Philly Rep’s Nonprofits Paid Out $5.8 Million to Ex-Staffers, Associates and Their Families

One of Philadelphia’s biggest power brokers, U.S. Representative Chaka Fattah, used millions of dollars from nonprofits, some of them taxpayer-backed, to pay ex-staffers, friends, and their relatives, the Philadelphia Daily News reports this week:

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.

This isn’t the first time suspicions have been raised about the cash flow at Fattah’s pet not-for-profits. As National Review Online reported last month, a plea deal entered by one of Fattah’s former political consultants implicated the congressman and several of his allies in a big fraud scheme, which allegedly laundered campaign cash through not-for-profits:

An early front-runner [for Philadelphia mayor in 2007], Fattah nonetheless found himself short of cash and sought to overturn Philadelphia’s $5,000-per-individual, $20,000-per-political-committee campaign-contribution caps, but the state appeals court ruled against him.

So, the plea memorandum says, Fattah “engaged in a scheme to violate the applicable Philadelphia campaign finance laws and contribution limits by secretly arranging for and receiving a $1 million campaign contribution in the form of a personal loan from long-time friend and political supporter, Person D.”

… Despite the alleged illicit loan, Fattah ended up losing his primary bid for mayor. To pay back the money, the plea deal says, Fattah used taxpayer dollars funneled through a not-for-profit, disguising the transactions with fake contracts.

Enter the Educational Advancement Alliance (EAA), a not-for-profit that just happened to be run by Karen E. Nicholas, Representative Fattah’s former director of constituent services.

Thanks in large part to Fattah’s congressional patronage, the not-for-profit had a steady flow of taxpayer money. Between 2009 and 2011, EAA received more than $21 million from the federal government. Likewise, Department of Energy records released in 2010 show the not-for-profit receiving millions of dollars in funds from the U.S. Department of Education, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, and the National Aeronautics and Space Administration. EAA also received funding from Sallie Mae.

At Fattah’s bidding, the not-for-profit inked a fake contract with a tech firm friendly with the congressman, which in turn inked a fake contract with the political-consultant middleman, according to the plea memorandum. Essentially, it alleges, these bogus deals allowed Fattah to steal $600,000 in federal money and use it to pay off the secret campaign loan.

These allegations become all the more troublesome, given Fattah’s standing as a senior member of the House Appropriations Committee, which controls over $1 trillion in federal spending.

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity and a Senior Fellow for the Independent Women’s Forum.