Compliance June 30, 2004

'Pay to Play' Violations Alleged in Philadelphia

June 30, 2004 (PLANSPONSOR.com) - A dozen defendants have been charged with a litany of federal law violations in connection with the financial transactions of the City of Philadelphia.
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Federal authorities handed down the indictments in part of an ongoing investigation into the corruption of former Philadelphia City Treasurer Corey Kemp, 34, by Ronald White, 54, a Philadelphia attorney.   The charges of “pay to play” violations were the culmination of an investigation conducted by the Department of Justice, the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS), according to an announcement by US Attorney Patrick Meehan.

The indictments allege the corruption occurred from January 2002 through October 16, 2003, during which time White made payments and offered benefits to Kemp.   These gifts included at least $10,000 paid in 2002, a $10,350 deck for Kemp’s house in 2003, a trip to the Super Bowl in San Diego in January 2003, tickets and limousine rides to all three days of the NBA All-Star events in Philadelphia in February 2002, and numerous other meals, parties, and tickets to sports and entertainment events.

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In exchange for these benefits, Kemp permitted White to direct Kemp’s decision-making as Treasurer of the City, which included instructions on which financial service providers to select for participation in City transactions, and which to exclude.   Kemp’s decisions created large financial gains for White and those White favored, the announcement said.

“The nameplate on the desk of the City Treasurer may have read Corey Kemp but Ron White was calling the shots,” said Meehan. “This is an indictment not only of the defendants but of a ‘pay to play’ culture that can only breed corruption.”

Federal Charges

White is charged with conspiracy to commit honest services fraud, 22 counts of wire fraud, four counts of mail fraud, two counts of extortion, and five counts of making false statements to the FBI.   If convicted on all counts, he faces a maximum sentence of 555 years imprisonment and an $8.25 million fine.

Kemp is charged with conspiracy to commit honest services fraud, 20 counts of wire fraud, 15 counts of mail fraud, two counts of extortion, three counts of making false statements to a bank, four counts of money laundering, and one count of filing a false tax return.   If convicted on all counts, he faces a maximum sentence of 798 years imprisonment and a $10.75 million fine.

Also charged were:

  • Glenn Holck – the president of Commerce Bank/Pennsylvania. Holck is charged with conspiracy to commit honest services fraud, eight counts of wire fraud, and one count of mail fraud.
  • Stephen Umbrell – the regional vice-president of Commerce Bank/Pennsylvania. Umbrell is charged with conspiracy to commit honest services fraud, eight counts of wire fraud, and one count of mail fraud.
  • La-Van Hawkins – a Detroit businessman. Hawkins is charged with conspiracy to commit honest services fraud, four counts of wire fraud, and four counts of committing perjury before the federal grand jury.
  • Janice Knight – a businesswoman.   Knight is charged with conspiracy to commit honest services fraud, three counts of wire fraud, and three counts of making false statements to the FBI.
  • Charles LeCroy – a former managing director of the southeast regional office of J.P. Morgan.   LeCroy is charged with two counts of wire fraud.
  • Anthony C. Snell – a former vice-president of J.P. Morgan.   Snell is charged with two counts of wire fraud. If convicted on both counts, he faces a maximum sentence of 40 years imprisonment and a $500,000 fine.
  • Denis Carlson – a senior vice-president of Janney Montgomery Scott. Carlson is charged with two counts of making false statements to the FBI agents investigating this case; it is alleged that Carlson misrepresented his relationship with White and his purpose in giving Corey Kemp the free use of a vacation condominium Carlson owned.
  • Francis McCracken – the pastor of the St. James Chapel Church, Church of God in Christ.   McCracken is charged with three counts of making false statements to a bank, four counts of money laundering, and six counts of mail fraud.
  • Jose Mendoza – a former worker employed by McCracken, and allegedly assisted in the preparation of a false statement submitted to Commerce Bank.   Mendoza is charged with one count of making a false statement to a bank.
  • Rhonda Anderson – an attorney who allegedly participated in a fraudulent scheme with Kemp. Anderson is charged with one count of mail fraud.

A copy of the indictment announcement is available at  http://www.usdoj.gov/usao/pae/News/Pr/2004/jun/Whitepressrelease2.pdf .

Deals and People June 29, 2004

PBGC Committee Gets New Members

June 29, 2004 (PLANSPONSOR.com) - The Bush Administration has tapped a new chair of the Advisory Committee of the Pension Benefit Guaranty Corporation (PBGC) as well as three committee members.
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Named as chair was Melody McDonald of San Francisco, managing director at RCM Capital Management LLC, a San Francisco investment firm. Her investment management and banking career includes 18 years at RCM and four years at Wells Fargo Bank, according to a PBGC news release. McDonald received a master of arts from the New England Conservatory of Music, a doctorate in music from Stanford University and a master’s in business administration from Harvard Business School.

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Named as committee members were:

  • Thomas Garrott of Memphis, chairman of the executive committee of National Commerce Financial (NCF) Corp., a retail bank where he served as chairman of the board until 2003. He holds a bachelor’s degree in economics from Vanderbilt University and a master’s in business administration from the Wharton School of Finance at the University of Pennsylvania. Garrott will represent the interests of employers in a term that expires in 2007.
  • Betty Scott Ireland of Charleston, W.Va., president and CEO of Jackson & Kelly Solutions LLC, the enterprise arm of West Virginia’s largest law firm. She previously served as head of Jackson & Kelly’s employee benefits group and from 1998 until 2000 was executive director of the West Virginia Consolidated Public Retirement Board. Ireland is a graduate of the University of Cincinnati. She will represent the interests of employers until 2007.
  • James Nevels of Swarthmore, Pa., chairman of the board of The Swarthmore Group, an independent investment advisory firm. Nevels earned a bachelor’s degree in philosophy and political science from Bucknell University, a J.D. from the University of Pennsylvania Law School and a master’s in business administration from the Wharton School of Finance. He will represent the interests of the general public until 2007.

The PBGC is the nation’s insurer of private-sector pension plans that receives its financing from insurance proceeds paid by covered companies and investment income.

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