Case Document 4 Filed 02/22/13 Page 1 of 12 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Criminal Number: i 3 (jag) UNITED STATES OF AMERICA, Violation: 26 U.S.C. 7212(a) (Attempting to MILLICENT D. WEST, Interfere with the Administration of Internal Revenue Laws) Defendant. I FEB 22 21313 ?3 I (Hark, i} STATEMENT OF THE OFFENSE Courts tor the u? Colorribia Pursuant to Rule 11 of the Federal Rules of Criminal Procedure, defendant Millicent D. West, formerly Millicent D. Williams, and the United States agree and stipulate that, at all relevant times: INDIVIDUALS AND ENTITIES 1. PUBLIC-PRIVATE PARTNERSHIP 1 was a non-pro?t, public-private partnership incorporated in June 1999 and dedicated to providing resources and developing programs that bene?tted children and youth in the District of Columbia (the ?District?). PUBLIC-PRIVATE PARTNERSHIP 1 was primarily funded by the DC. Government, including through funds designated by the Mayor, or the Council of the District of Columbia (?Council?), or both for particular youth?related purposes. PARTNERSHIP 1 provided grants to organizations to expand and improve services and opportunities for children and youth. PUBLIC-PRIVATE PARTNERSHIP 1 was a non-profit organization that had been granted tax?exempt status pursuant to Section 501(c)(3) of the Internal Revenue Code As a 501(c)(3) organization, PUBLIC-PRIVATE PARTNERSHIP I enjoyed tax Case Document 4 Filed 02/22/13 Page 2 of 12 bene?ts, including a tax exempt status, and quali?ed to receive tax-deductible contributions for income, estate and gift tax purposes. However, the IRC prohibits a 501(c)(3) organization from engaging in some political activities, including contributing funds to political activities. 2. From in or about July 2008 to in or about October 2009, WEST was the Director and Chief Executive Of?cer of PUBLIC-PRIVATE PARTNERSHIP 1. While in this position, WEST had frequent contact with Council members concerning funding for grants designated by the Mayor, or the Council, or both for PARTNERSHIP 1 to manage. WEST had authority to authorize and direct PUBLIC-PRIVATE PARTNERSHIP 1 to issue payments to vendors and grantees. 3. INDIVIDUAL 1 was an employee of PUBLIC-PRIVATE PARTNERSHIP 1. 4. Harry Thomas, Jr., (?Council member Thomas?) was elected as the Ward 5 representative to the Council in November 2006 and took of?ce in January 2007. In his ?rst four-year term in of?ce, Council member Thomas served as Chair for the Council?s Committee on Libraries, Parks, Recreation and Planning, which involved oversight responsibility for the DC. Department of Parks and Recreation an agency that conducted youth sports activities, among other things. Council member Thomas?s of?cial duties as a Council member included voting on legislation, such as laws concerning the distribution of public funds. As part of Council member Thomas?s of?cial duties, he, like other Council members, advocated on behalf of individuals and organizations seeking funding and other support or assistance from the District Government. 5. During Council member Thomas?s ?rst four-year term in of?ce, STAFF MEMBER 1 served as Committee Director for the Council Committee on Libraries, Parks, Recreation and Planning. 6. During Council member Thomas?s ?rst four-year term in of?ce, STAFF Case Document 4 Filed 02/22/13 Page 3 of 12 MEMBER 2 served as Council member Thomas?s Director of Constituent Services. During Council member Thomas?s second four-year term, STAFF MEMBER 2 was promoted to serve as Council member Thomas?s Chief of Staff. 7. Youth Technology Institute (?Youth Tech?), a non?profit organization that had been granted tax-exempt status pursuant to Section 501(c)(3) of the IRC, conducted youth programs and was controlled and operated by Danita Doleman. Accordingly, the organization benefited by being exempt from some federal income taxes, but was prohibited from engaging in some activities, including contributing funds to political activities. 8. POLITICAL ORGANIZATION 1 was the District?s local chapter of a national partisan political organization. STAFF MEMBER 2 was the President of POLITICAL ORGANIZATION 1. The Drug Prevention and Children at Risk Fund 9. The Public Fund for Drug Prevention and Children at Risk (the ?Drug Prevention/Children at Risk Fund?) was established by District law to raise money for programs that prevented drug and alcohol consumption and supported children under the age of 18 years who had direct or indirect contact with drugs. The Drug Prevention/Children at Risk Fund was funded by District residents who voluntarily contributed money on their District of Columbia individual income tax returns, such as the Forms D-40 and D-40EZ. This type of contribution was known as a tax check-off fund. By law, however, funds contributed to the Drug Prevention/Children at Risk Fund had to be spent for fund?s intended purpose. District of Columbia Code section 47-4002 required the Drug Prevention/Children at Risk Fund to be used to support programs designed to prevent drug and alcohol consumption and to support persons under the age of 18 years who have had direct or indirect contact with drugs. 