Monday, April 11, 2011

Railroad exec charged with two felonies for illegal campaign contributions

Railroad executive William Gardner was charged Monday with two felonies today for a scheme to launder illegal campaign contributions to Scott Walker and others, and his employer will pay one of the largest fines in state history for reimbursing those donations.

A criminal complaint details a pattern in which Gardner had Wisconsin & Southern Railroad employees and his daughter make political contributions and then reimbursed them with either personal or company funds.

Gardner, the president and CEO of the railroad, faces two class I felonies, one for making excessive contributions and the other for unlawful donations.

Government Accountability Board Director Kevin Kennedy said the $166,900 forfeiture the railroad has paid is the largest in the history of his agency. Milwaukee County John Chisholm said the size of the forfeiture would reinforce the obligation of corporate entities to follow the spirit and the letter of campaign finance laws. He said prosecutors didn't include jail time for Gardner in order to send the message that if violators cooperate early, "you will be treated differently."

Walker's campaign said in a statement it cooperated with the GAB in its investigation and regularly checks contributions to ensure full compliance. It returned $43,000 in donations last year following revelations about the illegal contributions.

"Immediately after this situation was brought to the attention of the campaign, any known contributions related to this donor were immediately returned," the campaign said.

As part of a plea deal, Gardner would serve two years on probation with a stayed prison term. The GAB said seven railroad employees will pay forfeitures of $250 each.

The complaint details how Gardner made donations and was reimbursed by the company, and then solicited others to do the same.

For example, Gardner made a $5,000 donation to Walker in November 2009 and then submitted a report to the company seeking reimbursement for an expense detailed as “Friends of Scott Walker” and “Contribution for Governor” for the exact amount of his contribution.

Gardner also personally made contributions to former Rep. Mike Sheridan, who was then the Assembly speaker, and to the Assembly Democratic Campaign Committee.

Gardner said in a statement that at the time he made the contributions, he did not realize he was violating the law.

The complaint notes that Gardner re-cut checks to Sheridan and the ADCC because his initial contribution of $2,000 to the Janesville Dem exceeded state contribution limits. He ended up giving $500 to Sheridan and $3,500 to the ADCC, which the complaint says suggests he was "informed as to the law of campaign contribution limits."

The ADCC later returned the money.

After soliciting one railroad employee to donate $4,900 to Walker's campaign, Gardner wrote in an e-mail to him "And lets (sic) not blab this around ..."

Gardner's attorney told investigators he wanted the employee to keep quiet "out of a concern for lavish political spending during tight economic times requiring Railroad wage cuts."

"Ignorance of the law is not an excuse," Gardner said in a statement. "More importantly, I had the obligation to make sure what the law was before getting myself, the company, and others involved. But I didn't. My employees had every right to assume that what I was asking them to do was legal. But it wasn't. I failed them and everyone else miserably."

The complaint details $60,800 in donations that were reimbursed by Wisconsin & Southern Railroad and another $12,000 made by others that Gardner reimbursed himself.

Of that, $57,800 went to Walker. Former Gov. Jim Doyle received $5,000, while state lawmakers Alberta Darling, Ted Kanavas and Mike Sheridan received $500 each and the ADCC received $3,500. Some of the donations were outside the statute of limitations.

Gardner stressed in the statement that neither Walker nor his campaign ever suggested he or the company would get anything in return for the contributions and he "never asked, suggested or even though I would."

The complaint includes an e-mail Gardner sent Walker following a meeting at Noodles & Co. in Madison thanking him for the time and expressing his hopes that the Republican would pick a Transportation secretary who understands the importance of rail in Wisconsin. He also wrote with adequate funding for capital upgrades on the state-owned rail lines, "Wisconsin & Southern Railroad Co. will continue to spur economic development throughout the state and do what we do best."

Milwaukee County Assistant DA Bruce Landgraf said campaign finance laws are "inherently a difficult type of violation to ferret out," and that law enforcement usually must rely on a tip to move forward with an investigation.

In the Gardner case, his former girlfriend Stacie Long notified the GAB of the potential violations in April 2010 after a domestic dispute with Gardner.

The complaint only identifies Long as a “former woman friend” of Gardner who contacted the GAB because a man she did not name asked her to make a contribution to a candidate using his funds. Though she didn’t name Gardner, a GAB investigator was able to determine it was him.

