D.C. Council Chairman Kwame Brown is charged with bank fraud

D.C. Council Chairman Kwame Brown is charged with bank fraud

By Del Quentin Wilber and Tim Craig, Washington Post, Updated: Wednesday, June 6, 2:37 PM

D.C. City Council chairman Kwame Brown (D) was charged Wednesday with bank fraud, according to documents released this afternoon.

Brown has been the subject of a long-running corruption investigation.

The charges were filed in the District’s federal court in a “criminal information,” a document that can only be filed with the defendant’s consent and signals a plea deal is near, the officials said. Brown did not immediately return phone calls. His attorney, Frederick D. Cooke Jr., did not respond to numerous phone calls and emails Wednesday. A spokesman for the U.S. Attorney’s office, Bill Miller, declined to comment.

The three-page charging document says that Brown provided Industrial Bank of Washington “falsified documents” that overstated his income by “tens of thousands of dollars” to allow him to obtain a home equity loan and to purchase a boat. Prosecutors wrote that the two-year scam started in August 2005.

Bank fraud carries a maximum penalty of 30 years in prison, but Brown is sure to be exposed to far more lenient punishment under federal sentencing guidelines.

Almost immediately after the news of the possibility of charges broke this morning, Brown staffers locked all the doors to the chairman’s wing of offices in the John A. Wilson Building.

From behind locked doors, Brown spokeswoman Karen Sibert told reporters Brown was having a staff meeting, which included the city council secretary and general counsel.

At one point, Brown approached the glass door and made joking hand signals and facial gestures with a reporter. But a few minutes later, Brown staffers could be seen hugging each other through the glass door.

It’s unclear if Brown plans to address the media this afternoon, but more than a dozen reporters and cameramen have staked out his office.

Brown has sent texts to friends and associates indicating that he would resign, but the messages did not put a timetable on any possible resignation.

The full council is scheduled to meet with Brown later Wednesday.

D.C. Council member Marion Barry (D-Ward 8) was the first to arrive, but declined comment.

“I’m just a Ward 8 council member,” the usually talkative Barry said in brief statement to the media.

Around 2 p.m., Brown summoned Council member Mary M. Cheh (D-Ward 3), the chairman pro tempore of the council, to his office. If Brown resigns, Cheh would become the temporary chairman and oversee the naming of an interim chairman. The council would then select an interim chairman from among sitting at-large members.

As she walked into Brown’s office, Cheh said she “didn’t have anything to report at the moment.”

The law enforcement officials said that Cooke and prosecutors have been in discussions about a potential plea in the case during the last few weeks. The most serious charges appear to be linked to a mortgage Brown obtained in 2006 on his four-bedroom Hillcrest home and not directly tied to his 2008 campaign for an at-large city council seat.

Brown and his wife, Marcia, purchased the brick home for $313,000 in late 2002, and at some later point they obtained the home-equity line of credit from Industrial Bank, which is mentioned in court papers.

In 2006, at the height of the market, the Browns refinanced, borrowing $598,000 from McLean-based First Savings Mortgage Corp. At the time, Brown was drawing a $92,530 salary as a council member; his wife had left her job to raise their two children, born in 2001 and 2003, and would not return to work until 2007. “We made a sacrifice for that, and I don’t regret that sacrifice,” said Brown, who now is paid $122,530 a year and stands to make $190,000 if elected chairman.

Less than four months after closing on the refinance, Brown completed an application for a Visa card through the Department of Commerce Federal Credit Union. (He was an executive in the department’s Business Liaison Office during the Clinton administration.) On the application, Brown wrote that he had an outstanding mortgage balance of $506,000 on a home he estimated to be worth $850,000. At the time, the city’s assessment — which tends to lag behind market trends — valued the home at $357,930.

Brown told the Post that the home equity was used for household expenses and to help family members through financial difficulties. “You step up and provide,” he said at the time.

In 2010, three credit-card issuers sued Brown in D.C. Superior Court, alleging nonpayment of bills and interest exceeding $55,000, court records indicate. The outcome of those cases could not be determined Wednesday. At that time, Brown estimated that his personal debt exceeded $700,000.

On Tuesday, Brown started his day by calling some of his colleagues into his office to inform them of changes he was making on the council. He said he was giving up the chairmanship of the council’s Economic Development Committee, a portfolio he had coveted for years and a centerpiece of his 2010 campaign to lead the D.C. Council.

Brown’s conversations and his decision to quit the panel fueled rampant speculation that the 41-year-old is preparing to step aside as a federal investigation of his finances and 2008 campaign intensifies.

But after a day when reporters stalked him and some of his colleagues drew up plans for a possible post-Brown council, he met with reporters in his office for an afternoon announcement.

“I have no plans to resign,” Brown said. “That is all I am going to say. . . . I have no plans at this time to resign.”

Brown would become the second sitting Council member to be charged by the District’s U.S. Attorney’s Office in just the last few months. Harry Thomas (D) pleaded guilty to theft charges and was recently sentenced to 38 months in federal prison.

U.S. Attorney Ronald C. Machen Jr. has been leading wide-ranging corruption probes into D.C. politicians. In recent weeks, two aides on Mayor Vincent Gray’s 2010 campaign pleaded guilty to scheming to keep a minor candidate in the race. They admitted they gave that candidate, Sulaimon Brown, Gray campaign cash so Brown could keep assailing then-incumbent Mayor Adrian Fenty (D) on the campaign trail. Gray (D) beat Fenty in the Democratic primary and cruised to a general election victory.

Staff writers Mike DeBonis and Nikita Stewart contributed to this report.

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