First of two parts; also read Part 2



A Jaguar convertible sits in the driveway of Latasha Jackson's million-dollar mansion in Menomonee Falls. Built on a hill with a sprawling back deck overlooking a pond, the 7,600-square-foot home features an indoor swimming pool and indoor basketball court.

Jackson is not an Olympic swimmer, a professional basketball player or a celebrity of any sort. She is a day care provider in the city of Milwaukee.

She built her fortune with taxpayer funding from the Wisconsin Shares program.

And although documents show regulators had many reasons to believe the 32-year-old mother of three was billing the state for kids not in her care, providing false information and otherwise defrauding the system for more than a decade, they continued to pay her.

That ended Thursday, but only after the state learned the Journal Sentinel was preparing to publish a story on the case. And only when Jackson turned herself in - a day after the newspaper confronted her.

Despite recent records that indicate Jackson was running what police and regulators refer to as a "child-care ring" - adding mothers with many kids to her payroll for the main purpose of enrolling their children in her center - the state continued to deposit thousands of dollars in her account each month. This month alone Jackson collected more than $90,000 from Wisconsin Shares.

All told, Jackson has received nearly $3 million in taxpayer-financed child-care funding since she got in the day care business in 1999.

The Wisconsin Shares program is meant to help hardworking, low-income parents get and keep jobs. An ongoing Journal Sentinel investigation has identified people swindling millions from the system.

The Jackson case shows how licensers, caseworkers and even fraud investigators haven't stopped it.

The newspaper compiled a paper trail on Jackson tallying more than 1,800 pages, including public records as well as those obtained from sources that state and county regulators refused to release. The documents detail how regulators repeatedly failed to take action or cut off payments despite Jackson's extensive violations, her history of lying and even regulators' own outright proof of fraud.

In an hourlong interview at her new center on Milwaukee's northwest side, Jackson denied she ever cheated the program. She insisted the records must be mistaken, that she had never had any program violations, never had a problem with attendance records.

"That's not me. I don't do nothing dirty. I don't do nothing fraudulent. I do what I have to do to take care of my stuff," she said. "Everything I have I have worked for, and I work very hard."

Suspicions date to 1997

As early as 1997, before Jackson even got into the day care business, regulators suspected she was scamming the system. Jackson was a young mother seeking child-care assistance for her 1-year old daughter. Records show she lied about her income to qualify for the program. Milwaukee County caseworkers referred her case to the fraud unit that year and again in 1998. Records don't indicate what became of those investigations. She was never criminally charged.

And Jackson continued to collect Wisconsin Shares funds - tapping the pot, at times, as a mother reportedly in need, and on and off as a day care provider. Even as new signs of fraud surfaced.

In 1999, Jackson was 22 with a 3-year-old daughter in tote when she launched her day care business. Child care offered a perfect way to make a living. She could stay at home on the northwest side near N. 74th St. and W. Hampton Ave., watch a few children and collect a steady check from the state.

It was a couple years after the inception of the state's welfare-to-work program, and demand for day care providers was great. So it didn't take long for Jackson to build her business.

By 2004, she was receiving more than $350,000 a year from the Wisconsin Shares program, with state approval to care for 67 kids in a new center near N. 24th St. and W. Capitol Drive.

She moved to a nice home in Waukesha County, a few miles from where she would later build her mansion.

By 2006, her business had more than doubled to $830,000 a year in public child-care funds and more than 100 children reportedly enrolled.

There is no way to know how much of that money was earned legitimately. Throughout the years, regulators received complaints from people accusing Jackson of falsifying documents and billing for kids not actually in her care. And, inspectors cited her repeatedly for not keeping accurate attendance records. Inspectors also found workers at the center didn't know the names of the kids or the number of children under their watch.

Regulators also investigated allegations that workers were using drugs, watching pornography and that Jackson left the children in the care of a young teenage boy.

In all, from 2001 to 2007 inspectors cited Jackson for more than 150 violations. On at least five visits, inspectors found Jackson's attendance records were inaccurate, at times listing children present who were not in her care.

Yet they continued to pay her.

For years, oversight of Jackson's center was the responsibility of state licensing specialist Jane Abshire.

Abshire, a former day care center director, repeatedly cited Jackson for the attendance violations but took no enforcement action.

She took no enforcement action when she found other troubles at Jackson's center either.

In 2002, for example, Abshire wrote up Jackson for sleeping while children were in her care. Jackson was not penalized.

In 2004, Abshire cited Jackson for punishing children with "time-outs" lasting as long as 30 minutes, six times longer than state rules allow. Again, Abshire took no enforcement action.