According to the complaint, she contacted the GAB in an attempt to force Gardner to return her personal property. She wrote in an e-mail that she had not disclosed Gardner's name to the GAB but would do so if she did not receive "all of my belongings, and I mean everything belonging to me" by April 30.

Gardner responded in an e-mail, "Knock yourself out. I did nothing wrong and have broken no law."

According to the complaint, Long stopped payment on the check for the $10,000 contribution Gardner asked her to make. A Long friend contacted Walker’s campaign in January 2010 to bring up the potential violations, officials said. He didn't explain the reason for the stop payment order on the check and was assured by the campaign that it had “methods to detect illegal contributions and that they were confident that there were no illegal contributions coming into the Walker campaign.”

Gardner has an initial court appearance scheduled May 2.

Monday, March 02, 2009

Parties dispute bid confidentiality as Lupton trial begins

MILWAUKEE--Prosecutors told a federal judge today a real estate agent sought a kickback in the proposed sale of a state office building to cover his gambling losses and other financial troubles.

But Larry Lupton's defense attorney downplayed his financial troubles while insisting the real estate agent was operating within his contractual obligations and abiding by the law in negotiating a commission split.

Lupton is charged with soliciting an illegal $75,000 kickback and sharing confidential bid information with a broker representing a potential buyer of the Department of Administration building in Madison. He is also charged with lying to an FBI agent.

The building was valued at about $30 million. Lupton represented Equis, the commercial real estate firm that had the contract to sell the building for a 4.3 percent commission.

The government was to wrap its case up today. It was unclear in court today when the defense would present its side, but it could be as soon as Tuesday afternoon or as late as Thursday, depending on scheduling and other issues. The parties have agreed to proceed without a jury and U.S. District Judge Lynn Adelman is hearing the case.

Assistant U.S. Attorney Gregory Haanstad said today Lupton attempted to arrange for buyer's broker Gabrielle Silverstein to pay him 0.25 percent of the sales price from Silverstein's commission and then shared information to ensure Silverstein's buyer would be able to make a winning bid. Silverstein immediately contacted the FBI regarding the initial conversation and assisted in the investigation, according to Haanstad.

Haanstad said Lupton then lied about whether he revealed confidential information regarding bids to an FBI agent investigating the complaint. Haanstad said that despite the agent telling Lupton not to contact any potential witnesses, Lupton immediately phoned Silverstein after the interview.

Haanstad worked to establish Lupton's financial difficulties prior to meeting with Silverstein in April 2007 by noting that a foreclosure judgment on Lupton's home was issued in November 2006 and that he showed only $281 in adjusted income on his 2006 tax return.

Haanstad also pointed to a string of roughly $20,000 in gambling losses Lupton incurred from Dec. 26, 2006, through April 3, 2007, of which $2,000 came the day before his initial conversation with Silverstein. Lupton had been receiving $6,000 each month since November 2006 in advances from Equis, and the firm would have recouped that money before paying Lupton his remaining share of the commission.

But Lupton's defense attorney, Joseph Owens, painted a different picture of Lupton's finances and the nature of the bidding process and commission arrangement.

Pointing to the same casino records the government used, Owens showed that Lupton won almost $31,000 over the four occasions he visited the casino prior to the losses detailed by prosecutors. He also noted that Lupton showed little income in 2006 because he was unemployed for part of the year and then was paid in the form of advances he didn't need to report. Owens said the government failed to mention the bank reconstituted Lupton’s mortgage five weeks after it foreclosed.

Owens said Lupton was free to share bid information in negotiating the sale with other brokers. Owens noted that a confidentiality clause at the end of the template Lupton provided bidders was meant to prevent bidders from talking together to drive the price down, not to limit what Lupton could share. He also noted that the information Lupton provided Silverstein about a competitor's bid came from phone conversations and was provided to Silverstein two hours before the competitor sent the letter of intent to Lupton with the confidentiality clause in it.

Owens agreed that Lupton told the FBI investigator that he did not reveal confidential information, but that the two were "talking past each other" and what the FBI thought was confidential was, in fact, not confidential.

Owens pointed out that the letters of intent from many of the bidders had buyer broker commissions of up to 1.5 percent. This figure was based on the 4.3 percent commission the state was going to pay, Owens said.

The state however, was in the process of attempting to change its contract with Equis to offer only 1.75 percent commission. This, Owens said, would have left Equis with virtually no commission if the buyer broker commissions weren't negotiated lower. Owens said Lupton was instructed to renegotiate commissions as a contingency plan. Disclosure of the commission split would have been required during the closing, Owens said, which never occurred because the state scuttled the contract when the government announced it would seek charges against Lupton.

