JACKSONVILLE, Fla. – Two Jacksonville City Council members indicted on dozens of federal charges that could land them in prison for decades appeared before a U.S. magistrate Thursday afternoon. Katrina Brown, 37, and Reginald Brown, 56, were read the dozens of mail and wire fraud counts against them and processed before being released to await trial.
The defendants share a last name, but are not related.
Federal prosecutors said the two incorporated businesses that handled nearly $3 million in federal and city loans and grants, and then used the businesses to submit fake invoices to their lender for services the businesses had not provided. (See chart of businesses and ownership below.)
The 38 counts are related to Katrina Brown's family barbecue businesses, one of which was raided by the FBI in December 2016, and a business set up by Reggie Brown. The indictment says Reginald Brown deposited reimbursement checks into the businesses' bank accounts.
COURT DOCUMENT: United States v. Katrina Brown, Reginald Brown
Katrina Brown is named in 37 counts, including:
- 1 count of attempt and conspiracy to commit mail fraud
- 26 counts of aiding and abetting mail and wire fraud
- 6 counts of illegal monetary transactions
- 2 counts of attempted bank fraud
- 2 counts of false statement to a federally insured institution
Reggie Brown is named in 34 counts:
- 1 count of attempt and conspiracy to commit mail fraud
- 26 counts of aiding and abetting mail and wire fraud
- 6 counts of illegal monetary transactions
- 1 count of failure to file Form 1040 return
If convicted on all charges, Katrina Brown could face up to 720 years in federal prison and $12,250,000 in fines. Reggie Brown could face up to 601 years in prison and $8,275,000 in fines.
Both told U.S. Magistrate Judge James Klindt that they understand the charges against them and their rights.
Bond was set at $50,000 for each, but they were able to leave the courthouse Thursday without posting any cash. The magistrate ordered that they not change their principal residences, not travel outside the continental United States, report any contact with law enforcement officers -- even a traffic stop -- and appear at all court appearances.
At their arraignment, which could come as soon as the next scheduled hearing on June 14, they must submit written documentation for any medications they are taking.
A tentative trail date was set for Aug. 6.
WATCH: Attorney Randy Reep details what's next for indicted council members
"Public corruption undermines the strength of our democracy, and the FBI Jacksonville Division investigates allegations of misconduct by public officials as a top priority," FBI Jacksonville Special Agent in Charge Charles Spencer said. "The public should know that we are tireless in our efforts to preserve their trust in the government that serves them."
Timeline of events
|
The indictment says both Browns used the money for personal use and hid the paper trail.
“Reginald Brown withdrew cash, wrote a check, or obtained a cashier’s check in amounts in the thousands of dollars and provided (the money) to Katrina Brown," according to the indictment.
Prosecutors said the mail fraud charges are because the two mailed the checks and wire fraud was for transferring the money electronically. The feds say they also attempted bank fraud because they used forged Wells Fargo statements to apply for loans.
Reginald Brown is accused of not filing his 1040 tax return in 2014, even though he: “Received gross income substantially in excess of the minimum filing amounts established by law," according to the indictment.
Defense: A failed business is not a crime
Katrina Brown refused to answer questions as she left Thursday's hearing, but let her attorney, Curtis Fallgatter, speak for her.
"People who commit fraud take that money and spend it on personal use," Fallgatter said. "She'll have her day in court and get to tell the jury: 'We put every penny back into the business and a third of a million dollars of my family's money back in this company. And guess what? I made $600 per year.' What crook who gets a $2.9 million loan takes away $600 dollars per year? That's not a crook."
Leaving court Reggie Brown told reporters he's innocent and his constituents "have no reason not to trust me."
His attorney told News4Jax that the feds are indicting people over a business failure.
"Mr. Brown has served his community (for a) really for a long time and (served) his country as a veteran for over two decades," attorney Alan Ceballos said. "He did not profit a penny from this involvement. The business failed. Businesses fail. Unfortunately, that’s what happened here. Every time a business fails does not mean that a crime has occurred."
The business entanglements of Katrina Brown and Reggie Brown
The attorneys for both Browns issued a statement earlier in the day stating the defendants have cooperated with the federal investigation for two years and insists that no fraud was committed.
"Unlike cases where true fraud exists, no one took any money they were not entitled to. All funds were properly invested in the business," Fallgatter and Ceballos wrote. "Thus, we are surprised to learn that federal prosecutors have elected to file fraud charges regarding an SBA loan that Katrina Brown and her two companies obtained, seven years ago, with great expectations of successfully operating a barbecue sauce manufacturing plant."
DEFENSE ATTORNEYS: Statement on indictment of Katrina Brown, Reginald Brown UNCUT: Reaction from indicted City Council members’ attorneys UNCUT: Defense attorney not connected to case analyzes case
City Council President Anna Lopez Brosche announced Thursday afternoon that both Browns were being removed from their committee assignments.
RELATED: Reaction from Brosche, other council members, mayor
Gov. Rick Scott has the power to remove sitting elected officials under criminal investigation.
"We are currently reviewing this," a spokeswoman for the governor's office told News4Jax on Thursday afternoon.
📷
Troubled history
Since 2011, nearly $3 million in federal and city funds was either loaned or awarded as grants to Katrina Brown's family to open and operate Jerome Brown BBQ Sauce. The business never lived up to the promise of creating 56 new jobs and closed down after going bankrupt.
COMPLETE TIMELINE: Katrina Brown, Reggie Brown business interests
Last week, the city of Jacksonville filed a lawsuit trying to collect over $346,000 from Brown's family company. At a council meeting the next day, Katrina Brown talked to News4Jax about her commitment to the people of Jacksonville.
"If you look at my record, I have filed some great legislation. I have been very consistent with my voice, representing people in District 8," she said. "I will continue to work hard for the people."
The city lawsuit against Katrina Brown is being handled by an outside law firm because there would be a conflict for city lawyers to be involved. Attorneys could not comment because of pending litigation.
In addition, the Small Business Administration is trying to collect a $2.6 million loan it gave the failed company. Since the SBA's litigation was filed, the building that once housed the business was sold at a foreclosure auction.
The city was exploring the option of garnishing Katrina Brown’s City Council wages. She earns $49,000 annually.