Mr. Wool said. "The child fatality would not necessarily trigger closer financial scrutiny."
After FIVE dead children, the state shut down Daystar RTC, and left Shiloh RTC open. More on Daystar Closing.

Updates:

Michael Owens, Restrained to Death at Daystar RTC

June 6, 2010 -
Mentally and Physically Disabled [Distressed] Foster Children forced to Fight for Snack
250 cases of abuse include a staff-provoked fight among 7 girls

June 15, 2010 - [Mentally and physically disabled] Kids choked, stripped, beaten at facilities

Many children come to the Daystar Residential Treatment Center from backgrounds of beatings and hunger. Others suffer from afflictions that trap their minds in dark and violent corners. Some can't talk, some can't walk and some can't clean themselves.

But the 100 or so Daystar residents are exceptionally good at one thing. They make a lot of money for a man named Clay Dean Hill.

1. Clay Hill says he worked almost 7,000 hours last year, which averages 19 hours a day.
2. He also coaches a baseball team that travels out of state.
3. 2-4 Daystar's clients live in modest houses and trailers, and officials say they strive for a "home-like setting."
4. But Kristine Hopkins, whose son Shawn lived at a Daystar residence for eight months, said, "When I saw it, I was thinking I stepped in the backwoods somewhere."
5. Clay Hill "does more good than anyone I've ever met," said E.Z. Jones, a Sugar Land minister and Daystar director.
6. Mr. Hill, whose official title is program director for Daystar, has a house appraised at $477,640 near a country club in Sugar Land, an affluent suburb of Houston.
7. Daystar's executive director, Cal Salls, said the company provides good care and complies with all state regulations.
8. In 2000, Behavior Training Research bought a condominium appraised at $130,500 in a luxury high-rise in the Houston Museum District for Kellie Pitts, 32, director of quality improvement for Daystar who could not qualify for a mortgage.
9. CHART(S): HOW THE MONEY MOVES list 1

Mr. Hill, 55, founded Daystar, one of the state's largest providers of residential care for foster children with acute emotional problems. The investment has paid off handsomely.

His real estate company, which supplies housing for the foster children, has amassed property appraised at nearly $3 million in or near Houston. His management firm and other companies he owns help run Daystar for more than $4 million a year.

Last year, Mr. Hill reported making more than $1.5 million, about 14 times the average for an executive in his field.

Taxpayers furnish nearly all the money.

While Mr. Hill collects his millions, some Daystar children live in isolated trailers in this semi-rural town south of Houston.

"The kids stay all doped up, stuck in a house somewhere in the country with baby sitters who are unqualified," said Kristine Hopkins, mother of a child who resided at Daystar.

Last year, a child at Daystar died - a result of insufficient training and supervision of employees, state investigators said.

Mr. Hill would not comment for this story. Daystar's executive director, Cal Salls, said the center provides good care for children and young adults and complies with all state regulations.

This year, auditors from the Texas Department of Protective and Regulatory Services reported hundreds of thousands of dollars in questionable costs at Daystar, including parts of Mr. Hill's earnings.

But officials from that agency have not sought - and say they will not seek - repayment of any of that money. Nor have they mounted a comprehensive review of Mr. Hill's books, despite auditors' complaints of missing information and a failure to comply with state and federal financial reporting requirements.

No increased scrutiny is needed, state officials said.

"We believe children at Daystar are receiving the services Daystar is being paid to deliver," said Geoffrey Wool, spokesman for the regulatory agency. "He's getting the same rates as everyone else. He is required to provide the same services as everyone else. ... There's not much here in ways for a residential treatment center to make extraordinary amounts of money."

$8 million in revenue

Daystar had revenues of more than $8 million last year, with almost all of it coming from government agencies in California and Texas. It is a nonprofit, tax-exempt corporation whose president is Terrie Hill, Mr. Hill's wife.

An examination by The Dallas Morning News of reports that Daystar filed with Texas DPRS found that millions of dollars flow each year from Daystar to subcontracting companies owned by Mr. Hill.

