Fattah nonprofits paid millions to ex-staffers

CHAKA FATTAH has been walking the halls of Congress for nearly 20 years, but he never forgot his friends back home.

Tax records reviewed by the Daily News show that between 2001 and 2012, nonprofits founded or supported by the Philadelphia congressman have paid out at least $5.8 million to his associates, including political operatives, ex-staffers and their relatives.

Three people who had ties to the organizations were later convicted of federal crimes.

For the past seven years, criminal investigators have been poking and prodding at Fattah and the cottage industry of mostly taxpayer-funded nonprofits run by his political allies.

"I think that they have a belief that something nefarious took place," Fattah said in a recent interview.

Fattah, 57, who has held public office for most of his adult life, is a senior member of the powerful House Appropriations Committee, which controls about $1 trillion in annual discretionary funding.

He has used the position to direct millions of dollars to worthy causes in Philadelphia - everything from education, the arts and youth-violence prevention, to bioterrorism response, blood-decontamination technology and advanced battlefield apparel.

But following the money through Fattah's nonprofits is the stuff of nightmares for federal auditors and government watchdog groups. The FBI has subpoenaed financial documents, questioned his associates and nailed two former staffers and a childhood friend.

Fattah, a Democrat seeking an 11th term next month, has denied participating in any illegal activity, and he's grown weary of the prolonged investigation.

"The way I look at it is, a person in my position, anything that you're involved in is up for review," he said. "When you have discretion, people are interested to make sure that you are exercising that appropriately."

In August, the U.S. Attorney's Office revealed that it had breached Fattah's inner circle: Fattah's longtime friend and former chief of staff, Gregory Naylor, pleaded guilty to participating in the secret repayment of an illegal $1 million campaign loan and to using campaign cash to pay down college debt owed by Chaka "Chip" Fattah Jr., the congressman's son.

Naylor's plea memorandum - which accuses Fattah, identified as "Elected Official A," of initiating both schemes - was filed three weeks after Fattah Jr. was hit with a 23-count indictment alleging that he defrauded banks, the IRS and the School District of Philadelphia. Fattah Jr., 31, has pleaded not guilty.

With more indictments possible, the Daily News decided to take a trip down the rabbit hole of Fattah's nonprofits and attempt to connect the dots.

The Educational Advancement Alliance was set up by Fattah more than 20 years ago. It has run a science-experiment bus known as the "Chaka Fattah Learning Lab" and has hosted the "Chaka Fattah Conference on Higher Education."

Fattah secured at least $10 million in federal money for EAA through congressional "earmarks" between fiscal 2008 and 2010, the years when such requests were publicly linked to individual members of Congress. In 2007, the Daily News reported that EAA had received about $8 million in federal earmarks over the previous five years.

Records show that between 2001 and 2011 EAA paid more than $1 million to Karen Nicholas, a former Fattah staffer who had served as its president and CEO and is identified as "Person A" in the Naylor case.

Other people who have appeared on EAA's payroll since 2001 include: Nicholas' cousin Sheronda Ball ($212,567 in three years), former Fattah staffer Roger Jackson ($223,000 in two years), former John Street campaign manager Shawn Fordham ($137,750 in two years) and former Fattah aide James Mitchell ($95,000 in one year).

"The fact that people around me are interested in helping people, I wear that as a badge of honor," Fattah said, when asked about the payments to his ex-staffers and political associates.

Last year, Cheryl Mobley, who was Fattah's chief of staff in the state Senate, was sentenced to house arrest for failing to pay federal taxes. Prosecutors said EAA improperly used federal grants to pay Mobley nearly $107,000 in 2005 and 2006. She drove a luxury van with a foldout leather sofa and flat-screen TV, but told the judge that she was studying for a divinity degree, according to the Inquirer.

"Who needs a $55,000 van to be an educational consultant?" Assistant U.S. Attorney Paul Gray asked at Mobley's July 2013 sentencing.

Tax records show that EAA also paid $813,500 to Solutions for Progress, a consulting firm that was run by Robert Brand, a Fattah campaign contributor whose wife is a former Fattah staffer.

Some of the Solutions money was likely part of the scheme federal prosecutors laid out in the Naylor plea memorandum:

They allege that Fattah used $500,000 from the Sallie Mae Fund and $100,000 from NASA to pay back the balance of an illegal $1 million campaign loan that he'd received from Al Lord ("Person D"), the former CEO of Sallie Mae, during Fattah's failed mayoral bid in 2007. The money was allegedly received by EAA, then funneled through Solutions and CORE Philly, another Fattah-backed nonprofit previously affiliated with EAA.

