The Lois Matheson Affair

 

Before the legal dependent issue was resolved, something else came up. Someone in the accounting department had given some documents to our secretary, whose name then was Diane Foster. They pertained to a tuition payment for a Lois Matheson. Diane asked me if I knew anyone in the state legislature she could send them to. I offered to take care of it.

 

For this story, I don’t have to rely on my memo collection. I am using an account of it I wrote for my kids in 1983.

 

First I had to find out who Lois Matheson was. I went to the nearby Civil Service building and looked up her personnel file. It showed that she transferred to Social Services from the Department of Management and Budget on 3/25/75 and was stationed in Wayne County (Detroit). I called a guy I know in Management and Budget and asked if he know Lois Matheson and he said “Wow, let me go to another phone and call you back.” When he did, he told me that Matheson was a close associate of Social Services director John Dempsey and had followed him from the Executive Office, where he was special assistant to governor William Milliken, to Management and Budget, which Dempsey directed for a couple of years, and finally to Social Services. (Dempsey died of cancer in 1982.)

 

I then called some people I knew in Wayne County Social Services. One told me Matheson was an older woman with teenage children. In her position with Wayne County DSS, she went to a lot of meetings, but did little else. This person also said that Nova University, where Matheson was studying toward a PhD in Public Administration, was a diploma mill.

 

Since I was putting my neck on the line, I was careful to follow the proper channels of authority. On 4/7/76, I wrote a memo to Don Czinder, my boss, saying that the $2450 payment toward Matheson’s tuition seemed to violate the rules of the Department’s tuition reimbursement program. Only 5 days earlier, it had been officially announced that the money allocated for the program had run out, and there would be no tuition reimbursement for spring courses. Don gave my memo back to me the same day with this note written on it:

 

Steve – Before I look into this I must know for certain that this actually occurred. What is your source of information and do you have proof – I don’t question your concern, I just want to be certain of the facts. I know of one Masters/Doctorate program where advanced payment of this amount is required in the start. Could be that an exception was made on that basis. Do you know the program (school)?

 

I gave the memo back to Don the next day with this note:

I personally have seen copies of the disbursement voucher and a memo from John Smith to Lee Hall directing him to prepare the warrants. It is the Nova University program.

John Smith was the personnel director. I don’t remember what Hall’s position was then, but several years later he became director of the Bureau of Management Information Services.

 

It took Don 3 weeks – until 4/30/76 – to reply formally, but it took only 5 minutes after his memo came to rest in my in-basket for me to write my next memo. John Smith did not respond. Instead, I got a call from Dr. Dempsey himself, summoning me to his office.

 

Dempsey gave me a lengthy explanation of the tuition payment, but I don’t have any notes and I am sure I was too scared to remember much of what was said. I know he said he would give me a written explanation because I had a note dated 5/11/76 that said I called Dempsey’s secretary and asked her to remind him that he had promised to respond to my memo to John Smith. Another note dated 5/12/76 said the secretary called me and said Dempsey would be out of town the rest of the week, but would respond by next week. Someone told me later - I don’t remember who - that Dempsey spent several minutes trying to justify the tuition payment to Lee Hall. Dempsey told Hall “That kid won’t get off my back.” Hall pointed out that Matheson was a crony, so it could hardly look anything but bad.

 

Dempsey replied on 5/19/76. He said the tuition reimbursement program wasn’t the only education program for Social Services employees and he said the memo announcing the lack of funds for tuition reimbursement was incorrect. He didn’t mention Lois Matheson.

 

I responded on 5/24/76 with a long memo spelling out the problems I saw with the Matheson deal. Dempsey responded on 5/28/76 with an even longer memo justifying his action. I responded on 6/4/76 saying that I was going to ask the press to look into it. The following account of subsequent events was written during that time.

 

6/8/76

Czinder told me in the A.M. that Dempsey had called and he wanted to see us in his office at 3:30. John Smith was at our meeting also. Dempsey did most of the talking. He repeated most of what he had said in his May 28 memo. He said something like “correct me if I’m wrong, John, but I asked you whether this would be a proper payment to make out of the director’s education account, and you said it was.” Smith did not correct him. He also said that there was no intent on his part to be secretive about it, but he later found out that Lee Hall had asked Mike Armstrong to handle it personally. At one point he referred to my statements in the May 24 memo about Lois Matheson’s pay rate and classification. He said he believed that such information may be considered confidential and unlawful to divulge. I did not point out that such information seems to be available to anyone who goes to Civil Service and asks…

 

Dempsey reminded me that I had said in the May 24 memo that someone might go to the press or the legislature. He said if I felt compelled to go outside, he preferred that I go to the legislature, and he could tell me who to talk to in the House and Senate appropriations committees. He mentioned [Ray] Kehres and a couple others. He said some reporters wanted more than to just report; some slant a story to achieve an effect, to accomplish a purpose. I agree that it might be best to go first to the legislature.

