Updated 6:03 p.m.: This story was updated to include new details on the case and quotes from Reggie Brown.
Jacksonville City Council members Reggie Brown and Katrina Brown have been indicted on 38 counts of fraud and other charges related to Katrina Brown’s family’s barbecue sauce business.
Both council members posted $50,000 bond and neither can travel, while awaiting trial. The pair faces more than 1300 years in prison between them, though federal prosecutor Tyson Duva said they're unlikely to get all that time.
In addition to the time behind bars, Katrina Brown was ordered to pay $12.5 million in fines, while Reggie Brown is on the hook for more than $8 million. Katrina Brown will also have to retake her drug test, after it came back "diluted." Drug tests are routine during cases such as this.
Documents related to the case were unsealed Thursday morning.
The indictment says Katrina Brown and Reggie Brown hatched the scheme as the councilwoman’s barbecue sauce business failed to meet the terms of a federal loan. The councilwoman was unable to repay a $2.6 million Small Business Administration-backed loan after her business sold less sauce to Sam’s Club and Winn Dixie stores than had been projected.
The FBI raided the plant in 2016. Meanwhile, the city is suing the councilwoman for failure to repay a $346,000 loan after the barbecue business failed to create the 56 jobs it promised.
The alleged scheme involved two fake companies founded by Katrina Brown and listing Reggie Brown as the principal — A Plus Training Consultants and RB Packaging, LLC.
“A Plus Training never performed a legitimate business,” the 61 page indictment said. “A Plus Training was incorporated and used solely to perpetuate the scheme to defraud.”
“RB Packaging likewise never performed legitimate business,” the indictment continued.
Reggie Brown opened bank accounts in both companies’ names, and he and Katrina Brown deposited tens of thousands of dollars after submitting fraudulent invoices for services purportedly performed by the companies, as well as other entities. The two councilmembers are also accused of using much of the money for personal use.
The indictment charges “the defendants herein, did knowingly and willfully combine, conspire, confederate and agree with each other and others known and unknown to the grand jury, to devise and intend to devise a scheme and artifice to defraud.”
"Public corruption undermines the strength of our democracy, and the FBI Jacksonville Division investigates allegations of misconduct by public officials as a top priority. The public should know that we are tireless in our efforts to preserve their trust in the government that serves them," said FBI Jacksonville Special Agent in Charge Charles P. Spencer.
Federal prosecutors are looking to recoup at least the more than $754,000 in funds they say they can tie to the alleged offenses.
The FBI said it ordinarily does not issue statements, but felt it necessary to in this case. The Bureau will not be doing interviews.
Reggie Brown is challenging a fellow Jacksonville Democrat — Audrey Gibson — for her state Senate seat. Katrina Brown is running for reelection for her District 8 seat, according to our Florida Times-Union news partner.'
Outside the courthouse Thursday, Reggie Brown told reporters he'll make the decision about continuing his run for the sate Senate "at a later date," while maintaining his innocence. When asked whether his constituents should still trust him, he responded "Absolutely. They have no reason not to trust me."
In a statement sent from the Office of the City Council, Council President Anna Lopez Brosche said she is removing Katrina and Reggie Brown from their committee assignments and that she’s “been in regular communication with the General Counsel to understand next steps.”
“Council Member Greg Anderson and Council Member Joyce Morgan will serve on the Finance Committee, Council Member Jim Love will serve on the Land Use and Zoning Committee, and Council Member Garrett Dennis will serve on the Rules Committee for the remainder of this council year, which ends June 30, 2018.”
Furthermore, Brosche said “it is a sad day in Jacksonville,” but that “these developments do not stop the business of the City of Jacksonville. The City Council will remain focused on our highest priority, which is serving the people of Jacksonville.”
In a joint statement sent Thursday, the pair's lawyers — M. Alan Ceballos and Curtis Fallgatter — wrote "unlike cases where true fraud exists, no one took any money they were not entitled to."
The statement also said both Browns "have fully cooperated with the federal investigation, for the last two years, and provided key evidence to the government that no fraud was committed."
The lawyers argue that Katrina Brown, being only 30 at the time of incorporating the barbecue sauce business, was a novice business woman and relied heavily on the SBA and city for advice. The local and federal entities approved her loans based on her business plan, which was "sound and viable" they argue, but "countless unexpected construction, marketing and manufacturing delays doomed the business."
The delays "were so substantial" that Brown was due to begin repaying the loans a full two years before "the manufacturing facility becoming operational," the statement went on. "Few businesses can sustain mortage payments for 23 months, without revenue from the manufacturing operation. Her business fell victim to that reality."
The council members are expected to be in court for their first hearing at 2:30 this afternoon. They’ll go before Magistrate James R. Klindt.
This is a developing story. Please check back for more updates.