Economic development officials in Connecticut have been ordered to produce records as part of an ongoing federal probe into funding provided to nonprofits in the state.
A spokesman for the Connecticut Department of Economic and Community Development said Monday that DECD has received a federal grand jury subpoena in connection with the investigation, which was first reported last week by the Hartford Courant.
The spokesman, Jim Watson, declined to provide additional details, and said DECD will be "working with the federal government to make sure they have everything they need to complete their investigation."
Connecticut Gov. Ned Lamont offered a similar message speaking with reporters last week.
“We are working with the feds on this in a totally transparent and open way to help them get to the bottom of this,” Lamont said.
The federal inquiry comes several months after Connecticut halted funding to a social services organization in Hartford that was the victim of a $300,000 wire fraud. The Blue Hills Civic Association failed to immediately notify state officials of the theft when it was discovered last year, prompting DECD to claw back money it had provided and suspend future transfers.
The Courant reports federal authorities are now looking into the incident as part of a wider investigation into how millions of dollars in public funding was distributed to Hartford area nonprofits.
The investigation also encompasses a second wire fraud experienced previously by another nonprofit called The Prosperity Foundation, according to the Courant. The organization’s founder, Howard Hill, declined a request for comment.
Referring to the thefts, Lamont said the state has taken appropriate steps to safeguard public funds.
“Regarding some nonprofits, we found out early on that they were having problems with some of their payments, either they were being ripped off or something else was going on,” he said. “We held our state payments to these nonprofits going back to April, I think it was, doing everything we can on the side of caution.”
Tom Carson, a spokesperson for the U.S. Attorney’s Office in New Haven, did not confirm or deny the existence of an investigation. Carson said his office only provides comment on criminal matters when it comes forth with charges.
Like some other small nonprofits in the region, the Blue Hills Civic Association (BHCA) saw its role expand in recent years as public funding from COVID-19 recovery programs became available.
The organization, founded more than 60 years ago, aims to empower residents to create stable and attractive neighborhoods through initiatives like its former summer youth jobs program.
In recent years, however, BHCA also became a conduit for more significant public funding, helping to award money it received from the state to numerous subgrantees, state records show.
In the process, the organization’s budget swelled, with revenue rising from around $2 million to $3 million per year before the pandemic to more than $7 million during the 2024 tax year, according to IRS filings.
In the wake of BHCA’s financial collapse, some in the community have criticized the organization’s changing role, speaking out at public meetings before the Hartford City Council.
The chairperson of BHCA's governing board did not immediately respond to a request for comment Monday about the federal probe.
In a letter to the community in April, former Blue Hills Executive Director Vicki Gallon-Clark stressed the organization’s financial records were routinely audited in the past, and “have always been transparent and strong.”
“What happened was not mismanagement — it was a cybersecurity breach, something that has affected even the largest and most prestigious institutions,” Gallon-Clark wrote.
In a statement issued last week, Senate Republicans called for reforms at the state capitol to better protect taxpayers, saying the federal investigation underscores the need for more transparency and accountability in the nonprofit grant process.
Republican state Sen. Henri Martin told Connecticut Public he’s concerned about whether nonprofit organizations that do receive funding are thoroughly audited.
“You’ve got to really put up your antennas and start probing and asking significant questions to find out what happened here,” he said.
