Hospital, DA Reed differ on nature of Reed’s work _lowres

Walter Reed

A bouquet for his daughter. A family Thanksgiving dinner at a popular north shore restaurant. A housewarming party to celebrate a move into a Covington townhouse.

Those are some of the things prosecutors say Walter Reed bought with money from the campaign war chest he amassed during his decades-long dominance of the north shore political landscape. They are also among the expenditures that the U.S. Attorney’s Office has seized on in building its far-reaching case against the once-powerful district attorney of St. Tammany and Washington parishes.

Thursday’s indictment was long expected — and lengthy, clocking in at 30 pages covering 18 criminal counts. But what’s perhaps most unusual about the case that U.S. Attorney Kenneth Polite rolled out Thursday is that it is built in large part on alleged abuse of a campaign account set up under state laws — not normally grist for a federal prosecution.

The indictment makes reference to Louisiana campaign finance law, which forbids steering money to immediate family members unless it is to a legitimate business and solely for campaign purposes, among other strictures.

Reed’s attorney says the feds are overreaching. In an unusual news conference held less than an hour after the ink on the indictment was dry, attorney Richard Simmons stressed that the money Reed allegedly converted from campaign coffers to his own use is not public money. He also questioned whether federal authorities had jurisdiction to enforce state campaign finance laws.

Some fellow defense lawyers think Simmons has a point.

“When I saw this indictment, the thing that screamed out at me was: Is it a federal crime to misuse state campaign money in violation of a state law?” asked Tim Meche, a veteran defense lawyer and frequent critic of the U.S. Attorney’s Office. He said he thinks the case is pushing the envelope. “It all sounds salacious, but is it a violation of federal law?”

Campaign money is often spent in dubious ways, and laws on what constitutes an appropriate campaign expense are murky. Reed’s ex-fiancée, for instance, has said that Reed gave her and her son thousands of dollars from the campaign account to buy groceries and cover other living expenses. But Reed has said the money he paid Claire Bradley was for help on a campaign event — something Bradley denies.

Those particular payments doesn’t show up in the 30-page indictment. That’s because they happened in 2008, and any charges related to that tax year would have been proscribed on April 15 — a week and a half before the grand jury indicted Reed. For that reason, all of the tax-related charges in the indictment begin in 2009.

Given that Louisiana politicians routinely abuse their campaign accounts, Meche believes the government could be vulnerable to a claim by Reed of selective prosecution. “It raises a huge question of, ‘Hey, what about everyone else?’ ” he said.

But Matt Coman, a former federal prosecutor who handled many high-profile corruption cases and is now in private practice at Sher Garner, has a less jaundiced view of the government’s brief against Reed.

Coman said federal cases against political figures that include charges of campaign fund abuse are rare but not unheard of. In fact, the U.S. Attorney’s Office’s cases against former Mandeville Mayor Eddie Price and white supremacist David Duke both rested in part on misuse of campaign money.

“It’s not unprecedented in this district, and there are multiple examples of cases like this across the country,” Coman said.

He noted that Duke was charged in part with not paying taxes on the campaign money he solicited and converted to personal use — a charge that closely mirrors the four tax counts Reed faces.

Coman also predicted that prosecutors will be able to make hay from several other incriminating factors: the amount of campaign money Reed allegedly converted to personal use, the frequency of the abuse and his alleged efforts to conceal it.

Not only does the indictment claim Reed used more than $100,000 from his campaign account for personal purchases, it says that he directed two companies to overcharge the campaign by $5,000 apiece, and then cut checks for that amount in the name of Reed’s son and co-defendant, Steven.

“I would expect prospective jurors to be more forgiving of someone who buys a lunch or two in the course of their campaign, as opposed to repeated instances of large-dollar diversions from their campaign funds for their own personal use, as alleged in the indictment,” Coman said. “That suggests it wasn’t a mistake; it wasn’t an oversight. You show the intent with the repetitive nature and the relative dollar figure. The acts of concealment also goes to the intent.”

Simmons, who said the news media have not clearly delineated the difference between campaign funds and public funds, said his client reported donations to the state “with extensive details regarding their source and the expenses incurred.”

