Defense: Crimes Were Committed, But Not By Defendants

By George Anastasia
For BigTrial.net

A lawyer for Congressman Chaka Fattah Sr. conceded that the government had uncovered evidence of fraud, theft and corruption in the racketeering case that opened today against the 11-term congressman and four co-defendants.

But those crimes, attorney Mark Lee told a federal jury, had been committed by the government's two key witnesses, longtime Fattah associate Gregory Naylor and high-powered Washington, DC, political consultant Thomas Lindenfeld.

"Congressman Fattah had nothing to do with what the government alleges," Lee said in an opening statement before a packed courtroom and an 18-member (six are alternates) jury panel that will hear testimony in what is expected to be an eight-week trial.

Lee's 30-minute opening outlined a theme that was repeated, in varying degrees, by the other four defense attorneys as well: No one is disputing the essential facts in the case. What is being disputed is the government's interpretation of those facts.

Robert Welsh, the lawyer for Herbert Vederman, said the government was "cherry picking events out of context."

Barry Gross, who represents Robert Brand, said the prosecution had come to a "flawed conclusion" based in part on a rush to judgment. "Sometimes the truth gets in the way of a good story," said Gross, who like Welsh, is a former federal prosecutor.

The prosecution, on the other hand, told the jury that Fattah and his co-defendants were willing participants in a conspiracy designed to funnel hundreds of thousands of dollars in campaign funds and federal grants to cover Fattah's political and personal debts.

Fattah, who was first elected to congress in 1995, "abused his office and his oath over and over again . . . to serve his own interests," said Assistant U. S. Attorney Paul L. Gray.

The defendants "left a trail of false documents" while taking part in a conspiracy that included bribery, fraud and money-laundering, the prosecutor said, adding that Fattah "cheated his way out of paying campaign debts" and used Vederman, a wealthy lobbyist and long-time friend, "as a human ATM machine."

Gray, in a one-hour presentation, told the jury the government's case is built around a documented trail of misappropriated and misapplied funds. "Omissions" and "falsifications," he said, were the hallmarks of the conspiracy.

"This case is about theft, fraud and corruption," he told the jury.

The case, developed by the FBI and IRS, focuses on what the government alleges was an illegal flow of funds that began with an unreported $1 million loan to Fattah's failed 2007 Philadelphia mayoral campaign. The illegal flow included bribes and illegal payments to bolster a mortgage application for a vacation home in the Poconos that Fattah and his wife purchased; payments to cover tuition bills owed by his son, Chaka Fattah Jr.; and the misapplication of funds earmarked for non-profit educational program diverted to cover Fattah's personal and political needs.

In fact, Gray said, Fattah used some of money to pay taxes he owed to the city of Philadelphia.

The prosecutor told the jury that testimony and evidence would offer an "inside view" of a political organization that engaged in a racketeering conspiracy. But the convoluted schemes and money trails that form the basis for the case even gave Gray some problems. The prosecutor paused and restarted one explanation after apparently confusing companies and earmarks in one of the alleged scams.

The first witness called to testify was one of the FBI agents who headed the investigation. The prosecution opened by introducing dozens of documents that established a paper trail of cash flowing into and out of accounts as part of fraudulent schemes alleged in a 29-count indictment handed up in July.

Fattah, who was defeated in a primary election in April, appeared calm and relaxed as he sat at the defense table  with the lawyers and other defendants. The 16th floor courtroom of Judge Harvey Bartle 3d was packed for the morning session. The crowd thinned slightly for the afternoon proceedings. The trial will resume Tuesday morning.

Fattah is being tried along with Vederman, a lobbyist who was the financial director for Fattah's mayoral campaign; Robert Brand, who headed a company linked to what the government alleges was the illegal flow of cash; Karen Nicholas, a former staffer and the CEO of Educational Advancement Alliance (EEA), a Fattah-funded non-profit that is central to one of the corruption charges; and Bonnie Bowser, one-time chief of staff of the congressman's Philadelphia office as well as treasurer for his mayoral and congressional campaigns.

The indictment alleges the five were part of "an enterprise" that used "fraudulent and corrupt means" to further the financial interests of Fattah and conspired to hide those activities from Justice Department investigators and the media "through means that included the falsification of documents and obstruction of justice."

Gray outlined five different schemes that the prosecution contends were at the heart of the conspiracy. These included:

-- The use of charitable and federal grant funds earmarked for Fattah's non-profit Educational Advancement Alliance to repay a $600,000 debt from Fattah's mayoral campaign. The debt was what remained from the illegal and unreported $1 million loan Lindenfeld had arranged after being hired by Fattah to work on that campaign. .

-- A charge that Fattah and his associates had Lindenfeld set up a phony non-profit known as Blue Guardian and then arranged to have federal funds earmarked for that non-profit. The payments were, in fact, made to pay down political consulting fees Fattah owed Lindenfeld, according to the feds.

-- An allegation that campaign funds were illegally used to pay off the college tuition debts of Chaka Fattah Jr. The congressman's son was convicted last year in an unrelated case charging him with IRS and bank fraud.

-- A bribery scheme in which Vederman is accused of providing "things of value" to Fattah in exchange for Fattah's promise to try to secure an ambassadorship for Vederman or an appointment to United States Trade Commission.  The scheme also allegedly involved a job for Vederman's girlfriend. Among other things, the government charges that the phony sale of a 1989 Porsche 911 by Fattah's wife, TV news anchor Renee Chenault-Fattah, to Vederman was part of the conspiracy. The $18,000 Vederman paid for the car was used to bolster the Fattahs' mortgage application for their vacation home. Vederman never took possession of the Porsche, the government contends.

-- A scam in which the National Oceanic and Atmospheric Administration was duped into providing $50,000 to underwrite an EAA conference that never took place.

Gray called an ambassadorship "Vederman's dream job" and said that Fattah had lobbied President Obama and other members of his administration on Vederman's behalf. Meanwhile, he said, Vederman was writing checks to Fattah's son and daughter and providing "things of value" to Fattah as part of what the feds say was a quid-pro-quo bribery scheme.

Vederman "showered Fattah with money and things of value," Gray said.

Two other alleged conspirators, Lindenfeld and Naylor, have pleaded guilty to related charges and are scheduled to appear as government witnesses at the trial. Both were described by defense attorneys as less than credible.

The case, Lee told the jury, is based on speculation, innuendo and the testimony of "two men who have now cut deals to keep them out of federal prison." Lindenfeld is expected to take the stand sometime this week. Naylor will likely to be called later in the trial.

Lee urged the jury to stay focused on the issues. This is not, he said, a case about "Fattah's lifestyle." Nor is it a case about Philadelphia politics, he said, or "Mrs. Fattah's choice of automobile."

Welsh, Vederman's attorney, told the jury that Fattah and Vederman, whose fortune came from his family's ownership of the Charming Shoppes women clothing chain, were "best friends." He said the government was misinterpreting "friends helping friends" and turning Vederman's assistance into something nefarious.

Nicholas' lawyer Ann Flannery hit on the same theme, telling the jury the case against her client was built on "miscommunication" and "misunderstanding" by government bureaucracies.

She said her client worked tirelessly at EAA to develop programs to help students in need obtain educational opportunities.

"The only conspiracy between Karen Nicholas and Chaka Fattah was to help underprivileged young people" get a higher education, she said.

George Anastasia can be contacted at George@bigtrial.net.