10. Before approximately 2008, funds contributed to the Drug Prevention/Children at Case Document 4 Filed 02/22/13 Page 4 of 12 Risk Fund were controlled by, accumulating at, and maintained by DPR. On or about May 13, 2008, the Council, including Council member Thomas, passed the Support for At?Risk Youth Act of 2008, which transferred the administration of ?all collected and future funds? to the PARTNERSHIP 1. The 51St State Inaugural Ball 1 1. In or about December 2008, Council member Thomas indicated publicly that an inaugural event would be held at the John A. Wilson Building in the District of Columbia, and that he would seek private donations to cover the difference between the event?s cost and any revenues raised by the $51 price of admission. The 51St State Inaugural Ball was organized by STAFF MEMBER 2, who was the president of POLITICAL ORGANIZATION 1, but Council member Thomas was closely involved in planning the event. 12. The 51St State Inaugural Ball was held from 10 pm. until approximately 2 am. in the Wilson Building on the evening of January 20, 2009, following the Inauguration of the President of the United States. It was a formal, black?tie event open to members of the public who had purchased tickets. 13. WEST did not attend the 51St State Inaugural Ball and had no involvement in or awareness of the planning for the Ball. 14. Ticket sales and other contributions did not generate nearly enough money to pay the expenses associated with 51St State Inaugural Ball. 15. Several days after the event, WEST was contacted for the first time about the Ball and informed that the organizers of the event had failed to collect enough funds to pay the expenses associated with the Ball. According to WEST, she was informed by Council member Thomas that it had been an event youth had been able to attend to honor the historic inauguration of President Barack Obama. WEST believed that such an event served PUBLIC-PRIVATE Case Document 4 Filed 02/22/13 Page 5 of 12 PARTNERSHIP 1?s target population. 16. On or about January 27 or January 28, STAFF MEMBER I contacted WEST at PUBLIC-PRIVATE PARTNERSHIP 1 concerning the Drug Prevention/Children at Risk Fund. 17. On or about January 29, 2009, STAFF MEMBER 1 submitted a budget and budget narrative to PUBLIC-PRIVATE PARTNERSHIP 1, seeking a $110,000 grant to POLITICAL ORGANIZATION 1 to fund a ?youth/young adult inauguration celebration.? This grant application paperwork was submitted to obtain funds to pay expenses associated with the 51St State Inaugural Ball. According to the proposed budget, the $110,000 would be used for ?Other consultants/professional fees.? The budget narrative stated that $10,200 of the grant funds would be used for ?Technical Assistance?; $30,000 would be for security, including 10 hours of ?crowd control?; $32,335 for a ?Nutritional Component? consisting of ?assorted and diverse regional and cultural cuisine?; $10,000 for ?Professional services? such as cleaning and trash removal; $16,000 for ?Marketing and Promotion?; and $1 1,465 for ?Staf?ng,? including ?Project staff responsible for creating concept, realizing outcomes and assuring compliance with plans.? STAFF MEMBER 1 also inquired ?how soon? a grant check could be issued. 18. On or about January 30, 2009, STAFF MEMBER I emailed WEST to inquire whether a grant check could be picked up that day. On or about January 30, 2009, WEST replied and told STAFF MEMBER I that PUBLIC-PRIVATE PARTNERSHIP I had not received the money in the Drug Prevention/Children at Risk Fund, which had been identified by STAFF MEMBER 1 as a funding source for the grant. The event was presented to PUBLIC- PRIVATE PARTNERSHIP 1 as a ?youth/young adult inauguration celebration? to which the public could purchase tickets, and included the target service community of PUBLIC-PRIVATE PARTNERSHIP 1. Case Document 4 Filed 02/22/13 Page 6 of 12 19. Between on or about January 30, 2009, and February 3, 2009, STAFF MEMBER 1 communicated with representatives of DPR and PARTNERSHIP 1, including WEST, to facilitate the execution of the Memorandum of Agreement transferring the Drug Prevention/Children at Risk Fund from DPR to PARTNERSHIP l, which had not been transferred to PUBLIC-PRIVATE PARTNERSHIP 1 following Council?s legislative action. 20. On or about January 30, 2009, in response to STAFF MEMBER 1, WEST instructed STAFF MEMBER 1 that once PARTNERSHIP 1 received the funds in the Drug Prevention/Children at Risk Fund from DPR, PUBLIC-PRIVATE PARTNERSHIP 1 would move to fund the grant request. 