Walter Reed, for 30 years the tough-on-crime district attorney of St. Tammany and Washington parishes, was indicted by a federal grand jury Thursday on 18 counts, one for conspiracy with his son, Steven Reed, and multiple counts of wire fraud, mail fraud, money laundering and filing false statements on income taxes.
Steven Reed also is named on one of the wire fraud counts.
If found guilty on all counts, Walter Reed faces a maximum of 277 years in prison, and his son faces a maximum of 65 years, U.S. Attorney Ken Polite said in a news conference immediately following the indictment. However, both would almost certainly receive far more lenient sentences than that in the event they are convicted, due to their lack of a criminal history and the way federal sentencing guidelines are calculated.
The government also says it intends to go after the money the Reeds got from their alleged scheme, an amount the indictment puts at “at least $365,932.”
The federal case hinges largely on a theory that Reed sought to feather his nest by helping himself to taxpayer money that wasn’t his and by converting campaign cash to personal use.
For a federal white-collar indictment, the case is unusually focused on the alleged misuse of campaign money, some of which prosecutors say was diverted to Reed’s son. They also charge that Reed committed fraud in his work for St. Tammany Parish Hospital, accusing the DA of taking money for himself — to the tune of roughly $30,000 a year for 20 years — that should have gone to the office.
But the bulk of the 30-page indictment is devoted to laying out an alleged conspiracy by father and son to funnel campaign money to the younger Reed by having Reed’s campaign overpay for work purported to be for the DA’s re-election efforts. Those alleged overpayments included an anti-drug video and Steven Reed’s supposed services at large fundraisers that the elder Reed held at the Castine Center in Mandeville. The indictment also says the younger Reed received money from his father’s campaign in connection with a housewarming party that the government says had nothing to do with the campaign.
The father and son gave conflicting accounts to the news media of what services the younger Reed actually provided at the Castine Center fundraiser, which took place in 2012. Walter Reed said his son provided alcohol, while Steven Reed said he provided bar setups but no booze. Steven Reed was paid $29,400 for the event, for services the indictment says “were not commensurate” with that amount.
The indictment also details a scheme in which the Reed campaign allegedly purposely overpaid two companies that provided services for a 2012 fundraiser by $5,000 apiece and then directed the firms to return that money to companies controlled by his son.
While the indictment doesn’t name the two firms — they are listed “Company A” and “Company B” — it’s clear from the facts in the indictment that the first is White Oak Productions, of New Orleans, and the second is the Lake House, a restaurant in Mandeville. Reed’s reports show that the Lake House was paid $35,000 for catering and that White Oak was paid $32,700 for “production expenses.”
The two firms were then told to write checks to companies controlled by Steven Reed, the indictment says. Those two transactions are cited in the two counts of money laundering.
Ed White, listed on state records as the president of White Oak, did not immediately return phone and email messages left Thursday by The New Orleans Advocate. Nor did Cayman Sinclair, proprietor of the Lake House.
Steven Reed allegedly used the money he received from the companies to repay the bulk of a $60,000 loan that he and his father owed to Gulf Coast Bank & Trust Co., the indictment says. The loan was for Steven Reed’s bar, Tugendhaft’s Tavern.
While it’s unusual for federal authorities to file criminal charges for misuse of campaign funds — in part because the rules on what constitutes an acceptable expenditure are murky — experts have said that the fact that Walter Reed was allegedly using the money to satisfy a personal loan gives the case a clearer nexus.
The indictment also notes that in 2014, Steven Reed amended his tax return for 2012 to include as income, for the first time, the $29,400 he was paid by his father’s campaign account. That followed widespread media coverage of the payment, the court document said.
The indictment’s six counts of wire fraud detail other instances in which Walter Reed allegedly used campaign money for personal expenses. One of those counts includes Steven Reed and deals with the check for $29,400 that was drawn from Reed’s campaign fund and was deposited into one of Steven Reed’s companies, Liquid Bread LLC, in connection with the 2012 fundraiser.
The wire fraud counts include two dinners that Walter Reed hosted for Pentecostal pastors to recruit them for the purpose of getting them to refer private civil legal work to him, a Thanksgiving dinner he hosted for 10 people and a birthday party he threw for a 17-year-old boy.
