Kane shut down sting that snared Phila. officials

Posted: March 17, 2014

The Pennsylvania Attorney General's Office ran an undercover sting operation over three years that captured leading Philadelphia Democrats, including four members of the city's state House delegation, on tape accepting money, The Inquirer has learned.

Yet no one was charged with a crime.

Prosecutors began the sting in 2010 when Republican Tom Corbett was attorney general. After Democrat Kathleen G. Kane took office in 2013, she shut it down.

In a statement to The Inquirer on Friday, Kane called the investigation poorly conceived, badly managed, and tainted by racism, saying it had targeted African Americans.

Those who favored the sting believe Kane killed a solid investigation, led by experienced prosecutor Frank G. Fina, that had ensnared several public officials and had the potential to capture more. They said they were outraged at Kane's allegation that race had played a role in the case.

Before Kane ended the investigation, sources familiar with the inquiry said, prosecutors amassed 400 hours of audio and videotape that documented at least four city Democrats taking payments in cash or money orders, and in one case a $2,000 Tiffany bracelet.

Typically, the payments made at any one time were relatively modest - ranging from $500 to $2,000 - but most of those involved accepted multiple payments, people familiar with the investigation said. In some cases, the payments were offered in exchange for votes or contracts, they said.

Sources with knowledge of the sting said the investigation made financial pitches to both Republicans and Democrats, but only Democrats accepted the payments.

The investigation's undercover operative was a little-known lobbyist, Tyron B. Ali, 40, who agreed to wear a wire and tape the officials to win favorable treatment after his arrest in a $430,000 fraud case, the newspaper has learned.

In an unusual move, the Attorney General's Office then dropped the fraud charges secretly, under seal, last fall.

Robert J. Levant, a lawyer for Ali, said neither he nor his client would have any comment.

People with knowledge of the investigation said those caught on tape included former Traffic Court Judge Thomasine Tynes, who acknowledged that Ali gave her the bracelet.

Four state lawmakers took money, the sources said. State Rep. Ronald G. Waters accepted multiple payments totaling $7,650; State Rep. Vanessa Brown took $4,000; State Rep. Michelle Brownlee received $3,500; and State Rep. Louise Bishop took $1,500, said people with knowledge of the investigation.

Bishop denied receiving money. Brownlee said she couldn't recall taking a payment, and Brown declined to discuss the matter.

Sources say that as money changed hands, the conversations were often blunt.

In May 2011, Ali went to Brown's office and handed her an envelope with $2,000, according to people who have reviewed a transcript of a tape Ali made on that day.

As Brown accepted the money, they said, she put it in her purse and said: "Yo, good looking and Ooowee. . . . Thank you twice."

After he gave Brown the money, Ali urged her to vote against a bill that would require voters to show identification at the polls, the sources said.

Brown voted against the measure - as did every other Democrat in the House.

In an interview Saturday, Brown's lawyer, Wadud Ahmad, said she had done nothing wrong. He said he had not been contacted by law enforcement and knew little about the investigation.

Ahmad, a former prosecutor, said, "I have never seen a prosecutor or any federal agent give someone a pass when they have strong evidence that they did something wrong."

Waters, for his part, said he did not recall receiving any money from Ali, but later added: "I'm trying to remember if he gave me something for my birthday."

In April 2011, to mark Waters' 61st birthday, Ali gave him $1,000, and the transaction was recorded on tape, according to people who read a transcript of the conversation.

As Ali handed Waters an envelope, the sources said, Ali told him: "Hey, there's $1,000 in there, bro."

According to the sources, Waters replied: "My man, happy birthday to Ron Waters."

Tynes, in interviews with The Inquirer, confirmed that Ali gave her the bracelet. She initially said she had mailed it back to him, but later said she had kept it, lost track of it, and recently discovered it in her safe deposit box at a local bank.

Those who sources say pocketed the cash failed to report it, as required by law, on annual financial disclosure forms for public officials, records show. Under state law, those omissions may be considered false swearing to authorities, a crime with a penalty of up to one year in jail.

Kane declined to be interviewed about her handling of the case and instead issued a statement attributed to her office.

