Case 3:18-cr- -O-O409 Document 1 Filed 08/09/18 Page 1 of 10 Pa 1,13 1 11s 1U 311??, IN THE UNITED STATES DISTRICT I FOR THE NORTHERN DISTRICT OF TEXAS AUG 9 2mg 1 DALLAS DIVISION (v UNITED STATES OF AMERICA V. NO 3'181312?409 DWAINE CARAWAY. (Related ?to Case as. - INFORMATION The United States Attorney Charges: Introduction 1. From in or around 2011 to in or around 2017, Robert Carl Leonard, Jr., the president of Force Multiplier Solutions (FXS), a technology company that put cameras on school buses, paid, among others, Dwaine Caraway, a Dallas City Council Member for much of the relevant time period and the current Mayor Pro Tem of Dallas, over $450,000 in bribe and kickback payments/bene?ts in exchange for favorable of?cial- action, or the promise of favorable of?cial action, related to stop?arm-camera program with Dallas County Schools (DCS) and Leonard?s efforts to develop and pro?t from low income housing. 2. To disguise the bribe and kickback payments that Caraway and others received, Leonard funneled a signi?cant portion of the illicit payments through various paSs- through companies created and operated by his business associate, Slater Washbum Information Page 1 of 10 Case 3:18-cr-00409-M Document '1 Filed 08/09/18 Page 2 of 10 PageID 2 Swartwood, Sr. 3. To further mask the illegal purpose of the payments that Caraway received through Swartwood, particularly through ELF Investments, the coconspirators attempted to characterize the payments as consulting fees. Later, Leonard and Swartwood attempted to recast a signi?cant portion of those ?fees? as a loan pursuant to a promissory note that Caraway signed but never intended to repay. 4. Leonard also proVided Caraway bribe and kickback payments in the form of checks which Caraway cashed at liquor stores or pawn shops, luxury suits, fully funded trips to New Orleans, Louisiana, Austin, Texas, and Las Vegas, Nevada, security cameras for Caraway?s home, a ?loan? for Caraway?s father?s home, funeral expenses for Caraway?s family members, a campaign bus, casino chips, and gambling money for the - horse track. I 5. In addition, Carawayfailed to report for income tax purposes a substantial portion of the bribe and kickback payments that he received from Leonard, and offset much of the income that he did report via phony business expenses. . 6. Speci?cally, on his 2014 tax returns, Caraway failed to report $97,000 that'he received directly or indirectly from Leonard, primarily under the auspice of ?consulting? fees paid to a company which Caraway owned and controlled. 7. Caraway knowingly and willfully failed to disclose the $97,000 in income from Leonard to his tax preparer. Information - Page 2 of 10 Case Documentl Filed-O8/09/18 Page30f 10 Page D3 8. Caraway ?led a false and fraudulent tax return for tax year 2014 by omitting the $97,000 in payments that he received directly or indirectly from Leonard during 2014. 9. In total, Leonard paid approximately $3.5 million in bribe and kickbaCk payments to Dallas area of?cials, including Caraway, to help secure over $70 million in contracts,- agreements, orders, and other bene?cial treatment for FXS, all of which the coconspirators concealed from DCS, its board, the Dallas City Council, and the citizens of the school districts in which DCS operated school buses and provided other services, I and the citizens of the City of Dallas. 10. DCS, for its part, was left virtually bankrupt by the agreements it entered into with FXS and was ultimately abolished by voters in November 2017. Duty of Honest Services 11. Caraway served as a Council Member on the Dallas City Council from before the beginning of the conspiracy until June 2015, and upon reelection thereafter in May-2017 to the present. I 12. Caraway was a public servant as a result of. being a Council Member. Caraway owed a duty of honest services to the citizens of the City of Dallas to perform the duties and responsibilities of public of?ce free from bias, con?icts of interest, self-enrichment, self-dealing, concealment, deceit, fraud, kickbacks, and bribery. 13. The citizens of the City of Dallas expected, and were entitled to receive, Caraway?s honest services in the ful?llment of the Council Member?s duties. It was a Information - Page 3 of 10 Case Document 1 Filed 08/09/18 Page 4 of 10 PageID 4 violation of Caraway?s duty, and the citizens of the City of Dallas? rights to the Council Member?s honest services, for Caraway to accept bribe and kickback payments from Leonard in exchange for favorable of?cial action or the promise of favorable of?cial action. Information - Page 4 of 10 Case Document 1 Filed 08/09/18 Page 5 of 10 . PageID 5 Conspiracy to Commit Honest Services Wire Fraud [Violation of 18 U.S.C. 371] 14. All preceding paragraphs of this Information are realleged and incorporated by reference as if set forth ?illy herein. 15. From in or around 2011 to in or around 2017, in the Dallas Division of the Northern District of Texas and elsewhere, the defendant, Dwaine Caraway, Leonard, Swartwood, Ricky Dale Sorrels, and others known and unknown, unlawfully, willfully, and knowingly did combine, conspire, confederate and agree together and with each other to Violate Title 18, United States Code, Sections 1343 and 1346. 