 

Czinder didn’t say a word during the whole meeting.

 

When Dempsey showed us to the door he offered me his hand. I shook it. His handshake was soft and weak.

 

6/9/76

Tuesday afternoon I called Keyres’ office and said I wanted an appointment. He wasn’t there and neither was his regular secretary. The woman who answered said she’d have the secretary call me in the morning.

 

Wednesday morning, June 9, Kehres’ secretary called. I told her why I wanted to see Kehres and she put him on the phone. I told him the story and he said he’d call Dempsey right away and get the details. I told him I had the details and he said to send them over. Then he asked me what I did and asked about the morale in the Department. He had heard there were problems. I said there were indeed morale problems. Part of it was the dissolution of the regional offices. He said he had found a lot of highly-paid administrators who knew less than the county directors they were giving orders to. I said I had mixed feeling about it, but I knew there were many effective, hard-working people there that really believed they were doing an essential job. And there were also some very poor administrators who were stuck in the regional offices to get them out of someone’s hair. He said it was a real problem with ineffective administrators that had only ten years to go before retirement – he did not know what to do about them.

 

I put together copies of all the memos subsequent to Don’s, along with the administrative memorandum that announced the exhaustion of the tuition refund account and the one that declared the first memorandum obsolete. During lunch break I took them to the Capitol Building. Kehres’ door was locked, so I slipped the package under the door.

 

In the afternoon, I called to see if they’d found the package. Kehres got on the phone and told me Dempsey was coming to see him the next morning.

 

6/10/76

When I got in the next morning there was a note to call Kehres. I called and his secretary told me he wanted to see me at 1:45. She said the House would be in session at 3:00.

 

I was ushered in and found that Mel Larson was there with Kehres. After shaking hands, I sat down and Kehres said, “Well, what’s the problem?” I said nothing and motioned to the series of memos I had brought over. We talked for the next half hour about the contents of the memos and about what I knew that wasn’t in the memos – which wasn’t much. We had a good give and take. They cross examined me about just what I knew and found wrong with Dempsey’s action. I told them that the tuition payment wasn’t the only thing I didn’t like. I didn’t like the way Dempsey was bringing all his cronies in and making them his “special assistants.”

 

I was puzzled by their probing about the source of the documents, but I trusted them enough at the time to tell them all I knew – which still didn’t satisfy them. They asked me Diane’s name and I told them, and I told them someone in Accounting had copied the documents and had given them to Diane in a manila envelope so that she would put an address sticker on it so it could be sent over to the Legislature. Diane had told me about it before she actually received them and I offered to take them and do something about it. They were interested in knowing whether I still planned to go to the press. I said I didn’t know, but that I certainly was in no hurry. I was willing to give them time to do something about it. At this point Larson said rather sharply that maybe I’d better go to the press now if I was going to go, that they didn’t want me to hold that threat over their heads. I made no promises.

 

They did say they intended to dig into the matter. They were especially interested in Nova University and they…

 

The account ends abruptly there. I think I lost a few pages. Kehres did tell me he told Dempsey to give him a written report and he would give me a copy.

 

On 8/18/76, I got a call from John Pratt of the Auditor General’s office. We talked about the Matheson affair and he asked if I had gone to the press or done anything further. That is all my record of the call says.

 

On 8/25/76, I called Keyres about Dempsey’s report. He said he had received it and he would send me a copy. He also said he was going to do nothing further about the matter.

 

On 9/22/76, I again called Kehres’ office about the report. The secretary said she had lost it, but would get another copy from Dempsey and send it to me. I got it a few days later. It was a 2-page memo on “Staff Development Programs, Department of Social Services, 1965-1976”, with charts attached showing amounts spent in each year for training, tuition refund, curriculum grants to universities, educational leave and pre-employment scholarships. Dated July 25, 1976, it was addressed to the House Appropriations Subcommittee from John T. Dempsey. It included no reference whatsoever to Lois Matheson or Nova University.

