A longtime aide and political adviser to U.S. Rep. Chaka Fattah (D., Pa.) pleaded guilty Wednesday to concealing the misuse of $622,000 in campaign contributions and federal grant funds, in a case that appears to have led investigators straight to the congressman's door.
Gregory Naylor, 66, admitted that he conspired with his boss - identified in court filings only as "Elected Official A" - to pay off a series of debts, including an unreported $1 million campaign donation, with grant funds and political contributions funneled through a series of nonprofits and consulting firms.
In a separate scheme, Naylor said, he helped steer more than $22,000 in federal campaign donations to his own firm, Sydney Lei & Associates, that were then covertly used to pay off college debts for the elected official's son. A source close to the investigation confirmed that Fattah's 31-year-old son, Chaka Jr., was the beneficiary of those payments.
Prosecutors would not confirm the identity of the elected official identified in Naylor's plea documents. But their description of the politician overlaps with several key details of Fattah's 10-term congressional career.
For instance, much of the case against Naylor centers on his work for a candidate in the city's 2007 mayoral race. During that campaign, Naylor served as chief strategist in Fattah's failed bid for the seat.
The documents also reference a lawsuit filed that year by the official challenging limits on contributions to city campaigns. Fattah filed and lost such a suit in Superior Court.
Fattah and his staff did not respond to multiple calls for comment Wednesday. By late in the day, phones in his congressional office went unanswered.
His lawyer, Luther E. Weaver 3d, also declined to discuss Naylor's case.
For federal investigators, who have scrutinized Fattah's dealings for much of the last seven years, Naylor's guilty plea marks the first breach of the congressman's tight-knit inner circle.
This month, a grand jury handed down an indictment charging the congressman's son with multiple counts of bank and tax fraud. He denied the allegations and blamed the case on overzealous federal authorities determined to bring down his father.
The younger Fattah said Wednesday that he did not want to discuss Naylor's case.
The congressman also has raised concerns about the "fair administration of justice" in his son's case.
As for Naylor, a fixture in Philadelphia Democratic politics since the 1980s, he had little to say in court Wednesday. After a brief appearance before U.S. District Judge Harvey Bartle 3d, he and his lawyer declined to discuss the case.
After pleading guilty to counts of concealing a felony, falsifying documents, and lying to the FBI, Naylor faces up to 13 years in prison at a sentencing set for December.
As part of his plea deal, he agreed to cooperate with the ongoing investigation and testify about the misuse of funds at any future trials.
That suggests that other charges could be coming. Prosecutors describe a number of other coconspirators in the congressman's orbit who they say helped move the campaign and grant funds now under scrutiny.
Those include a political consultant and operative in Fattah's mayoral campaign who also heads a Washington political consulting firm and the spouse of a former Fattah staffer who founded his own for-profit public policy technology firm. The names of both were withheld in court filings.
Naylor has long been one of Fattah's closest confidantes. The two have been close friends for more than two decades.
At various points, Naylor worked in Fattah's congressional office in Washington and as a campaign strategist.
His reputation for running successful get-out-the-vote operations attracted national attention from Democrats and made him a staple in Philadelphia politics with campaign work for former Mayors W. Wilson Goode and John F. Street, and Gov. Ed Rendell. He also worked on President Obama's 2004 U.S. Senate race in Illinois.
It was during Fattah's run at the mayor's seat in 2007 that the criminal case against Naylor began.
By April of that year, the congressman, an early favorite, had dipped in the polls, and his campaign coffers were quickly running dry.
Fattah's attempt that year to challenge the city's $5,000 campaign contribution cap in court had failed and left staffers scrambling for cash.
Under that fiscal pressure, prosecutors say, Fattah sought out and obtained what court filings now describe as an "illegal" $1 million campaign donation from a longtime supporter and friend.
The donor's name was withheld from court filings Wednesday.
Because the amount of the donation far surpassed the city's cap, the money was given in the form of a personal loan to the Washington-based Fattah strategist, whose name was also withheld, and then passed through to Naylor's management consulting firm, prosecutors said.
Naylor admitted in court Wednesday that he used the cash to cover campaign expenses, including $600,000 for television ad time and $200,000 more to pay street workers on Election Day.
Later that year, to help account for some of the money, he created a fake invoice for $193,000 in work on Fattah's campaign.
But that only covered part of the original loan. And once the lender called in his debt, after Fattah's loss to now-Mayor Nutter in the 2007 primary, the scheme became even more complicated.
Court documents suggest that Fattah's confidence that he could pay his donor back never wavered. He told Naylor "he had a plan and was putting some things in place," the filings say.
The plan involved diverting more than $600,000 in federal grant funds from the Educational Advancement Alliance (EAA), a nonprofit founded by the congressman to grant scholarships and backed by several million dollars in congressional earmarks, to two for-profit firms through a series of fake contracts.
The first of those companies, described by prosecutors as a "public policy technology company" run by the spouse of a Fattah staffer, submitted a bid to provide EAA with software and indicated the work would require "substantial up-front funding," court documents said.
The second, the consulting firm owned by the Washington strategist, contracted with the technology company for "developmental income" and "marketing expenses."
When the technology company's chief financial officer questioned what his firm was getting out of its contract with the strategist, the documents say, the company's owner replied: "Influence and political connections."
Prosecutors say neither company did any work to earn that government money. Even as Department of Justice auditors began to question how EAA had spent its grant money in late 2008, the strategist's firm was wiring it to pay back Fattah's original $1 million campaign debt.
Tax forms show that EAA paid Broad Street-based Solutions for Progress $613,500 for "consulting" in the 2007-08 fiscal year.
Asked whether the company was the one referenced in Naylor's plea documents Wednesday, the firm's former CEO, Robert J. Brand, said he would not comment until he had a chance to read the filings.