Gov. Jim Doyle proposed selling the DOA building on West Main Street in downtown Madison in his 2007-09 budget. The governor did not propose making a second attempt at selling the building in the budget he unveiled last month.

By David Wise

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Friday, October 10, 2008

McGee asks for sentencing extension

Former Milwaukee Ald. Michael McGee Jr. in a hand-written motion is requesting a 20-day extension so he can review a pre-sentence report from the prosecution. McGee was found guilty in June on nine federal charges.

See the notice of motion here.

See the motion here.

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Friday, June 27, 2008

Judge OKs release of McGee audio recordings

U.S. District Judge Charles Clevert today ruled that certain evidence from former Ald. Michael McGee's trial could be released to the public, including wiretap recordings played during the trial.

In allowing the release of wiretaps, Clevert would not release CDs and DVDs containing body-wire recordings or those that weren't entered into evidence. He also withheld bank records and other documents that could be used for identity theft purposes.

The defense had argued that all the records should be held at least until another federal hearing could be held after McGee's appearance in state court next week, arguing that the immediate release of recordings could taint a potential state jury pool. Prosecutors argued that the state case is irrelevant to the federal case and said the public had a right to access the information.

A lawyer for the Milwaukee Journal-Sentinel also appeared before the court and argued that the guilty verdict was already the most prejudicial information that a potential jury could hear and said the public should have access to the underlying evidence that was the basis for that verdict.

Prosecutors made a CD of audio recordings available today. Other documents are expected to be released after Clevert's staff reviews them.

Download a .zip file of the audio recordings (21 MB)

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Tuesday, June 24, 2008

Jury finds McGee guilty on all nine counts

By David A. Wise

MILWAUKEE -- A federal jury in Milwaukee has found former Ald. Michael McGee Jr. guilty on nine federal charges, including five counts of bribery, three counts of extortion and one count of attempting to avoid reporting requirements for a $15,000 wire transfer. The verdict was announced shortly before 9:30 p.m. Tuesday night, after roughly six hours of deliberation.

McGee, who looked straight ahead as the verdict was read, faces up to 30 years in prison. He will remain in custody until his sentencing, which is set for Oct. 24.

U.S. Attorney Steven Biskupic said afterwards that he was pleased with the verdict and said it was the result of excellent law enforcement work.

McGee's younger brother, Jonathan McGee, expressed disappointment in the verdict but said it was not unexpected. He also said he believes Michael McGee was targeted because of his family's controversial nature.

"He's a McGee," Jonathan McGee said. "Y'all haven't forgotten [Michael McGee] Senior," he said, addressing a group of reporters.

In closing arguments earlier today, federal prosecutor Joseph Wall laid out each of the nine counts facing McGee. Wall said the informant in the case, Jack Adel, came forward because he was "tired of being used and exploited" by McGee, who Wall said had "almost complete power" over whether Adel could continue to keep his liquor license for his grocery store.

Wall recounted witness testimony about McGee demanding money from numerous business owners for support on license and zoning decisions and pointed to various recordings of McGee himself asking for money.

He recounted a tape in which McGee said "I'm the gatekeeper" on licensing decisions and suggested McGee's power was such that when it came to decisions for the district, "it starts and stops with Mike McGee."

Meanwhile McGee's attorney, Calvin Malone, painted McGee as the target of plot by Adel to remove him from office because he opposed Adel's sale of his store to a man who did not live in the district.

Malone tried to raise doubts about tapes the prosecution did not play and cases in which taped evidence or paperwork did not exist, suggesting there was evidence there that Adel plotted to remove McGee.

He attempted to portray Adel as deceitful for secretly recording conversations he had with others while serving as an informant. He also pointed to Adel taking money from others in his own unsuccessful bid for McGee's Common Council seat even though he said he did not intend to win the seat as further evidence of Adel's deceitful nature.

Given that, Malone said that any evidence linked to Adel is insufficient to convict McGee.

"The deception and manipulation and ambition is in the evidence," Malone said.

To those who believe such a deceptive plot cannot exist, Malone pointed to the case of the Tuskegee syphilis experiment in which African-American males were told they were receiving treatment for the disease, although none had been given.

