JACKSONVILLE, Fla. – Day 4 of Katrina Brown and Reggie Brown Trial:
The Federal Government spent hours analyzing bank records for Katrina Brown and Reggie Brown in day four of the trial.
Prosecutors claim the Browns, who are unrelated, misused hundreds of thousands of dollars in funds from a loan for Katrina’s family’s barbecue sauce company.
In court Thursday, the FBI forensic accountant who analyzed the Browns’ bank accounts — A Plus Training Consultants, RB Packaging, and Basic Products— and financial documents took the witness stand.
Kyle Stevens testified bank records revealed money from the accounts was spent on various things like rent, restaurants, bills, department stores, among other things.
A Plus Training Consultants – Reggie Brown had signatory authority on the account. Bank records show the account was opened on Dec. 12, 2013 and closed Sept. 15, 2015. Stevens said a majority of the money in the account, $12,500 to be exact, came from Cowealth, Katrina’s business. Stevens said there were several cash and ATM withdrawals from the account for over $12,000. Bank records also showed two payments at Camp Blanding, the movie theater, and department stores, according to Stevens’ testimony.
• RB Packaging — Reggie Brown had signatory authority on the account. Financial records show the account was opened Feb. 19, 2014 and closed on Aug. 13, 2015. Stevens said the account received 10 checks from Cowealth for a total of $251,919.04. Stevens said there were 74 ATM Withdrawals for $8,420 along with various transactions at Hyatt Regency, restaurants like Maggiano’s, Taco Bell and Zaxby’s, department stores such as Dillard’s, etc.
• Basic Products – Stevens said $470,180.31 was deposited than withdrawn from the account belonging to Katrina between Aug. 31, 2012 and May 19, 2015. Stevens told the jury the account’s largest source of income was seven payments received from RB Packaging for a total of $148,500. The second largest source of income for the account was 77 cash deposits, Stevens testified. Stevens said there were no deposits consistent with the bulk sale of BBQ sauce to retailers. As far as disbursements, Stevens said the account showed several payments to Biz Capital the loan provider. He also said there were 37 withdrawals of cash over $80,000, more than $26,000 paid to The Strand, a luxury condo in downtown Jacksonville, and various transactions at restaurants, stores like Best Buy, and even at SeaWorld.
The prosecution revealed in 2015 and 2016, Katrina applied for loans to get additional capital for the business, but was denied on both occasions.
The first in 2015, was for a merchant advanced loan over $60,000, prosecutors said. Michael Mangani with LendCore said he received a loan application from Katrina in Oct. 2015.
A hold issue was placed on the request “due to the bank statements being requested,” Mangani said.
A month later, Manganis said Katrina sent over bank statements which he forwarded to Credibly, a small-medium size business loan company.
Manganis said Credibly ultimately denied the loan request because “they indicated the application appeared to be unverifiable or had been altered.”
After telling Katrina the request was denied, she sent an email back saying, “kool.”
The employee with Credibly who denied the original request told the jury the bank statements “looked like they were fraudulent.” Specifically, she noted the format and font of the bank statements seemed “suspicious.”
After Katrina’s first loan request was denied, prosecutors said she tried again in 2016, but this time “she got better at it.” Prosecutors said the quality of the bank statements were fake, but better and hard to detect.
Giancarlo Baldan with BizFi said he received a loan request from Katrina in 2016. He said the bank statements provided by Katrina appeared to show a positive cash flow for the business.
Ultimately, the loan request was denied because it didn’t meet the approval thresholds, and not because fraud was detected.
The government is expected to rest its case Friday. Then it will be Katrina’s turn to call forward witnesses to testify on her behalf.
Day 3 of Katrina Brown and Reggie Brown Trial:
Scathing new details were released in the federal trial of Katrina Brown and Reggie Brown as prosecutors work to build their case.
The former Jacksonville City Council Members are accused of fraud and money laundering.
Prosecutors claim the Browns, who are unrelated, doctored a dozen checks totaling more than $260,000.
The federal government argues Katrina steered the money through Reggie’s two sham businesses.
