U.S. Rep. Fattah indicted, allegedly took illegal $1 million loan

Federal prosecutors on Wednesday accused U.S. Rep. Chaka Fattah of using his campaign coffers, charities he created, and federal grant funds he controlled to bankroll a failed 2007 Philadelphia mayoral bid, and line the pockets of family members and close political allies.

The 11-term Democratic congressman, who holds a seat on the powerful Appropriations Committee, was charged in a 29-count racketeering conspiracy indictment that alleges he channeled hundreds of thousands of dollars to pay off an illegal $1 million campaign loan as well as the college debts of son Chaka "Chip" Fattah Jr.

In addition, federal authorities said, Fattah, 58, accepted bribes including stacks of cash, payments toward a Poconos vacation home, and college tuition for an au pair from a lobbyist seeking his help to land an ambassadorship with the Obama White House.

The criminal case unsealed Wednesday brought to a head rumors that have dogged the West Philadelphia native for years and could end the congressional career of a politician who for the last two decades has represented a large section of the city and a small part of Montgomery County.

Fattah, however, remained bullish on his political future.

Outside his congressional office in Washington, he shrugged off the allegations as the product of a witch hunt that has long targeted him and his inner circle. He maintained Wednesday - as he has done for months - that he did nothing wrong.

Within hours of the indictment, however, the congressman gave up his position as ranking Democratic member of the appropriations subcommittee that oversees funding for commerce, justice, and science.

"It's obviously going to be important to my constituents that this matter not be a distraction in terms of my work, and I'm going to try not to have it be a distraction," he told reporters.

And in a puzzling reference to the controversy surrounding New England Patriots quarterback Tom Brady's use of underinflated footballs, he added, "This is not Deflategate."

His lawyer, Luther Weaver 3d, said Fattah would not resign and intends to fight the charges.

Fattah has been advised of the indictment, said U.S. Attorney Zane David Memeger, who was flanked by officials from the Justice Department, FBI, and IRS at a Center City news conference. The congressman will be booked after his initial appearance in U.S. District Court in Philadelphia. It was not known when that would be.

"The public does not expect their elected officials to misuse campaign funds, misappropriate government funds, accept bribes, or commit bank fraud," Memeger said. "These types of criminal acts betray the public trust and undermine faith in government."

In the city, elected officials responded cautiously to word of the indictment, with few suggesting that Fattah should step aside. Still, Philadelphia's political gossip mill had already turned to discussing potential candidates to replace him should he be convicted on counts including wire fraud, mail fraud, bank fraud, money laundering, and falsification of records.

Mayor Nutter called Fattah his political colleague of 35 years and a longtime champion for Philadelphia.

"I've said many, many times, and I think it's true, Congressman Chaka Fattah has probably helped more children go to college than any other member of the U.S. Congress," Nutter said outside his City Hall office.

He offered no opinion on Fattah's future in Congress.

Democratic mayoral nominee Jim Kenney, when asked Wednesday night whether Fattah should resign, said, "That's a personal decision he can make on his own. He doesn't need my advice."

U.S. Rep. Robert Brady, chairman of the city's Democratic Party, called Fattah's indictment a "major loss to the city" because of his work bringing federal funding for education and science programs. He said he last saw the congressman on Tuesday, as the House let out for a five-week recess.

"We were like little kids in school getting out for summer recess," said Brady, who heard the news of Fattah's indictment on his car radio. "It knocked me for a loop."

Yet the charges hardly came as a surprise.

Federal investigators have signaled their interest in Fattah and his family for years - first with a subpoena of his congressional office in 2014, then in a legal fight over the FBI's access to the congressman's work e-mails.

Investigators built their case much the same way as Fattah has run his political career: by paying close attention to a small circle of insiders who have followed him from jobs in his Washington office to posts at various nonprofits launched under his banner.

Last year, Fattah Jr. was indicted in an unrelated bank and tax fraud scheme. Then, in the fall, two longtime Fattah political advisers - Gregory Naylor and Thomas Lindenfeld - pleaded guilty to charges tied to an illegal loan to Fattah's mayoral campaign.

Charged Wednesday alongside Fattah were Bonnie Bowser, Fattah's chief of staff in his district office; Karen Nicholas, a former Fattah staffer who went on to run a nonprofit he created; Herbert Vederman, a lobbyist and former deputy mayor in the Rendell administration who served as finance director for several of Fattah's campaigns; and Robert Brand, a Fattah family friend who is married to a former employee of the congressman's.

All four, prosecutors said, played a role in various schemes to misappropriate public or charitable funds. And in return, Fattah offered them unwavering support in Congress - whether through steering federal grants their way or in pressing political flesh to obtain plum job postings.

