Washington Political Consultant Pleads Guilty in Honest Services Wire Fraud Scheme
PHILADELPHIA—Political consultant Thomas Lindenfeld, 59, of Washington D.C., pleaded guilty today to an information charging him with one count of conspiring to commit honest services wire fraud. Lindenfeld faces a maximum possible statutory sentence of 20 years in prison, a fine of up to $250,000, and up to five years of supervised release.
The charges were announced today by United States Attorney Zane David Memeger, Assistant Attorney General Leslie R. Caldwell of the Department of Justice’s Criminal Division, FBI Special Agent-in-Charge Edward J. Hanko, and IRS Criminal Investigation Acting Special Agent-in-Charge Richard Gross.
The charges stem from Lindenfeld’s participation in a wire fraud scheme initiated by his former employer, “Elected Official A,” which was disclosed in court proceedings today. According to the information, Lindenfeld, Elected Official A, and their associates, violated local campaign finance laws during Elected Official A’s 2007 race for Mayor of the City of Philadelphia by arranging for an illegal campaign contribution in the form of a $1 million loan from Person D. Lindenfeld and his confederates routed the money from Person D through Lindenfeld’s political consulting firm, LSG Strategies Services Corporation (“LSG”), which was working on Elected Official A’s campaign. LSG executed a promissory note with Person D and used the money—received via wire transfer—to pay various expenses of Elected Official A’s campaign. Of those funds, $400,000 went unspent and was returned to Person D by LSG.
In late 2007, Person D experienced acute financial difficulty and contacted Lindenfeld at LSG to call in the $600,000 remaining debt. That debt was subsequently repaid with stolen charitable funds and federal grant money routed through several entities, including LSG, under the guise of sham contracts for services that were never rendered. To repay the debt, Elected Official A arranged for Nonprofit 1, an entity founded by Elected Official A, to route a total of $600,000 received from Sallie Mae’s charitable arm, as well as federal grant money, to Company 2, under the guise of a false contract for services. Company 2 was run by Person C, an ally of Elected Official A. Person C’s for-profit company executed a fake contract to disguise the movement of money from Nonprofit 1 to Company 2. Person C and Lindenfeld’s LSG also executed a fake contract to disguise the movement of money from Company 2 to LSG, after which Lindenfeld used the funds to repay Person D.
To resolve Elected Official A’s 2007 mayoral campaign debt to Lindenfeld and LSG, and to compensate them for participating in hiding the $1 million campaign contribution, Lindenfeld and Elected Official A and others agreed to use Elected Official A’s official position to steer federal funding to Lindenfeld’s proposed environmental advocacy group, “Blue Guardians,” which was created by Lindenfeld for the purpose of receiving federal funds. In 2009, during the appropriations process, Elected Official A asked for $15 million in federal funding for “Blue Guardians,” which Elected Official A associated with a Philadelphia address belonging to Person C’s Company 1. In December of 2009, Elected Official A’s office notified Lindenfeld that “Blue Guardians” had received $500,000 (not the entire $15 million that had been requested) in federal funding as an earmark through the National Oceanic and Atmospheric Administration (“NOAA”). Approximately one month later, Elected Official A’s campaign began writing down the debt the campaign owed to LSG on its disclosure forms. Specifically, Elected Official A reduced the amount his campaign owed to LSG in the amount of $20,000, a transaction falsely labeled as a “contribution in kind.”
NOAA received no information regarding “Blue Guardians” until the earmark showed up in the final bill. NOAA learned that “Blue Guardians” did not have a website, and only identified a point of contact for “Blue Guardians” by calling Elected Official A’s office, which advised NOAA to contact Lindenfeld. NOAA learned that Lindenfeld was a political operative who had worked for Elected Official A. NOAA was suspicious that the earmark was a “political payoff,” and documented all of its interactions with Lindenfeld and informed its legal counsel of what it had learned. When NOAA reached Lindenfeld in approximately March 2010, it requested, among other things, the articles of incorporation for “Blue Guardians,” its physical address, its lists of Board of Directors or officers, and its tax status. Lindenfeld told NOAA that he would “speak with [Elected Official A] and get everything straightened out.” In fact, prior to April of 2010, “Blue Guardians” did not exist. Lindenfeld only obtained an e-mail address, articles of incorporation, and a tax identification number for “Blue Guardians” in April 2010. Even after receiving those documents, Lindenfeld never forwarded them to NOAA. Eventually, Lindenfeld told NOAA that he “had spoken with [Elected Official A]” and that they decided the money could be better spent on the oil spill in the Gulf of Mexico. After Lindenfeld declined to accept the funding, NOAA never disbursed the $500,000 to Lindenfeld or his “Blue Guardians.”
Additional criminal activities undertaken during the schemes included (1) creating false contracts between the parties to justify the interstate transfer of the funds stolen to repay the illegal campaign loan, and (2) filing false campaign reports which concealed the illegal campaign debt, among other things.
The case is being investigated by the Federal Bureau of Investigation and Internal Revenue Service Criminal Investigations with assistance provided by the NASA Office of Inspector General and the Department of Commerce Office of Inspector General. It is being prosecuted by Assistant United States Attorney Paul L. Gray, and Trial Attorney Eric L. Gibson of the Criminal Division’s Public Integrity Section.