Although these subcontractors are for-profit corporations, state rules say they should not make a profit from the foster-care operations. Daystar officials say Mr. Hill's companies provide their services on a cost pass-through basis.

But an inspection of records by The News determined that that is not always the case.

Mr. Wool initially said a DPRS analysis of Daystar's reports shows that the center's payments from the state have been less than its costs. But that analysis, he later said, was actually an "informal check" involving only a few simple calculations.

The DPRS spokesman added that Mr. Hill's subcontracting arrangements prompted an "on-site audit" of Daystar by the agency.

It found $327,516 in unallowable costs - expenses that do not meet federal or state guidelines. Among the multiple accounting deficiencies it noted were possible undisclosed transactions between Daystar and Mr. Hill's companies.

However, that audit carried no potential for contractor penalties, sanctions or repayment to the state.

"It's not designed that way," Mr. Wool said. "It's really used just for setting rates." In other words, the state conducts the audits to discover how much foster-care contractors are spending now so it can determine how much to pay them in the future.

Thomas Chapmond, executive director of DPRS, declined to be interviewed for this story. His agency's decisions to seek no repayment from Daystar come as Texas state government makes deep budget cuts in human services, including health benefits to children.

Such lack of action is not unusual for DPRS, said a state legislator who has been critical of the agency's oversight of foster care.

"There's no accountability," said Rep. Suzanna Gratia Hupp, R-Lampasas.

Hers is not the first such criticism leveled at DPRS. A 2000 report on the agency by the Texas Office of the State Auditor found "serious gaps in the oversight of foster care contractors." These gaps, the report said, "could undermine the department's efforts to ensure the safety of children in its care."

DPRS officials said the problems raised by the state auditor have been remedied.

"Our caseworkers, program staff and our contract administration division monitor each residential treatment center to make sure children ... are getting the services and quality of care that are expected," Mr. Wool said.

Residential treatment centers provide 24-hour care for foster children whose mental or behavioral problems are too severe for them to stay in individual foster homes. There are 85 such centers licensed in Texas.

State and federal funds

Private contractors run the centers. DPRS pays 33 of them more than $63 million a year to house and treat children placed by the agency's Child Protective Services division.

Foster children with the most severe difficulties are the most expensive. For them, the state of Texas pays the treatment centers as much as $101,105 a year per child, from a mix of state and federal funds. Similar arrangements exist in many states.

"I call it the foster care industrial complex," said Richard Wexler, executive director of the National Coalition for Child Protection Reform.

Some of these children are suicidal. Others try to mutilate themselves or harm those around them. They may eat glass, stab themselves or attack their attendants. Most are treated with heavy doses of mood-altering medications.

Daystar specializes in handling children with the toughest problems. It is one of 31 facilities in Texas that accept so-called Level 6 clients. It is the only Texas center to take those even more severely troubled, whom the state classifies as "exceptional care children." State records put Daystar's population of Level 6 and exceptional-care children at 25.

Daystar also takes in mentally retarded and emotionally disturbed children from other states - principally California - as well as some juvenile offenders, who are mixed in with the foster children.

They live in 16 spare but clean houses and trailers scattered across Manvel, 18 miles south of Houston. Two-lane county blacktops crisscross the town.

Manvel offers a mix of pasture, scrubland, natural-gas wells, small homes, a few baronial ranchettes and some overgrown lots stacked with abandoned, rusted drilling equipment.

Daystar's modest houses and trailers, many of which have little or no landscaping, bear little resemblance to the traditional campus environments of some other institutions. Center officials say they strive for a "home-like setting." Some outsiders have a different impression.

"When I saw it, I was thinking I stepped in the backwoods somewhere," said Ms. Hopkins of El Cajon, Calif. Her son Shawn spent eight months at Daystar last year.

Mr. Hill, whose official title is program director at Daystar, does not live in Manvel. He owns a house appraised at $477,640 two blocks from a country club in Sugar Land, an affluent suburb of Houston. A 1973 graduate of the University of Houston, with a degree in education, he began his child-care career as director of a 20-bed autism treatment center in Dallas.

