Former Council Chairman Kwame R. Brown Pleads Guilty to Bank Fraud and Campaign Finance Violation

June 11, 2012

7thSpace.com on June 9, 2012 released the following:

“WASHINGTON— Kwame R Brown, the former Chairman of the Council of the District of Columbia, pled guilty today to a federal charge of bank fraud and a second criminal charge involving a violation of the District of Columbia’s campaign finance laws.

The guilty pleas were announced by United States Attorney Ronald C Machen Jr; Ronald T Hosko, Special Agent in Charge of the FBI Washington Field Office’s Criminal Division; and Rick A Raven, Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI).

Brown, 41, pled guilty to the bank fraud charge in the United States District Court for the District of Columbia. In a separate proceeding, he pled guilty in the Superior Court of the District of Columbia to the campaign finance violation. As part of the plea agreement, he agreed to submit his immediate resignation from the District of Columbia Council. Brown also has agreed to cooperate as the investigation continues.

The Honorable Richard J Leon scheduled sentencing in the federal case for 11 AM on September 20, 2012.

The Honorable Juliet McKenna scheduled sentencing in the campaign finance case for 2:30 PM on the same date.

The bank fraud charge carries up to 30 years in prison. Under federal sentencing guidelines, the parties have agreed that the applicable range for this offense would be up to six months in prison and a possible fine of up to $5,000. The campaign finance charge carries a maximum of six months of incarceration and a possible fine of up to $5,000.

Brown is the second member of the Council of the District of Columbia to plead guilty to criminal charges this year. In January, in a separate and unrelated case, Harry L Thomas, Jr pled guilty to federal theft and tax charges.

Thomas, who resigned as part of his plea agreement, has since been sentenced to a prison term of 38 months. Thomas was the first sitting member of the DC. Council to be charged with and convicted of a felony.

The charges against Kwame Brown involve two separate matters. In one case, Brown admitted providing false documentation to secure two personal loans, totaling more than $220,000.

In the other, Brown admitted aiding and abetting another individual, a relative, to make a cash payment of $1,500 to a campaign worker for the 2008 council campaign. The relative was a signatory on the campaign’s bank accounts; Brown also admitted failing to disclose the relative’s identity to the District of Columbia Office of Campaign Finance.

“For the second time this year, a member of the DC. Council has pled guilty to a felony offense and been forced to resign,” said United States Attorney Machen. “While sitting on the council, Kwame Brown repeatedly falsified and forged documents to deceive the bank into giving him money, even faxing one of the fraudulent documents from his council office.

Brown also gave a family member free license to make illegal and untraceable cash expenditures from his 2008 campaign in violation of DC. law. The people of the District of Columbia deserve better from their elected officials. Today’s pleas take us one step closer to a culture of integrity and accountability that will not tolerate politicians engaging in dishonesty and self dealing.”

“This week, Mr Brown admitted to forging bank documents and withholding information about his re-election campaign finances,” said Special Agent in Charge Hosko.

“This investigation and today’s guilty pleas demonstrate that the FBI and our law enforcement partners will pursue all allegations of illegal conduct that clouds the judgment of our elected officials and deprives our citizens of the honest government to which they are entitled.”

“No matter what your position, it is unacceptable to submit false information to a financial institution in an effort to secure a loan,” said Special Agent in Charge Raven. “IRS-Criminal Investigation will make every effort to aggressively investigate financial fraud of any kind and not give a free pass to anyone who blatantly fails to comply with the law.”

Brown was elected as an at-large member of the District of Columbia Council in 2004 and took office in January 2005. He was re-elected in 2008, and then, in 2010, he was elected chairman. He took office in that position in January 2011.

According to a statement of offense signed by the government as well as the defendant, Brown submitted false information in securing a $166,000 home equity loan, as well as a $55,335 loan that he used to purchase a boat.

Both loans were issued by Industrial Bank, NA.

In paperwork for the home equity loan, which Brown sent by facsimile from his council office on September 26, 2005, Brown provided a Verification of Employment Form. In it, he falsely wrote that he held the position of “Vice President of Strategy” in an unnamed company; that he earned $3,000 per month; that his probability of continued employment was “great”; that he was projected to earn a $10,000 pay increase on January 3, 2006; and that he was a full-time employee. At the bottom of this form, Brown forged the name and signature of a friend from college who was purportedly the president of the company. In fact, Brown did not have his friend’s permission to sign this form, and his friend was never Brown’s employer.

