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July 29, 2015

U.S. Rep. Chaka Fattah, four associates charged in 29-count racketeering indictment

U.S. Rep. Chaka Fattah Sr. and four associates on Wednesday were charged with racketeering in a 29-count indictment for their alleged involvement in several schemes that misappropriated hundreds of thousands of dollars of federal, charitable and campaign funds.

Fattah, 58, who represents the 2nd Congressional District in Philadelphia, was allegedly involved in a conspiracy that was intended to further his political and financial interests as well as those of others, according to federal investigators. If convicted on all counts, he could face a maximum of 420 years behind bars. 

The indictment charges participation in a racketeering conspiracy; bribery and conspiracy to commit wire fraud among a litany of other counts. According to prosecutors, in connection with Fattah's failed 2007 campaign for mayor of Philadelphia, he and certain associates borrowed $1 million from a wealthy supporter and disguised the funds as a loan to a consulting company. About $200,000 of which was used as "walking around money," which is a term signifying money used flexibly by political organizers around election day.

After he lost the election, the indictment alleges Fattah returned $400,000 to the donor that went unused by the campaign and arranged for a nonprofit entity that he founded and controlled, Education Advancement Alliance, to repay the remaining $600,000 using charitable and federal grant funds that passed through two other companies, including one run by Brand.

RELATED: Read the federal indictment 

The charges were announced Wednesday, July 29, by United States Attorney Zane David Memeger, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, FBI Special Agent-in-Charge Edward J. Hanko and IRS-Criminal Investigation Special Agent-in-Charge Akeia Conner.

“The public expects their elected officials to act with honesty and integrity,” Memeger said. “By misusing campaign funds, misappropriating government funds, accepting bribes, and committing bank fraud, as alleged in the Indictment, Congressman Fattah and his co-conspirators have betrayed the public trust and undermined faith in government.”

Fattah posted a statement this afternoon on his U.S. House web page:

“This has been an eight-year effort by some in the Department of Justice to link my public service career to some form of wrongdoing. With today’s charges, this misguided campaign has now moved from speculation to specific allegations. 
“As I have previously stated, I have never participated in any illegal activity or misappropriation of taxpayer dollars as an elected official. For the last 21 years, I have represented the people of Philadelphia in Congress with honor and dignity, helping millions of families through my efforts focused on education, employment, mortgage relief, and health care. I will proudly continue to serve my constituents and look forward to helping millions more."

Fattah said he would step down from his position on the House Commerce, Justice, Science, and Related Agencies Appropriations Subcommittee while the charges were being fought.

"This is not Deflategate, this is a normal issue," Fattah told reporters earlier in the day, referring to the alleged cheating scandal surrounding the New England Patriots football team, adding "I have never been involved in any wrongdoing."

U.S. Attorney Zane David Memeger, left, speaks during a news conference Wednesday, July 29, 2015, in Philadelphia. U.S. Rep. Chaka Fattah of Philadelphia was indicted on racketeering charges alleging he misappropriated hundreds of thousands of dollars of federal, charitable and campaign funds. (Matt Rourke / AP)

Also charged in the indictment were: Bonnie Bowser, 59, of Philadelphia, the district director in Fattah's Philadelphia congressional office and treasurer of both Fattah's mayoral and congressional campaigns; Karen Nicholas, 57, of Williamstown, New Jersey, a former Fattah congressional staffer; Herbert Vederman, 69, of Palm Beach, Florida, who was finance director for the mayoral campaign; and Robert Brand, 69, of Philadelphia, founder of Company 2, a Philadelphia public-policy technology company.

“When elected officials betray the trust and confidence placed in them by the public, the department will do everything we can to ensure that they are held accountable," said Assistant Attorney General Caldwell. "Public corruption takes a particularly heavy toll on our democracy because it undermines people’s basic belief that our elected leaders are committed to serving the public interest, not to lining their own pockets.”

To conceal the contribution and repayment scheme, prosecutors allege, the defendants and others created bogus contracts and made false entries in accounting records, tax returns and campaign disclosure statements. Hints in the indictment and a previous article in the Philadelphia Inquirer point to Albert Lord, a former executive at Sallie Mae, as the loaner of the $1 million.

The indictment also alleges that Fattah sought to extinguish about $130,000 in campaign debt owed to a political consultant by agreeing to arrange for the award of federal grant funds to the consultant. According to the indictment, Fattah allegedly directed the consultant to apply for a $15 million grant on behalf of a nonprofit entity that did not exist at the time. (Ultimately, he did not receive the grant.) In exchange for Fattah’s efforts, the consultant allegedly agreed to forgive the debt owed by the campaign.

Fattah also misappropriated funds from his mayoral and congressional campaigns to repay his son’s student loan debt, the indictment further alleges. To execute the scheme, Fattah and Bowser allegedly arranged for his campaigns to make payments to a political consulting company, which it then used to reduce the student loan debt. According to the allegations in the indictment, between 2007 and 2011, the consultant made 34 successful loan payments on behalf of Fattah’s son, totaling about $23,000.

In another alleged scheme, beginning in 2008, Fattah communicated with individuals in the legislative and executive branches in an effort to get Vederman an ambassadorship or an appointment to the United States Trade Commission. In exchange, Vederman allegedly gave Fattah an $18,000 bribe payment and tried to disguise it as payment for his wife's sham Porsche sale. Fattah's wife is Renee Chenault-Fattah, an NBC 10 anchor.

Finally, the indictment alleges that Nicholas obtained $50,000 in federal grant funds that she claimed would be used by EAA to support a conference on higher education. The conference never took place. Instead, Nicholas allegedly used the grant funds to pay $20,000 to a political consultant and $10,000 to her attorney. She also wrote several checks to herself from EAA's operating account, prosecutors allege.

“These crimes and their cover-up constitute a breach of the public trust,” said Hanko. “A founding principle of our democracy is that citizens place their faith and trust in the public servants they elect to represent them. It is the duty of the FBI, IRS, and Department of Justice to investigate and prosecute those who violate this trust and put personal gain above public service."

PhillyVoice staffer Bob McGovern contributed to this report.