In his rebuttal, Wall reiterated that Adel was motivated out of being tired of being forced to pay McGee money and provide him free food and cell phone minutes. He noted that during his defense Malone did not choose to play the tapes that he suggested showed McGee was the victim of a conspiracy.

Wall said he did not play complete tapes because they would be gibberish and irrelevant

As for Adel's credibility, Wall said he did not just put Adel on the stand alone, but called up 25 witnesses, 65 wiretapped phone calls, 16 body wire recordings and numerous documents.

To close his rebuttal, Wall played a six-minute slide show of McGee's alleged victims with audio of McGee allegedly demanding money and planning and discussing extortion activities with others.

The tape ended with McGee telling an associate that he could be called Michael, Mike, or "thug Mike."

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McGee defense rests

The lawyer for Michael McGee Jr. called just three witnesses in his federal corruption case trial Monday before resting, a decision the former alderman initially took issue with when questioned by the judge overseeing the trial.

Asked whether he agreed with the decision not to call more witnesses, McGee replied, "No, your honor, not really."

Following those remarks, a conference was called to discuss how to proceed with the case. U.S. District Judge Charles Clevert again asked McGee if he agreed with the decision not to call any more witnesses, and he said he did.

Both sides will work on jury instructions before Tuesday morning, when the jury will be called back for closing arguments.

McGee attorney Calvin Malone spent last week trying to chip away at the government's case while the prosecution presented its witnesses, focusing on the credibility and memory of informant Jack Adel. Malone called only former acting Mayor Marvin Pratt, FBI agent George Strong and Bill Arnold, who works in the Milwaukee Common Council's media office, to the stand.

Pratt, who served on the Common Council before becoming acting mayor, testified that he was allowed to receive payment for assisting business owners with license issues as a lobbyist but would not have been allowed to accept such compensation while on the council.

Strong testified about a phone call from Adel about whether he should help a gas station attendant translate for a media interview regarding McGee's arrest. Malone questioned Adel about a recording of the phone call last week, and Adel could not remember which George was on the tape.

Arnold testified about a press release from McGee's office about a reward that was offered for tips in a rape case. Adel's money was used to put up the reward, though he was not mentioned in the press release. Malone questioned Adel about the reward last week.

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Friday, June 20, 2008

Witness details extortion in McGee trial

The prosecution's key witness in the federal corruption case of Michael McGee Jr. spent Thursday testifying about numerous incidents in which he supplied McGee with money and goods and helped arrange meetings with other business owners and McGee.

Jack Adel's testimony was punctuated by prosecutors playing dozens of recorded phone calls, body wire recordings and several video tapes in which McGee either demanded money or other goods from Adel, or of Adel helping arrange payments from business owners who needed support for license renewals or transfers.

Adel, who served as an FBI informant in the case and owned Mother's Foods, told jurors that McGee began demanding money and goods from him starting in 2004. Adel said McGee demanded free cell phone minutes for pre-paid cell phones for him, his wife and his associates, food, money and sponsorship of fundraisers.

Adel said McGee’s demands increased over time, and Adel estimated McGee siphoned as much as $30,000 worth of money and goods from his store.

"Always his need was increasing," Adel said. "It came to the point where I got sick going in to the store."

"For what? What am I working for?" Adel said. "It is not profitable to me."

He discussed one case in which he said McGee called him before the store even opened to have more minutes put on his cell phone.

"I didn't even have my lights turned on yet and already I have expenses," Adel said.

But Adel said he kept paying McGee in order to keep his beer and liquor licenses, which he said brought in sales of over $200,000 per year.

"He was my alderman. The alderman has the power over my license," Adel said. "What can I say, no?"

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Thursday, June 19, 2008

Witness: McGee solicited money for license approval

Jurors heard wiretap recording of former Milwaukee Ald. Michael McGee Jr. allegedly soliciting money for the approval of a liquor license as his federal corruption trial continued today.

Mohammed Abdul Rahim, a businessman from McGee's district, took the stand Wednesday afternoon and recounted a meeting with McGee at a Sam's Club to discuss a beer license for the store he manages, Family Super Saver. During the encounter, Rahim said that McGee told him, "You owe me for it." The amount he said he and McGee agreed upon was $5,000.

Several days later Rahim gave an associate of McGee's, identified by prosecutors as Dennis Walton, the money. The beer license was green-lighted during the next common council meeting.

Prosecutors played recordings that included McGee and Rahim discussing an additional $5,000 that the Rahim had agreed to pay.

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