Brown filed and submitted this form to overstate his annual income in an effort to win approval of his loan application, believing that, without artificially inflating his income, his request would be rejected.

Based on Brown’s purported income, Industrial Bank issued a loan to Brown on October 12, 2005, in the amount of $166,000.

Brown submitted the second loan application on July 25, 2007, this time seeking money for the purpose of purchasing a boat. As part of the application, he submitted an Internal Revenue Service form, purporting to be from a company for which he had worked as a consultant. The form that Brown submitted showed his 2006 income from the company to be $85,000. In fact, Brown’s income from the firm that year totaled $35,000.

Before submitting the form, Brown had altered the “3” on the document to an “8,” so that it appeared he earned $85,000, not $35,000.

As with the 2005 loan, Brown believed that this loan would not be approved without artificially inflating his income. Based on Brown’s purported income, Industrial Bank issued a loan to Brown on August 30, 2007, in the amount of $55,335.

In the campaign finance case, Brown admitted aiding and abetting an unlawful cash campaign expenditure, in excess of the $50 limit imposed on individual cash transactions. According to a statement of offense in that matter, signed by the government as well as the defendant, the “Committee to Re-Elect Kwame Brown” was formed for Brown’s 2008 re-election campaign for the at-large seat on the council.

In or around April 2007, Brown allowed a relative to be a signatory on the committee’s bank account, which was held at Industrial Bank. The relative and the committee’s treasurer jointly opened the account.

In his Statement of Candidacy, filed with the Office of Campaign Finance, Brown listed this account as the committee’s sole bank account. He failed, however, to disclose that his relative was a signatory on the account.

In August 2008, with Brown’s knowledge and permission, the relative opened a second bank account at Industrial Bank, called the “side account,” purportedly to pay for “get-out-the-vote” campaign activities. Brown authorized the relative to make withdrawals on behalf of the committee from the side account. However, he failed to amend his Statement of Candidacy to disclose the existence of the second account.

Later, on or about September 11, 2009, Brown’s relative paid an expense in the amount of $1,500 related to the 2008 re-election campaign, using cash withdrawn from the side account.

This case was investigated by the FBI’s Washington Field Office and the Washington Field Office of IRS-Criminal Investigation.

In announcing the guilty pleas, United States Attorney Machen, Special Agent in Charge Hosko, and Special Agent in Charge Raven commended those who investigated the case for the FBI and IRS-CI.

They also acknowledged the efforts of Assistant United States Attorneys David S Johnson, Maia L Miller, Matt Graves, Ellen Chubin Epstein, and Daniel Butler of the Fraud and Public Corruption Section of the United States Attorney’s Office; Assistant United States Attorney Anthony Saler of the Asset Forfeiture and Money Laundering Section of the United States Attorney’s Office; and Trial Attorney Peter Mason of the Public Integrity Section of the Department of Justice’s Criminal Division, who have prosecuted the case.

Finally, they expressed appreciation to Forensic Accountant Crystal Boodoo; Paralegal Specialists Diane Hayes, Lenisse Edloe, Tasha Harris, Shanna Hays, and Sarah Reis; Legal Assistants Krishawn Graham, Nicole Wattelet, and Christopher Samson; former Legal Assistant Jared Forney; Criminal Investigators Matthew Kutz and Duncan Templeton; Litigation Support Services Specialist Thomas Royal; Information Technology Specialist Kimberly Austin; Victim-Witness Coordinator Dawn Tolson-Hightower; former Student Law Clerks Carl Barnes, Iris Postelnicu, and Danielle Rosborough; and Intelligence Specialist Lawrence Grasso, all of the United States Attorney’s Office for the District of Columbia.

Reported by: FBI”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Virginia Businessman Pleads Guilty to Federal Money Laundering Charge in Investigation of Federal Government Contracts

April 19, 2012

7thspace.com on April 18, 2012 released the following:

“WASHINGTON— James Edward Miller, 64, the owner of a Virginia-based construction management company, pleaded guilty today to a federal charge of conspiracy to commit money laundering in connection with an ongoing investigation into the awarding of millions of dollars of contracts by the United States Army Corps of Engineers.

The plea was announced by United States Attorney for the District of Columbia Ronald C Machen, Jr; James W McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; Eric Hylton, Acting Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI); Peggy E Gustafson, Inspector General for the Small Business Administration (SBA); Robert E Craig, Special Agent in Charge of the Mid-Atlantic Field Office of the Defense Criminal Investigative Service (DCIS); and Major General David E Quantock, the Commanding General of the United States Army Criminal Investigation Command (CID).