And in 2005, when a probation officer called to report that Jackson had admitted to running a day-care ring, Abshire wrote in her report that she passed the complaint to Milwaukee County because "my only authority was over attendance records." Records don't indicate why Jackson was talking with a parole officer. She was not on parole or probation, according to court records.

It wasn't until 2006, when a 2-year-old boy at her center was left outside alone for about 10 minutes that the state took enforcement action. Regulators fined Jackson $300 for the incident.

In 2007, records show, another parole agent contacted state regulators alerting them that a person on probation for carrying a concealed weapon had reported working for Jackson's day care center. The 22-year-old man had also been convicted of disorderly conduct and as a juvenile was arrested for sexual assault of a child and felony battery.

The probation agent questioned whether it was appropriate for the man to be working in a child-care setting, according to an e-mail among state workers.

"I explained (to the parole agent) about the caregiver background check process," state worker Anne Carmody wrote to her colleagues in the e-mail. "The crime for which (the man) was convicted is not listed as a barred crime."

In fact, there are no crimes that forever prohibit a person from working in a day care. Rules allow anyone - even those convicted of homicide - to qualify, as long as they win approval from a rehabilitation panel.

None of those violations, or dozens of others, kept Jackson from collecting from the Wisconsin Shares program.

State rules in many cases give inspectors - such as Abshire - discretion about when to take enforcement action. Officials would not permit the Journal Sentinel to interview Abshire or other licensers.

License revoked after beating

Then, in March 2007, Jackson beat her nephew with a belt. This time the state stepped in.

Jackson's 12-year-old nephew had reportedly stolen some shoes from a relative. Jackson figured six or seven lashings would teach him to behave, according to state documents.

The next month, the state revoked her license.

But it wouldn't be for long. And it wouldn't end her access to public child-care subsidies.

Despite the $1.6 million she received from the Wisconsin Shares program the previous two years, Jackson claimed that without the continued day care center income, she now needed state aid from programs designed for the poor - food and child-care assistance. By this time, she had two children and was pregnant again. The $8.50 per hour she claimed to earn working at a friend's day care center wouldn't support her, she said.

Jackson wasn't even allowed to work in a day care center given Milwaukee County's finding of substantiated abuse of her nephew. Because of the way the system is designed, Waukesha County workers had no way to know that. They granted her $315 per month in food assistance in May of that year. The amount would soon double.

Then in July, a Waukesha County caseworker approved Jackson's request for child-care assistance, according to documents. State and county officials won't disclose the identity of the person, citing security reasons. The worker was identified only as caseworker XWK479.

Live-in boyfriend brings scrutiny

Within a few months, regulators got another tip: Jackson had not reported that her boyfriend, the father of her third child, was living in the house. If employed, his income would be a factor in whether the family qualified for subsidized care. If he was not employed, he would be responsible for watching the children while Jackson worked and they would not be eligible for the program.

This time fraud investigators ordered surveillance on her house. They nailed her. Her boyfriend, Greg Wilder, was living with her and he was making $88,000 a year driving a van for another day care center, investigators learned.

When they combed through Jackson's checking account records, they found tens of thousands of dollars of undeclared deposits that Jackson refused to explain.

Jackson had intentionally misrepresented and withheld facts, they concluded in March 2008, and had essentially stolen $27,000 from the public food and child-care programs.

But instead of pursuing criminal charges, Waukesha County fraud investigator Sue Rhode cut off Jackson's food and child-care benefits and required her to repay the money. She banned Jackson from the food-subsidy program for one year and gave her an official warning on the child-care program.

Rhode said she hadn't made a referral to the district attorney's office in at least two years. Compiling the materials needed to build a case is time-consuming, and often prosecutors reject cases when the money isn't big. Rhode said she is the only person with the Waukesha County Department of Health and Human Services fishing for fraud by mothers seeking child-care help. She is overloaded, she said, and instead focuses on stopping the funding.

"It takes a huge amount of time," she said of making a criminal referral. "It's overwhelming."

District attorneys statewide seldom file criminal charges against parents and child-care providers who cheat the system, despite evidence that millions of dollars wind up in the hands of scammers every year. More often the cases are treated as mistakes. The state attempts to recover the money, and the parents and providers continue to collect public funds.

In an interview, Jackson maintained she didn't defraud the system. She said Wilder, the father of her soon-to-be-born baby, was not living with her at the time she sought assistance. The basement to his house had flooded, and he was temporarily staying with her, she said. The two have since married.

Applies for new license

Waukesha County's punishment didn't deter Jackson for long. Before the end of the year she was again tapping into the Wisconsin Shares program. She reapplied for a child-care provider license, a license she had lost after beating her nephew.

Now all she had to do was convince a three-member panel of state and county workers she had been rehabilitated from her abusive tendencies - prove to them she would not be inclined to punish children physically. If they cleared her, she could seek a new license.

