be interviewed in detail. Guadalupe Granados, a Casita Maria employee who serves with Father Lucio on the agency's board, acknowledged most of The News' findings.
"Maybe everything hasn't been done by the rules and regulations," she said. "But these are just mistakes some people made because we're not informed."
Father Lucio said he had given the newspaper abundant information by allowing a reporter to copy some records at his Oak Cliff office. He later cut off access to other files. State law requires most nonprofit organizations to release "all records, books, and annual reports of the financial activity of the corporation," and makes refusal to do so a misdemeanor.
Ms. Granados, who keeps the organization's books, said she was aware of that law but would follow Father Lucio's order to withhold documents. She said that the inaccurate statements to the government "are things that can be corrected."
Bishop Grahmann – a longtime advocate for immigrants, whose influx has made Catholics the largest religious group in Dallas – declined an interview request. So did Coadjutor Bishop Joseph Galante. Diocesan spokesman Bronson Havard would not comment about The News' findings except to say that the priest "is responsible for his own actions, as is any adult person operating an agency subject to government regulation and oversight."
Internal Revenue Service spokesman Phil Beasley declined to comment about Casita specifically, but did say: "Any time there's self-dealing, the IRS will want to ask questions."
Casita Maria was born in 1989, the year Father Lucio was forced from St. James Catholic Church and began a protracted pressure campaign against diocesan leaders. His supporters picketed and accused the hierarchy of racism; the priest went on a hunger strike.
Later, he filed a slander suit against a lay leader who had told the Dallas Diocese about the sexual and financial misconduct accusations. Ultimately, Father Lucio dropped the lawsuit and agreed never to refile it.
While the suit was pending, Bishop Grahmann reassigned Father Lucio to part-time work at another church, then rescinded the move after the priest sometimes didn't show up to celebrate Mass. Mr. Havard said Father Lucio then was restricted to non-parish ministry and assigned to full-time work at Casita.
This "final resolution of the controversy" came "with the full encouragement and support of the Hispanic community leadership," the spokesman said.
In the decade since, some of those supporters have turned away from the organization.
One of the priest's most prominent backers then was Adelfa Callejo, a Dallas lawyer and longtime civil rights activist. In a recent interview, she said she initially believed Father Lucio's claims that the diocese was retaliating against him because of his advocacy for its burgeoning Hispanic population.
She said she began referring clients to Casita in the early 1990s, only to hear complaints about staff members driving expensive cars and charging high fees. She said she also became worried about Father Lucio's personal volatility and eventually cut ties with him.
"I told him, 'You are betraying your trust as a priest.'"
Ernesto Maldonado, a lawyer who helped incorporate Casita Maria, also has broken with Father Lucio. He said the organization abandoned its purpose long ago.
"It was just a money-making machine," he said. "And it's so easy to make money off these people. They live in the shadows. They die in the shadows."
Early in its existence, the organization won nonprofit status with the IRS, which spares it taxation, and permission for non-lawyers to represent clients in Immigration and Naturalization Service proceedings, which saves on attorney costs. In turn, Casita had to promise to offer free or nominally priced services.
"Because there will be numerous ones that will not be able to pay anything, we will request donations from the general public to assist in this ministry," Casita wrote to the IRS in 1989, estimating that 98 percent or more of its clients were poor and unable to work legally. "No one in this organization, or on the board of directors, is seeking to profit from this ministry or receive any unreasonable compensation for their labor."
Tax returns show, however, that Casita has gained all of its income in recent years from client fees and interest earned on those funds.
Such a situation could lead to an investigation by federal immigration officials, said Anne Estrada, director of the Dallas district of the INS. She cited an immigration appeals board ruling that said: "The imposition of nominal fees was not intended as a means through which an organization could fund itself."
Casita's fees range from $15 for an initial consultation to $300 and higher for help filling out government forms. The diocese's Catholic Charities program charges similar amounts for immigration counseling.
Casita's records show that in 2000, the immigration service investigated whether to withdraw its accreditation of the charity, though it is not clear why. Casita hired a lawyer to argue its case and prevailed. The charity and the INS refused to release their files on the matter.
Before cutting off contact with The News, Father Lucio said his ministry did not rely entirely on fees. He explained that in 2001, it raised about $1,500 at a special event and occasionally got donations of a few hundred dollars from lawyers or other professionals. The money wasn't accounted for separately from the fees, he said, and donors didn't get receipts.
