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Fattah trial focuses on ex-Sallie Mae CEO's loan

Late in the 2007 mayoral race, U.S. Rep. Chaka Fattah sought a meeting with a very wealthy man - perhaps one of the few who could save his struggling campaign.

U.S. Rep. Chaka Fattah leaves the federal courthouse in Philadelphia earlier in the week.
U.S. Rep. Chaka Fattah leaves the federal courthouse in Philadelphia earlier in the week.Read moreSTEVEN M. FALK / Staff Photographer

Late in the 2007 mayoral race, U.S. Rep. Chaka Fattah sought a meeting with a very wealthy man - perhaps one of the few who could save his struggling campaign.

Al Lord, CEO of Sallie Mae - then the largest student-loan financier in the world - had supported the congressman in the past. And at an April meeting in the lobby of the former Four Seasons Hotel Philadelphia on Logan Square, Fattah made his pitch.

"In terms of his prospects, it was bad news," Lord recalled before a federal jury Tuesday. "The congressman told me, in order to win, they would need more funds [to buy TV ad time]. He said it would be expensive. He said he could use my help."

Lord's aid, which came in the form of what investigators have called an illegal $1 million campaign loan, dominated testimony on the second day of Fattah's federal corruption trial.

The now-retired executive testified under a grant of immunity as prosecutors sought to trace the financial desperation that drove Fattah to Lord in the first place, and the complicated trail of stolen funds they say the congressman used to pay him back.

Lord told jurors he hoped his money would help push Fattah to victory in a five-person field that included the race's eventual winner, Michael Nutter. But under cross-examination from the congressman's lawyer, he maintained that he never discussed the specifics of the loan with Fattah.

Fattah and four codefendants face racketeering conspiracy charges involving various schemes to steal grant funds, charitable donations, and campaign contributions to pay the congressman's debts, including Lord's $1 million loan.

Lord, a Philadelphia native and a prolific political donor, met Fattah in 1998, and they quickly bonded over their mutual interest in broadening access to higher education.

Their relationship deepened over frequent rounds of golf. In 2005, Lord flew Fattah and his wife, then-NBC10 anchor Renee Chenault-Fattah, on Sallie Mae's private jet to watch the Eagles play the Patriots in Super Bowl XXXIX in Jacksonville, Fla.

When Fattah began mulling a mayoral bid three years later, Lord was eager to lend his support.

But as Fattah's former campaign manager, Charles Hayden, described on the witness stand Tuesday, the campaign was in shambles from the day Fattah entered the race.

Strong egos battled over strategy, campaign staff often had no idea how to reach the congressman, and newly implemented city rules capping campaign contributions hamstrung fund-raising goals from the start, he said.

Hayden, now a Municipal Court judge, had managed Fattah's first race for the state House in 1988. But it soon became clear, he said, that the Fattah for Mayor campaign would be outmatched and outspent in a field that included U.S. Rep. Robert Brady and millionaire businessman Tom Knox.

"A mayoral campaign is more like being in a Formula 1 race," Hayden told the jury. "A campaign for state rep - like when we were kids - that's more like being in go-carts."

Hayden had hoped to land a nationally renowned campaign strategist to bring order to the chaos - someone like David Axelrod, who turned down Fattah's offer and went on to become the strategist credited with Barack Obama's 2008 presidential victory.

Instead, Hayden said, Fattah ended up with Axelrod's former business partner, Thomas Lindenfeld, a hard-charging Washington-based political consultant.

It was Lindenfeld, Lord said, who negotiated the $1 million campaign loan, and Lindenfeld's Washington-based firm, LSG Strategies, to which Lord cut the check.

And although he maintained he never discussed the loan with Fattah, Lord said his intention in dealing with Lindenfeld was clear: The money would help Fattah break onto TV airwaves in the waning days of the campaign.

Lindenfeld has since admitted he paid Lord back after the congressman's loss with funds raided from a Fattah-founded scholarship fund for underprivileged children. He told a federal judge in 2014 that he played a role in devising a complicated scheme to hide the source of the money.

Prosecutors say Fattah and at least three of his codefendants shifted the funds through a series of fake contracts - first through an education nonprofit run by a former Fattah aide, then a for-profit business owned by a Fattah family friend. From there, they allege, the money went to Lindenfeld's firm and eventually back to Lord.

Lindenfeld has pleaded guilty to wire-fraud charges and is expected to testify against Fattah later in the trial.

But Fattah's defense lawyers contend that Lindenfeld acted without the congressman's knowledge. In cross-examining Lord on Tuesday, they sought to underline that point.

"I thought this was different than a campaign contribution," he said in response to questions from Fattah lawyer Mark Lee. "I thought I was lending money to an individual who would make these media buys."

Lord said Tuesday that he saw Fattah only one more time after his mayoral campaign had come to a disappointing end. They met for a late breakfast at the Willard Hotel in Washington.

"The congressman wasn't particularly happy that he lost, and his mood reflected it," Lord said.

Nine days later, the executive received his first loan payment from Lindenfeld. Attached to the $400,000 check was a note.

"As it turns out," the campaign consultant wrote, "the business opportunities we had contemplated weren't as fruitful as expected."

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