She first went before the panel in November 2007. She told them she had taken a 12-week anger management course and had learned that physical punishment was not appropriate. With her attorney at her side, she answered a few basic questions about her history and her plans for the future, according to the transcript from the hearing.

Panel members seemed impressed. But they were concerned that not enough time had passed - about eight months - since the beating. They told her to come back in six months.

She did, and on June 11, 2008, the state notified Jackson she had been approved. Since the first hearing, she had undergone a psychological evaluation and taken 10 hours of continuing education on managing aggression and child abuse and neglect.

Despite their knowledge Jackson had pilfered the system earlier that year as a mother seeking help, panelists ruled she was fit to resume her role as a child-care provider - and once again draw from public coffers.

"The Rehabilitation Review Panel finds that you have demonstrated sufficient evidence to support rehabilitation approval," wrote Bruce Ratzmann, of the Bureau of Milwaukee Child Welfare, the lead panel member.

The approval was no anomaly. In 2008, panelists determined that 26 of the 30 applicants who had their licenses revoked or had been denied a license were rehabilitated and eligible for child-care licensure.

In an interview, Ratzmann said the panel has a limited focus: to examine applicants' personal growth and determine if they're fit to care for children - not whether they would be likely to scam the system.

"That's not our issue," he said.

Once Jackson was deemed rehabilitated, she reapplied to the state for a new child-care provider license.

This time a bureaucrat in Waukesha County botched the paperwork.

In October 2008, the state sent a request for information about Jackson to Waukesha County, specifically asking "Does your agency have information on the character, behavior or background of this applicant?"

Waukesha County worker Carolyn Howe checked the "No" box, disregarding the county's recent determination Jackson had defrauded the food and child-care programs.

The same state worker who licensed her at least once before, Charlene Langsdorf, signed off on the deal, allowing Jackson to care for up to 110 children.

Jackson reopened her business in December 2008 under the name Kiddie Springs Child Development Center, which she relocated in June to a former warehouse on W. Lancaster Ave. near N. 38th St. in Milwaukee.

State regulators said last week if Howe had done her job properly and alerted the state to the fraud, Jackson would never have been relicensed.

"It absolutely would have caught our attention, and that would have been grounds for denial," said Jill Chase, director of the Bureau of Early Care Regulation for the state Department of Children and Families.

Chase gave no reason why the state didn't shut Jackson down or take enforcement action on the repeated attendance-record violations and other troubling rule infractions.

New laws would prevent funds

A Journal Sentinel examination of Jackson's recent business arrangements shows much of her subsidy money would be denied under laws passed since the newspaper began reporting in January how parents and providers easily con the system - if those changes were to be enforced.

Nearly two-thirds of the children enrolled belonged to employees of Jackson's center, according to documents obtained by the newspaper. Such an arrangement is a red flag for regulators because it is designed with the sole purpose of tapping into child-care funds. Parents don't actually have to report to work. They can stay home and take care of their children and still get paid. Rules that went into effect in June require that no more than 40% of children enrolled in a center belong to a parent who is employed at the center.

Records show Jackson also almost always hired parents who have at least four or five children, making the set-up more lucrative. Each child is typically worth close to $200 a week in subsidies, depending on the age and number of hours of care authorized.

On one recent afternoon, more than a dozen women and men from Somalia reported to work with their children on their hips. Jackson estimated that at least 50 of the children enrolled in the center belong to them.

Workers came from shut down day care

Records show many of the workers came to her center from Ark of Safety, a day care business that was shut down in April amid allegations of rampant fraud. Jackson said the workers have no trouble caring for the English-speaking children at the center because they all speak English. However, records show, some of the workers used translators when applying for their own child-care benefits.

In April, county regulators pulled some records from Jackson's new operation suspecting they might be fraudulent. On Thursday, knowing the Journal Sentinel was working on this story, they said they had just completed the investigation and determined the government had improperly paid Jackson a significant amount of money.

They would not disclose the amount.

In her interview, Jackson told the Journal Sentinel she's not worried about any investigations. She said her paperwork is all in order.

"I don't see how they could be looking at me for fraud," she said.

The next day, however, Jackson told the state about her fraud involving the child-care and food assistance in Waukesha County. On Thursday, state regulators shut her down for that reason and admitted they had botched her case, too. They said Waukesha County had notified them in July 2008 about Jackson's fraud, months before the Waukesha County worker checked the wrong box. The state overlooked the paperwork.

Jackson said her child-care business has required so much work she's rarely been able to enjoy her four bedroom, six-bathroom mansion. She's only been in the pool maybe five times since she moved in last year.

She put the house on the market in February.

Asking price: $1,499,900.