Less than a month after leaving office as Wilmington City Council president, Theo Gregory received his first check from the city for his nonprofit — money he earmarked for himself in his last weeks in office.

Emails obtained by The News Journal show that in his position as president, Gregory arranged for his post-politics venture to secure $40,000 of taxpayer money on Day 1 of his successor's tenure. Up to half of that money would go directly in his pocket.

The grant came from the council's controversial discretionary fund, a pot of roughly $450,000 mostly under the president's control. Earlier this year, The News Journal found that the fund allows council members, especially presidents, to give taxpayer dollars to nonprofits of their choosing — with little oversight and without informing each other or the public.

In this environment, Gregory used his authority over four years to direct nearly $600,000 to Education Voices Inc., a nonprofit organization he founded but through which he was not paid.

But after he lost a mayoral bid last September, he launched another nonprofit, Student Disabilities Advocate Inc.

This time, the budget included a salary for Gregory — $20,000 for six months of work via a "program manager/advocate" position, records show.

President Hanifa Shabazz signed off on the $40,000 grant during her first days in office.

In a video interview with The News Journal in July, she insisted that she did not know the identity of the program manager. She said, "I don't know," a total of 10 times.

But email correspondence between Gregory and Shabazz, obtained through a Freedom of Information Act request, indicate that she was aware that Gregory was the program manager.

On March 13, Gregory emailed Shabazz, referring to himself as the "program manager for SDA." She answered that message. In June, he repeated his title in an email to council staff, on which Shabazz was CC-ed, records show.

More than a week ago, The News Journal asked Shabazz for an interview for this story and followed up with repeated interview requests. The council president was "unable to accommodate" an interview, according to her communications director, Antoine Oakley.

Gregory did not respond to a request for comment.

Meanwhile, Gregory has another grant request pending before the council.

"That’s an integrity issue that I seriously have a problem with," said Councilman Bob Williams, who recently sponsored legislation to make discretionary spending more transparent. "It's a tangled web we weave when we try to deceive."

BACKGROUND: Wilmington council president gave $40,000 in taxpayer money to predecessor

MORE: Little oversight for Wilmington City Council discretionary fund

CHANGES MADE: 'Significant enhancements' coming to Wilmington council discretionary fund

Following the money

Sometime after losing the Democratic primary in September 2016, Gregory decided to revive Student Disabilities Advocate, a nonprofit he originally created in the 1990s, which would provide legal advocacy for students with special needs.

On Nov. 10, Marchelle Basnight, the City Council's finance officer, wrote an email laying out discretionary fund balances, records show. Gregory responded and CC-ed Shabazz, reminding Basnight not to forget the money intended for Student Disabilities Advocate.

"Marchelle, you did not make it clear that 40,000 of the remaining 250,000 is earmarked for SDA," the email states.

On Dec. 29, Basnight sent an email to Gregory and Shabazz describing the grant process. Gregory's nonprofit grant application was attached. Basnight stated she would talk to Shabazz on Jan. 4, her first day in office, "once she has the ability and powers to approve funding."

Shabazz approved the grant by Jan. 12, records show.

"There’s some clear collusion there, to earmark money for an outgoing president for a nonprofit for which there was no review process," Williams said. "It's just improper all around."

When the grant was made public in July, citizens demanded reforms and a state audit, which is underway.

John Flaherty, a director of the Delaware Coalition for Open Government, said the discretionary fund should be suspended until the audit is completed.

"This is an enormous appearance of impropriety," he said.

A budget proposal stated a "program manager/advocate" would get half of the $40,000. Gregory told The News Journal in July that he was the program manager but received only $15,000. He said the difference paid was for three assistants, supplies and marketing.

The City Council said it couldn't confirm this. The city doesn't know for sure how much Gregory was paid, according to Shabazz, who answered two questions by email.

"Our documents received from SDA do not show nor are required to disclose the staff names or how much they are individually paid," she wrote.

Emails show that council members, including Finance Chairman Bud Freel, were not aware of the grant, even weeks after the six-month program it funded had concluded.

On July 26, Freel emailed Shabazz, Basnight and Council Chief of Staff Gary Fullman after a News Journal reporter called him.

"Christina called. She is asking about Theo's new foundation," Freel wrote. "I know nothing about it."

Shabazz quickly informed her colleagues. She forwarded Freel's message to Basnight with directions: "Send SDA info to all of council."

Robert Poppiti, 63, a former councilman and finance chair who still observes city politics, said the situation "stinks."

"What everyone forgets about discretionary spending is, that’s not their money," he said. "That’s the taxpayers' money."

'... it should not have been allowed'

While council members have had some form of discretionary spending for years, the $250,000 fund controlled by the president is relatively new. It exists in large part because of Gregory.

In 2013, the council under Gregory's leadership added the money to its budget for youth projects. News Journal archives show it was a major sticking point in passing the budget that year. Then-Mayor Dennis P. Williams was worried the money would lack oversight and would be mismanaged. He wanted to put the $250,000 in the Parks and Recreation Department.

The mayor called the pot of money a "slush fund" and vetoed a budget passed by the council. But Gregory ultimately won the fight with a veto override.

Mayor Williams was wrong about many things, Poppiti said, but history is on his side here.

"Williams was right," he said.

In August, after The News Journal reported that Gregory was paid through the fund he essentially created, City Budget Director Robert Greco offered a suggestion to council Chief of Staff Fullman: Get rid of the fund.

"A sign of good will and understanding (of the public’s concerns) would be to agree to remove the additional $250,000 that Theo added to his discretionary fund when he first took office," Greco wrote. "There was no past practice of it and it should not have been allowed to become an institutionalized, and now perfunctory, part of the annual base level budget for Council discretionary spending."