 

No. 2 wife Edith and I lived on W. Shiawassee next to a guy named Conner or O’Conner who was a reporter for Booth Newspapers. I told him the story and showed him all the documents and memos. He didn’t do anything with it as far as I know. I assumed it was just not newsworthy and let it drop. I had gotten the Tuition Refund program reinstated and had proved that a state employee could take on a top state official and come out unscathed. I had enjoyed it and I was satisfied.

 

As it turned out, the story was newsworthy and there is some indication that it was suppressed. There was an anonymous 9/29/76 letter to Lou Gordon of WKBD-TV in Southfield which said Booth Newspapers “decided not to release the story due to their support of [Governor Milliken].” And a year later, when the story finally did hit the newspapers, the Bay City Times reported that

There were reports that Dempsey, one of Gov. William G. Milliken’s close associates, had agreed nearly a year ago to resign on the condition that the situation involving Mrs. Matheson was not made public.

Edith and I separated in April 1976 and a few months later I became acquainted with a serious Social Services troublemaker named Bonnie Russell. We lived in the same apartment building (Riverview Towers on S. Washington). Bonnie and I were making sure the newspapers had copies of a series of very unfavorable audits of the Department’s Food Stamps program. Through her, I met Tom Suber and Rich Gibson, officers in Local 1880 (Detroit) of the American Federation of State, County and Municipal Employees (AFSCME). Suber and Gibson were out to get Dempsey for tangles they’d had with him in Wayne County. When I told them about the Matheson business, they thought it was serious enough to file a complaint with the State Ethics Board.

 

The rest of the story – as much as I can remember, anyway – is in the newspaper articles that finally appeared starting in August ’77. I don’t remember it taking a long time to get the newspapers interested, but I had a note dated 2/4/77 on a call I received from Susan Brown of the Detroit free Press. I told her about the Matheson thing and sent her a packet – copies of all the pertinent documents. Another note dated 6/16/77 says Tom Suber had found out from some Republican Party office that Matheson was Dempsey’s campaign manager in ’66.

 

The story appeared first on 8/6/77 in both the Bay City Times and the Detroit Free Press. In the Times, it was front page, above the banner, and lengthy. In the Free Press, it was short and buried on page 5. On 8/9/02, it was on the front page of the Detroit News. On 8/10/77, there was a short article in section B of the Lansing State Journal. I’ll quote mainly from the News article because it is the least faded:

 

State welfare chief Dr. John Dempsey is under investigation for granting$1,200 in tuition and one day off a week for schooling to his assistant and longtime friend, Mrs. Lois Matheson, in an apparent departure from schooling policies for other employes.

A state Board of Ethics probe of Dempsey, director of the Michigan Department of Social Services, results from a complaint by a Detroit union, which represents state employes, including welfare workers.

According to documents obtained by the union, Dempsey granted the special payment and leave to Mrs. Matheson, 42, of Dearborn Heights, so she could attend classes offered in Michigan by Nova University of Fort Lauderdale, Fla. State education officials have recommended that the school be banned.

Dempsey helped set up Nova’s Michigan program.

The payment occurred during a period when the welfare department had suspended tuition reimbursement for other employes because of a money shortage. Dempsey later issued a memo rescinding that policy after a high-ranking department official questioned the privileges granted to Mrs. Matheson, a $19,000 a year welfare executive in Wayne County…

Dempsey, a close associate of Gov. William G. Milliken, has denied bending department rules…

The dispute [with the union] arose last year when Steve Harry, who heads the department’s systems analysis unit, questioned Dempsey’s authorization of a payment of $2,450 toward total tuition cost of $4,900 for Mrs. Matheson to take a course of study leading to a doctorate in public administration.

Harry noted in an April 30, 1976, memo that, while her 30-month course was not scheduled to begin until January, 1976, the $2,450 payment had been made in March of that year. Other employes, he said, do not qualify for tuition refunds until successful completion of a course.

“This seems unfair to employes whose tuition refund applications for spring term are being denied because of lack of funds, “ Harry wrote. “The tuition payment appears improper.”

On May 19, Dempsey, with no reference to Mrs. Matheson, responded to Harry in a memo, explaining that the administrative memorandum which had frozen tuition reimbursements “was released in error without my knowledge.” The following day, a new administrative memorandum was released, announcing that applications from employes for partial tuition refunds would again be accepted.

