Knoxville's political and financial establishments bought into Jerry Upton's dreams for the inner city. Now he's in
prison, and nobody knows where the money went.
by Matthew T. Everett
A sign for Inner City Community Development, Incorporated still hangs outside a gray brick building on Martin Luther King Jr. Boulevard. The slogan "Together We Can Make A Difference" is printed underneath the company's logo and a stark black and white depiction of a city skyline. Around the corner, on the east side of the building, a similar but smaller sign with the same slogan bears the name of the Knoxville Community Investment Corporation.
But neither corporation is there anymore. Instead, the building is home to a combination printing company and bail bond service owned by Tim BeShea. BeShea's company made the signs for ICCD and he keeps them up as a reminder of the hope the program once held for Knoxville's historically disadvantaged—and heavily African-American—inner city.
When Knoxville Community Investment Corporation opened, national voices heralded it as a model for future inner-city development. Its founder, the Rev. Jerry Upton, met with Vice-President Al Gore and Henry Cisneros, then head of the U.S. Department of Housing and Urban Development, to announce the corporation in 1993. The city of Knoxville paid $165,000 to establish the investment corporation, and National Football League star Reggie White promised $1 million to capitalize the corporation's lending pool for small business and consumer loans. Cisneros and a group of high-profile African-American celebrities—rapper Hammer and White's fellow NFL players Herschel Walker, Ronnie Lott, Bruce Smith, and Leroy Thompson—attended the corporation's grand opening ceremony in March 1995.
Now, six years later, it's all gone. Both the development corporation and the community investment group have disappeared, and Upton is serving a 10-year sentence in a federal prison in Arkansas on gun and drug trafficking charges. The promises Upton and his organizations once represented remain, to a great degree, unfulfilled.
It's nearly impossible to tell exactly what happened to them. Upton's financial records, such as they are, are in the hands of federal law enforcement officials, and what's left—primarily court documents, city records, and the memories of those who worked to support Upton and his early efforts—only provides sketchy details about the workings of ICCD, KCIC, and their ultimate union under the name Inner City Knoxville Community Investment Corporation. By 1996, the supposedly separate development and investment corporations had become so intertwined—with nearly identical boards of directors and the apparent intermingling of funds—that neither could be considered distinct from the other. Upton refused an interview request to talk about the programs, and most former staff members are reluctant to talk about their experiences.
Skepticism and suspicion have shadowed Upton in recent years—ever since the still-unsolved 1996 arson that destroyed his Inner City Church—and there is evidence to indicate that, in addition to an early stroke of bad luck, the bank was underfunded, its management was mishandled, and Upton was ill-equipped for a financial enterprise of ICCD's scope.
At the time of the investment corporation's founding, Upton and White were two of the most visible African-American leaders in Knoxville. Upton was a popular minister and, when he founded Inner City Community Development in 1993, was considered one of the inner city's best hopes. By 1996, he had served in Leadership Knoxville and was a member of the board of directors of the Chamber of Commerce.
In 1993, White, a former All-American defensive lineman for the University of Tennessee, had recently returned to the Knoxville area, serving as a part-time minister at Inner City Church and as an unofficial spokesman for the black community.
"I think Jerry was a charismatic leader, and the combination of Jerry and Reggie White being a team caused a great deal of excitement," says Laurens Tullock, who was then the city's director of development. "Yes, as a result everyone saw it as an extremely hopeful team for leadership in the inner city. That was the context in which support was given. You'd have to be there to understand. I don't know anybody who wasn't excited about that team. The secretary of HUD was excited about that team. It was a risk worth taking at the time."
Upton, now 46, had overcome a troubled past to claim his leadership position. Born into poverty in Madisonville, Tennessee, in 1954, he began using drugs while he was still in high school. After he was released from the Navy in 1973, he moved to Knoxville. In 1975, he was arrested for possession with intent to sell both heroin and PCP. He pleaded guilty to the charges and was sentenced to five years probation.
After the conviction, he began to turn his life around. While working as a laborer at the L&N Railroad in 1978, he was ordained a minister at St. Joseph's House of Prayer, a vibrant, predominantly African-American church in Mechanicsville. In 1982, he became senior pastor there. He traveled across the country for revivals and spent two months in Kenya as a missionary. He spent five years as pastor of Abundant Life Christian Fellowship in Maryville, then returned to Knoxville and joined Inner City Church, led by his older brother David.
Reggie White and his wife, Sara, joined Abundant Life in 1989, and followed Upton to Inner City two years later. White and Upton had known each other since 1980, when White played at UT. At the time White joined Abundant Life, he played for the Philadelphia Eagles, but he bought a home in Blount County and soon became an associate minister at Inner City Church. His position there continued when he joined the Green Bay Packers in the early '90s.
