Congressman who championed mortgage relief convicted on raft of racketeering charges

by Ryan Smith23 Jun 2016
A sitting U.S. congressman – and former champion of post-crisis mortgage relief – has been found guilty on a raft of racketeering charges.

Rep. Chaka Fattah Sr. (D-Pa.) and three of his associates were found guilty of participating in a racketeering conspiracy that involved the misappropriation of federal, charitable and campaign funds, according to the Department of Justice.

Fattah was one of the architects of the Department of Housing and Urban Development’s Emergency Homeowner Relief Program, according to a HousingWire report. The HUD program set aside $1 billion to provide interest-free loans to cover mortgage payments for unemployed borrowers in the wake of the financial crisis.

Fattah was convicted – along with associates Robert Brand, Karen Nicholas and Herbert Vederman – of participating in a racketeering conspiracy. Fattah was also convicted 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.

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

According to prosecutors, Fattah and some of his associates borrowed $1 million from a wealthy supporter to help fund his failed 2007 campaign for mayor of Philadelphia, disguising the money as a loan to a consulting company. After Fattah lost the election, he returned $400,000 that the campaign hadn’t used, and arranged for the remaining $600,000 to be repaid by the Educational Advancement Alliance – a nonprofit that he founded and controlled – using charitable and federal grant money. That money was run through two other companies, one controlled by Fattah’s co-conspirator, Brand. To conceal the scheme, Fattah and the other defendants created phony contracts and made false entries in accounting records, tax returns and campaign finance disclosures.

Fattah also sought to get rid of about $130,000 in campaign debt owed to a political consultant by arranging for federal grant funds to be awarded to the consultant, the Justice Department reported. He told the consultant to apply for a $15 million grant (which the consultant ultimately didn’t receive) on behalf of a nonprofit which did not, at that time, exist.

Fattah also misappropriated funds from his mayoral and congressional campaigns to repay his son’s student loan debts. He arranged for his campaign to make payments to a political consulting company, which then used those funds to pay down the student loan. According to the Justice Department, the company made 34 loan payments, totaling about $23,000, between 2007 and 2011.
Starting in 2008, Fattah began pressing people in the executive and legislative branches in an effort to secure either an ambassadorship or an appointment to the U.S. Trade Commission for Vederman. For this consideration, Vederman paid Fattah an $18,000 bribe, which the two disguised as a payment for a phony car sale.

“The corruption demonstrated by Congressman Fattah and his co-defendants is yet another sad example of the type of behavior that corrodes citizens’ faith in their government,” said FBI Special Agent in Charge William F. Sweeney of the bureau’s Philadelphia division. “The FBI is firmly committed to ensuring that public officials and their co-conspirators who choose to use their positions for personal gain rather than provide the honest services that the community rightly expects will be investigated and brought to justice.”