In court Wednesday, two witnesses testified for the government, claiming they never did any work for Katrina’s family’s barbecue sauce business, but still got paid.
A total of ten witnesses took the witness stand Wednesday alone.
Here are some of the key witness testimonies from day three of the trial:
• Vandaren Gantt told the jury he cashed two checks at the request of Katrina Brown in 2013, but never sold any furniture to the company. A check dated Oct. 5, 2013 was for $6,088 and the second check dated Dec. 9, 2013 was for $1,500. Gantt said he kept $500 and gave the rest to Katrina. Gantt testified that he cashed the checks so Katrina could help him get his business certified under the Jacksonville Small Emerging Businesses program. Gantt described the deal as a “pay for play” and “at the end of the day it was wrong.”
• Tommie Hogan, a relative of Katrina by marriage, testified that in 2013 he cashed three checks for $6,000 as a “favor” for Katrina. Under the memo line on the checks, it said “work for Commonwealth,” but Hogan told the jury he never worked a day at the warehouse. Hogan said Katrina went to the bank with him and waited outside while he cashed the checks. He testified he received a $1,000 payout. Hogan admitted that the time, it seemed “suspicious.” Hogan said he became “worried” when he learned federal agents searched the warehouse in 2016. He said he asked Katrina if the search had anything to do with the three checks and she said she didn’t think so. In 2017, Hogan said federal agents interrogated him at his job. He said he wasn’t truthful at the beginning and told the investigators he did some work for the company, but eventually “came clean” to the agents. During Katrina’s cross examination, she asked Hogan why he changed his story, he responded, “I shouldn’t have ever been put in this position in the first place.” He went on to say he knew cashing the checks in the first place “was wrong” and he came clean because he “didn’t want to get in trouble and “had to defend myself.”
• Michael Hall, a former food inspector, testified in court that he inspected the warehouse on two separate occasions. During the first inspection in October 2015, he said they saw what appeared to be a food manufacturing facility. He noted there was no inventory and no materials to make barbecue sauce. He told the jury the business never had a valid permit to manufacture BBQ sauce and issued a stop work order. Hall said he inspected the warehouse again in April 2016. “There was no food processing, no packaging, no labeling, no caps, no pallets,” Hall recalled. He also said the equipment inside the warehouse wasn’t being used.
Day 2 of Katrina Brown and Reggie Brown Trial:
The federal government continued arguments Tuesday in day two of the trial for two former Jacksonville city councilmembers accused of fraud and money laundering.
Before testimony got underway, the judge explained to the court why Katrina Brown, who opted to represent herself, referred to herself in third person.
The judge said she’s doing that at her direction.
“I want it to be clear she’s acting as a lawyer,” the judge said.
The first witness of the day (fifth witness of the trial) was Frank Palmisano, the loan administrator with Biz Capital who helped Katrina Brown with her loan money.
Palmisano explained how loan funds are distributed. He said draws are requested by the borrower which is typically done by an email invoice requesting certain vendors be paid.
Palmisano said if the invoice complies with the terms of the loan, he’d send the borrower a disbursement authorization form that would list the amounts being paid to certain vendors.
Palmisano said they don’t give the money outright because the borrower has to prove the loan funds are properly being used.
He said approximately 82 draws were made on the loan for Katrina Brown.
Prosecutor argue of those, roughly 13 were fictitious.
When asked if he investigated the authenticity of the expenditures on the invoice, Palmisano said no, “We trust that what’s being provided is truthful and accurate.”
Prosecutors presented evidence that included an email exchange in which Katrina Brown asked Palmisano to overnight checks, writing in all caps, “WE NEED THOSE BOTTLES ASAP. WE HAVE ORDERS TO FILL.”
Email exchanges also show a $6,000 invoice Katrina Brown submitted for a part-time employee by the name of “Tommie Hogan” that prosecutors claim was made up.
The emails also revealed several invoices submitted by Katrina Brown for A Plus Training and Consultants and RB Packaging, businesses operated by Reggie Brown.
One check for RB Packaging on Sept. 11, 2014, was written out for $25,411.25.
Palmisano said he was under the impression the barbecue sauce business was doing well and barbecue sauce was being made and sold.