Casita's reported income – virtually all cash – totaled nearly $1 million in 2001, the last year for which it filed a tax return. The charity has no written budget, and the board's three top officials – Father Lucio, Ms. Granados and her husband, Joe – are also staff members.
"That's generally not a good practice," said Dr. Audrey R. Alvarado, executive director of the National Council of Nonprofit Associations. "Then who's overseeing your performance?"
Father Lucio said Casita has no budget because he can't predict how many needy people are going to seek help each year. "The board has never asked for a projected budget," he said.
The board has met a few times, at irregular intervals, over the last two years. Ms. Granados said the non-staff directors sometimes glanced at financial statements but never scrutinized them.
"I had no idea what was coming in and what was going out," said Christine DeSio, who served as treasurer until quitting the board about a year ago. She declined to comment further.
Board member Jose Pineda described himself as "completely ignorant" about the organization's finances, although he acknowledged, "I do have a fiduciary duty to Casita Maria."
While the charity has spent thousands of dollars on cars and real estate used by top staff members, most of its approximately 15 employees work without computers and none has Internet access.
Charity and government records show that Casita:
• Assembled a small fleet of automobiles it values at $140,000, even though it does not run a transportation service for clients. Recent-model vehicles have been supplied for personal use to Father Lucio, who is executive director and board chairman; to his housemate, Casita maintenance worker David Villatoro; and to Mr. Granados, who is the No. 2 staff member. Casita told the IRS on its annual filing that it did not provide any goods to its leaders or employees.
• Spent about $45,000 in the last two years on expenses listed as entertainment. Payments listed in its books include $4,400 to the Dallas Mavericks. Mr. Granados said the charity bought two season tickets that were raffled to clients as a fund-raiser. The organization provided no supporting documentation.
The other entertainment expenses were paid with credit cards assigned to Father Lucio and Mr. Granados, according to Casita records. Billings for the first 11 months of 2002 show that Father Lucio spent several thousand dollars at restaurants, grocery stores, hardware stores and pharmacies, and at service stations as far away as Mr. Villatoro's native El Salvador.
At its most recent meeting, last month, Casita's board stripped Mr. Granados and Father Lucio of their American Express cards and MasterCards, Ms. Granados said. She would not release minutes of the meeting, which occurred after The News asked to review credit card billings and other financial records.
Board member Fred Fields said he had never been told about personal use of the charity's credit cards and vehicles.
• Gave $10,000 bonuses to each of its top four top administrators in 2001, when Father Lucio's salary was listed as about $52,000. The board awarded the bonuses, as well as $3,500 apiece for the rest of the agency's employees, after hearing about long hours of overtime.
Board members also voted unanimously to set up $100,000 retirement funds for Father Lucio, Mr. Granados and a third veteran employee, Maria Briones, according to minutes of their December 2001 meeting. The full amount was to be set aside immediately for the priest; the other two funds were to be built over five years.
• Paid cash for a one-story office building that now houses a for-profit business Ms. Granados owns, Granados Notary Services. Casita clients are urged to use the business, which sells money orders and, for a fee, will send faxes, take ID pictures and translate documents. One phone number listed as Casita's rings to the business, which has no listed number of its own.
The charity told the IRS that it had not furnished facilities for any of its leaders, and it did not list any rental income on its 2001 tax return. Ms. Granados said she pays $500 rent, but it was not itemized on the return because all of the revenue was lumped together.
Mr. Fields, a real estate broker, said he advised on the purchase of the office building and was told that the organization needed room to expand. He said he "had no idea" that Casita wasn't using the building. Mr. Granados said the expansion plans turned out to be unnecessary.
• Owns a house in DeSoto that it rents for $10 a month to Father Lucio, 59, and the maintenance man, Mr. Villatoro, 28. The two men originally bought the house themselves in October 2001 – with the charity's cash, Ms. Granados said – then transferred the title to Casita two months later.
Ms. Granados said Father Lucio called her and her husband that October while they were in San Antonio, saying he wanted to borrow funds to pay off his house. She said they gave their proxy votes by phone, thinking he was referring to a duplex he owned in East Dallas.
Father Lucio told them he had a board majority, Ms. Granados said, adding that she did not ask for details. There is no record of the vote, she said.
She subsequently learned that he had used about $170,000 in charity funds to buy the DeSoto house. Board members, she said, later decided that instead of having Father Lucio repay the loan, Casita would take possession of the house and let him live there.