But Simmons has not yet addressed the “kickback” scheme outlined by the feds and highlighted by Coman. According to the indictment, Reed made an agreement with two companies, identified as Company A and Company B, to overpay them by $5,000 apiece for services at a 2012 fundraiser with the stipulation that they return the money to Steven Reed’s companies.

Making matters perhaps worse for the elder Reed, the money was then used to pay off the bulk of a $60,000 loan that the two Reeds had taken out from Gulf Coast Bank & Trust so that Steven Reed could buy Tugendhaft’s Tavern, a Covington bar.

The facts in the indictment make it clear that the companies the DA allegedly put the arm on were White Oak Productions of New Orleans and the Lake House, a Mandeville restaurant. They were paid $32,700 and $35,000, respectively.

Former U.S. Attorney Harry Rosenberg said the “kickback” allegations could be more appealing to a jury, who would see the paper trail as questionable. They would also see the elder Reed reaping a direct financial personal benefit from his campaign money, in the form of retiring the $60,000 loan.

The indictment also raises pointed questions about the amount of money paid to Steven Reed, including $14,300 for an anti-drugs video and $29,400 for services he rendered at the same 2012 fundraiser.

The indictment flatly states that Steven Reed was overpaid, but it doesn’t say by how much. Setting an appropriate value for the services could be tricky, Rosenberg said, pointing to Simmons’ argument that the claim is subjective.

Simmons also has sought to undercut the notion that the case is even one of public corruption. In his Thursday news conference, he repeated what has become a mantra: that there is nothing in the government’s case to suggest Reed sold his office — that is, no allegations of a bribery scheme or kickbacks for favors granted by the former DA in his official capacity.

But the feds take a different view of things. While Reed might not have sold official favors, the indictment charges that he took money from the St. Tammany Parish Hospital that was supposed to go to the DA’s Office and stuffed it into his own pockets — $30,000 a year for 20 years. Reed has said the arrangement was between the hospital and his private legal practice, and Simmons has stressed that Reed never tried to hide it.

As evidence, the lawyer distributed Reed’s financial disclosure forms. Those forms, available to the public online, list Reed’s income from the hospital each year — income Simmons said Reed paid taxes on.

Simmons also produced a letter, dated 1996, from Reed to the then-head of the hospital’s board, Paul Cordes, that makes clear that Reed was providing the services personally. However, it’s not clear whether the letter was ever sent or received, or whether Cordes — who is now dead — shared it with other board members.

The hospital, however, has produced resolutions from 1992, 1994 and 2001 in which the board approved arrangements with the District Attorney’s Office, rather than Reed personally.

Rosenberg added that prosecutors likely have cooperating witnesses to support their contention that the deal was between the hospital and the DA’s Office. In addition, the fact that Reed sometimes sent assistant district attorneys to attend hospital board meetings in his stead is significant, Rosenberg said. That would only be legitimate if the arrangement was with the office.

“He can’t have it both ways,” Rosenberg said.

While Simmons has said Reed rarely missed the hospital board’s meetings, prosecutors allege he sent a subordinate in his place on “dozens” of occasions.

The two Reeds will be arraigned May 4 in U.S. District Judge Eldon Fallon’s court.

While Walter Reed was notoriously reluctant to answer media inquiries during the year before his indictment, his legal team is employing a far different strategy. Rosenberg said it’s one that Simmons used successfully in defending Anna Pou, the Memorial Medical Center doctor who was accused of euthanizing patients in desperate conditions after Hurricane Katrina.

Rosenberg described the strategy as one of getting out in front and speaking to the public through the media instead of relying on a “No comment” when the government has a 30-page indictment and a news conference.

Steven Reed’s lawyer, W. Glenn Burns, followed suit Thursday night, issuing his own statement suggesting the government indicted his client simply to put pressure on Walter Reed to agree to a plea bargain.

“How can someone hide money when he reports it? How can the government determine the value of someone’s creativity and work?” Burns asked rhetorically.

His statement concluded: “There is another side to this story.”

Follow Sara Pagones on Twitter, @spagonesadvocat.