FBI raids Riverbank home, office of SCAP execs

December 7, 2011 

— FBI agents served search warrants Wednesday at the Riverbank home of Denise and Joe Gibbs, and the Modesto office of the Stanislaus Community Assistance Project that they managed before they were suspended last week.

The FBI would not say what they were looking for at the Gibbses' home or the non-profit housing agency's Coffee Road office and referred all questions to the U.S. attorney's office in Sacramento.

Also involved with the searches were officials with the Department of Housing and Urban Development's Office of Inspector General, which has investigated how federal money was spent in Modesto's $33 million Neighborhood Stabilization Program.

"All I can confirm is that FBI agents are searching those locations," said Lauren Horwood, spokeswoman for the U.S. attorney's office. "Everything is under seal. There is no more information I can give you."

As of Wednesday, no arrests were reported.

Denise and Joe Gibbs have managed SCAP, which has received millions of dollars in federal housing money. Last week, SCAP's board suspended the Gibbses and housing director Caryl Prunty, citing the need to establish reforms and ethical practices at the housing agency.

Since May, SCAP has drawn attention for the $627,300 in compensation awarded to Joe Gibbs last year, for housing employees or their relatives in homes remodeled with taxpayers funds, and for how it spent funds and managed NSP rental housing.

In the overnight hours after the board's decisions last week, there was a burglary at SCAP's office on Coffee Road; the only item taken was a computer server, police said.

Wednesday morning, there were at least five unmarked cars in front of the Gibbses' home in Riverbank, which sits on a bend in the road in a quiet neighborhood north of downtown. Investigators were going into the home through the front and garage doors.

Agents who answered the door would not confirm the Gibbses whereabouts.

At about 8:30 a.m., FBI agents entered the SCAP's Modesto office with a jarring knock, as staff and a board member were meeting with Cynthia Shallit, the city's consultant who was hired recently to manage NSP projects.

Agents ordered the staff to cease work and not leave the building. They talked with everyone in the office and then started removing computers and boxes filled with files, Shallit said.

Just before the raid, the consultant and SCAP representatives were discussing a recent monitoring letter that cited deficiencies in managing NSP rentals. Shallit said she spoke briefly with and gave contact information to an agent before she was allowed to leave.

"I have no idea what they are looking at," she said.

Authorities worked throughout the day boxing up files and carting items from the Coffee Road office.

Tina Tavernier, who works for a medical billing service next door, said that in recent days she and other employees have noticed SCAP personnel making trips to a Dumpster and a storage unit around the corner.

"We have seen Denise Gibbs since they have been suspended," Tavernier said. "We have seen her on site before the business opens."

According to a statement from SCAP's board of directors, the search warrant requested information such as computer records and other files. The statement said SCAP Interim Director Kathy Lee "is and will continue to fully cooperate with the FBI agents, as will other relevant SCAP staff members."

It further said the board "fully welcomes any investigation into possible or alleged criminal activities, in order that we may clearly bring to light the complete picture of past practices. Our goal remains to move forward with implementation of reforms based on the highest standards of ethics, best practices and transparency while providing quality services to the community we serve."

Modesto Police Chief Mike Harden said federal authorities asked the department to provide uniformed officers to assist with serving the search warrant, but otherwise local police were not involved with the investigation.

Modesto police have been investigating the theft of the computer server during the burglary late Nov. 30 or early on Dec. 1.

"I don't know where (the FBI) will go with this next," Harden said.

Councilman Dave Lopez, who talked with an FBI agent last spring about SCAP, said he believes the computer server contains important information.

"Finding that server would be of utmost importance to finding out what was going on, where the money was going and how it was spent," Lopez said.

A former compensation deal entitled Joe Gibbs to a nominal salary plus 4 percent of the value of funding secured from his grant-writing. SCAP was legally barred from paying the bonuses from grant funds, but was supposed to use unrestricted funds to compensate Gibbs, who served as development director.

More than $8 million was allocated to SCAP to buy and renovate foreclosed residential properties for the NSP effort. In July, the city froze a remaining $770,000 due to SCAP over concerns that its employees or relatives were living in rental homes, including a lavishly improved Rumble Road house occupied by Denise Gibbs' parents.

In a conference call Wednesday with Mayor Jim Ridenour, City Manager Greg Nyhoff and Assistant City Manager Dee Williams-Ridley, the officials said they had no indication if the investigation was about SCAP's involvement with the NSP effort.

City officials are responding to issues raised in a draft report from the Office of Inspector General, which has been auditing the program since May. But confidentiality rules prevented them from talking about its contents.

"We don't have any details on the investigation," Williams-Ridley said. "We are going to be responsive to whatever their needs are and make sure our staff responds."

Shallit said she was talking with SCAP about its ability to continue serving clients during the recent management shake-up and now the FBI probe. The nonprofit with 200 housing units provides housing to clients with AIDs and HIV, as well as people with other special needs.

Leo Briones, a SCAP spokesman, said the agents were copying computer records and paper files, but were being careful not to seize items that would shut down or impair operations.

Lee, SCAP's interim director, said office staff were able to work with some clients Wednesday and expected to have unrestricted use of the Coffee Road office today.

"We are still serving our clients," Lee said. "Right now, they are our main priority."

Bee staff writer Ken Carlson can be reached at kcarlson@modbee.com or (209) 578-2321.

Bee staff writer Erin Tracy can be reached at etracy@modbee.com or (209) 578-2366.

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