"I never would have imagined moving back to Knoxville except for the fact that the only church I wanted to go to was Jerry's," White said in a 1994 Metro Pulse interview.
"He's my mentor, and I'd trust him with my life," White added.
In 1993, Upton founded Inner City Community Development as a non-profit extension of the church, intended to open economic avenues for inner-city residents through affordable housing loans, small business loans, and financial education. The programs eventually sponsored by ICCD included a micro-loan program, which set up regularly-meeting peer groups of a dozen or so small business borrowers with an experienced group coordinator; an entrepreneur school, led by local business leaders like Jim Haslam, the president of Pilot Oil, and Jim Clayton, president of Clayton Homes; an affordable housing division for low-interest mortgages; a real estate division that bought and rehabilitated homes in inner city neighborhoods, then made them available to low-income buyers; and finally, in 1994, the Investment Corporation, to make low-interest business and consumer loans.
The Investment Corporation drew national attention even before it was founded. In November of 1993, Upton, White and Ashe met in Washington, D.C., with Gore and HUD secretary Cisneros to announce their plans. KCIC would, according to the announcement, take advantage of pending federal legislation—a law to create the Community Development Financial Institution (CDFI) fund—that would provide money "to promote economic revitalization and community development through investment in and assistance to community development financial institutions" like KCIC. White pledged $1 million to the bank's lending pool, and the group expected to get up to $5 million from CDFI.
An Associated Press writer called the effort Reggie White's "million-dollar miracle," and the program was widely praised as a model for future inner city redevelopment efforts around the country. In December of the same year, the city agreed to fund a year-long, $165,000 planning process to set up the corporation, which was originally intended to be a separate non-profit group distinct from the broader ICCD.
But despite the positive press reports, two things hampered KCIC's effort to get federal funding. First, the legislation wasn't passed until 1995, a year later than expected. The delay meant the money wasn't available until nearly a year after the bank officially opened in a small office in the Burwell Building on Gay Street.
The second, and insurmountable, impediment was the grant application itself. Even though KCIC was presented as a new standard for economic investment in the inner city, the organization still had to present a plan to the CDFI. White had recruited John Henry Smith, a Madison, Wisconsin, consultant and noted African-American activist, to handle the grant proposal. But the application was, according to Tullock, "awful."
"It was the worst one I ever saw," Tullock says. But Smith's application was completed as the deadline for submission approached, and there was no time for revision. Not surprisingly, at least to Tullock, the grant was denied.
Following that failure, ICCD and KCIC became essentially a single organization. KCIC was formed to take advantage of the CDFI money, and, if that money wasn't available, KCIC wouldn't be able to do anything that couldn't be done through ICCD. But it remained, at least in name, a separate division of the larger development corporation.
To make matters worse, the delay and the grant denial seem to have prompted White to reconsider his $1 million contribution, which would have been under considerably more risk without the additional support of $3 to $5 million in federal money. Despite continuing newspaper reports that White bankrolled KCIC with his $1 million, there's doubt about how much of that money he actually gave.
In late 1996 or early 1997, Bill Gosnell, a certified public accountant who prepared a financial statement and two tax returns for ICCD, asked Tullock whether the development corporation would be required to repay the $165,000 used to plan KCIC. In a letter dated Jan. 21, 1997, Tullock responded, "It is our position that the conditions of the grant have been met in a satisfactory condition, albeit in a different way than originally anticipated in the grant agreement. It was originally anticipated that Reggie White would capitalize the program with a lump sum $1 million...Because the CDFI initiative did not pass Congress as originally anticipated by the end of the planning process, it was our understanding at the time that Reggie White indicated to ICCD that instead of a lump sum contribution, his contribution would be spread out over time."
Tullock's letter didn't explain how much of the $1 million was actually contributed to KCIC during its three-year existence. But Teresa O'Mary, the closest person to Upton's operations to speak on the record, confirms that White's money didn't come as originally promised—if it came at all.
"Reggie White never did—the money was never given, to my knowledge," says O'Mary, who managed the micro-loan program when it was under ICCD's supervision and now runs it under the auspices of Knoxville's Community Development Corporation.
White, who now plays for the Carolina Panthers in Charlotte, North Carolina, did not respond to repeated requests through the NFL franchise's public relations office for an interview.
Considering the increased risk to his money from the failure to obtain federal support for the bank, the star lineman's apparent reluctance to make good on his contribution may have been justified. But it left the bank's loan pool undercapitalized from the start, O'Mary says. Others agree.