Miller, formerly of Virginia Beach, Virginia, pleaded guilty in the United States District Court for the District of Columbia. A sentencing date has not been set. The charge carries up to 20 years in prison as well as potential fines and an order of restitution. As part of the plea agreement, Miller must forfeit a money judgment of $4,055,063 and forfeit specific property, including bank account funds, a property in Virginia Beach, three vehicles, diamond rings, and other jewelry.

Miller is the sixth person to plead guilty to charges stemming from an investigation into a scheme that unfolded from 2007 to 2011.

The scheme allegedly involved two former managers for the United States Army Corps of Engineers, various businesses and executives, more than $20 million in bribes and kickback payments, and the planned steering of a government contract that potentially was worth about $1 billion.

Miller’s role in the crimes is described in a statement of offense that he signed as part of his plea agreement. Miller was the owner of Big Surf Construction Management LLC, a company based in Virginia Beach that was involved in residential and commercial construction projects. He was a close friend of another businessman, Harold Babb, the director of contracts at Eyak Technology (EyakTek), a business with an office in Dulles, Virginia.

In 2008, Babb proposed that Miller use Big Surf to obtain government contracts awarded by the United States Army Corps of Engineers. Under the plan, Big Surf would be hired by EyakTek as a subcontractor.

Initially unbeknownst to Miller, Babb was already involved in a conspiracy with, among others, Kerry F Khan, then a program manager for the United States Army Corps of Engineers, and Ananke LLC, a company that was controlled by Khan.

The statement of offense identifies three subcontracts awarded and paid by EyakTek to Big Surf in 2008 and 2009, totaling more than $8 million. Of this money, Big Surf channeled more than $3.6 million from the first two subcontracts to Ananke. According to the statement of offense, Babb directed Miller to pay another $2.9 million, from the third subcontract, to Ananke. However, Miller allegedly reneged on the plan and Big Surf kept the money.

As a result, a fourth intended subcontract, worth about $1.9 million, was canceled.

In the early stages, according to the statement of offense, Miller believed that Ananke was actually providing services for the money. However, by the time of the second contract, he knew that Ananke was not providing services to EyakTek or the Army Corps of Engineers. He also understood that Babb was using his position at EyakTek to facilitate the award of orders to Big Surf in exchange for payments from Big Surf directly and indirectly to Babb.

Indeed, during the scheme, Miller and Big Surf provided a number of benefits to Babb, including cash payments, an investment in real estate, and money for a Porsche.

Babb, 60, pleaded guilty in March 2012 to federal charges of bribery and unlawful kickbacks. He is awaiting sentencing.

Khan, 54, was indicted in September 2011 on one count of conspiracy to commit bribery and wire fraud and aiding and abetting and causing an illegal act to be done, as well as one count of bribery and one count of conspiracy to commit money laundering. He pleaded not guilty.

In the overall investigation, to date, the United States has seized for forfeiture or recovered approximately $7.2 million in bank account funds, cash and repayments, 19 real properties, six luxury cars, and multiple pieces of fine jewelry.

In announcing the plea, United States Attorney Machen, Assistant Director McJunkin, Acting Special Agent in Charge Hylton, Inspector General Gustafson, Special Agent in Charge Craig, and Major General Quantock thanked those who investigated the case from the FBI’s Washington Field Office; the Washington Field Office of IRS-CI; the Office of the Inspector General for the SBA; DCIS; the Defense Contract Audit Agency; and the United States Army CID. They also expressed thanks to the United States Marshals Service for its assistance on the forfeiture matter.

They also praised the efforts of those who worked on the case from the United States Attorney’s Office for the District of Columbia, including Assistant United States Attorneys Michael K Atkinson and Bryan Seeley of the Fraud and Public Corruption Section and Assistant United States Attorney Anthony Saler of the Asset Forfeiture and Money Laundering Section. Finally, they expressed thanks for assistance provided by former Special Assistant United States Attorney Christopher Dana; Forensic Accountant Maria Boodoo; Paralegal Specialists Tasha Harris, Shanna Hays, Taryn McLaughlin, Sarah Reis, Christopher Samson, and Nicole Wattelet and Legal Assistant Krishawn Graham.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.