Kwame Brown pleads guilty to felony bank fraud charge, separate misdemeanor

June 8, 2012

Former D.C. Council chairman Kwame R. Brown pleaded guilty Friday to lying on bank-loan applications and violating a city campaign law, branding a once-promising star in local politics as a convicted felon.

In the first of two court appearances just hours apart, a subdued Brown admitted that he committed a federal felony when he forged a name on one loan document and then switched a “3” to an “8” on another to inflate his salary. The charge of bank fraud carries a maximum penalty of 30 years in prison, but under federal guidelines spelled out in his plea deal, he faces far less punishment — up to six months in jail — when he is sentenced Sept. 20. The guidelines are not binding on U.S. District Judge Richard J. Leon, who can sentence Brown to more time behind bars.

Brown, who agreed to cooperate with investigators and remains free pending sentencing, then went to D.C. Superior Court and pleaded guilty to a misdemeanor charge of violating a city campaign statute that prohibits cash expenditures in excess of $50. He faces up to six months in jail on that charge.

The court proceedings were visibly humbling for a once brash and swashbuckling politician who referred to himself in the third person, was sworn into office by Attorney General Eric H. Holder Jr. and had compared himself to President John F. Kennedy. Just two days after resigning from the council hours after he was charged with bank fraud, Brown slunk past reporters lined up to attend his appearance in the District’s federal court. In the packed courtroom, he spoke so quietly that observers in the gallery could barely hear him. “Yes, your honor,” he replied meekly to Leon’s questions.

After the 23-minute hearing, Brown and his attorney went to the courthouse steps, where Brown read a statement that was contrite, emotional and combative.

“I served this city over seven years,” he said. “I love this city. Working for the residents has been an honor. I have worked every day on behalf of the people and have done it wholeheartedly. But six years ago, I made some very serious mistakes and judgments. And I have taken full and sole responsibility for those mistakes.”

“The government has not charged me with misspending, stealing or improperly using campaign funds,” he added. “I have not stolen or improperly used any campaign funds from either my 2004, 2008 or 2010 campaigns. I have not stolen or improperly used any public money.”

Avoiding ‘drama’

Brown then made the short trip across the street to the D.C. Superior Court building, where he was permitted the unusual courtesy of slipping in through a nonpublic entrance. Court officials said they worried that Brown and a swarm of reporters might disrupt courthouse business if they used the doors for the public.

In his second court appearance of the day, Brown was again restrained. After he signed a document waiving his right to a trial, he bowed his head, closed his eyes and handed the paper back to his attorney, Frederick D. Cooke Jr. Later, Cooke said Brown pleaded guilty to the federal and D.C. charges because “he did not want to put this city and his family through the drama of a trial.”

Ronald C. Machen Jr., the District’s U.S. attorney and its top prosecutor, called Friday “a dark and unfortunate day in the city’s history.”

“One of the city’s elected leaders has once again gone astray,” he said, adding that Brown had “traded away his principles for personal gain.”

“Those who fail to abide by the rules will pay a steep price,” Machen added. “Mr. Brown failed from his own doing. His actions were manipulative and illegal — a grown man forging bank documents for his own enrichment.”

Brown was the second council member to resign from office and plead guilty to felony charges this year. Harry Thomas Jr. was sentenced last month to 38 months in federal prison for stealing more than $350,000 in city funds. The plea deal also comes just weeks after two aides with Mayor Vincent C. Gray’s 2010 mayoral campaign admitted that they funneled funds to a minor candidate in the hopes of keeping him in the race to assail then-mayor Adrian M. Fenty (D). Gray (D) beat Fenty in the Democratic primary and cruised to victory in the general election.

Federal agents and prosecutors are also investigating a prominent D.C. contractor and his ties to city officials.

Scheme started in 2005

The broad outline of the federal charge against Brown was well known by the time he entered Leon’s courtroom. But in court papers made public after the hearing, federal prosecutors revealed that Brown falsified records because he did not believe that two loan applications with Industrial Bank would be approved “without artificially inflating his income.” The two-year scheme started in 2005, prosecutors said, when Brown forged the name of a college friend on an employment verification form so he could apply for a home-equity line of credit from the bank.

Brown claimed that the friend was president of a company and that he was the firm’s vice president of strategy. Brown added that he was paid $3,000 a month, that his probability of continued employment was “great” and that he was projected to earn a $10,000 pay increase the next year. But none of it was true, according to court papers.

Brown then faxed the form to Industrial Bank on Sept. 26, 2005, from his council office. The next month, he was given a $166,000 loan.

Two years later, Brown wanted to buy a 38-foot powerboat that he named “Bullet Proof.” To improve his chances of obtaining a boat loan from Industrial Bank, prosecutors said, Brown doctored an IRS 1099 form from a St. Louis-based consulting firm that employed him. The firm, identified by prosecutors only as “Company 2,” said on the 1099 that Brown had earned $35,000 in 2006. Brown changed the “3” to an “8,” increasing his annual pay by $50,000, before sending the form to the bank. In court, Brown identified the company as Fuse Advertising.

One reason prosecutors are not seeking a tougher punishment is because Brown repaid the home-equity line of credit. Assistant U.S. Attorney David Johnson added in court that Brown is “current” on the boat loan. The size of the financial loss to the bank is a key factor in determining the guideline range.

Even so, Johnson said, lying on applications is a serious crime because it puts “a financial institution at risk.”

Federal prosecutors and investigators began looking into Brown’s personal finances more than a year ago as they started probing his 2008 campaign for an at-large council seat. A D.C. audit found that his campaign did not report the raising and spending of more than $270,000; it also determined that $239,000 in campaign funds had been passed along to a now-defunct consulting firm run by Brown’s brother Che.

Che Brown has not been charged with any crime. Federal authorities have said the investigation is continuing.

In court papers filed in the D.C. misdemeanor case, federal prosecutors wrote that Brown allowed one of his relatives to be a signatory on his campaign committee’s bank account. That person is not identified in court papers, but a city audit report makes clear that it is Che Brown.

With his brother’s knowledge, Che Brown then created a “side account” to pay for “get-out-the-vote” activities. However, Brown never amended his D.C. campaign reports to disclose the existence of the side account. Prosecutors said that in September 2009, the brother paid a campaign expense with $1,500 in cash withdrawn from the side account. D.C. law bans cash campaign expenditures above $50 in cash.

Staff writers Tim Craig and Mike DeBonis contributed to this report.

Keith Alexander covers crime, specifically D.C. Superior Court cases for The Washington Post. He has covered dozens of crime stories from Banita Jacks, the Washington woman charged with killing her four daughters, to the murder trial of intern Chandra Levy.
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