However, prosecutors argue the business was failing and several invoices were fake.
Palmisano testified that had he known invoices were fake, he wouldn’t have authorized payments.
It was a shaky start for Katrina Brown during her cross-examination of Palmisano. At times, she made statements rather than asking the witness questions during. “What is the question?” the judge asked more than once.
The judge called several sidebars, which slowed down the trial. You could see jurors fidgeting in their seats.
The seventh witness in the trial was a bank teller at BBVA Compass who recalled seeing Katrina Brown and Reggie Brown — who are not related — at the bank together on at least two occasions.
A City of Jacksonville employee who worked with Katrina Brown to help get grant money using the Northwest Jacksonville Development Economic Trust Fund also took the stand.
During her testimony, she said she toured the warehouse in February 2013 and March 2014. She said in 2014 there was furniture in the offices, a conveyor belt line where the sauce would be put into bottles, and she was shown bottles of sauce.
Court ended at 4 p.m., so Katrina Brown’s standby counsel could handle a personal issue. Court will pick back up Wednesday with cross-examination of the City of Jacksonville employee.
Opening arguments began Monday:
Opening arguments began Monday in the federal trial for two former Jacksonville city councilmembers.
Katrina Brown and Reggie Brown, who are unrelated, were indicted on 38 federal counts related to allegations of fraud and money laundering.
The federal government said they used taxpayer-funded financial incentives for Katrina Brown’s family barbecue sauce business.
The pair tried to separate the cases, but they’re being tried together.
Katrina Brown opted to represent herself. However, she was appointed a standby attorney during the trial.
Reggie Brown’s appointed attorney hinted that he plans to testify.
Just before 9:30 a.m., the jury, which is made up mostly of females and Caucasians, was sworn in.
During jury instructions, the judge told the group to expect a two-week commitment.
Prosecution arguments are expected to last a week, followed by the defense and any rebuttal by the government. Parties will have the opportunity to present final arguments before jury begins deliberations.
The federal government kicked off opening statements talking about Katrina Brown’s family barbecue sauce business.
In 2011, the business got the idea to expand and build a thriving small business, prosecutors said.
The prosecution said Katrina Brown used the small family business to propel her run for a political seat in the Jacksonville City Council, a seat she won in May 2015.
Prosecutors said Katrina Brown applied for loans, but by 2013, the business was in “trouble.”
Prosecutors argue Katrina Brown resorted to fraud and lying to the Small Business Administration lender about how money was spent and that the lender would’ve never handed out the loan had they known the business was failing.
When Katrina Brown addressed the jury during opening statements, she referred to herself in third person.
She talked about how her parents worked hard to start their own barbecue sauce business.
The former councilwoman said the sauce was a “hit” and was sold at area stores.
To keep up with the growing demand, Katrina Brown said they needed a manufacturing plant to distribute the sauce.
Katrina Brown shot down claims the money was used to live a lavish lifestyle. She said evidence would show it was used to make the business a success.
Reggie Brown’s lawyer turned the tables during opening statements when he put the blame on Katrina Brown.
He said at the time, Reggie Brown was struggling financially. He said he tried to become a food inspector and even thought about becoming a toilet paper salesman.
His lawyer said he saw the business relationship with Katrina Brown as beneficial and an exciting opportunity.
His defense attorney conveyed to the jury that Reggie Brown was duped and should’ve been more suspicious.
The first witness of the day was Angela Hill, the FBI lead agent on the investigation.
Hill said prior to conducting a search warrant at the warehouse, they subpoenaed bank records and reviewed them to track the funds.
Hill said Biz Capital was going to lend $2.6 million to the business to renovate the manufacturing facility.
Hill said the borrowers had to submit a draw request to the lender, specifying the funds spent for the purpose for the loan then the lender would pay the borrower.
During Hill’s testimony, she reviewed several bank statements and invoices she claims were fake.
Other witnesses Monday included a man who works with the Small Business Administration and two inspectors who performed inspections at the warehouse.
Both inspectors testified that it didn’t appear there was any manufacturing taking place or any employees at the site.