At a December 2001 meeting, with the priest abstaining, directors approved the $10-per-month rent – after Ms. Granados warned that an accountant had advised caution because "if ever audited by IRS, this could look as a conflict of interest."
The director who proposed the $10 rent was Mr. Pineda, the only lawyer on the board. He said in an interview that there was nothing wrong with providing compensation in the form of housing. "The part I find odd," he added, is that Father Lucio bought the house before getting board approval.
Father Lucio still owns the East Dallas duplex, which is valued on the tax rolls at nearly $190,000. Asked why Father Lucio might need to quit living at the duplex, Mr. Granados said: "It's ugly."
• Loaned tens of thousands of dollars to employees, including some who are board members. Casita reported the borrowing to the IRS, although it did not answer questions on the tax form about the purposes, interest rates or other matters.
Ms. Granados said the Casita staff had not known about a state law against lending to board members. The loans were considered interest-free salary advances to employees and are being repaid with payroll deductions, she said.
Board members approved large loans, Mr. and Ms. Granados said. But some directors disagreed, and minutes documenting any approvals are missing.
Mr. Fields, who has been on the board for several years, said the board was asked last October to lend $40,000. He said he raised concerns, the request was denied and members agreed that the charity should not be making loans.
In 1998, Father Lucio owed the charity $10,000, according to the organization's tax return. And Mr. Granados owed nearly $50,000. At the time, his salary was about $36,000 and his wife had just bought a house in San Antonio from her relatives, without a mortgage. That property, which is publicly appraised at $65,000, is now co-owned by Mr. Granados.
Mr. Granados said they borrowed the money mainly to pay off credit card debt amassed at a business they previously owned. His wife said they had bills for the criminal defense of their son, Eric Granados, who was charged in 1997 with raping the 12-year-old daughter of a Casita client.
The son, who was 17, was doing volunteer work for the organization and took the girl there after hours. He has since gone to prison for violating terms of his original probation.
Ms. Granados said the girl had pursued her son and told him she was 15. He "was still a kid" and barely old enough to face adult charges, she added.
Office crimes reported
The same year as the rape, two other crimes were reported at Casita's Oak Cliff office. First, in June 1997, Father Lucio told Dallas police that one of the agency's vehicles had been stolen from its parking lot over the weekend – a Nissan pickup that Ms. Granados said had been assigned to Mr. Villatoro for personal use. She said insurance covered the loss.
A police report said there were "no signs of broken glass where the vehicle was parked." The truck was never recovered, police said, and no one was arrested.
In October 1997, Father Lucio reported that someone had stolen about $42,000 in cash and $6,000 worth of gold jewelry from an office safe. There was no sign of forced entry into the building or the safe.
'Very little paper trail'
According to a police report and the minutes of a Casita board meeting, Father Lucio said that the crime was an inside job and that only one employee knew the combination to the safe. That employee remains on the job today, and the case remains unsolved.
The police investigator assigned to the case said the safe may not have been locked, and others may have known the combination. Several employees were considered suspects, he said.
"They've got a lot of money and very little paper trail," said Senior Cpl. David McWilliams. "Their accounting practices were just horrible."
A couple who served on the Casita board then, lawyers George Rodriguez and Michelle Saenz-Rodriguez, were hired to oversee an internal investigation that included polygraph tests for all employees and volunteers.
Mr. Rodriguez declined last week to comment on the results of the investigation. Minutes for more than two years of ensuing board meetings are missing, Ms. Granados said. She declined to provide a copy of the lawyers' report to the board.
Mr. Rodriguez said he and his wife quit the board soon after completing their investigation. He would not say why.
A few years earlier, Father Lucio told police that some employees had stolen about $20,000. Three people were accused of pocketing fees and issuing fake receipts; at least one pleaded guilty and was put on probation.
Similar allegations arose against an employee last year, according to board meeting minutes. Ms. Granados said the man quit and police were not notified.
Before his departure, the man defended himself before the board. According to minutes of the meeting, he said the only money he had kept from clients was that which he received on Fridays, when Casita is normally closed. He and Father Lucio split whatever came in on those days, he said.
Ms. Briones, the No. 3 staff member, told the board about several other allegations against the employee. But she echoed his central assertion, the minutes show:
"When there was excessive work, Fr. Lucio had approved that the representatives could keep the representation money from clients, because the reps. were having to work on their day off."
There is no indication in the minutes that Father Lucio disputed this account.
Monday: The sexual misconduct allegations against the priest.
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