OAKLAND -- The former director of an Alameda County anti-poverty agency will have to pay back the federal government for stolen grant money but will spend the next five years on probation, not in prison, a judge ruled Friday.

"She received no personal direct benefit" for her crimes, Alameda County Superior Judge Allan Hymer said as he sentenced Nanette Dillard and her husband, Paul Daniels, to five years of probation for financial crimes committed while running the now-defunct Alameda County Associated Community Action Program.

Dillard led the anti-poverty agency for seven years before she was fired in 2011 and the organization dissolved. Daniels was a grants manager. The couple will have to jointly return $308,587 defrauded from the U.S. Department of Health and Human Services, which had awarded the agency a grant to help low-income county residents save money to buy a home, open a business or further their education.

A jury in March convicted Dillard of three felony crimes for stealing from the federal grant, misleading the government agency that awarded it and falsifying a memo. Daniels was found guilty of two of the same crimes -- grand theft and false accounting by a public official.


Advertisement

The two were found innocent by the same jury of charges they conspired with each other to defraud the government. They were also acquitted of charges they used the grant money for personal profit and that they misappropriated grant funds to meet payroll for the agency staff.

The drawn-out jury trial began in October and lasted four months as defense attorneys accused county prosecutors of scapegoating Dillard and Daniels for bigger financial and governance problems beyond their control.

Defense lawyers said Friday they are appealing the convictions.

Founded four decades ago, the grant-funded agency -- known as ACAP -- was one of many formed in the wake of President Lyndon Johnson's War on Poverty to give voice to the poor and empower low-income residents with job opportunities and education. It was governed by a board of politicians representing each city in Alameda County except for Oakland and Berkeley, which had their own programs.

At the crux of the trial was how the duo pulled money from the federal savings grant to temporarily fill other holes in the agency's budget, breaking the rules of the grant by not leaving enough funds to match what the federal government provided.

"I understand they were under some pressure; on the other hand, it was a crime," Hymer said Friday.

The judge said he "does not believe for a minute that they didn't know the requirement to keeping matching funds. ... That's a simple concept."

He said, however, that "extraordinary reasons" led him to put them on probation instead of sending them to prison. Dozens of supporters sent letters to the judge, extolling the character of Dillard and Daniels, both of whom are also accomplished musicians.

"This has been their first criminal offense. They have done a lot of good in their lives," Hymer said. "I don't believe any of that money was received for their direct personal benefit."

Dillard and Daniels declined to comment, but their lawyers said they were pleased by the judge's ruling.

"We're very grateful they have not been sentenced to any jail time, as long as they successfully complete probation," said attorney Thomas Mesereau, who defended Dillard and said the long trial revealed "a lot of problems" at various levels of county government.

"There was a lot of confusion about how to handle the grants and keep the agency running," he said.

Hymer said the couple is expected to find new employment as they make good-faith restitution payments over the course of their probation.

A civil rights leader and friend of the Dillard and Daniels families who sat through much of the trial said Friday he believed their prosecution was unjust.

"They should have got the people accountable for it -- the bosses, not the staff people," said the Rev. Phil Lawson, pastor emeritus of Easter Hill United Methodist Church in Richmond.

Lawson directed Berkeley's own community action agency in the 1970s and said it was the governing board, not the staff, that had ultimate decision-making authority.

Alameda County's top lawyer, Donna Ziegler, also sat through the Friday morning hearing.

"I am pleased that restitution is an integral part of the sentence for both defendants," she stated in an email comment. "The Court identified Ms. Dillard as the ring leader and has prioritized repayment of monies that show as debts of ACAP. I applaud the District Attorney for taking on this case and securing restitution of valuable public funds."