Skip to content
Link copied to clipboard

At trial, prosecutors target Fattah's education charities

Among the millions of dollars in federal funding that U.S. Rep. Chaka Fattah prides himself on securing for worthy causes, he has repeatedly singled out money obtained for two education nonprofits that he helped create.

U.S. Rep. Chaka Fattah leaves Federal Courthouse in Philadelphia last week.
U.S. Rep. Chaka Fattah leaves Federal Courthouse in Philadelphia last week.Read moreSTEVEN M. FALK / Staff Photographer

Among the millions of dollars in federal funding that U.S. Rep. Chaka Fattah prides himself on securing for worthy causes, he has repeatedly singled out money obtained for two education nonprofits that he helped create.

But witnesses Monday in the congressman's federal corruption trial testified that questions surrounded the spending of both organizations - Educational Advancement Alliance (EAA) and CORE Philly - well before they became embroiled in the case currently playing out before a jury.

"We had concerns over the use of grant funds for political gain," Tom Puerzer, an auditor with the Justice Department's Office of the Inspector General, said of a 2008 audit of federal funds issued to CORE.

Puerzer was one of five federal investigators to testify as the trial of Fattah and his four codefendants entered its second week.

And as agents from the Justice Department, NASA, the IRS, and the FBI each detailed their own audits and investigations, their testimony sketched out a much wider review of the sprawling network of nonprofits Fattah has either created or supported during his two decades in office.

Only some of their collected findings were presented to jurors, as many of the conclusions, outlined in audit reports and investigative files, are unrelated to the charges Fattah faces. But repeatedly, investigators have cited Fattah-backed nonprofits for questionable spending, including the six-figure salaries earned by allies of the congressman who were appointed to lead them.

Fattah founded the Educational Advancement Alliance in 1990, hoping to provide opportunities to underprivileged youths in the Philadelphia schools. Led by one of his former staffers, Karen Nicholas, the organization was perhaps best known for its annual conferences on higher education, where Fattah often delivered the keynote speech.

CORE Philly, founded in 2003 to fund scholarships for Philadelphia high school students, was organized as a partnership among the city, the School District, and the School Reform Commission. Fattah sponsored $3.2 million in federal earmarks in 2009 and 2010 to support the group.

The congressman has credited both nonprofits with helping thousands of children gain access to higher education. Of CORE Philly, he said recently: "This was [a program of about] $30 million that helped 24,000 kids in Philadelphia go to college."

But the scholarship program drew scrutiny from Justice Department auditors in 2008 for its spending on a $1.8 million grant intended to allow the organization to better advertise to potentially eligible students.

Among the auditor's concerns, Puerzer testified Monday, were questions over "unallowable" salaries, noncompetitive contract awards, and the $25,000 the organization spent on sweatshirts bearing the names of Fattah and former Mayor John F. Street. Puerzer said the last expense appeared to have been a violation of rules prohibiting grant funds from being used for political purposes.

Agents at NASA later became involved, as did investigators with the Departments of Energy and Housing and Urban Development, all of whom had issued funding to CORE Philly, the alliance, or other Fattah-backed charities.

But even as auditors were crawling through the charities' books, Nicholas was allegedly carrying out her piece of the transaction now at the heart of Fattah's criminal charges.

Prosecutors say that charitable donations and federal grants issued to EAA and CORE Philly were used in a complex scheme to repay an illegal $1 million campaign debt Fattah incurred during his failed 2007 bid to become Philadelphia mayor.

Nicholas has been charged with misappropriating the funds used to pay back the loan. Investigators allege that through a series of sham contracts, she funneled $600,000 to Solutions for Progress, a for-profit company run by another Fattah ally, Robert Brand.

Brand is accused of passing the money to Fattah's former campaign strategist, Thomas Lindenfeld, who delivered the money to the original creditor, former Sallie Mae CEO Al Lord.

Kenneth Dieffenbach, an agent with the Justice Department's Office of the Inspector General, testified Monday that the contract ratifying the relationship between EAA and Solutions for Progress was drawn up and signed only after he subpoenaed records from Brand's company as part of his investigation.

Brand and Nicholas deny the government's theory and maintain that the contracts between EAA and Solutions for Progress were for legitimate work.

But agents testified Monday that when confronted with the government's theories, the two executives had very different reactions.

Asked in July 2008 about Solutions for Progress, Nicholas only mentioned unrelated work the company had done for CORE years ago. She neglected to say, said Dieffenbach, that EAA had paid the Brand firm $600,000 over the previous six months - a transaction prosecutors have singled out as part of the loan repayment scheme.

(Nicholas's attorney said Monday that agents also asked Nicholas to wear a recording device in the hope of capturing incriminating conversations with Fattah.)

Brand, meanwhile, offered several different explanations for his contracts with EAA and Lindenfeld's firm when agents showed up on his doorstep in June 2013, said Michael Scheffer, the IRS case agent leading the Fattah investigation. But he informed agents that he had recently retired from his company and could not remember details.

The same day, Scheffer said, he and an FBI agent stopped by the South Broad Street offices of Solutions for Progress, where they were surprised to find Brand in the lobby.

"He was almost out of breath, and he was sweating to some degree," the agent testified. "All he could offer up was, 'If I knew you were coming here, we could have shared a cab.' "

In addition to the alleged campaign loan scheme, prosecutors have accused Fattah of accepting bribes and participating in three other plots to misappropriate campaign contributions, charitable donations, or federal grant funds under his control.

Testimony is expected to resume Tuesday.