Prosecutors on Thursday continued to dissect business dealings between Walter Reed and his son Steven, calling a District Attorney’s Office staffer who worked on Walter Reed’s campaign events to the stand in federal court along with the younger Reed’s accountant.
Much of the corruption case against Walter Reed, the former longtime district attorney in the 22nd Judicial District, centers on an allegation that he funneled campaign money to his son, and prosecutors sought to poke holes in claims that Steven Reed provided legitimate services for his father’s campaign.
But the elder Reed, who faces 19 counts, is also accused of using his campaign fund for a vast array of other personal expenditures, and some of Thursday’s testimony was aimed at showing his spending habits, a theme that also arose the previous day with testimony about dinners at local restaurants.
Mandeville florist Caroll Chatellier, of Flowers N Fancies, testified at length about hundreds of dollars Reed spent monthly on roses and other floral arrangements.
The prosecution also introduced additional evidence of Reed’s dining habits, putting a former server from La Provence on the stand to testify about Reed’s use of gift cards at the Lacombe restaurant. A Reed nephew also testified about a graduation party Reed threw for him.
But Thursday’s testimony, like that of the previous day, dealt in large part with Steven Reed and the 2012 campaign event at the Castine Center for which he was paid nearly $40,000.
The prosecution put Jerry Reed, who was an administrative assistant at the District Attorney’s Office under Walter Reed, on the stand. Aside from an office manager who testified briefly about receiving a subpoena for records, Jerry Reed is the first member of Walter Reed’s staff to testify.
Jerry Reed said he, along with others — including Bart Pepperman, who headed the office’s diversion program — were largely responsible for getting alcohol donations for campaign fundraisers.
Jerry Reed, a second cousin of Walter Reed, said all of the alcohol for the Castine Center event was donated. He testified that Steven Reed showed bartenders — all volunteers who worked in the District Attorney’s Office — how to pour liquor and to handle people who were “overserved.” But when asked whether Steven Reed provided liquor, ice or anything else for the event, Jerry Reed said he had no knowledge of it.
The most detailed testimony came from Amy Bailey, a certified public accountant who handled the books for Liquid Bread LLC, which did business as Tugendhaft’s Tavern. The younger Reed opened that bar with a $60,000 commercial loan, for which his father was the guarantor.
Bailey, who also prepared the younger Reed’s taxes, said she noticed two unusually large deposits in the Liquid Bread account while preparing his 2012 return — one of them for $34,400 on Oct. 1. Both deposits occurred after the business had closed, and she wasn’t sure how to categorize the money.
Steven Reed gave conflicting answers, she testified, first saying he had sold bar equipment and materials and used the money to pay down the loan with Gulf Coast Commercial Bank and Trust.
Bailey said the bar had only $23,000 worth of equipment. “You wouldn’t sell used equipment for twice what you paid for it,” she said.
Steven Reed said a check for $29,400 was for the production of a film and another $5,000 was from “St. Tammany.”
Bailey found that the October deposit included a $5,000 cashier’s check and a $29,400 check drawn on the Walter Reed Campaign Fund. She contacted Steven Reed again, and he told her that the $5,000 was a down payment for the sale of some equipment to a cousin.
Bailey concluded the money was a gift from his father and should not be treated as taxable income.
But the next witness drew a different conclusion, saying 2014 news reports about Walter Reed’s campaign spending made him believe the $29,400 was for catering work that should have been reported as income.
Steven R. Johnson, a CPA whose firm Bailey is affiliated with, said he told Steven Reed he would need to file an amended return.
The two checks came up in testimony Wednesday when Cayman Sinclair, a caterer for the fundraiser, testified that he sent the $5,000 cashier’s check made out to Liquid Bread to Walter Reed at his behest. The larger check allegedly was for bar services provided by the younger Reed at the fundraiser.
During cross-examination Thursday, Glenn Burns, Steven Reed’s attorney, asked how his client had reacted to the news that he had to file an amended tax return. Johnson said Steven Reed was calm and simply asked if he could pay the amount over time.
Walter Reed’s defense team tried to hammer home its argument that the district attorney’s spending on flowers and dinners was done in connection with holding public office, which is allowed by state law.
Marianne Wise, who represents Walter Reed, asked the florist who signed the checks to his business and where she sent them. Chatellier said they often were signed by Reed’s secretary and were sent to the District Attorney’s Office.
Rick Simmons, Walter Reed’s lead attorney, also asked Walter Reed’s nephew, Chris Reed, if members of the district attorney’s staff attended Thanksgiving dinners hosted by his uncle at the Dakota. He agreed that they did, naming several staff members.
For the first time Thursday, the government tackled the second prong of its case against Walter Reed, which concerns his work for St. Tammany Parish Hospital.
Hospital CEO Patti Ellish testified that Reed attended meetings of its board of directors in his capacity as district attorney, rather than in a private capacity.
Prosecutors questioned her about numerous sets of minutes that list Reed or one of his underlings as attendees or that show resolutions adopted to engage the District Attorney’s Office as special counsel for the hospital.
Reed maintains that the hospital’s deal was with him as a private lawyer, and he declared the $30,000 a year on personal financial disclosure forms he filed with the state. The government contends that he took money meant for his office.
Follow Sara Pagones on Twitter, @spagonesadvocat.