Daniel L. Hatcher: With poverty's iron triangle, you have the relationship between the federal government, between the state government, and between the poverty-industry private contractors. Funds that are intended to help vulnerable populations are misused, either the states are misusing the funds and routing them into general coffers or sometimes other uses. And a significant amount of that federal aid is used to pay the private contractors.

White: You cite some pretty disturbing, egregious first-hand examples of poor people being gamed by the very services meant to protect them. How did you happen upon this information?

Hatcher: My first job at Legal Aid was representing children in the Baltimore City foster-care system. Over a year, I probably represented 300 children or more. That experience has stayed with me: Seeing what these children are going through both while they're in foster care, what brought them into foster care, and how they're struggling when they leave foster care. I encountered this practice where the agencies that exist to serve foster children are taking their resources. It really spurred me into action.

White: How does this exploitation work, say in the case of foster services?

Hatcher: You have foster agencies across the country—these agencies that exist to serve abused, neglected children—partnering with revenue-maximization consultants. One of the strategies they use is to go after children’s survivor and disability benefits. They hire contractors to try to increase the number of children in their care determined to be disabled, or target those children that have deceased parents. It’s not to provide additional resources to those children or actually use those services to improve services for the child's conditions, but to take the money as a state-revenue source. Then contractors will cut sometimes a contingency fee, sometimes a flat fee, depending on the arrangements.

I represented a former foster child in Maryland. He had been in foster care since he was 12. His father died while he was in foster care. The father worked, paid into the system, and so his child earned a survivor benefit, which is much like life insurance. The state applied for that money on his behalf and applied to become a representative payee to take control of the money. And then took the money. The foster-care agency took his money without even telling him he had this benefit that his father had left him. So that harm is not only just taking a cash benefit from a maltreated child, but it's taking away a connection to a deceased parent that can have a vast emotional benefit.

White: And the foster-care system is just one example, right? Where else to these abuses exist?

Hatcher: What's most rampant are Medicaid maximization and diversion strategies. For these plans, states target nursing homes or hospitals that serve a disproportionate share of the poor, or schools with disabled children. They claim additional funds and then route the federal aid to general state coffers.