By 1984, he had established Behavior Training Research in Manvel, a for-profit residential treatment center. When regulations required a nonprofit corporation as contractor, Daystar was formed in 1991.

Paid by the state

Daystar's residents, ages 6 to 23, have been placed by public agencies. A sister facility, Shiloh Treatment Center, holds about 30 children, many of whom are private placements.

In 2002, Daystar got more than $3.5 million from the state of Texas for foster care. Only one other residential treatment center in the state received more.

An additional $3.9 million came to Daystar from various governmental agencies in California, which has a shortage of such centers.

Smaller amounts from other counties and states brought Daystar's total revenues to more than $8.5 million last year. Slightly more than half that, about $4.3 million, flowed directly to subcontractors controlled by Mr. Hill, according to reports filed with DPRS.

Behavior Training Research, for example, was paid $594,258 to provide shelter, furniture and vehicles to Daystar. Mr. Hill is the president of Behavior Training.

Daystar Pharmacy received about $71,000 for prescriptions and other medications. Mr. Hill is its president. HHH Community Service was paid $69,275 for buildings and vehicles. Mr. Hill is the president. C&E Investments received $2.1 million to furnish, among other things, accounting and management services. Mr. Hill is president of that company.

Shiloh Treatment Inc. got almost $1.5 million to provide staff. Mr. Hill is president of Shiloh. It's a self-contained operation: The subcontractors work only for Daystar or its affiliated companies. Mr. Salls, the Daystar executive director, defended the arrangement.

"In each case, we're hiring people who know how to do it, correctly and efficiently," he said. State rules say related subcontractors like Mr. Hill's companies must be paid for their costs only. That, according to the Texas Administrative Code, is "to avoid payment of artificially inflated costs which may be generated from less-than-arms-length bargaining."

Allowable costs

Daystar's contract with DPRS requires that it return to the state "any income that exceeds actual allowable costs." Mr. Salls said the related subcontractors pass their costs - but nothing more - on to Daystar. "They're not making a profit, not from Daystar," he said. "They can't."

He added that none of Mr. Hill's companies is making a profit from any source. "We've got it set up that they're not," he said. "It's just a pass-through.

"The cost is the cost. I'm talking about the actual cost in all cases, even real estate."

When questioned about specific transactions, however, Daystar officials acknowledged that the actual-cost claim is not always so.

In 1989, Mr. Hill, in partnership with a local physician, bought a house on about five acres in Manvel for $210,000, according to county records. The partnership paid off the loan by 1999.

In 2002, the partnership leased the property - including the house for use as a residential facility - to Behavior Training Research for $2,000 a month. Behavior Training, in turn, leased the property to Daystar for $2,387 a month, according to records Daystar filed with the state.

Thus, Mr. Hill's partnership was being paid $28,644 a year for property that it owned free and clear.

Not a pass-through?

"The rental amount is considered to be well within competitive market rates," Daystar's attorney, John Carsey, said in a written statement. He added that it "is not considered a simple pass-through."

Over the last 20 years, Mr. Hill and companies he controls have purchased more than 100 acres of property in or around Manvel. Brazoria County tax authorities now appraise the property, held by Behavior Training Research, at $2.7 million. That appraisal may rise as new development in adjacent Pearland - including some subdivisions with $700,000 homes - creeps ever closer to Manvel.

Mr. Hill owns 75 percent of Behavior Training Research, according to state franchise tax records. The company's revenue, Mr. Salls said, comes solely from residential care.

Much of the acreage contains no dwellings, and some of it has been leased to energy companies for drilling rights. Attorney Carsey said he was "unaware of any property that's ever been purchased by BTR that wasn't for the need of a residential house for clients."

In 2000, Behavior Training Research bought a condominium, appraised at $130,500, on the 18th floor of a luxury high-rise in the Houston Museum District. The resident of the condo, according to building management, is Kellie Pitts. Miss Pitts, 32, is director of quality improvement for Daystar.