21. On or about February 2, 2009, the MOA was executed by DPR and WEST. The MOA speci?cally stated it was intended solely to achieve the goals of the Drug Prevention/Children at Risk Fund, which were to support programs for youth of the District residents eighteen years old and younger. 22. Following execution of the MOA, on or about February 3, 2009, STAFF MEMBER 1 emailed WEST inquiring when STAFF MEMBER 1 could pick up the check for the grant submitted to pay for the costs incurred by the 51St State Inaugural Ball. WEST replied on or about February 3, 2009, and told STAFF MEMBER 1 that a check would not be issued that day, but would be available for STAFF MEMBER sometime that week. 23. On or about February 3, 2009, INDIVIDUAL 1, an employee of PUBLIC- PRIVATE PARTNERSHIP I, emailed STAFF MEMBER 1 and requested that the prospective grantee, POLITICAL ORGANIZATION 1, complete an IRS Form W-9 to enable check processing. 24. On or about February 3, 2009, in response to concerns raised by INDIVIDUAL Case Document 4 Filed 02/22/13 Page 7 of 12 1 about what expenses the grant money would be reimbursing, WEST responded that she had reminded STAFF MEMBER 1 that he needed to address the budget narrative to ensure that it complied with the revised, more rigorous funding guidelines that WEST had put into place. In the narrative then, STAFF MEMBER I needed to ensure it included only ?the activities that we will monitor . . . outreach, etc,? even though the event had already occurred. WEST further stated that the grant request presented a dilemma for PARTNERSHIP 1, as it came from the of?ce of one of PARTNERSHIP 1?s ?major champions,? Council member Thomas. WEST explained that Council member Thomas ?needs this done.? 25. On or about February 3, 2009, WEST emailed STAFF MEMBER 1 that there was a ?hiccup? because the proposed recipient of the grant for expenses incurred by the 5151 State Inaugural Ball, POLITICAL ORGANIZATION 1, was a political organization. POLITICAL ORGANIZATION 1 was a prohibited recipient under the IRC. WEST also relayed to STAFF MEMBER 1 the need to change the name of the entity that would receive the funds. 26. On or about February 4, 2009, WEST instructed INDIVIDUAL 1 to change the name of the entity requesting the grant from ?democrats? to ?democratic.? 27. On or about February 4, 2009, INDIVIDUAL 1 informed WEST that INDIVIDUAL 1 was concerned about granting money to POLITICAL ORGANZIATION 1, because PUBLIC-PRIVATE PARTNERSHIP 1, as a 501(c)(3) organization, was prohibited by its status as a 501(c)(3) from donating funds to any political entities or partisan organizations without jeopardizing PUBLIC-PRIVATE ORGANZATION 1?s 501(c)(3) status with the Internal Revenue Service 28. Council member Thomas directed STAFF MEMBER 1 to change the grant recipient to the Youth Tech. On or about February 4, 2009, STAFF MEMBER 1 submitted Case Document 4 Filed 02/22/13 Page 8 of 12 nearly identical budget paperwork to PUBLIC-PRIVATE PARTNERSHIP 1, but now claimed that the grant recipient was Youth Tech. 29. On or about February 5, 2009, in response to concerns raised by INDIVIDUAL 1 about the grant to Youth Tech for the 51St State Inaugural Ball, and whether such a grant was consistent with the purpose of the Drug Prevention/Children at Risk Fund, WEST, cognizant of the granting guidelines for PUBLIC-PRIVATE PARTNERSHIP 1, stated that the grant agreement would ?say what it needs to say.? 30. On or about February 5, 2009, WEST directed the issuance of a check, in the amount 0f$110,000, from PUBLIC-PRIVATE PARTNERSHIP 1 to Youth Tech. The check was picked up at PUBLIC-PRIVATE PARTNERSHIP by STAFF MEMBER 1. PUBLIC- PRIVATE PARTNERSHIP 1 designated the Drug Prevention/Children at Risk Fund as the source of the funds for the grant. On a later date, DPR transmitted the Drug Prevention] Children at Risk Funds to PUBLIC-PRIVATE PARTNERSHIP 1. 31. WEST never required Youth Tech to provide an accounting of activities or services provided in connection with the 51St State Inaugural Ball, nor did PUBLIC-PRIVATE PARTNERSHIP 1, and of course, could not monitor the event as it had already occurred. West knew that the purpose of the grant was to use money from the Drug Prevention/Children at Risk Fund to pay vendors for an event put on by Council member Thomas and Staff Member 2. In truth, after the grant was issued, Youth Tech immediately forwarded nearly the entire amount to Political Organization 1, which paid expenses from the 51St State Inaugural Ball, a fact that WEST learned at a later date. 32. At all times during the grant approval process for the 51St State Inaugural Ball, WEST viewed the Ball as an event that was organized and sponsored by Council member Thomas. WEST failed to consider which individuals or organizations were legally liable for the Case Document 4 Filed 02/22/13 Page 9 of 12 debts and liabilities associated with the 51St State Inaugural Ball. WEST knew that the public funds that PARTNERSHIP 1 granted to Youth Tech would be used to satisfy liabilities incurred for the 51St State Inaugural Ball, which would be of bene?t to Council member Thomas and other persons and entities. 