A U.S. Congressman who was once at the forefront of the government’s post-crisis mortgage relief efforts is now facing federal corruption charges for allegedly misappropriating hundreds of thousands of dollars of federal, charitable and campaign funds.
Rep. Chaka Fattah, D-Pa., who championed the U.S. Department of Housing and Urban Development’s Emergency Homeowner Loan Program, and four of his associates were indicted Wednesday on 29 counts of racketeering and other crimes, including bribery; conspiracy to commit mail, wire and honest services fraud; and multiple counts of mail fraud, falsification of records, bank fraud, making false statements to a financial institution and money laundering.
Assistant Attorney General Leslie Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Zane Memeger of the Eastern District of Pennsylvania, Special Agent in Charge Edward Hanko of the Federal Bureau of Investigation’s Philadelphia Division and Special Agent in Charge Akeia Conner of the Internal Revenue Service-Criminal Investigation Philadelphia Field Office made the announcement.
According to the FBI, Fattah, 58, of Philadelphia; lobbyist Herbert Vederman, 69, of Palm Beach, Florida; Fattah’s Congressional District Director Bonnie Bowser, 59, of Philadelphia; and Robert Brand, 69, of Philadelphia; and Karen Nicholas, 57, of Williamstown, New Jersey, allegedly engaged in several schemes including using funds from Fattah’s failed 2007 campaign to serve as mayor of Philadelphia to repay Fattah’s son’s student loan debt.
“As charged in the indictment, Congressman Fattah and his associates embarked on a wide-ranging conspiracy involving bribery, concealment of unlawful campaign contributions and theft of charitable and federal funds to advance their own personal interests,” said Assistant Attorney General Caldwell.
“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,” Caldwell continued. “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.”
The indictment also alleges that while Fattah was running for mayor of Philadelphia in 2007, he and “certain associates” borrowed $1 million from a wealthy supporter and disguised the funds as a loan to a consulting company.
The indictment also states that after he lost the election, Fattah allegedly returned $400,000 to the donor that the campaign had not used, and arranged for Educational Advancement Alliance, a non-profit entity that he founded and controlled, to repay the remaining $600,000 using charitable and federal grant funds that passed through two other companies, including one run by Brand.
To conceal the contribution and repayment scheme, the defendants and others allegedly created sham contracts and made false entries in accounting records, tax returns and campaign finance disclosure statements.
Fattah rose to prominence in the housing industry when he was one of the architects of Emergency Homeowner Loan Program, a HUD program that set aside $1 billion to provide up to $50,000 in interest-free loans covering mortgage payments for up to 24 months for unemployed borrowers in the wake of the financial crisis.
In 2011, the House voted to end the program, despite Fattah’s protestations.
At the time, Fattah said the program has worked well for the state of Pennsylvania for the past 30 years.
He pointed out the state appropriated $222 million for its program through the Pennsylvania Housing Finance Agency, and received back nearly $245 million.
But now, Fattah is facing serious federal charges.
The federal indictment alleges that after his defeat in the mayoral election, Fattah tried to extinguish approximately $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 allegations in the indictment, Fattah directed the consultant to apply for a $15 million grant, which he did not ultimately receive, on behalf of a then non-existent non-profit entity.
In exchange for Fattah’s efforts to arrange the award of the funds to the non-profit, the consultant allegedly agreed to forgive the debt owed by the campaign.
In another alleged scheme, beginning in 2008, Fattah communicated with individuals in the legislative and executive branches in an effort to secure an ambassadorship or an appointment to the U.S. Trade Commission for Vederman.
In exchange, Vederman provided money and other items of value to Fattah. As part of this scheme, the indictment alleges that the defendants sought to conceal an $18,000 bribe payment from Vederman to Fattah by disguising it as a payment for a car sale that never actually took place.
“The public expects their elected officials to act with honesty and integrity,” said U.S. Attorney Memeger. “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.”
After the charges were announced, Rep. Nancy Pelosi, D-Ca., the House Minority Leader, said that charges were “deeply troubling.”
“The charges in the indictment against Congressman Chaka Fattah are deeply saddening,” Pelosi said in a statement.
“Congressman Fattah has been a tireless and effective advocate for America’s hard-working families across more than 20 years of distinguished service in the House,” Pelosi continued. Congressman Fattah has rightly stepped down from his position as Ranking Member on the House CJS Appropriations Subcommittee pending the resolution of this matter.”
As of press time, Fattah’s office had not issued a statement on the charges, but NBC Reported Luke Russert tweeted out a short statement from Fattah.
Fattah: "we have not received the indictment...I've spent my time helping people.l— Luke Russert (@LukeRussert) July 29, 2015
Fattah: This is not #DeflateGate ---we have actual allegations now and we'll have a chance to respond.— Luke Russert (@LukeRussert) July 29, 2015
Fattah: I'll recuse myself from my leadership position on appropriations till this is cleared up— Luke Russert (@LukeRussert) July 29, 2015