Mr. Carsey said Behavior Training bought the condo because Miss Pitts could not qualify for a mortgage.

"Kellie Pitts is a valuable and responsible employee," he said. She pays the full costs of the condo, he said, and "costs are not passed on to TDPRS."

The News asked to examine Daystar's books, but that request was denied by Daystar management.

No condos have been purchased for other Daystar workers, Mr. Carsey said, but "had other valuable and responsible employees requested assistance, the request would have been carefully considered."

Last year, Mr. Hill reported to DPRS that he made $1,510,887 from Daystar and his subcontracting companies. In 2001, he reported compensation of $1.1 million.

The Alliance for Children and Families - which conducted a survey used by DPRS to establish allowable costs - found in 2002 that the average compensation for a chief executive officer with a budget the size of Daystar's was $102,950. The residential treatment center with the largest number of Level 6 clients in Texas - 30 children - is Cedar Crest of Belton. Its president, according to the most recent federal tax files available, made $117,242 in 2001.

"The Hill salary depends on your perspective," said Mr. Salls, Daystar executive director. "More central is just the special knowledge and experience he's got, being the founder. ... I know the organization would not exist without him."

E.Z. Jones, a Sugar Land minister and Daystar director, said Mr. Hill "does more good than anyone I've ever met." Mr. Hill said in state reports that he worked 6,984 hours last year, which averages out to more than 19 hours a day, seven days a week. He does not, however, maintain an office at Daystar.

He also coaches a select baseball team for 18-year-old boys. The team sometimes travels to out-of-state tournaments. 'On 24-hour call'

At Daystar, Mr. Hill "has a lot of functions," Mr. Salls said. "He's on 24-hour call. He's the person who has primary responsibility."

In a deposition taken last month as part of a wrongful-death suit, Mr. Hill was asked to name the highest-ranking employee at Daystar. He could not.

Mr. Hill also was asked where Daystar maintained its corporate books. "I'm not sure," he said. And he was asked to name the president of Behavior Training Research. "I think I am," he said, according to the initial transcript, "but I'm not sure."

As for his wife's role as Daystar's president, Mr. Hill said she has no day-to-day duties, but "sometimes she helps with the food ordering person."

DPRS officials say any talk of profit, large salaries or lack of knowledge misses the point. They say the focus should be on what Mr. Wool calls "our long-term goals of safety, permanency and well-being of children."

That was also the focus of Ms. Hopkins of California, whose son Shawn came to Daystar in February 2002. Shawn, 12, was a bright child who could not control violent impulses, his mother said. The San Diego County mental health department placed her son at Daystar, she said.

Ms. Hopkins was not impressed by her initial visit to Manvel. Subsequent visits and phone calls did little to allay her misgivings. Her son told her that meals sometimes consisted of Hamburger Helper with no meat, and that recreation periods were spent watching attendants play video games.

'Just out of it'

Shawn was treated with heavy doses of Zyprexa, she said. That anti-psychotic drug gave him tremors, slurred his speech and caused tremendous weight gain, she said. "He gained 60 pounds" over eight months, she said. "He couldn't respond to questions. He was just out of it."

After her repeated complaints, Shawn was returned to San Diego. He now lives at home.

"I wouldn't have paid them $5 a day for that Daystar place," Ms. Hopkins said. "They dang near killed my son."

Daystar executive director Salls said the problems cited by Ms. Hopkins "have not been brought up by anybody." Dietitians plan children's meals, he said, and physicians prescribe all medications.

"We've gotten very positive remarks from monitoring people about the children getting up, going to school and going out into the community," he said.

Until last year, Texas licensing inspectors - who operate separately from financial monitors - recorded few serious violations at Daystar.

And California officials said their relations with Daystar had been better than average.

"We've had real good experience with them in servicing some of the most challenging kids we've had," said Paul McIver, district chief for the Los Angeles County mental health department.