Brand, 69, the former CEO at Solutions for Progress who is identified as "Person C" in the Naylor plea memo, declined to comment when reached at his home.

"I'm not saying anything while this stupid investigation is going on," Brand said.

EAA paid $626,273 to Naylor's consulting firm, Sydney Lei & Associates, where both Fattah Jr. and one of the congressman's daughters, Fran Fattah, have worked.

Prosecutors say Naylor, 66, also conspired with Fattah to use campaign money to pay off $22,663 of Fattah Jr.'s student-loan debt from when he attended Drexel University. Fattah Jr. did not graduate, but his consulting firm, 259 Strategies, later landed a $450,000 school district minority-participation subcontract from Delaware Valley High School, a for-profit company that Congressman Fattah has supported.

An audit conducted by the Justice Department's Inspector General and released last year criticized EAA for unallowable grant expenditures, unauthorized consultant payments, no-bid contracts and other questionable payments.

The treasurer of EAA, according to tax documents, was Howard Brown, the husband of Councilwoman Blondell Reynolds Brown, a close Fattah ally.

In 2004, Fattah secured a $750,000 earmark for a nonprofit company called Environment and Sports Inc., headed by Brown, according to the U.S. Environmental Protection Agency's Inspector General.

The money was to be used to "highlight best environmental practices in the management of golf courses and distribute the information to other golf course managers," according to the inspector general's audit report. But the EPA blocked the grant after it concluded that Brown didn't have the expertise required and because the proposal didn't include anything "new or innovative."

The Pennsylvania Department of State has no record of Environment and Sports Inc. or similarly named companies ever existing.

Brown, who had worked as an assistant director of administration at the Philadelphia Redevelopment Authority until he was laid off last year, could not be reached for comment. He owes about $8,000 in property taxes and penalties on a home in Mantua. The councilwoman and Brown have been separated for five years and are in the process of divorcing.

The former board chairman of EAA is Raymond Jones, a former Fattah and Street aide who ran unsuccessfully for City Council in 2007. Jones didn't get paid by EAA, but a federal audit found that he quietly "paid himself" an "unreasonable" salary between 2009 and 2012 while serving as the sole employee of Philadelphia Safety Net, a small Fattah-funded nonprofit that ran a gun-buyback program.

The audit report, released in January by the Justice Department's Inspector General, determined that the nonprofit misspent or couldn't sufficiently document 62 percent of its approximately $800,000 in federal funding.

Jones, 50, used grant money for a parking ticket, hotel room, restaurant meals and cash withdrawals for "personal activities" unrelated to the nonprofit's mission of exchanging $100 grocery-store cards for guns, auditors found.

Jones was paid $374,442 between 2009 and 2012, according to the report, including $81,942 that was in excess of his authorized salary.

Auditors also found that Jones still had 83 gift cards, worth $8,300, in his possession six months after the federal grant had ended, and that he could not account for 280 other gift cards worth $28,000. He told the Daily News that he gave some cards away.

"Some folks showed up who were just hungry and didn't have a gun, so I just gave them cards," he said.

Jones defended his six-figure salary at PSN, where federal auditors said he worked in "relative isolation without any oversight by the Board of Directors," which was chaired by his sister. He said he took about 3,000 guns off the street.

"We work very hard in this business to help people. It's not glamorous work, standing out in the cold or when it's 90-degree weather," he said. "You do it because you're committed to having an impact."

Following his stint at PSN, Jones went to work for Councilman Curtis Jones Jr. and Councilwoman Cindy Bass, both members of Fattah's political organization. Sources say Jones, who had served as Bass' director of constituent services and spokesman, was often missing during business hours. The joke in City Hall was that he should have a private investigator tailing him.

"He was on the payroll, but what was he really doing?" said a source familiar with Jones' work.

Jones, who was most recently paid $75,000 a year, was terminated last month. Bass' office declined to discuss his departure, calling it a personnel issue. Jones said he left to pursue other options and denied that his job performance was a problem.

"I'm looking for other opportunities," he said. "People leave jobs all the time."

James P. Baker Jr., a friend of Fattah's dating back to their days at Overbrook High School, was paid $775,614 over seven years to run a small Fattah-backed nonprofit called the Caribbean-American Mission for Education, Research and Action, tax records show.

