A federal grand jury is investigating charges of fraud, drug sales and payoffs in drug-addiction testing at two halfway houses operated by the nonprofit Volunteers of America, (VOA), according to sources familiar with the investigation.
Moreover, following an investigative audit of the charity group's books showing "deficiencies" and the death last week of an inmate at one of the houses, the Federal Bureau of Prisons said it intends to cancel its $300,000 a year contract for inmate supervision at the houses.
The halfway houses are operated by the same Volunteers of America chapter that supervised a home for mental outpatients at 1715 Lamont St. NWSS, where 10 women were killed by the worst fire in the city's history on April 11.
VOA officials, in a statement issued through their New York public relations, firm, Hill and Knowlton, said only: "VOA states affirmatively that it has been at all times, andis presently, in full compliance with all rules and regulations of the Bureau of Prisons."
The grand jury investigation, described as "just beginning" and having "a long way to go" by the sources, follows a four-month inquiry by the U.S. marshals, who first heard the allegations against VOA from an escaped resident of one of the halfway houses.
A spokesman for the marshals said many more former residents of the houses, at3932 14th Street NW and 3218 13th Street NW, have been interviewed in the last several months.
In addition, a VOA staff member who asked not to be identified, said the group has received a grand jury subpoena to turn over by today all of its financial and inmate records dating to January 1978.
The scope of the grand jury investigation, sources said, will include allegations that:
Some VOA staff members took payoffos from inmates who were afraid that forbidden drug use would show up in mandatory urine testing. For $10 or $20, other sources said, the drug-using inmates could buy a "clean" urine sample.
Questionable loan practices were allowed inside the houses and that, in some cases, money was extorted from prisoners with threats that they would be returned to prison if they did not cooperate.
One or more VOA staff members sold illegal drugs to inmate residents.
The Bureau of Prisons halfway house program is intended to put inmates back into the community three to four months before their release or parole dates so they can find jobs and readjust to community life.
In announcing the cancellation of their contract with VOA, prison officials said "a factor" in the decision was VOA's handling of the death of 27-year-old Louis Adams, who died July 4 from injuries received during a fight on June 24.
D.C. homicide detectives said Adams was fatally injured during a scuffle with another inmate over a boxing program on television. Adams skull was fractured when he was struck in the head with a floor-stand ashtray. He lingered unconscious until his death at Howard University Hospital, police said. Police would not identify the second inmate.
No charges have been filed and it was not clear why VOA's handling of the death was being called into question by prison officials.
In a formal notice canceling VOA's contract-effective Aug. 5-SteveGrzegorek, director for prisons in the Northeast, told VOA executive director, James F. Whitt, that one reason for canceling was the apparent negative results of an investigative audit of VOA's books. Prison officials have refused to make the audit public.
VOA has received more than $500,000 from the government since October 1976 to house 30 to 40 inmates.
Under the contract, VOA receives $20.50 a day for each prisoner housed. The contract had never been audited until this spring when the U.S. marshals' inquiry spotlighted various questionable practices at VOA facilities.
At least three staff members have alleged in interviews that VOA has a longstanding practice of sending inmates on extended furloughs and requiring them to pay their $2-a-day bed fees while they are gone.
In the meantime, the staffers have said, VOA supervisors would arrange for new inmates to fill those beds. In this way, the charitable organization would bill the government twice for a single bed.
Prison officials would not say whether their audit confirmed the staffers' allegations. Spokesman E. Michael Aun would say only that the audit had uncovered "deficiencies."
"I believe the continuation of our contract would not be in the best interest of the Bureau of Prisons," Grzegorek told VOA's Whitt in the cancellation letter.
In the meantime, the elimination of VOA's 40 inmate beds in the District is expected to create a temporary shortage. Prior to the cancellation there were 160 halfway house beds for federal prisoners in the District and another 100 in Maryland.
"We've got 32 (prisoners) in there now," said Aun, who added that by Aug. 5 a quarter of those prisoners will have reached their parole or release dates.
He said the bureau hopes to place the remainder of the inmates in other area halfway houses.