Much changed in February 2002 with the death of 15-year-old Latasha Octavia Sarajane Bush.

Latasha was 5-foot-3, weighed 276 pounds and had the mental function of a 6-year-old. Diagnosed as bipolar, she was prone to outbursts and delusions.

"She was a lovable child," said her mother, Leslie Brown. "But she would be out of control at times."

Ms. Brown, a single parent with three other children, said she could not keep Latasha at home and did not have enough money for private placement. So she allowed the state to take custody of her daughter.

Child Protective Services sent Latasha from her home in Bell County to Daystar. She lived in a four-bedroom mobile home dormitory on Country Drive in Manvel.

During her 12 days at Daystar, Latasha was a chronic bed-wetter. "She said she wet her bed because she was afraid of me," her attendant, Tisha White, testified in a deposition.

Forced to the floor

After an argument over whether she had to wear socks, Latasha threw herself against an interior wall of the trailer. She struggled with a male attendant, who teamed with a female aide to force Latasha to the floor, on her side. The male attendant pinned her arms against her while the woman held her feet - a common form of restraint.

"She was kicking and stuff," Yolanda Houston, the aide who held her legs, said in a deposition. "We were ... asking her to calm down, calm down, and she was saying: 'I'm trying, I'm trying. Get up, get up.'"

The two attendants stood. Latasha took one last breath and stayed on the floor. "Then her lips starts changing colors," Miss White testified.

The Harris County medical examiner ruled the death a homicide caused by "complications of mechanical asphyxia." Contributing factors were seizure disorder and obesity.

The autopsy report did not say what action by her attendants, if any, contributed to the girl's death.

Daystar later issued a statement that took issue with the autopsy report's terminology. "Homicide does not mean the client died due to an intended or neglectful act," the statement said. "It simply means a person or persons were present and may have been a contributing factor. ... The word 'homicide' has negative connotations which, in good part, are inaccurate."

Brazoria County District Attorney Jeri Yenne said she considered prosecuting the attendants but reluctantly dropped the idea because the autopsy offered no hard evidence of criminal intent. "You have to explain to me medically how it was a criminal homicide," she said. "That, I don't have."

This was the second Daystar-related death in just over a year. In early 2001, 16-year-old Stephanie Duffield died after being similarly restrained at Shiloh Treatment Center. The medical examiner ruled that death an accident, and state foster care inspectors issued a finding that there had been no physical abuse.

The Bush death was different. DPRS investigators found that Latasha had been physically abused and that Daystar "failed to employ sufficient qualified staff" to prevent the girl's death. Because of "excessive force" used by the attendants, state inspectors determined, "Latasha suffered injuries which resulted in her death."

The state placed Daystar on "last chance" probationary status and threatened to revoke its license. The action resulted not only from Latasha's death, the state said, but also the "number of injuries sustained by clients." Details on these injuries were not provided.

Daystar developed, as required, a plan for corrective action. It included improved emergency medical services and a "crisis management training program." DPRS then removed Daystar from probation.

Lawsuits by both dead girls' families are pending. Mark Collmer, attorney for the families, contends that Daystar hired unqualified staff - some attendants made less than $6 an hour - and that center management would not pay for necessary training.

"He Mr. Hill underpays his employees while he aggrandizes wealth for himself," Mr. Collmer said. "The money he puts in his pockets might have been better spent on training his employees to take better care of children."

State satisfied

As far as the state is concerned, that question already has been answered.

"Nothing indicated there was any relationship between the fatality and the way money for care was being spent," Mr. Wool said. "The child fatality would not necessarily trigger closer financial scrutiny."

Ms. Hupp, the state representative, said she has talked with agency officials about tougher financial monitoring of contractors but came away discouraged. She said she will press for more legislative oversight of DPRS's foster care operations.

"The idea that there's a profit motive involved I find very, very disturbing," she said. "I'm a big believer in profit, but not on the backs of kids."

E-mail dswanson@dallasnews.com

Emphasis Added