Jacksonville, FL - Two Democratic Jacksonville City Council members have been federally indicted on charges including fraud, money laundering, and more.
37-year-old Katrina Brown and 56-year-old Reggie Brown face a joint 38-count indictment. During their first appearance in front of a federal judge Thursday, they were allowed to remain out of custody on a $50,000 unsecured appearance bond each, which means they did not have to put money down to be released.
Under the conditions of their release, both will have travel restricted to the continental US, must stay crime-free, and report to pretrial services. Reggie Brown surrendered his passport, while Katrina Brown is prohibited from applying for one, for the time being.
The next hearing has been scheduled for June 14th.
The US Attorney’s Office says an unnamed relative of Katrina Brown obtained a $2.652 million loan through the Small Business Administration in 2011 for two businesses- Cowealth, LLC and Basic Products, LLC. They also were approved for a $380,000 loan and more than $210,000 grant from the City of Jacksonville, to establish a facility on Commonwealth Avenue to manufacture, bottle, and sell barbecue sauce. The business was already in operation, but sought to expand, including creating 56 full time jobs.
In late 2013, which is before Katrina Brown joined the City Council in mid-2015, she began to operate as the primary principal for those businesses.
The BBQ sauce business struggled, and was not meeting financial projections by late 2013. The indictment says, instead of notifying the lender and City and lender of the business’ state of affairs, Katrina Brown approached Reggie Brown- who was a sitting Council member at the time- about incorporating two businesses, A Plus Training and Consultants, LLC and RB Packaging, LLC.
Katrina Brown allegedly submitted fake invoices, saying those two businesses provided goods or services that were never actually delivered, in order to continue getting payments from the loan. Some of the examples in the indictment include fraudulent invoices to buy heavy machinery, labels, and other supplies, but prosecutors say the transactions didn’t actually take place. In one case, prosecutors say Katrina Brown falsified a quote for heavy machinery, to make it appear as though it was from one of the alleged shell companies
Reggie Brown was a principal in those allegedly fake businesses, and prosecutors say he managed the bank accounts. The indictment says the money drawn from these fake invoices was used for personal expenses for Reggie Brown and Katrina Brown, with some also going to the business, but under the false pretenses. The indictment further alleges Katrina Brown arranged for at least two other people to get money through the SBA loan for services or goods that were not actually provided. Some of that funding was then given by the third party to Katrina Brown, according to prosecutors.
Indictment says money was requested from the loan by Katrina Brown, then moved around various accounts managed by Reggie Brown. Sometimes the accounts were low, even negative, before the loan payment.— Stephanie Brown (@SBrownReports) May 31, 2018
Katrina Brown is also alleged to have used false bank statements and doctored information to try to get two bank loans, after the SBA loan was found to be in default in 2015, because of nonpayment. Reggie Brown allegedly did not file a 2014 tax return and did not disclose to the IRS that he had received tens of thousands of dollars from the SBA.
Attorneys for both Council Members say they maintain their innocence. A statement from their attorneys say they have fully cooperated with the ongoing federal investigation and there was no fraud.
“Unlike cases where true fraud exists, no one took any money they were not entitled to. All funds were properly invested in the business,” says the statement from their attorneys Curtis Fallgatter and M. Alan Ceballos.
The statement says Katrina Brown had every intention of operating a successful business when she obtained the loan.
“Unfortunately, countless unexpected construction, marketing, and manufacturing delays doomed the business,” the statement says.
Their attorneys say all of the SBA loan money and hundreds of thousands of dollars from Katrina Brown’s family went to the business. Reggie Brown says he formed the companies for the “worthy goal of getting the businesses up and running”, according to the statement.
#Jacksonville city council member Katrina Brown's attorney tells me, “We’re shocked at the indictment. She's an innocent lady who did her best to operate a business that ultimately failed through causes beyond her control.” https://t.co/d7h30RdO3u @ActionNewsJax pic.twitter.com/YKTKc3o3Ya— Jenna Bourne (@jennaANjax) May 31, 2018
Following federal indictments both Council members Reggie Brown and Katrina Brown were in court today. I asked Reggie if his constituents should still trust him @ActionNewsJax pic.twitter.com/ULz8Yjwldw— Danielle Avitable (@DanielleANjax) May 31, 2018
Jacksonville City Council President Anna Lopez Brosche confirms to WOKV that she is removing both Council members from their committee assignments. She has engaged the Office of General Counsel for further guidance on their overall standing on the body.
“Council Members Katrina Brown and Reggie Brown have served their districts with passion, and it is now time for them to focus on the legal process which they are now entering. I am praying for the community, for the people of District 8 and District 10, for the Jacksonville City Council, and for the children and families of Council Members Katrina Brown and Reggie Brown,” says a statement from Brosche.
JUST IN: Full statement from City Council President about removing Council members Katrina Brown and Reggie Brown from their committee positions pic.twitter.com/qKqhWYFcJw— Stephanie Brown (@SBrownReports) May 31, 2018
Florida Governor Rick Scott has the power to remove public officials, and his Deputy Communications Director tells WOKV they’re reviewing the case.
“These charges are very serious and the Governor, along with the families of our state, expect elected officials to behave ethically and responsibly,” says a statement
Jacksonville Mayor Lenny Curry says it’s a disappointing day for the City.
“Any time public servants are accused of violating public trust, we are all impacted. While these allegations are concerning, I have complete confidence in our judicial system and respect the process all citizens are afforded,” says a statement from Curry.
Both Council members have been indicted on conspiracy to commit mail and wire fraud, 26 counts of aiding and abetting mail and wire fraud, and six counts of money laundering. Katrina Brown has also been indicted for two counts of attempted bank fraud and two counts of making false statements to a federally insured financial institution, Reggie Brown has also been indicted for failure to file a tax return.
If convicted on all charges, prosecutors say each Council Member could face hundreds of years in prison, although that would require sentencing to be consecutive and at the statutory maximum. As part of this case, prosecutors are seeking forfeiture of $754,613.10, which they say is connected to the alleged offenses.
Two Jacksonville City Council members have been indicted for fraud, money laundering, and more. I’m going in depth on the nature of the charges, and what comes next.Posted by Stephanie Brown, News 104.5 WOKV on Thursday, May 31, 2018
The case against #Jacksonville city council members Katrina Brown and Reggie Brown will be prosecuted by Assistant U.S. Attorneys Tysen Duva and Michael Coolican, who also prosecuted former Congresswoman Corrine Brown's case. @ActionNewsJax pic.twitter.com/fYiYwVgnGZ— Jenna Bourne (@jennaANjax) May 31, 2018
Reginald Brown is running for state senate against Sen. Audrey Gibson. Her response to news of the federal indictment against him.. “I have not made any comments about the opponent in the race and I have none today." @ActionNewsJax @WOKVNews pic.twitter.com/NwgsHPeCaD— Paige Kelton (@PaigeANjax) May 31, 2018