33. In granting public funds to Youth Tech, instead of the true bene?ciaries of the funds, WEST caused the records maintained by PUBLIC-PRIVATE PARTNERSHIP 1 to inaccurately and falsely show that the grant was given to an organization that was a tax-exempt entity pursuant to 501(c)(3) of the IRC. This resulted in a failure to report to the IRS that the ultimate bene?ciaries of the grant funds, and Council member Thomas were ineligible recipients, in the form of political entities. These political entities were not tax-exempt entities and did not otherwise fall into the exemption for non?partisan activity. 34. WEST knew that the documents detailing the grant to Youth Tech and its participation in the 51st State Inaugural Ball would be relied upon by PUBLIC-PRIVATE PARTNERSHIP 1?s auditors and accountants in preparing the tax return for the PUBLIC- PRIVATE PARTNERSHIP 1, Form 990, Return of Organization Exempt From Income Tax orm 990?) and that PUBLIC-PRIVATE PARTNERSHIP 1 would ?le the false Form 990 under penalties of perjury with the IRS. 35. In or about October 2009, WEST resigned her position with PUBLIC-PRIVATE PARTNERSHIP l, to accept a position in the Mayor?s administration. 36. On or about August 16, 2010, PUBLIC-PRIVATE PARTNERSHIP I ?led its Form 990 with the Internal Revenue Service. This Form 990 was for the tax year October 1, 2008 through September 30, 2009. As such, the Form 990 included the period of time during with PUBLIC-PRIVATE PARTNERSHIP improperly granted the funds to pay off the expenses associated with the event organized by a political ?gure and a partisan organization, the Case Document 4 Filed 02/22/13 Page 10 of 12 51St State Inaugural Ball. The Form 990 was signed by the individual who was then President and CEO of PUBLIC-PRIVATE PARTNERSHIP l. 37. On Schedule I attached to the Form 990, a 501(c)(3) itemizes for the IRS all recipients of any grants or donations from the 501(c)(3). The Schedule I attached to the Form 990 ?led with the IRS by PUBLIC-PRIVATE PARTNERSHIP 1 listed all organizations to which PUBLIC-PRIVATE PARTNERSHIP 1 provided grants during the ?scal year of 2009. Included on Schedule I was the grant awarded to Youth Tech. The Schedule I falsely reported that the purpose of the grant was to Youth Tech for ?funding to provide programming for children and youth.? Nowhere on Schedule I of the Form 990 were the true bene?ciaries of those funds, including Council member Thomas and STAFF MEMBER 2, identi?ed, and thereby rendering Schedule I of the Form 990 false. Case Document 4 Filed 02/22/13 Page 11 of 12 33. As a result of her conduct, which caused PUBLIC-PRIVATE PARTNERSHIP it I to falsely record the true beneficiary ot'the grant funds in its records. in or afier January 2009, to about August 2010. in the District ofColumbia, WEST did improperly impede and impair the due administration orthe intemal revenue laws by facilitating the preparation offalse and misleading documents which WEST knew would be relied upon for the preparation ofthe false US. Return ot'Organization Exempt from Income Tax, Form 990 of PUBLIC-PRIVATE PARTNERSHIP for the period October I, 2008, through September 30. 2009. Because WEST caused the records PARTNERSHIP to be inaccurate. WEST knew that the Form 990 for the period October I. 2008 through September 30, 2009 would necessarily be false. The Form 990 misrepresented that the grant for $1 10.000 was made to, and fur the benefit of, Youth Tech, which was materially lalse. because in fact the grant improperly benefited. among others. a minimal figure and a polltical nrganimtion. in violation ofthe IRC. Respectt'ully submitted, RONALD C. MACHEN JR, United States Attorney for the District ofColumbia AN HARAY, . . ar 8 ID JOHNSON. DC Bar 477293 E. SMITH, D.C. Bar 482985 Assistant us. Attorneys Case 1:13rcr700063rJDB Document 4 Filed 02/22/13 Page 12 of 12 ACCEPTANCE [have read every word oflhis Statemenl of Offense. Pursuant to Fed. R. Cr. P. 11, after consulting with my altomey, I agree and stipulate ro this Stalemem ofOffense. and declare under penalty of perjury that it is true and correcl. Dale: [Mil/fl I have discussed this Slalemsm wixh my clicnl. I concur with her decision lo slipulale Ihis Statement ofOt'fense, Dale: [1 5:28 3 Caro] Eldcr Ele. Anomey for 1h: Defendam