Harry, in subsequent memo to Dempsey complained that, at a time when the department was “severely strapped for funds,” the program authorized for Mrs. Matheson stood to cost the state $10,458. This, he said, included tuition plus 110 paid administrative leave days at her state salary rate of $72.80 a day. State social service employes are allowed to spend two hours each week on education leave.

Dissatisfied with Dempsey’s responses, Harry said he would take the matter to the Legislature.

Mrs. Matheson completed 14 months of the 30-month program, but dropped out this spring because of family obligations, Dempsey has explained. He said Nova has returned half of the tuition to the state. Under the program’s shared tuition plan, the cost was $4,500 with Mrs. Matheson paying half.

Mrs. Matheson has been associated with Dempsey since 1966, when she worked in his unsuccessful republican congressional campaign. When Dempsey became director of the state Office of Management and Budget in 1971, she joined that department as a human resources representative and later was promoted to the rank of program analyst 10.

Shortly after Dempsey was appointed welfare chief in 1975, she transferred to that department as a program executive.

Dempsey helped to launch the Nova program in Michigan in the fall of 1975 with its “cluster” courses offered on the University Michigan’s Dearborn campus. He said he did so at the request of the Michigan Civil Service Department. John W. Porter, state superintendent of public instruction, has advised the state Board of Education to ban the school from the state because its program did not offer a reasonable number of courses for a Ph.D.

Dempsey told The Detroit News that Mrs. Matheson was not granted special privileges. He said he asked five or six other department employees if they would be interested in taking the courses, but they declined, citing lack of time or money (to pay the matching $2,450 tuition). Mrs. Matheson was the only one who expressed an interest in the program, he explained.

State travel expense vouchers show that Mrs. Matheson has represented Dempsey at conferences and meetings in Reno, San Diego and Washington in 1976-77. Dempsey signed all the vouchers personally.

Mrs. Matheson’s job also has included attending several meetings with Dempsey and she has chauffeured him to and from Detroit Metro Airport…

 

All of the articles covered, for the most part, the same ground, but this appeared only in the Bay City Times report:

 

            The union’s complaint contained handwritten memos by Dempsey asking another official to “expedite” the payment to Nova and also noting that “we will need to process a check (no warrant) to Nova University for the appropriate amount.”

            Not issuing a “warrant” in a payment means there is no official order, one source said. It is considered a little unusual, the source said.

            The matter of a warrant came up again on the disbursement voucher dated March 18, 1976. It says on the voucher to “please return warrants to the Department of Social Services.”

            This is not unusual in state government, a source said, but sometimes they are returned to the Office of Management and Budget.

 

Editorials appeared in the Free Press and the News on 8/11/77. Under the heading “Flimsy Case Against Dempsey”, the Free Press concluded it was “much ado about nothing”. The News found that “The whole matter certainly has the appearance of impropriety – if not illegality. The ethics board should get to the bottom of the case promptly…”

 

On 9/7/77, the state Board of Ethics cleared Dempsey of misconduct charges. The Detroit Free Press reported the next day that

            Board member Theodore Souris of Detroit, a former Michigan Supreme Court justice, said those who brought the charges against Dempsey hadn’t furnished “a modicum of proof” that Dempsey’s actions were in violation of state ethical guidelines.
            He called their actions in charging Dempsey “irresponsible.”

That is all there is to my Matheson story. You might think it was pretty gutsy of me to take on the department director like I did. What is really amazing is that on 6/9/76 – the day after the meeting in Dempsey’s office – I wrote him a memo asking him to consider me for a “Federal-State Interchange Work/Training Program” in which I would be sent to Washington to work at HEW for a year. Jerry Brockmyre recommended me for the program, but felt it necessary to mention a problem:

 

Steve’ apparent weaknesses (which some people may consider strengths), are his bluntness or lack of diplomacy and his reluctance to compromise if he thinks his alternative is the best approach. His inflexibility occasionally leads to irritation of other members of a group with whom he is working.

 

Soon after that, I demonstrated my weakness by not only refusing to have my staff work on the proposed “Client Reporting System” (for reasons I don’t remember well enough to get into), but promising to expose the people who were pushing it. As a result, Brockmyre took my staff away from me and withdrew his recommendation. Even so, Dempsey accepted my application and recommended me to the Federal Government. Maybe he wanted me out of Michigan.

Two people were recommended. If anyone was chosen, it was not me.