Feds charge ex-Pa. Treasurer Hafer with lying and millionaire donor with fraud in pay-to-play probe

3 x 2 barbara hafer
Former Pennsylvania Treasurer Barbara Hafer has been indicted on federal charges of lying in an alleged pay-to-play scheme.

Campaign donations traded for contracts. Contributions surreptitiously routed through a charity founded to help cancer-ridden children. Phony bonuses for family employees and executives, to make them whole for secret campaign donations.

These and a multitude of other alleged schemes were presented by federal prosecutors as they indicted former Pennsylvania Treasurer Barbara Hafer and one of her largest campaign donors, millionaire businessman Richard W. Ireland.

They accused Hafer, 72, of Indiana, Pa., of misleading the FBI and IRS about nearly $700,000 in consulting payments given her by Ireland after she left office in 2005. She faces two counts of making false statement.

And they accused Ireland, 79, of East Fallowfield, Chester County, of orchestrating a "seven-year-long bribery scheme" to influence then-Treasurer Rob McCord. Ireland was a "finder" paid millions by asset management firms for getting them contracts with the Treasury Department.

Prosecutors said Ireland's inducement to McCord included $500,000 in secret campaign contributions and an offer to put him on Ireland's "payroll" when he left office.

Ireland faces 79 criminal counts of mail and wire fraud, money laundering, and other offenses.

McCord, 57, was not charged Thursday. He pleaded guilty last year to attempting to shake down campaign contributors, and quit office in the middle of his second term.

Before his plea, sources say, McCord secretly recorded Ireland while going undercover to help the government and seek a more lenient sentence.

Ireland's lawyer, Joshua D. Lock, said the businessman would be vindicated at trial.

"The charges made against Mr. Ireland are based on half-truths, gross distortions, and innuendos of a desperate man," Lock said, referring to McCord.

Hafer's lawyer, John A. Knorr, described her as "for 30 years a good and dedicated public servant."

As the Inquirer reported Sunday in an article detailing Ireland's lengthy, though low-profile, career, he and a longtime partner, Brian McElwee, have thrived at the intersection of politics and high finance. McElwee was not charged Thursday.

Operating out of offices in King of Prussia, they and family members have held ownership stakes in businesses that directly managed public investment funds or served as finders, helping other such firms land work to manage billions in public funds.

They have made $3 million in campaign contributions, mainly to Republicans, since 2000.

The men also have earned millions in direct payments from the government or in finders' fees from contracts with the Treasury Department and other public agencies.

Ireland's work put him in the crosshairs two years ago of a protracted federal investigation into "pay to play" in Pennsylvania, the practice of exchanging government contracts for campaign money.

Besides McCord, prosecutors from the Middle District of Pennsylvania, based in Harrisburg, have netted politically connected Philadelphia lawyer John H. Estey.

A former chief of staff to Gov. Ed Rendell, he pleaded guilty in May to wire fraud. He, too, is reported to have worked undercover, wearing a body wire and taping political associates.

Assistant U.S. Attorneys Michael A. Consiglio and William S. Houser have been leading the investigation.

In the indictment of Ireland, prosecutors characterize his campaign donations as bribes.

They say the money was part of attempts to win business from McCord's Treasury Department and the vastly more lucrative $22 billion pension program for state employees. McCord sat on the board of that pension plan.

The indictment says Ireland was involved in a "quid pro quo exchange" of "bribe payments made in the form of campaign donations."

Cancer charity

According to the indictment, Ireland cultivated McCord, a Democrat, in 2008, at a time when Ireland was grappling with a "multimillion-dollar decrease" in state business from the incumbent treasurer.

To win more government business, Ireland funneled campaign contributions to McCord and promised him a job on "his payroll" once he left office, the indictment alleges.

In one of the elaborate alleged schemes, Ireland used charities as a cutout to conceal that he gave huge campaign contributions to Treasurer McCord, prosecutors say.

Ireland paid a total of $100,000 to three family employees and two executives with the understanding that they would give the money to a charity, according to the indictment.

In return, an unnamed officer with the charity gave $100,000 to McCord's campaign fund a month later, the indictment says.

The charity was not named in the indictment, but people familiar with the matter identified it as Michael's Way, a Montgomery County-based nonprofit that aids children with cancer.

The charity did not respond to requests for comment.

Key moment

In Hafer's long political career - she served as an Allegheny County commissioner, state auditor general, and treasurer - she was known for her unvarnished language.

In 1990, she called then-Gov. Robert P. Casey Sr. a "redneck Irishman." Six years later, she told a radio audience that the incumbent treasurer and staff were "lying scumbags."

She was elected treasurer twice as a Republican but changed her registration to Democratic during her second term.

Ireland began dealing with her at a key moment in the growth of his business.

In 2001, he and McElwee each gave her $150,000 in campaign contributions on the same day - a record for them and her, according to state documents.

Afterward, Hafer greatly increased the amount of state money given to investment advisers with ties to Ireland and McElwee's firm, the documents show.

By the time she left office, at the end of 2004, the amount of such money under management had hit about $2 billion, according to the records.

Hafer's indictment, at a mere eight pages, is far simpler than Ireland's 41-page charging document.

Unlike Ireland's indictment, hers does not explore Ireland's campaign donations.

Rather, it only contends that Hafer lied to FBI and IRS agents on May 9, when they asked about the nearly $700,000 the government said she received nearly a decade earlier.

After she falsely told the agents that Ireland had not helped her after she left office in January 2005, the indictment says, the agents confronted her with a contract calling for him to pay her $500,000 over one year to help them locate a hotel to buy near Gettysburg. The contract was initialed by Hafer.

Prosecutors say Hafer insisted that she never received any payment related to the agreement. But the indictment says she was paid $675,000 between 2005 and 2007.

mfazlollah@phillynews.com

215-854-5831