"They operated for a long time without as much money as they thought they were going to get on the front end," says Tullock.
The initial lack of funding started a cycle that plagued ICCD and KCIC throughout their existence. The low-interest lending programs and the business school run from ICCD brought in very little revenue, and much of what was generated was spent on payroll expenses. "There was no cash flow," says Knoxville Legal Aid community economic development specialist Bill Murrah, a member of the planning committee that developed ICCD and chair of the committee that created the micro-loan program. "It was inadequate. There wasn't enough cash flow to support their operations."
"I don't see how [Upton] met the payroll," O'Mary says.
Gosnell adds that the community investment loans—high-risk loans to people who couldn't get money from local banks—had a high rate of default and delinquency. At least three local banks—Home Federal, SunTrust, and First American, now AmSouth—contributed to the operational expenses of the micro-loan program and the entrepreneur school. But they only gave small amounts to the loan pool—more than likely, not enough to keep it afloat. In April of 1995, KCDC contributed $100,000 to Upton's operations—$30,000 to run the micro-loan program and $70,000 for loans to public housing residents. After those loans were repaid to ICCD, the corporation would be free to use the money for other types of loans or operational expenses.
Neither the lack of incoming revenue nor the absence of millions of dollars in federal money had any apparent effect on Upton's intentions. KCIC released a semiannual report on March 31, 1995, that claimed more than $500,000 had been loaned to 53 lenders—$332,000 in affordable housing loans, $178,500 in small business loans, and just over $40,000 in small consumer and micro-loans. A June 1996 ICCD report claimed that $600,000 had been loaned.
Where did that money come from? Where did it go? It's impossible to tell. The ATF seized Upton's financial records from a mini-warehouse in March 1998. (The boxes of records were taken just hours before all the property in Upton's storage units was to be auctioned off; at the time, he was several months and $1,900 behind in his rent on the units.) In theory, those records should indicate where the community bank operation got its loan pool money, and who it was loaned to, and whether those loans were satisfactorily repaid.
But in reality, even the most detailed documents held by the ATF might not provide a clear picture of the inner workings of ICCD or KCIC. Gosnell, the CPA who conducted an audit of ICCD in 1996, told city officials during the auditing process that the corporation's record keeping was "real sloppy." The people closest to the ICCD—Upton; his nephew Ricky, who was vice-president and operations manager of ICCD; Shirley Mickens, executive director of KCIC; Faye Metts, Jerry Upton's administrative assistant; and even Diane Jordan, a Knox County commissioner and public relations director of ICCD—all refused to be interviewed. Ricky Upton, who, to judge by his title, would have been responsible for the day-to-day operation of ICCD, says, "I don't know what happened there. You'd have to talk to Jerry or David about that." He says he left ICCD in 1997 or 1998.
"The money came from lots of different sources: contributions, grants from certain folks," Gosnell says now. "As to who specifically, I wouldn't know unless I looked back and even then I probably couldn't tell you."
As an example of ICCD's sloppy records, Gosnell offers a hypothetical $20,000 check contribution made to the corporation: the single check might be deposited piecemeal into several accounts, rather than put into a single main account with checks written from that account to other programs. That "sloppy" management would leave a confused paper trail that might be nearly impossible to follow, he says.
"If I hadn't had access to [Lisa Lankford, identified as both head of the entrepreneur school and as Upton's secretary] I wouldn't be able to figure out where it came from or where it's gone," Gosnell says, and adds, "Church people can be terrible bookkeepers, and that's where most of these people came from. Shirley Mickens brought some control, because she had been a bank officer. I'm sure the ATF must have gone nuts [trying to make sense of the records]. I'm sure I would have, too."
As would soon become clear, however, the problems of Upton and his corporations went well beyond careless record-keeping.
Even though the ICCD and KCIC weren't officially affiliated with the 600-member Inner City Church, Upton's leadership neatly tied all three together, and many of ICCD's staff members attended the church. The community investment programs were, after all, attempts by the church to reach out to the surrounding neighborhoods, where most of its congregation lived.
So it's little surprise that the confusion at ICCD—about the legal status of the KCIC division, about funding for its programs, about which money went where—increased following the arson that destroyed Inner City Church on Jan. 8, 1996. Over the next several months, the church collected nearly $1 million—the exact amount is still in dispute—for a rebuilding effort that never happened, and its leaders faced a barrage of law enforcement and public scrutiny. Despite an intensive and still ongoing investigation, nobody has ever been charged with setting the blaze.
According to later court filings, the combined stress of the fire, the investigation, and the ongoing complications of keeping his various programs afloat took their toll on Upton. In the late summer of 1996, he started using drugs again.
