Former Universal companies executives indicted on RICO, related charges in wide-ranging fraud and bribery schemes involving city councilman and his spouse

 

Councilman Johnson accused of taking bribes, using public office to benefit Universal

Date: January 29, 2020

Contact: newsroom@ci.irs.gov

PHILADELPHIA— First Assistant United States Attorney Jennifer Arbittier Williams announced this morning that former Universal Community Homes Chief Executive Officer and Board President Abdur Rahim Islam of Philadelphia, PA; former Chief Financial Officer and Secretary of Universal's Board Shahied Dawan of Philadelphia, PA; Philadelphia City Councilman Kenyatta Johnson and his spouse, political consultant Dawn Chavous both of Philadelphia, PA; were charged today in a twenty-two-count indictment alleging a wide-ranging racketeering conspiracy and related crimes including bribery, honest services fraud, multiple counts of wire fraud, and tax offenses.

The charges were announced at a press conference held by IRS Criminal Investigations Special Agent-in-Charge Guy Ficco, FBI Assistant Special Agent-in-Charge Christian Zajac, and First Assistant U.S. Attorney Williams.

According to the Indictment, the charges stem from criminal schemes orchestrated by Islam and Dawan through Universal Companies which included thousands of dollars in bribe payments to public officials and the misappropriation of hundreds of thousands of dollars from Universal. The Indictment, summarized briefly below, describes the various schemes.

"IRS-Criminal Investigation is proud to have provided its financial expertise in this investigation," said IRS Criminal Investigation Special Agent in Charge Guy Ficco. "We, along with our law enforcement partners and the Department of Justice, are committed to aggressively investigating individuals who engage in corruption, tax fraud, or other types of white-collar crimes."

"What we have here is four people pretending their motives were purely civic-minded, when, in fact, they were unlawfully conspiring to enrich themselves," said Christian D. Zajac, Assistant Special Agent in Charge of the FBI's Philadelphia Division. "As alleged in the indictment, Abdur Rahim Islam and Shahied Dawan stole nearly half a million dollars from Universal — money for themselves, and to use as bribes to further their financial pursuits. Councilman Kenyatta Johnson accepted their payoffs and based his official actions on those bribes, with Dawn Chavous providing him cover. The FBI is committed to fighting public corruption at every level, and we would ask anyone with knowledge of wrongdoing by public officials to call the FBI, or share the information online at tips.fbi.gov."

"As alleged in the Indictment, Universal Companies, including its real estate and education arms, constituted a RICO enterprise, hijacked by the defendants Islam and Dawan to engage in a pattern of criminal activity that spanned two states and several years. In pursuing their criminal objectives, Islam and Dawan bribed public officials, including Johnson, with Universal's funds, and hid those bribes as consulting fees paid through Chavous' consulting firm," said First Assistant U.S. Attorney Williams. "These charges are based on a pattern of activity which violates multiple federal and state laws including mail fraud, honest services mail fraud, honest services wire fraud, wire fraud, obstruction of justice, bribery, and use of an interstate facility in aid of racketeering."

Bribery and Honest Services Fraud in Philadelphia

Islam and Dawan are charged with engaging in a corrupt scheme in which Philadelphia City Councilman Kenyatta Johnson and his spouse, Dawn Chavous, received payments in excess of $66,000 in exchange for Johnson using his public office to take official actions to benefit Islam, Dawan, and Universal, including but not limited to: introducing and voting upon spot zoning legislation related to the Royal Theater, a property formerly held by Universal, and blocking reversion to the City of Philadelphia of another property held by Universal after it failed to develop the property pursuant to its agreement with the City of Philadelphia;

Bribery and Honest Services Fraud in Milwaukee

Islam and Dawan are also charged with engaging in a corrupt scheme in which Michael Bonds, the former president of the Milwaukee Public Schools (MPS) Board of Directors, received approximately $18,000 in exchange for Bonds using his official position to take a series of official actions advantageous to Islam, Dawan, and Universal, including but not limited to: advocating for and voting in favor of Universal's expansion of charter school operations in Milwaukee, motioning the MPS Board to lease MPS property to Islam, Dawan, and Universal, motioning the MPS Board to approve more favorable lease terms to the benefit of Islam, Dawan, and Universal, and voting in favor of the more favorable lease terms;

Theft and Embezzlement at Universal

Also according to the Indictment, between 2010 and 2016, Islam drew significant sums of money from Universal in the form of bonuses and travel or expense reimbursements, in addition to his annual salary. Although Universal's Board of Directors was charged with reviewing and approving Universal's financials and major initiatives on a quarterly or annual basis, defendants Islam and Dawan used their positions as CEO and CFO, respectively, to pay themselves bonuses without the approval or knowledge of the Board. Islam and Dawan paid themselves annual five-figure bonuses even while Universal was hemorrhaging money due to the failed charter school expansion in Milwaukee.

The Indictment also alleges that Islam and Dawan used Universal's funds to pay Islam excessive, inflated, or outright fraudulent reimbursements for "travel" or other purported "business expenses." Islam would pad his "expenses" related to the operation of Universal, including its charter schools, with a variety of personal expenses that should not have been reimbursed. For example, Islam submitted his personal car insurance, political contributions, personal vacations, and gym memberships as "business expenses," which were reimbursed by Universal and also not included as income on his IRS Forms 1040. Islam's "reimbursements" were reviewed and approved by Dawan outside the standard procedures for Universal and without proper and detailed supporting documentation. Islam and Dawan also authorized Islam to receive large sums of "pocket money" or per diem from Universal. In total, Islam and Dawan stole approximately $463,000.

If convicted as charged, the defendant faces the following statutory maximum sentences:

  • Islam: 303 years' imprisonment; 3 years supervised release, a $4,350,000 fine, and a $2,100 special assessment;
  • Dawan: 285 years' imprisonment; 3 years supervised release, a $3,750,000 fine, and a $1,500 special assessment;
  • Johnson: 40 years' imprisonment; 3 years supervised release, a $500,000 fine, and a $200 special assessment;
  • Chavous: 40 years' imprisonment; 3 years supervised release, a $500,000 fine, and a $200 special assessment.

The Internal Revenue Service Criminal Investigations Division and Federal Bureau of Investigation conducted this investigation. The IRS and FBI received assistance from the Department of Education Office of Inspector General. Assistant United States Attorneys Eric L. Gibson and Mark B. Dubnoff are prosecuting the case. Trial Attorney Ivana Nizich of the Criminal Division's Organized Crime and Gang Section in the Department of Justice provided assistance.                                                                   

An Indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.