OAKLAND -- Was Nanette Dillard a corrupt official who schemed with her husband to steal from the government, as Alameda County prosecutors have alleged? Or was the anti-poverty director a beleaguered whistle-blower fighting a dysfunctional county government to lift up the poor?
Her former second-in-command, Lenita Ellis, testified over three days this week that Dillard was a micromanager who ordered underlings to downplay the financial troubles of the now-disbanded Alameda County Associated Community Action Program as its phones stopped working and bills went unpaid. But Ellis also acknowledged harboring doubts that Dillard's management problems constituted criminal wrongdoing.
Dillard and her husband, Paul Daniels, are now on trial in Alameda County Superior Court on charges they conspired with one another to defraud the anti-poverty agency, known as ACAP, by misappropriating federal grant money. Dillard was executive director, and Daniels grants manager, before the agency's governing board fired Dillard in February 2011 and asked Ellis, then the deputy director, to take her place.
The night after she was fired, Dillard returned to the agency's Hayward office with Daniels and carted out boxes of paperwork and belongings. Surveillance cameras and electronic key records documented the overnight visit, so Ellis said she was instructed by a county lawyer to put Daniels on administrative leave and call Hayward police. Ten of the boxes were later returned and a missing check was discovered slipped under the door, Ellis said. Not long after, the governing board -- made up of mayors and City Council members from throughout Alameda County -- voted to disband the nearly 40-year-old agency and draw down its funds.
Dillard, at the same time, filed a whistle-blower complaint with the state over Alameda County's handling of federal stimulus money and sued ACAP's governing board for wrongful termination, winning a $318,000 settlement in April 2012 -- two months after the Alameda County District Attorney's Office formally charged her and Daniels with felony counts of grand theft, conspiracy and crime by a public official.
Prosecutors say the duo presented a false picture of their finances to funders and used grant money inappropriately for payroll and, at times, for their own personal benefit. Defense attorneys have described the husband-and-wife team as well-intentioned and scapegoats for broader political problems.
Wednesday marked the 23rd day of testimony in the drawn-out trial that began with jury selection in October and has delved into the minutiae of anti-poverty programs and Alameda County governance, causing some jurors to close their eyes. With prosecutors still pursuing their case and defense attorneys waiting to call from their own list of 72 witnesses, the trial is likely to continue for weeks.
A key witness for the prosecution, Ellis also fueled some of the arguments of defense attorneys Tom Mesereau and Brendan Hickey as she took to the witness stand on Monday, Tuesday and Wednesday in the Rene C. Davidson Courthouse in Oakland.
The way that Dillard and Daniels pulled money from one pot of grant money to temporarily fill a budget hole -- a process known as "reclassification" that might have run afoul of federal grant restrictions -- was a routine part of the culture at ACAP and many other grant-funded organizations, said Ellis, now an administrator for the Oakland Housing Authority.
Dillard repeatedly told her staff that the money had to be shifted around because Alameda County's treasury was notoriously slow at distributing payroll and other money owed to the agency, Ellis and other witnesses have said.
Ellis, echoing Dillard, faulted the board of 13 politicians that was supposed to oversee the agency but rarely met.
"I did not have a lot of faith in this particular board," Ellis testified Tuesday. "They did not seem to be very well-informed. They did not seem to be very connected to what happens at the agency."
But she also portrayed Dillard as the final authority on many of the questionable expenses and financial transactions that prosecutors have unearthed. One of those was an all-day executive retreat for Dillard and Ellis in 2010 at Berkeley's Claremont Hotel Club and Spa that ended with a $300 pair of massages.
Ellis said she didn't want to go to the retreat, which Dillard organized to sort out her disagreements with Ellis but "felt it was a directive" and assumed that Dillard, not the agency, was paying for it.
When first hired to be ACAP's deputy director in late 2009, Ellis said she "felt excited, like it was going to be a privilege to be able to partner with this woman," but she said their relationship soon soured over Dillard's heavy-handed management style and poor business decisions.
For four months, "Nanette kept from me that Paul was her spouse," Ellis said. "I felt deceived."
Family involvement was not uncommon at the agency. Ellis said her own mother was a volunteer who transitioned into a job at the agency, but the decision to hire her was transparent, Ellis said. Also employed there was the daughter of Alameda County Supervisor Nate Miley, an elected official who met regularly with Dillard before the agency's collapse and might be called to testify by defense attorneys later this month.
"People were reaching into their own personal networks, their own personal contacts to get things going," Ellis said.