16. It was a part and object of the conspiracy that Caraway, Leonard, Swartwood, Sorrels, and others known and unknown, willfully and knowingly, having devised and intending to devise a scheme and arti?ce to defraud, and to deprive DCS, the school districts it serviced and their citizens thereof, the Dallas City Council, and the citizens of the City of Dallas of their intangible right to Caraway?s and Sorrells? honest services as public servants, would and did transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce, writings, signs, signals, pictures, and sounds for the purpose of executing such scheme and arti?ce, in violation of Title 18, United States Code, Sections 1343 and 1346, to wit, Leonard paid bribe and kickback payments to Caraway and Sorrells in exchange for favorable of?cial action, or the promise of favorable of?cial action, and in connection therewith and'in furtherance Information - Page 5 of 10 Case Document 1 Filed 08/09/18 Page 6 of 10 PageID 6 thereof, the coconspirators transmitted and caused to be transmitted interstate electronic wire transfers of funds. Manner and Means of the Honest Services Fraud Conspiracy I BRIBE AND KICKBACK PAYMENTS TO CARAWAY 17. During the honest services fraud conspiracy, Leonard paid, and Caraway accepted, over $450,000 in bribes and kickbacks, in addition to directly or indirectly contributing over $40,000 to Caraway?s political campaigns. 18. In addition to money, Leonard solicited Caraway?s of?cial actions and in?uence iwith bribes and kickbacks in the form of, among other things of value, checks which, Caraway cashed at liquor stores or pawn shops, luxury suits, fully funded trips to New Orleans, Louisiana, Austin, Texas, and Las Vegas, Nevada, security Cameras for Caraway?s home, a ?loan? for CaraWay?s father?s home, funeral expenses for Caraway?s family members, a campaign bus, casino chips, and gambling money for the horse track. l9. Caraway, in his capacity as a City Council Member, took of?cial action favorable to Leonard and FXS, including, but not limited to, voting on ordinances and authorizations in a way that forwarded business interests, pressuring the Dallas City Attorney?s Of?ce to provide a favorable opinion about the propriety of ?nes associated with stop-arm-camera program, and promising to use the Council Member?s of?cial position if and when necessary to forward Leonard?s efforts to develop Information - Page 6 of 10 Case Document 1 Filed 08/09/18 Page 7 of 10 PageID 7 low income housing. CONCEALMENT OF THE BRIBE AND KICKBACK PAYMENTS 20. As part of the conspiracy, the coconspirators undertook signi?cant efforts to disguise and conceal the source and purpose of the bribe and kickback payments to Caraway and others. 21. Leonard generally did not pay Caraway and others directly. Instead, Leonard caused bribe and kickback payments to be transferred to pass-through entitiescontrolled by Swartwood, including Elf Investments, after which Swartwood, at Leonard?s direction, would pay Caraway and others, or shell companies that they controlled. 22. Caraway received approximately $390,000 in bribe and kickback payments laundered through Swanwood?s companies. 23. As part of the conspiracy, and as a further act of concealment, Caraway and others opened shell companies so it did not appear that they were directly receiving payments. 24. The coconspirators, in an attempt to grant the bribe and kickback payments an air of legitimacy, created sham consulting agreements. 25. :As a further act of concealment, the coconspirators, at some point in the conspiracy, attempted to recharacterize past ?consulting? payments to Caraway and others as a ?loan,? and executed fake loan documents to that end. 26. When Leonard made bribe and kickback payments directly to Caraway, Caraway Information - Page 7 of 10 Case Document 1 Filed 08/09/18 Page 8 of 10 PageID 8 would often cash the checks at a liquor store or pawn shop to conceal the payments. Overt Acts 27. I In furtherance of the conspiracy and to effect the illegal objects thereof, the following overt acts, among others, were committed in the Dallas Division of the Northern District of Texas and elsewhere: I a. On or about May 16, 2014, Swartwood, at Leonard?s direction, caused approximately $15,000 to be wired from a bank account of ELF Investments to a bank account of a company owned and controlled by Caraway, which is known to the United States Attorney. All in violation of 18 U.S.C. 371. Count Two Tax Evasion [Violation of 26 U.S.C. 7201] 28. All preceding paragraphs of this Information are realleged and incorporated by reference as if set forth fully herein. 29. Starting in or about January 2014, and continuing through at least 2016, in the Northern District of Texas and elsewhere, the defendant, Dwaine Caraway, willfully . attempted to evade and defeat the payment of a substantial income tax due. and owing by him to the United States of America, for the tax year 2014, by substantially underreporting his income and by committing at least the af?rmative acts described in paragraphs 3 and 5 through 8 of this Information. Information - Page 8 of 10 Case Document 1 Filed 08/09/18 Page 9 of 10 PageID 9 In violation of 26 U.S.C. 7201. Information - Page 9 0f 10 Case Document 1 Filed 08/09/18 Page 10 of 10 PageID 10 JOSEPH A. MAGLIOLO Assistant United States Attorney Texas Bar No. 24074634 1100 Commerce Street, Third Floor Dallas, Texas 75242-1699 Tel: 214.659.8600 Fax: 214.659.8809 Information - Page 10 of 10