CAMERA, which received federal funds through Fattah, took Overbrook High students on trips to a beachfront resort in the U.S. Virgin Islands for an "eco-kayak tour" and other activities. An audit by the EPA's inspector general questioned whether the trips were worthwhile, finding that "less than half the time was spent on environmental-related activities."

The nonprofit was chaired by Mikel Jones, a personal-injury lawyer and childhood friend of Fattah's who was convicted in 2011 of defrauding a New York venture capital firm of nearly $500,000. Jones, who is serving prison time in Pensacola, Fla., has told FBI agents that he paid $90,000 to companies run by Fattah Jr. but could not recall exactly what work Fattah Jr. did for the money. Jones was disbarred in August.

Baker, 58, a pastor and consultant who has worked for Fattah, is identified in state business records as the president of companies with the same Broad Street address as Solutions for Progress, the company that was paid by Fattah's EAA nonprofit. The companies include Acclerating (sic) Diversity in our Economy Inc., for which Fattah has sought federal funding, Acclerating (sic) Diversity Everywhere Inc. and Mid-Venture Group Inc.

Solutions for Progress officials did not return messages about Baker, who could not be reached for comment. Court records show that he filed for bankruptcy this year.

Fattah has also sought environmental-education funding for a group that was to be run by political consultant Tom Lindenfeld, who worked on Fattah's mayoral campaign and is identified as "Person B" in the Naylor plea memo.

In fiscal 2010, the congressman secured $500,000 - and had planned to request $15 million altogether - for a group called Blue Guardians, run by Lindenfeld, to use door-to-door canvassing to "preserve environmental and coastal cultural heritage." But the plan fell through.

American Cities Foundation, another nonprofit founded by Fattah, is run by Sandra Dungee Glenn, who was Fattah's chief of staff when he was in the state Senate and has chaired the city's School Reform Commission. The foundation has received federal money through Fattah earmarks.

ACF, which focuses on urban policy, paid Glenn about $1.1 million between 2002 and 2011. Its payroll also included Mitchell, the former Fattah aide, and Judith Dumorney-McDaniel, the wife of John McDaniel, former campaign manager for Councilwoman Brown.

McDaniel, who worked on Mayor Nutter's re-election campaign in 2011 and landed a $87,125-a-year job at Philadelphia International Airport the following year, pleaded guilty last year to stealing $100,000 from Brown's campaign fund.

The Philadelphia Board of Ethics also found that McDaniel, at Brown's instruction, used campaign money to repay a $3,300 personal loan she'd received from Fattah Jr.

Brown had reached out to Congressman Fattah, her political mentor, when she was facing a home foreclosure, and Fattah said he would help. Shortly after their conversation, Fattah Jr. called Brown and said he had a check for her, according to the settlement agreement with the Ethics Board.

Real-estate records show that ACF owns the building on 54th Street in Wynnefield, where Fattah's district office is located. A Fattah spokeswoman said they pay a market rate to ACF's property manager and that the arrangement poses no conflict.

"Congressman Fattah's district office is our tenant and they make monthly lease payments to [property manager Integrity Real Estate Services] to cover the cost of management services, repairs and property maintenance," Glenn said in an email. "ACF receives the net proceeds for deposit to our general fund."

ACF was previously located at 4601 Market St., which was owned by a nonprofit called the Urban Education Development Research and Retreat Center. Its board was chaired by state Sen. Vincent Hughes. Fattah sat on the board. Baker, the Fattah friend who ran CAMERA, was the treasurer. A 2001 federal audit found that the retreat center, which had defaulted on loans, used about $600,000 to pay for "questionable expenses" instead of paying its contractors for eligible construction expenses.

Good-government groups say Fattah's nonprofit network, which has wilted amid increased scrutiny and a decrease in federal funding, is an ethical minefield.

"There are members of Congress that have gone to jail for exactly this sort of thing," said Sean Kennedy, director of research for Citizens Against Government Waste. "It's an inherently corrupting practice. When you see former chiefs of staff receiving earmarks, it does not look very good."

But Fattah was cool and collected - he usually is - last month when he took the podium at Philadelphia School District headquarters to announce $29.1 million in education funding through 2020.

Afterward, Fattah said he didn't know whether he'd be indicted.

"No one has a crystal ball," he said, adding: "I think that we have to see how it plays out. I know that there are people that like to rush to a conclusion, but after seven years, I'm not sure any of us should rush to anything."

Despite his legal troubles, Fattah is likely to be re-elected next month in the heavily Democratic district.