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http://www.ocregister.com/news/hermandad00509cci2.shtml

State sues Hermandad over alleged misuse of grant funds

Department of Education charges that the immigrant-rights group cannot account for funds intended for classes.

May 9, 2001

By COURTNEY PERKES

The Orange County Register

The state Department of Education has filed a $17 million lawsuit against Hermandad Mexicana Nacional and leader Nativo Lopez to recover money intended for English and citizenship classes for immigrants that the state says the group cannot account for.

The lawsuit, filed Friday in Sacramento, comes three years after a series of audits found poorly kept records and others that appeared phony. The department is seeking the return of $7 million in grants plus $10 million in punitive damages.

Officials from Hermandad, which has offices in Los Angeles and Santa Ana, deny any wrongdoing and said the money was spent for classes.

"The Department of Education is in for the fight of its life," said Lopez, executive director of the Santa Ana office.

Since those audits, Hermandad still has not provided credible documentation of what happened to the money, according to Doug Stone, spokesman for the state Department of Education.

State officials also said the matter appears to be more than just a case of poor bookkeeping. The suit accuses the immigrant-rights group of fraud. It alleges that Hermandad in February submitted what appear to be fabricated documents showing that classes had been provided with grant money. Stone would not elaborate on how the documents appeared to be fabricated.

In addition, the suit says that Hermandad claimed to have spent state money on employee salaries and payroll taxes, but that those taxes were never paid to the Internal Revenue Service.

"We have given them the benefit of the doubt for quite some time," Stone said.

"After almost three years of trying to get the complete documentation, it's pretty clear that it's never going to come across the table."

Register staff writer John Howard contributed to this report.