In the statement, Kane provided only one quote, dismissing those who questioned her decisions as "nothing more than the Good Ol' Boys club playing political games to discredit me in order to fulfill their own selfish and improper agenda."

The statement cited Kane's pursuit of political-corruption cases, including the pay-to-play scandal involving Democrats tied to the Pennsylvania Turnpike Commission and the corruption charges brought last week against Democratic State Sen. LeAnna Washington.

After Kane took office, her top staff conducted a review of the sting operation, in partnership with FBI agents. In the end, she chose not to pursue it.

In addition to asking federal officials to assess the case, her office asked the Dauphin County District Attorney's Office in Harrisburg to review it as well.

In an interview, District Attorney Ed Marsico, a Republican, said his staff had reviewed a summary of the investigation prepared by Kane's staff and determined the case "almost unprosecutable."

He said he did not read the full case file or listen to the tapes or read the transcripts. Nor did his office talk to Ali, who Marsico said had refused to meet with his staff.

Kane's office insisted the case was dropped because it was flawed, not because she was reluctant to bring political-corruption cases.

In explaining the decision to close the sting investigation without filing charges, Kane said one reason was that prosecutors in the case had issued orders to target "only members of the General Assembly's Black Caucus" and to ignore "potentially illegal acts by white members of the General Assembly."

Fina, the lead prosecutor, declined to discuss the case. People who have spoken to him about the investigation said he vehemently denies that race was a factor.

Fina, now a prosecutor in the anticorruption unit of the Philadelphia District Attorney's Office, has called Kane's assertions a "desperate smear" based on falsehoods, said a person close to him.

Fina's supporters noted that Claude Thomas, the lead agent on the Ali case, is African American and that Ali also is a person of color.

Thomas, too, now works for Philadelphia District Attorney Seth Williams.

Williams, a Democrat, denounced Kane's suggestion that Fina or Thomas acted improperly.

"The notion that they would target anyone based on race is ridiculous," he said in a statement Saturday. "I am confident they are not racist, and it is regrettable that the Attorney General would casually throw around such an explosive accusation."

In the statement, Kane's office quoted the lead agent in the case (Thomas) as saying he had been told to target members of the Legislative Black Caucus.

People close to Thomas said no one ever gave him such an order and he never said such a thing to Kane's staff. Had anyone made such a suggestion, Thomas would have rejected it, they said.

The Inquirer pieced together the story of the aborted investigation from interviews with  more than a dozen people familiar with different aspects of the inquiry - and with widely differing opinions of it.

The newspaper's reporting shows that the sting became entangled in - and perhaps fell victim to - a deep schism between Kane's new administration and veteran prosecutors who had worked for her predecessors and oversaw the investigation. The team was led by Fina, then chief deputy attorney general and head of the public-corruption unit.

Fina and his team had pursued a string of high-profile cases against both Republicans and Democrats, winning the conviction of 23 state legislators and aides in the Bonusgate and Computergate probes.

Those cases, political analysts agree, earned Corbett a reputation for pursuing Democrats and Republicans alike, and helped propel him into the governor's office.

Just weeks before Kane's January 2013 inauguration, those state prosecutors bundled up the investigation, including copies of all tapes, and shared the material with federal prosecutors. Federal authorities decided not to take the case. They have declined to say why.

State prosecutors went to the U.S. Attorney's Office because they believed Kane had a conflict and should not be making decisions on the case. Kane said Friday she had no such conflict.

The prosecutors believed that Kane had a conflict because Ali, before he began cooperating, had lined up illegal "straw" donations in 2009 that went to the campaign of Daniel D. McCaffery, then seeking to become Philadelphia district attorney. They pointed out that McCaffery was a supporter of Kane's, and had served as the master of ceremonies at her inauguration last year.

McCaffery, now a Philadelphia Common Pleas Court judge, declined to discuss his campaign or his relationship to Ali. Two people close to the campaign said McCaffery had no idea Ali had fronted money to other donors and that as soon as he found out, he reported it to law enforcement.

In the view of Kane's allies, she rightly shut down a flawed investigation - one that federal prosecutors decided not to pursue as well. In a statement, Kane's office said federal law enforcement officials - it did not specify from which agency - had pronounced the case "flawed and not prosecutable."

