Mortgage

Congressman, mortgage relief pioneer found guilty on raft of corruption charges

Rep. Chaka Fattah faced dozens of racketeering, bribery, fraud charges

A sitting U.S. Congressman who was once at the forefront of the government’s post-crisis mortgage relief efforts is now facing serious jail time after being convicted of 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 three of his associates were found guilty this week for their roles in a racketeering conspiracy that stemmed from Fattah’s failed 2007 campaign to serve as mayor of Philadelphia.

Fattah and his associates, lobbyist Herbert Vederman; Fattah’s Congressional District Director Bonnie Bowser; Robert Brand; and Karen Nicholas, faced 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.

A federal jury sitting in Philadelphia found Fattah, Vederman, Brand, Bowser and Nicholas guilty of various charges.

According to the Department of Justice, Fattah, Brand, and Vederman were found guilty of participating in a racketeering conspiracy.

Fattah was also found guilty of conspiracy to commit bribery, bribery, conspiracy to commit wire fraud, conspiracy to commit honest services fraud, mail fraud, money laundering conspiracy, money laundering, bank fraud, false statements to a financial institution, six counts of mail fraud and five counts of falsification of records.

Vederman was also convicted of conspiracy to commit bribery, bribery, bank fraud, making false statements to the Credit Union Mortgage Association, falsification of records and two counts of money laundering.

Brand was also convicted of conspiracy to commit wire fraud. Nicholas was also convicted of conspiracy to commit wire fraud, two counts of wire fraud and two counts of falsification of records.

Bowser, on the other hand, was acquitted of racketeering conspiracy but convicted of conspiracy to commit bribery, bank fraud, making false statements to the Credit Union Mortgage Association, falsification of records and money laundering.

The convictions stem from charges filed against Fattah and his associates in 2015.

According to the DOJ, Fattah and “certain associates” borrowed $1 million from a wealthy supporter for Fattah’s failed 2007 campaign for mayor of Philadelphia, and disguised the funds as a loan to a consulting company.

After he lost the election, Fattah returned $400,000 to the donor and arranged for Educational Advancement Alliance, a non-profit entity that Fattah 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, Fattah and several others created sham contracts and made false entries in accounting records, tax returns and campaign finance disclosure statements.

Following Fattah’s 2007 defeat, the DOJ stated that Fattah misappropriated funds from his mayoral and congressional campaigns to repay his son’s student loan debt.

To execute the scheme, Fattah arranged for his campaigns to make payments to a political consulting company, which funds the company then used to lessen Fattah’s son’s student loan debt.  Between 2007 and 2011, the consultant made 34 successful loan payments on behalf of Fattah’s son, totaling approximately $23,000.

Additionally, beginning in 2008, Fattah communicated with individuals in the legislative and executive branches to try to get Vederman an ambassadorship or an appointment to the U.S. Trade Commission

In exchange, Vederman provided money and other items of value to Fattah, the DOJ said. As part of this scheme, Fattah and others sought to conceal an $18,000 bribe payment from Vederman to Fattah by disguising it as a payment for a sham car sale.

Nicholas was found guilty of obtaining $50,000 in federal grant funds that she falsely claimed would be used by EAA to support a conference on higher education. 

Instead, Nicholas used the grant funds to pay $20,000 to a political consultant, $10,000 to her attorney and write several checks to herself from EAA’s operating account.

Fattah’s convictions mark a spectacular fall from grace for a man who once served as ne of the architects of the 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.

According to Philadelphia’s NBC affiliate, Fattah lost the April primary for his Congressional seat. If elected, it would have been Fattah’s 12th term in Congress. Instead, Fattah’s term in Congress will end in December.

“Congressman Fattah corruptly abused his office for his own personal and political gain,” said Assistant Attorney General Caldwell. 

“He took bribes, committed fraud and even stole money from his own campaigns.  In short, Congressman Fattah and his co-defendants deprived the people of eastern Pennsylvania of their right to the honest services of their elected representative,” Caldwell continued. “Today’s convictions should send a message that the Justice Department will vigorously investigate and prosecute political corruption wherever it takes place, and uphold the principles of honesty and integrity that are the foundation of our government.”

U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania said that Fattah and his associates “betrayed the public trust and undermined our faith in government” with their actions.

“Today’s verdict makes clear that the citizens of the Eastern District of Pennsylvania expect their public officials to act with honesty and integrity, and to not sell their office for personal gain,” Memeger said. “Hopefully, our elected officials in Philadelphia and elsewhere hear today’s message loud and clear.”

(Image above courtesy of LaMarr McDaniel / Shutterstock.com)

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