In a sentencing report after Upton pleaded guilty to drug charges late last year, his attorney David Eldridge wrote, "From about August 1996 until August 1999, [Upton] was addicted to crack cocaine and alcohol, and he used each of these substances on almost a daily basis. His addiction led to his involvement in buying larger amounts of cocaine to finance his habit and to the current charges for which he stands convicted."
On March 27, 2000, Upton was sentenced to 10 years in prison and eight additional years of supervised release. In September, Upton filed motions in the U.S. Court of Appeals to overturn his conviction, claiming that Eldridge provided "ineffectual" counsel. The motions are still pending.
At the same time that Upton was descending back into the drug use and trafficking that he had seemingly escaped, the management of ICCD began to deteriorate noticeably. Upton's supporters see the collapse of ICCD not as an effect of his drug use and ineffective management but as an indication that the organization's lack of initial funding finally caught up with him. Murrah says Upton tried gamely to keep the programs active beyond what was feasible.
"I think he was trying to break through and do something radically different," Murrah says. "For a while, it looked like he was breaking ground. He was a visionary, and he had a lot of skills."
The first sign of change at ICCD was its consolidation with the Investment Corporation into the Inner City Knoxville Community Investment Corporation (ICKCIC) in late 1996. Even though the change appears to have been made to clarify the corporation's legal status as a single non-profit organization, Tullock and other city officials were confused by the move. While the change was being formalized with the Secretary of State's office, Upton was negotiating with the city for a $161,000 grant to fund operation of the micro-loan program and entrepreneur school. The negotiations were delayed in October of 1996, in part because of the uncertainty over the name.
Discussion of the contract didn't resume until March 1997, when Tullock informed the city's legal and financial offices of the new combined corporation.
The city eventually approved the grant (which was actually federal money from the Department of Housing and Urban Development) in June 1997, after an increasingly defensive Upton had complained to the Knoxville News-Sentinel that the city was backing off the deal—and just after he announced the layoffs of 10 employees.
The grant wasn't made in a lump sum; instead, to make sure that Upton complied with federal guidelines, the corporation was reimbursed by the city for expenses incurred under the contract.
At best, the city's file on the 1997 contract and its execution reveals that the city and local banks contributed money to a program run by a man who wanted to do too much, too soon, and was unprepared and unqualified for what he had set out to do. At worst, it reveals something more damaging.
During the time the HUD money was administered through the city to ICKCIC, the corporation was guilty of a string of irregularities: several staff members went unpaid for several weeks; employee paychecks bounced; ICKCIC failed to deduct federal taxes from paychecks; employees were paid directly from Inner City Church funds (which may have been diverted from the rebuilding donations); the required progress reports weren't completed; and invoices were incorrectly calculated.
Further irregularities were revealed over the next three years. In March 1998, KCDC sued ICCD to recover $60,000 of the $70,000 it had given for housing loans in 1995. The suit claimed, based on an unidentified source, that Upton had diverted the money into a personal bank account. Upton never responded to the complaint, and a judgment was issued against ICCD in September 1998. A second suit on the same basis was filed by KCDC against Upton in December of 1998, but KCDC took possession of the few properties still owned by Upton's organization after the first judgment and has apparently given up on the second complaint.
At his sentencing this spring, Upton provided what, to many, was an unsatisfying account of where the money for rebuilding the church had been spent. He claimed the church collected $912,000—$505,000 from insurance, $357,000 from private donations, and a contribution of $50,000 from the National Council of Churches—and spent more than $1 million following the fire to settle debts, rehab additional homes, and organize church services at Austin-East High School. But a spokesperson for the National Council of Churches later told the News-Sentinel that the NCC had actually given $100,000 and suggested fraud on Upton's part.
In June 1997, Upton announced the layoffs of 10 ICKCIC employees. The layoffs were, effectively, the end of Upton's three-year community investment endeavor. The micro-loan program was soon moved to KCDC, and the city's funding followed. The money that the city had allocated for the entrepreneur school was never given to ICKCIC.
But it wasn't the end of the struggles Upton would endure because of the corporation's consistent mishandling of funds.
O'Mary, Lankford, and Metts continued to work at ICCD, often without pay. On Aug. 14, 1997, O'Mary and Lankford met with David Cook from the city's development office to discuss the problems with ICKCIC's invoices for the contract. O'Mary announced then that she was planning to resign from ICCD.
A few days later, the micro-loan program was hastily moved out of the ICKCIC offices and placed under the supervision of KCDC. It's still there, located in a basement office of the AmSouth building on Jessamine Street, just a few blocks away from the old ICCD office on Martin Luther King Jr. Boulevard.
