Guilty plea in scheme to steal more than $1M in donations

AP News
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Posted: Aug 10, 2015 5:59 PM

LOUISVILLE, Ky. (AP) — Samuel K. Pate Jr.'s job was to make sure donations were deposited into the accounts of his conservative clients — including campaign funds for now-Senate Majority Leader Mitch McConnell and fellow Republican Sen. David Vitter. Instead, his bookkeeping scheme diverted more than $1 million into his own accounts to pay for a lavish lifestyle of vacation homes, luxury vehicles and jewelry, federal prosecutors said Monday.

Pate pleaded guilty on Monday to three counts of mail fraud in federal court in Louisville, Kentucky. Prosecutors said the scheme ran from early 2008 through November 2014 and netted him more than $1.1 million.

More than half of the amount was taken from campaign funds for McConnell and Vitter, Republicans from Kentucky and Louisiana, respectively.

"This is really a case of embezzlement," U.S. Attorney John E. Kuhn Jr. told reporters after the court hearing. "It's simply theft. These were donations from donors all over the United States that were trying to participate in the political process, and his fraud disrupted and frustrated those efforts."

The scheme began unraveling after a McConnell donor didn't receive a customary thank you note from the senator's campaign, Kuhn said. He added that the 52-year-old defendant from Forest, Virginia, stole from 18 clients, including political campaigns, political action committees and non-profit groups.

In court, Pate showed no emotion while answering a series of questions from U.S. District Judge Greg N. Stivers before entering his guilty plea.

His attorney, Scott Cox, said afterward: "He's accepted responsibility for what's he's done."

Cox declined to comment on Pate's motives, saying he would discuss that at a sentencing hearing scheduled Nov. 3. Pate faces up to 60 years in prison, but prosecutors said the sentencing guideline range will likely be considerably less.

Pate owned and operated Stonewood Marketing, which was hired to handle bank deposits and record keeping. Donors would send checks to his clients, and the contributions were automatically forwarded through the U.S. mail to his firm for processing, Kuhn said. The checks were supposed to be deposited into his clients' bank accounts. But for years, he routinely diverted some of the deposits into this own accounts, according to Kuhn.

Prosecutors said some money went to purchase condominiums in Myrtle Beach, South Carolina, as well as to buy Cadillacs, a Lincoln Navigator and other vehicles, a golf cart and diamond jewelry. Stolen money also went to redecorate his vacation property and pay condominium maintenance fees, they said.

Pate used nearly $285,000 of the money to pay credit card expenses, he said.

Vitter was the biggest loser in the scheme. Pate stole $440,046 from the Vitter for Senate campaign fund, prosecutors said. Another $40,775 was taken from another fund for the Republican — Vitter for Louisiana, they said.

They added that Pate also targeted McConnell — Kentucky's senior senator — taking $118,294 from the McConnell Senate Committee.

Neither senator offered immediate comment on the case.

Pate took $319,691 from Christians in Defense of Israel, $153,445 from Catholic Advocates, $30,614 from the House Conservative Fund and $11,300 from the Republican Majority Campaign, according to Kuhn.

Liberty Counsel, a non-profit litigation, education, and policy group that focuses on religious freedom issues, said it incorporated Christians in Defense of Israel in June 2014. Liberty Counsel said it immediately took over donation processing.

"In late August, we learned from law enforcement that a former third-party vendor had misappropriated funds from CIDI," said Liberty Counsel founder and chairman Mat Staver. "No CIDI funds were misappropriated after Liberty Counsel took over the project."

Kuhn said the investigation began after a donor to the McConnell campaign contacted the campaign upon realizing a thank you note hadn't been received. The campaign found no record of the donation and reached out to the bank, which found some of the money was diverted into other accounts, Kuhn said.

"This case originated with one person ... who saw something that wasn't quite right," said Howard S. Marshall, special agent in charge of the FBI's Louisville Division.

That donor will remain anonymous, he said.

Investigators poured over 5,400 entries in a spread sheet to follow the money trail, Marshall said.

Federal authorities said they have recovered nearly half of the stolen money, which is being returned to the victim organizations.