That was the only mention in the indictment of Reed’s pursuing of private civil work, a practice exposed by The New Orleans Advocate that some legal experts have deplored as a conflict of interest. But it figured in the indictment as an alleged misuse of campaign money rather than an abuse of Reed’s office.
Reed also was charged with four counts of making false statements on tax returns covering 2009 through 2012. Reed listed income for those years that the government said is less than what he earned. The income he listed ranged from a low of $270,149 in 2010 to a high of $714,060 in 2012.
In a news conference announcing the long-expected charges, Polite was flanked by representatives from the FBI and the IRS.
Jerome McDuffie, acting special agent in charge at the IRS’ New Orleans office, said Reed’s indictment is a reminder that “no one is above the law.”
In an unusual gambit, Richard Simmons, attorney for Reed, also held a news conference after the indictment was announced. He said the government’s case is about campaign money, which he stressed is different from taxpayer money.
“It’s important to remember that campaign funds are not public funds,” he said.
He called the government’s accusations “basically a tax case with allegations of mail fraud/wire fraud and money laundering based on the tax issues.”
He also sought to blunt the government’s charge that Reed committed fraud in helping himself to the money from St. Tammany Parish Hospital, listed in the five mail fraud counts, that prosecutors say should have gone to the DA’s Office.
The indictment says an assistant district attorney identified as “L.C.” began advising the public hospital’s board on legal issues in 1990. That was Lane Carson, who then worked in the DA’s Office. In 1992, the board formalized the relationship, passing a resolution calling for the DA to provide legal representation in exchange for a retainer that increased over several years until it stood at $30,000 a year.
The indictment says Reed schemed to steal from taxpayers by depositing those checks into his personal account, noting that he “on dozens of occasions” sent an assistant district attorney to sit in on the meetings in his stead. The indictment also accuses Reed of transmitting an unsigned hospital board resolution last July that claimed to recognize Reed had advised the board in his personal capacity since May 1, 1994.
“As Walter P. Reed well knew the Hospital Board did not discuss, vote on, or pass the purported resolution,” the indictment said. The hospital has provided the news media with resolutions showing that its board voted on three occasions — in 1992, 1994 and 2001 — to hire the DA’s Office, not Reed personally.
The indictment says Reed provided a tax ID number to the hospital for it to file 1099s, but the number was affiliated with Old English Antiques, an entity owned by Reed.
Simmons, Reed’s lawyer, said the arrangement had always been with Reed’s private practice but said it is “regrettable (that) we cannot 20 years later find any formal resolution or contract between the hospital and Walter.”
Simmons also pointed out that since 2008, when Louisiana officials began having to fill out personal financial disclosure forms, Reed has listed the hospital work as private income. Simmons distributed copies of the forms.
Polite began his news conference by bemoaning the fact that it was “another month, another public official being charged with violating the public trust.” He called for zero tolerance for public corruption, noting that in his 18 months on the job, the Reed case is the second time a charge has been brought against an elected official in St. Tammany Parish — the other being former St. Tammany Parish Coroner Peter Galvan, who is serving time in federal prison in Oakdale.
But Polite said the specter of political corruption is not unique to any one place. “If you violate the public trust, you will most likely end up in prison,” he said.
St. Tammany Parish President Pat Brister, who last summer asked the state legislative auditor to thoroughly audit the DA’s Office, said the parish, which prides itself on good government, has been through enough scandal at the hands of what she called “old-school political players.’’ She said she hoped Reed’s indictment would be St. Tammany’s “last embarrassment.’’
St. Tammany Parish Sheriff Jack Strain called the indictments an important step in resolving the problems of the parish’s past. “The residents of St. Tammany Parish deserve public servants who honor the trust placed in them,” he said.
Warren Montgomery, who succeeded Reed as DA in January, said the best for the community is for Reed to have a speedy, fair trial by an impartial jury.
“In the meantime, we are continuing to prosecute cases,” he said, “and we will continue to be about the people’s business.”
Staff writers Gordon Russell, John Simerman, Faimon A. Roberts III and Matt Sledge contributed to this report. Follow Sara Pagones on Twitter, @spagonesadvocat.