Former child placement agency shut down after alleged financial irregularities

The child placement agency received its license in December 2014.

A former child placement agency is in hot water over its paying of both foster families and employees. Former workers are claiming they’re owed thousands of dollars in unpaid wages.

“It was very upsetting to see that world be shattered, to see somebody take advantage of people like this,” a former employee of Lonestar Social Services said.

“It is like a slap in the face or a punch in the gut. It’s just not fair,” another former employee added.

Both former employees agreed to share their stories about Lonestar Social Services on the condition of anonymity.

According to Texas Health and Human Services, the child placement agency received its license in 2014.

Texas HHS response email (Copyright 2023 by KSAT - All rights reserved.)

She worked as a caseworker for Lonestar.

“I still feel that drive to help families and especially with children,” she said.

He was a director for the company.

“It’s meaningful for me because I was a foster child as well,” he shared when asked why the work was so meaningful.

Both found new jobs after Lonestar announced plans to close its doors by the end of May.

Owners Jason Fulton and James Mercer sent a letter to their employees on April 25th.

The letter says in part, “Lonestar Social Services, LLC. is terminating its contract with the Department of Family and Protective Services to provide foster care services.”

According to DFPS, that’s not how it happened.

Five days before Mercer and Fulton sent their letter to employees, DFPS sent Lonestar’s CEO a letter ending its contract.

The DFPS letter cites several reasons for terminating Lonestar’s contract, including financial irregularities.

“There were a few families that didn’t get paid,” the former caseworker said.

Meanwhile, Texas HHS issued an intent to revoke Lonestar’s license in June, citing falsification, single serious deficiencies, endangering situations, and failure to correct deficiencies.

In an email, an HHS representative wrote, “Lonestar Social Services relinquished their license on June 15, 2023.”

The former caseworker says issues in paying foster families extended as far back as November last year. She says several employees’ checks were late by February, including her own.

Eventually, they stopped being paid altogether.

“When was the last time you were paid from Lone Star Social Services?” KSAT Investigates reporter Leigh Waldman asked.

“In April. April 20th,” the caseworker answered.

“How much money do they owe you at this point?” Waldman asked.

“It would be over $6,000,” she answered.

“I did a calculation. I am owed about $10,500,” the former director said when asked what he was owed. “It’s very upsetting to have, you know, eviction notices or, you know, late payments. I have my lights shut off for one day because I couldn’t find the money to pay.”

According to the Texas Workforce Commission, 47 unpaid wage claims have been filed against Lonestar Social Services in the last six months, totaling $206,002.

KSAT Investigates was given audio from Lonestar’s last staff meeting on May 19.

“Y’all are going to get your paychecks,” a woman’s voice can be heard saying.

Several former employees who attended this meeting say the woman speaking is Tiffany Verette, the state director for Lonestar.

“That is the utmost importance to me, currently, is making sure that staff receives their paychecks. I just am afraid it may be a couple of days late,” Verette can be heard saying.

Three months later, that money still has not come.

Verette had no official comment to share about the unpaid wages.

According to emails shared with KSAT from this spring, executive director Fulton wrote to his employees that they’re “working on a solution to get payroll sent out.”

He blamed the delay on DFPS, explaining that they rely on administration fees to pay payroll and other costs.

But yet again, that doesn’t align with the narrative from DFPS.

Its representative sent an email explaining that per Lonestar’s contract, the child placement agency was required to maintain three months of operating fees, and those fees could be used to pay employees.

The duty to pay them “is the sole responsibility of Lonestar as the employer.”

“If they are doing this maliciously, they haven’t broken our spirits. You know us as Lonestar employees. They haven’t broken our spirits,” the former director said.

With all the back and forth and changing narratives, KSAT Investigates wanted answers from Mercer and Fulton directly.

KSAT Investigates reporter Leigh Waldman sent emails and got a response back from their lawyer saying no comment.

A check of public records shows Dr. James Mercer and Dr. Jason Fulton are connected to 21 businesses under the Fulton Mercer Corporation.

On July 28, the company was dissolved because of tax forfeiture.

Further digging found several liens filed against both men for properties they own, and in August, the pair filed for Chapter 11 Bankruptcy for the Fulton Mercer Corporation.

With no luck getting answers via email, we saw a posting online for a back-to-school event at one of Mercer and Fulton’s businesses — Heritage Funeral Home in Lampasas.

“Can I help y’all?” a woman asked, walking outside the funeral home.

Waldman explained who our crew was and what they were doing.

The woman explained she was there to speak on behalf of Mercer. She said no when asked if she was affiliated with Lonestar Social Services.

“We’re with Heritage Funeral Home,” she said.

“Right, and we are here to speak with him about Lonestar Social Services,” Waldman answered.

“He won’t talk to y’all about that today,” she said.

“OK, we’re just gonna wait on him whenever he comes out,” Waldman said.

“He won’t be out today to talk to y’all about that,” she said again.

It turns out the woman wasn’t being honest.

A January Lonestar newsletter identifies the woman, Jeanie Smith, as part of its community relations department.

It didn’t take long for Smith to call Lampasas Police Department.

“I can’t make you get off public property. I’m not even going to try. I do know that Dr. Mercer said that he’s not gonna comment, so I asked him if I could express that to y’all so that you would at least know, and he said I can,” the officer told Waldman.

That wasn’t the only time our crew heard no comment. Mercer’s attorney, Norman Ladd, called, sharing the same sentiment.

“The answer will always be no comment,” Ladd said.

Waldman asked what Mercer and Fulton had to say to their employees not getting paid, and Ladd’s answer was the same.

Our crew waited outside the funeral home for three hours, still no closer to hearing from Mercer or Fulton about the allegations against them.

The changing stories and roadblocks did not deter Lonestar’s former employees from fighting for their unpaid wages.

“When I fell, I hit the ground pretty hard, but I grabbed rocks when I got back up and, you know. I’m going to throw those stones as far as I can. And let’s see if something hits,” the former director said.

“We have to speak up, and we have to keep fighting,” the former caseworker added.

While the former employees we spoke to have filed criminal complaints with the Travis County District Attorney’s Office for wage theft, Mercer and Fulton have not been charged with any crimes.

Waldman asked DFPS how many foster families were impacted by late or payments that never came. They said via email they didn’t have to release that information and shared it may be a part of the Office of the Inspector General’s investigation.

Per the OIG’s policy, it “cannot confirm or deny the existence of a specific investigation.”

Find more KSAT Investigates reports here

About the Authors

Leigh Waldman is an investigative reporter at KSAT 12. She joined the station in 2021. Leigh comes to San Antonio from the Midwest after spending time at a station in Omaha, NE. After two winters there, she knew it was time to come home to Texas. When Leigh is not at work, she enjoys eating, playing with her dogs and spending time with family.

Gavin Nesbitt is a photojournalist and video editor who joined KSAT in September 2021. He has traveled across the great state of Texas to film, conduct interviews and edit many major news stories, including the White Settlement church shooting, Hurricane Hanna, 2020 presidential campaigns, Texas border coverage and the Spurs.

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