FBI and IRS agents raid three prominent Philadelphia political players

A federal probe into campaign spending and two publicly funded nonprofits led Wednesday to raids on the offices of State Rep. William F. Keller (D., Phila.), the home of city Traffic Court Judge Robert Mulgrew, and the suburban office of a prominent political consultant.

The FBI and the IRS are looking at whether money from Keller's political action committee was used for noncampaign purposes, according to two sources familiar with the investigation.

Authorities are also scrutinizing finances related to two nonprofits: the South Philadelphia Area Revitalization Corp. (SPARC), a taxpayer-funded nonprofit established by Keller, and Friends of Dickinson Square Community Development Corp., a nonprofit linked to Mulgrew before he was elected a judge, according to a source with direct knowledge of the investigation.

Agents visited at least six locations in and around the city during early-morning raids. Among them were the Media offices of Martin O'Rourke, a public relations consultant who served as Keller's spokesman in 2008; the South 13th Street home of Lorraine DiSpaldo, Keller's legislative aide; and KO Sporting Goods at 2001 E. Moyamensing Ave., owned by Keller and his childhood friend Mark C. Olkowski.

FBI Special Agent J.J. Klaver confirmed only that agents visited those sites. IRS Special Agent Shauna M. Frye confirmed that agents from her office were also at the scenes. "We are here on official business," she said.

O'Rourke, DiSpaldo, and Mulgrew were among the top recipients of spending by Keller's PAC in 2007.

"Rep. Keller has not been involved in, nor is he aware of, any criminal activity whatsoever," said Keller's attorney, Fortunato N. Perri Jr. "He has fully cooperated with the request for documents and he will continue to in the future."

Perri confirmed that FBI and IRS agents took documents from Keller's political and business offices.

He said agents did not question Keller, who he said was not asked to appear before a grand jury.

"It's not our belief at this point that he's the target of any investigation," Perri said. He declined to offer a theory of who might be a target.

Mulgrew, Olkowski, and O'Rourke could not be reached for comment.

The prosecutors leading the investigation, Assistant U.S. Attorneys Paul L. Gray and John M. Gallagher, declined to comment.

Agents searched the home of DiSpaldo on the 2500 block of South 13th Street. She works in Keller's office and is listed as secretary-treasurer of SPARC, whose vice chairman is Keller's brother Fred. DiSpaldo is also a member of the state Democratic Committee.

DiSpaldo's lawyer, Jeffrey Lindy, declined to comment.

SPARC, at 237 Tasker St., was formed to redevelop the neighborhood bounded by Sixth, Fourth, Mifflin, and Jackson Streets. Its plan was to replicate the success of Jefferson Square Homes, a 93-house development project in South Philadelphia.

SPARC has acquired or controls 95 properties, mostly vacant lots and structures, using almost $4 million in grants secured largely through Keller. But a $4 million verdict last year in a lawsuit brought by a Philadelphia police officer who was injured in a building owned by SPARC has pushed the organization close to financial collapse.

The other nonprofit under scrutiny, Friends of Dickinson Square Community Development Corp., is a community organization that maintains and improves the park.

The raids shook the South Philadelphia political world connected to electricians union chief John J. "Johnny Doc" Dougherty, a close ally of Keller and Mulgrew. Dougherty has not been linked to the case other than having personal and political ties to those involved.

Keller missed a fund-raiser yesterday at Doc's Union Pub given for him by friends in the building trades.

In an interview, Dougherty, business manager of Local 98 of the International Brotherhood of Electrical Workers, praised Keller and Mulgrew.

Mulgrew worked for Local 98, drawing an annual salary of nearly $50,000, until he was elected judge in 2007.

"All I know is, Bill Keller, in all my years of doing business in Philadelphia politics, Democratic or Republican, is the most honest guy I have ever dealt with. He's always about the neighborhood and jobs," Dougherty said.

He said Mulgrew remained a community activist even after his election to the bench, coaching Little League, shoveling snow, and watering baseball fields.

State records show that Keller and Olkowski have owned KO Sporting Goods since 1975. The two are also partners in KO Investments, which has owned at least five properties in the city.

The two men have been "best friends their whole life," according to Dougherty.

The union leader has brought KO Sporting Goods – a few blocks from his home - considerable business, as it is one of three vendors favored by Local 98, Dougherty said. Campaign-finance reports show that the union, through its political committee, has spent close to $350,000 at KO Sporting Goods since 2007.

Of that, Local 98 spent $32,450 to buy campaign T-shirts for Keller in 2008, when he was seeking reelection.

The year before, Local 98 gave the store $6,744 to make T-shirts and hats for Mulgrew, who was running for judge.

A review of spending by Keller's political action committee shows that O'Rourke, as the state representative's campaign spokesman, was the biggest recipient of money since 2007. He was paid about $247,000.

DiSpaldo received nearly $32,000 in that period for work described in campaign reports as "expense" or "fund-raise expense."

Keller also contributed $20,000 to Mulgrew's campaign committee for judge.

About $44,000 was spent at Doc's Union Pub, which Dougherty does not own but which is a popular gathering place for many in his political circle.

Keller, 59, who represents the 184th Legislative District in South Philadelphia, was elected in 1993 to the state House. A former longshoreman, he is chairman of the Commerce Committee, vice chairman of the Appropriations Committee, and chairman of the Committee on Committees, according to his website.

Keller has been a leading proponent of dredging the Delaware River to deepen shipping lanes and sponsored a bill to expand the Port of Philadelphia. He was inducted in 1996 to the Mummers Fancy Brigade Hall of Fame.

O'Rourke is one of the city's most active political consultants. His other clients include the Parking Authority, City Controller Alan Butkovitz, and Council members James F. Kenney and Brian O'Neill.