Congress investigates how Mississippi spent federal funds amid Jackson water crisis
In the midst of a water crisis and widespread financial woes in Mississippi, the state Department of Human Services’ Office of Economic Opportunity used $8 million in federal funds to fund a five-month investigation of the state’s most notorious and well-documented case of corruption: the $7.7 billion Mississippi River water transfer from the Panola Project to Jackson, Mississippi.
The investigation, which ended in a guilty plea and a $5.8 million settlement, began on June 5, 2010, when officials from the Department of Human Services (DHS) and the Internal Revenue Service (IRS) met to discuss the Panola Project’s water debt to Jackson.
The Panola Project, which lies at the confluence of the Mississippi and Tallahatchie Rivers, is the largest natural gas reserve in the nation, with significant oil and gas reserves, and is owned by the state of Mississippi. Though the project was initially envisioned by Mississippi’s earliest governor, John Gill, as a way to relieve the economic burden of low-paying jobs in the delta, it has since become a symbol of the state’s corruption.
A federal investigation had begun two months earlier, after the IRS had issued a preliminary report warning that the Panola Project’s $7.7 billion water debt to Jackson would have to be paid if the Panola was to remain operational.
In its investigation, DHS and IRS officials learned that the Panola Project had failed to meet the water transfer deadline as set by Mississippi Governor Haley Barbour. DHS began an audit shortly thereafter to determine whether the Panola Project had, in fact, received its required $7.7 billion water transfer.
“The Panola Project had a contractual obligation to pay for its water deliveries, but, in most cases, it had failed to do so,” a June 2010 draft report from the DHS Office of Economic Opportunity (OEO), which conducted the audit, warned. “It is our understanding that there are no financial guarantees or security for the cash receipts from the Panola Project.”
In September 2010, DHS officials reported to the IRS on their investigation, identifying the key witness, Mary Lee Smith, in a formal statement to the IRS. The OEO officials