"It was an orphan child at this point," Murrah says. "The image I've used is that we were trying to save the baby from the burning building. It worked very smoothly. All Jerry had to say was, 'No, I don't want it to happen.' But to his credit, he took [the micro-loan program] under his wing in the first place and in less than three years, he made decisions because he wanted the program to survive."
But Upton seems to have had little to do with the transfer of the program. Upton did attend a meeting on Aug. 19, 1997, with, among others, Murrah, O'Mary, Tullock (who by then had moved to his current post as president of the non-profit Cornerstone Foundation), and Fred DeBruhl, executive director of KCDC, and signed an informal agreement transferring the program to KCDC—all without the consent of the city, which was funding the program through its contract with ICCD. A few weeks later, after consultation with DeBruhl, the city transferred its funding to KCDC.
But Upton—a year into his resumed drug habit by now—was unavailable for weeks after the initial meeting, and the formal transfer still required his signature. DeBruhl, in a letter to the city's new director of community development, Susan Brown, complained that certified mail to Upton had not been delivered. Upton finally responded to Brown with a letter in October of that year, explaining that his absence had been due to an unspecified illness. He reportedly suffered from severe health problems, but the sentencing report filed by Upton's attorney this spring also listed a drug-related "attack" in 1997 and a cocaine-induced seizure in 1998 or 1999, both of which required hospitalization.
Upton also fired one last shot at his critics in his letter to Brown: "In regards to our own programs, we are preparing to enlist the help of the African American Community to challenge the racism and rude remarks that have been stated by your staff and department," he wrote, months after the most successful of ICKCIC's programs had slipped from his grasp. He failed to explain exactly what sort of racism or rudeness he or his clients had encountered. "Our record in housing, business training, micro-lending, and rehab housing speaks for itself. I have no intentions of having to prove to your staff each time they examine our invoices or records the credibility and integrity that we are operating in...With or without the aid of the City, we will still continue to outproduce, outperform, and bring quality living to the inner city neighborhoods. We will not be put in a position to have to defend to the City of Knoxville our record of production any further. WE WILL NOT GO AWAY!"
Unfortunately, for both Upton and the inner city that he promised to help, ICCD's record may indeed speak for itself. And there's very little evidence to indicate a lasting, positive impact. He has most certainly gone away, as have nearly all of the efforts he sponsored under his various corporations.
There is still hope for Knoxville's inner city. In 1998, a 16-square-mile area of the center city—including the same neighborhoods targeted by Upton—was designated a federal Empowerment Zone by HUD, a designation accompanied by up to $100 million of community-investment funding over 10 years. There's even a community investment bank proposed through the Zone to provide credit counseling, training, and loans of up to $50,000 to small business owners. But such efforts may still be stigmatized by the revelations of Upton's drug use and the admitted diversion of church rebuilding money.
"There's a real need in the inner city," Gosnell says. "But the next guy may really have a burden, after all of this. I operated under the assumption that they were honest and idealistic, and I looked and looked to find documents to satisfy myself. Beyond that I couldn't tell you what happened."
For some people, the effort that Upton made and his original vision for transforming Knoxville's inner city neighborhoods are enough to justify all that's come since then.
"Perhaps what the investigators have found is a totally different Jerry Upton than the one I have seen," Tullock wrote in a letter to the sentencing judge upon Upton's conviction this spring. "Perhaps in the stress of his world crashing down around him he has changed as a person or made serious mistakes...All I can tell you unequivocally is that the man that I saw during the three short years that I knew him well was doing heroic work in the toughest of locations and circumstances."
White similarly defended both Upton and his own reputation. "We know that the money we personally donated went towards rebuilding lives, families and the Knoxville area. With everything that has occurred in the last few years, many have accused Jerry of stealing money. I have the utmost confidence that monies were used to help people," White wrote, concluding, "Lastly, Sir, some think that I was a victim that fell into Jerry's trap of deception. I would say that perception is an insult to my character and intelligence. I am 38 years old and I am able to discern wickedness and honor. Jerry Upton does not fit into this category."
In an interview with Metro Pulse in the summer of 1994, while Knoxville Community Investment Corporation was still considered a great step toward economic liberation for the inner city, Upton responded to criticism that he didn't have the resources to fulfill his goals.
"I've been told I'm not financially able," he said. "But God is telling me to help the inner city, and I'd rather have it written that I failed than that I didn't try."
He may have gotten his wish.
November 2, 2000 * Vol. 10, No. 44
© 2000 Metro Pulse
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