Fullman was not persuaded.

"It's a thought," he wrote. "We'll analyze discretionary funding in conjunction with the needs identified in council's strategic plan. Perhaps the need that prompted Theo to increase discretionary funding still exists or has been replaced with other needs."

He added: "I hope your suggestion does not find its way into the public debate in this issue."

Fullman's sentiment was clear, according to Councilman Williams: "Stay in your lane."

"We've got money just to allocate to ourselves via a backdoor method and we’re going cut firemen and do rolling bypass and give public safety a black eye while trying to fund our nonprofits?" Williams asked. "It's just completely wrong. Our priorities are completely upside down."

A conversation about whether to keep the $250,000 could have occurred during a budget hearing on council's expenses, Flaherty said, but the council does not hold a budget hearing like other city departments.

Freel said in years past, council budget hearings drew low attendance and amounted to "council members looking at each other." So council budget hearings stopped.

The Mayor's Office — and as of this year, the Treasurer's Office — also do not hold budget hearings. Flaherty said that's unacceptable.

"There’s no way anybody can examine what they're doing," he said. "It's a terrible way to run government."

Another grant on the way

Gregory's nonprofit may receive more taxpayer dollars through council's discretionary fund.

On June 8, Gregory emailed Shabazz with another grant request, this time for $35,000.

The first installment of his program had run from January through June, by which time he had completed 14 "telephone resolutions," six consultations, and six cases, he said in an email. Further details about services to students were not provided in the message.

A spending report provided to the city shows the first grant was spent mostly on salaries. The remaining $5,000 was spent on marketing materials like brochures and business cards. The report does not address services to youth.

In his June email, Gregory told Shabazz he wanted to avoid a "break in services."

A budget breakdown lists several employee expenses, including two lines for "attorney" — one to cost $20,000 and another to cost $30,000.

The proposal does not name employees, but a Student Disabilities Advocate staff list on the website for Gregory's law firm shows he is the only one among them that is a licensed attorney in Delaware, records show.

The grant proposal states that the City Council already "committed" the $35,000 and refers to it as an "amount received."

On July 14, Shabazz told the council's finance officer to move forward with the grant.

"You should have everything necessary to Please process SDA's grant request asap. Thanks," she wrote.

Two weeks later, The News Journal reported on the first $40,000 grant, and Shabazz was widely criticized for the appearance of a political favor.

When asked about the second grant by email last week, Shabazz said the money has not been awarded. She said the proposal will go through a new grant approval process that was established after reports were published in The News Journal.

Transparency legislation passed earlier this month requires all city grants of $5,000 or more — from the City Council, the Mayor's Office, and the city treasurer — to be approved by a City Council vote. A list of all smaller grants will be directed to the council Finance Committee on at least a quarterly basis.

The council is scheduled to vote on a resolution regarding the $35,000 grant on Nov. 2.

Freel said the original grant was "not appropriate," and he believes the discretionary fund should be eliminated. If Gregory's program is to receive more money, he said, it should demonstrate its impact.

"I’ll definitely be asking for some results," he said.

For Flaherty, the transparency legislation doesn't go far enough.

He also believes the council should nix discretionary funds altogether. But if they must exist, he feels every grant should be approved by the full council. In the 1980s, the council voted on resolutions for small amounts, such as a $50 grant in 1985 to the Muscular Dystrophy Association. It doesn't do this anymore.

"Even if it's 5 cents," Flaherty said, "it's not your money."

Shabazz also said she would create a review panel for grant funding that will be made up of three of her subordinates: Basnight; David Karas, the legislative and policy director; and Traci Owens, the executive administrative assistant.

But it's unlikely an employee will question their boss, Flaherty said.

"If they do speak up, they’re probably risking their employment."

'More important matters'

The new details about the grant come from a records request The News Journal filed in July.

Although Delaware's open records law requires a response within 15 days, the city only started releasing emails last week.

In September, Fullman blamed information technology issues and higher priorities for the delay.

"There are substantially far more important matters than responsing [sic] to weekly FOIA requests (fishing expeditions), that oftentimes lead nowhere, that the government must attend to," he wrote in an email to a reporter.

Fullman released some emails after The News Journal's attorney got involved, and the city's IT Department provided a larger release after the news organization filed a complaint with the Attorney General's Office.

In the process, the city's Law Department, which usually acts as the council's lawyer and provides legal review of FOIA-requested documents, stopped representing the city legislature in the matter of the emails. The department did not say why.

Asked whether council staff would redact or deny access to some documents, Fullman said "selected members of Council staff" would review and withhold emails based on perceived FOIA exemptions.

"An attorney has not been involved in this review process," he wrote in an email.

Fullman continued: "We have withheld documents that we believed are exempt from FOIA. We will have our law department review these. If they are determined not to be exempt from FOIA, we will deliver them to you as soon as law completes ists [sic] review."

The News Journal asked the Law Department again about its involvement, and a city attorney said Fullman's statement was inaccurate and the department was not involved.

Meanwhile, Shabazz replied-all to Fullman and CC-ed a News Journal reporter.

"Please do not respond to NJ without the guidance of counsel," she wrote. "Did you hear from the attorney?"

Councilman Williams said it shouldn't be so difficult to figure out how and why taxpayer dollars are spent.

"If it wasn’t for a FOIA to review emails, this story probably never would’ve come out. It would’ve been business as usual."

Contact Christina Jedra at cjedra@delawareonline.com, (302) 324-2837 or on Twitter @ChristinaJedra.