Fattah worked for years in a failed effort to land Vederman, 69, now of Palm Beach, Fla., an ambassadorship from the White House.

According to the indictment, he lobbied other politicians and White House staffers, and went so far as to press a letter into President Obama's hand at an October 2010 political event, urging the appointment.

In exchange, prosecutors alleged, Vederman offered the congressman bribes of more than $8,000 in cash and sponsored Fattah's South African au pair for an immigration visa.

When the congressman and his wife, the longtime NBC10 anchor Renee Chenault-Fattah, had their eye on a vacation home in the Poconos, Vederman helped them secure a mortgage - by giving them $18,000 disguised as payment for her 1989 Porsche Carrera convertible, the indictment alleges.

Chenault-Fattah kept the vehicle. NBC10 announced Wednesday that she had taken indefinite leave.

Vederman's lawyer, Catherine M. Recker, said her client intends to fight the charges.

"The government has cherry-picked facts to support its cynical view of friendship and wrongly labeled it bribery," she said.

The bulk of Wednesday's indictment stemmed from money allegedly misappropriated during Fattah's 2007 mayoral bid.

The accusations ranged from the straightforward - including claims that Fattah laundered campaign contributions through a political consulting firm to pay back $23,000 of his son's student loan debt - to the overwhelmingly complex.

The largest involved the congressman's efforts to pay back what investigators have described as an illegal $1 million campaign loan.

With Fattah's support dwindling in the polls, his campaign turned to Albert Lord, the wealthy former chief executive of student lender Sallie Mae, to secure a massive influx of cash.

Because the $1 million Lord lent the campaign far surpassed the city's cap on campaign contributions, the money was laundered through two political consulting firms before it was put to work buying TV ad time and Election Day street workers.

Once Lord called in the debt, after Fattah's loss to Nutter in that year's March primary, the congressman turned to an old friend, Nicholas. The former staffer was at the time running the Educational Advancement Alliance, a now-defunct nonprofit that Fattah had created to fund scholarships.

Fattah had steered several million dollars in congressional earmarks to EAA over the years, and directed Nicholas to divert some of those funds to pay off the debt owed Lord, prosecutors said. She allegedly signed off on phony contracts with a company owned by Brand to send him the money disguised as payment for work that was never done.

When that wasn't enough to pay off the debt, Fattah allegedly directed Nicholas to tap funds given to EAA by NASA and the charitable arm of Sallie Mae.

Ed Hanko, special agent in charge of the FBI's Philadelphia office, said those convoluted maneuvers were aimed at blinding EAA's own bookkeepers and federal auditors as to how the money was really being spent.

"As citizens, we expect honest services from those elected to represent us at all levels of government," he said. The crimes and the cover-up cited in the indictment, he said, are "a breach of the public trust."

The 29-count indictment charges that U.S. Rep. Chaka Fattah misused campaign funds to pay off $23,000 of son Chaka Jr.'s student loans; accepted an illegal $1 million campaign loan and misappropriated federal funds to pay off $600,000 of it; and accepted an $18,000 bribe to help a codefendant try to get a federal appointment.

The charges include racketeering conspiracy; bribery; conspiracy to commit wire, honest services, and mail fraud; money laundering; bank fraud; making false statements to a financial institution; and falsification of records.

The indictment alleges that Fattah relied on companies and nonprofits operated by associates in a complex scheme to hide financial transactions.

Also charged are Bonnie Bowser, 59, the congressman's Philadelphia office chief of staff and chair of his mayoral and congressional campaigns; Karen Nicholas, 57, CEO of the Fattah-founded Educational Advancement Alliance, a nonprofit; Herbert Vederman, 69, of Palm Beach, Fla., a lobbyist, former Philadelphia deputy mayor, and Fattah campaign official; and Robert Brand, 69, of Philadelphia, founder of a policy technology company and spouse of a former Fattah staffer.

The bribery charge stems from an alleged $18,000 payment by Vederman to Fattah to lobby on Vederman's behalf for an ambassadorship.

Fattah's wife, NBC10 news anchor Renee Chenault-Fattah, 57, is implicated but not charged in the alleged fraudulent sale of her 1989 Porsche. The indictment says that Vederman wired the Fattahs the $18,000 for the car in 2012 but it remained in her name and was in her garage two years later.

StartText

Following the money: What happened to $1 million campaign loan. A6

If Fattah steps down, who would replace him? A7.

Indictment casts shadow over a long career. A7.

Renee Chenault-Fattah, mentioned in the indictment, is on leave at NBC10. A7.

Editorial: Congressman should resign. A14.EndText

215-854-2608@jeremyrroebuck

Contributing to this article were Inquirer staff writers Julia Terruso, Tricia L. Nadolny, Chris Palmer, Claudia Vargas, and Jonathan Tamari.