Former Council Chairman Sentenced for Bank Fraud

False Documents Used for Home Equity Loan and to Purchase a Boat

Kwame R. Brown, the former chairman of the council of the District of Columbia, was sentenced today to a day in confinement and six months of home detention on a federal charge of bank fraud. He also was ordered to perform 480 hours of community service.
In a second proceeding later in the day, he was sentenced to probation on a separate criminal charge involving a violation of the District of Columbia’s campaign finance laws.
The sentences were announced by U.S. Attorney Ronald C. Machen, Jr.; James W. McJunkin, Assistant Director in Charge of the FBI’s Washington Field Office; and Rick A. Raven, Special Agent in Charge of the Washington Field Office of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Brown, 42, pled guilty on June 8, 2012, to the bank fraud charge, a felony, in the U.S. District Court for the District of Columbia. Also that day, he pled guilty in the Superior Court of the District of Columbia to the campaign finance violation, a misdemeanor.
As part of the plea agreement, Brown agreed to submit his immediate resignation from the District of Columbia Council. He also agreed to cooperate as the investigation continues.
This morning, the Honorable Richard J. Leon sentenced Brown on the bank fraud charge. Judge Leon ordered Brown to spend the day in confinement, under the custody of marshals at the federal courthouse. Brown then will be placed on six months of home detention, to be followed by two years of supervised release. Judge Leon ordered that Brown perform at least 20 hours of community service a month until he fulfills the 480-hour requirement.
Accompanied by marshals, Brown appeared this afternoon before the Honorable Juliet McKenna in the Superior Court of the District of Columbia. Judge McKenna sentenced him to 30 days in jail in the campaign finance case but suspended the time on the condition that Brown successfully completes two years of probation. The probation will run concurrently with the two years of supervised release ordered in the federal case. Judge McKenna also ordered Brown to perform 100 hours of community service. That requirement also was made concurrent to the federal sentence, meaning that Brown must perform a total of 480 hours of community service as a result of the two sentencing proceedings today.
Brown was 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 D.C. Council to be charged with and convicted of a felony.
In the bank fraud case, Brown admitted providing false documentation to secure two personal loans, totaling more than $220,000. In the campaign finance case, he 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.
“Kwame Brown squandered his bright political future and an opportunity to be a role model for the district’s youth,” said U.S. Attorney Machen. “His greed and ambition led him to forge documents and break the laws governing campaign spending. Kwame Brown’s fall from city leader to convicted felon should chasten others who believe they are above the law. The District of Columbia deserves leaders who set an example of integrity for our young people. Kwame Brown’s decision to come forward, take responsibility for his crimes, and tell the truth about what he knows is a step in the right direction for which he deserves credit.”
“Mr. Brown violated bank fraud laws by forging bank documents for his financial enrichment and illegally failing to disclose all of the necessary financial information regarding his re-election campaign to the Office of Campaign Finance,” said Assistant Director in Charge McJunkin. “These laws are in place to ensure stability in our financial system and fairness in our elections. By violating these laws, he violated the integrity of our government. Together with our partners, the FBI will continue our work to ensure citizens receive the honest government representation that they deserve.”
“IRS-Criminal Investigation provides financial investigative expertise in our work with all of our law enforcement partners. Pooling the skills of each agency makes a formidable team as we investigate allegations of wrong-doing,” said Special Agent in Charge Raven. “Today’s sentence demonstrates our collective efforts to enforce the law and ensure public trust.”
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 N.A.
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 sentences, U.S. Attorney Machen, Assistant Director in Charge McJunkin 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 U.S. Attorneys David S. Johnson, Maia L. Miller, Matt Graves, and Ellen Chubin Epstein and former Assistant U.S. Attorney Daniel Butler, of the Fraud and Public Corruption Section of the U.S. Attorney’s Office; Assistant U.S. Attorney Anthony Saler, of the Asset Forfeiture and Money Laundering Section of the U.S. Attorney’s Office; and Trial Attorney Peter Mason, of the Public Integrity Section of the Department of Justice’s Criminal Division, who prosecuted the case.
Finally, they expressed appreciation to Forensic Accountant Crystal Boodoo; Paralegal Specialists Diane Hayes, Lenisse Edloe, Krishawn Graham, Tasha Harris, Shanna Hays, Christopher Samson, and Nicole Wattelet; former Paralegal Specialist Sarah Reis; 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 U.S. Attorney’s Office for the District of Columbia.