Her office also raised the issue of entrapment, saying the investigation had targeted individuals without sufficient suspicion that they were predisposed to corruption. And it said the sting often failed to explicitly link payments to a quid pro quo of official action.

As a consequence, the office said, the investigation was marred by a lack of "quality control" that would have made the cases difficult to win in court.

"Is the acceptance of cash alarming? Absolutely," said one person close to Kane. "But you've got to think: I've got to try this case."

Supporters of the investigation reject that criticism.

They said the sting was overseen by prosecutors with a record of winning convictions against Democrats and Republicans alike.

They maintained that the prosecutions of those who accepted money would have been straightforward. For one thing, they said, politicians can be convicted for pocketing cash on grounds that they are using their office to enrich themselves - even if they have not promised any official action in exchange.

Those who supported continuing the investigation said they believed that Kane made a politically driven decision to spurn a case that was, in the words of one former prosecutor who was briefed on the inquiry by Fina, "a bombshell."

Echoes of Abscam

In technique, the operation echoed the 1970s Abscam investigation, recently the subject of the movie American Hustle.

In that sting, a convicted con man seeking leniency worked with the FBI to convict 19 public officials, including two Philadelphia congressmen and three City Council members. Despite defense complaints of entrapment, every conviction was upheld on appeal.

In Abscam, the FBI handed over as much as $100,000 at a time to those targeted by the investigation.

In the Pennsylvania sting, Ali paid out far more modest amounts - reminiscent of the $300 sums illegally paid by Roofers union officials to Philadelphia judges in a scandal of the late 1980s.

Ali, a native of Trinidad, owned a day-care center in North Philadelphia but was also a registered lobbyist.

In applying for state grants, Ali said he was a graduate of Temple University, but Temple said it had no record of that.

Ali, whose last known address was in Center City, began cooperating with the Attorney General's Office after he was arrested in April 2009 on charges of defrauding a state food program for low-income children and seniors out of $430,000.

He was accused of skimming money from the program from 2004 until 2008, submitting phony invoices for ghost employees, and forging hundreds of bank statements, tax forms, and paychecks.

In hopes of more lenient treatment, Ali agreed to wear a body wire as he trawled for corruption.

The sting was launched by Fina, one of the most successful public-corruption prosecutors in recent Pennsylvania history.

Under Fina's guidance, The Inquirer has learned, Ali taped 113 conversations between Oct. 13, 2010, and April 23, 2012. Many tapes were lengthy and most, 76, were made in 2011.

As he made his way in Philadelphia political circles, Ali was accompanied by a 24-year veteran agent of the Attorney General's Office who posed as his driver. The two tooled around in a confiscated BMW.

Reasons to cooperate

Ali appears to have been a natural for his secret role in what one source called "Frank Fina's Pennsylvania hustle."

He was a name-dropper, quick on his feet, cool under pressure, people who know him said. He dressed with panache - "very bling," said one political player who dealt with him, with a penchant for pin-striped suits and gold rings.

At the Palm restaurant, a haven for the city's political movers and shakers, Ali even had his own caricature on the wall - albeit tucked away in a corner.

And yet, Ali had ample reason to cooperate with investigators. Besides facing fraud charges, he was the subject of a separate state grand jury investigation into allegations he had defrauded investors.

One of his lawyers, Alan J. Tauber, put it this way in a legal filing: Ali was "under indictment in one criminal case with another looming."

No charges ever resulted from the financial investigation.

Along with his criminal problems, Ali had also been sued by investors who accused him of financial wrongdoing.

Leon Silverman, a lawyer for two clients who brought suits against Ali, said he was surprised that prosecutors had made a deal with Ali.

"I can't imagine that they would get into bed with someone like Ali," Silverman said. "He's a bad guy."

Others, however, described Ali as someone who worked month after month to assist the government without pay, pulling off a difficult assignment at professional and personal risk.

In the view of Ali's handlers, the key point was not his character, but his connections - and what the hidden devices they equipped him with recorded.

"They believed the tapes would speak for themselves," added one former member of the Attorney General's Office who spoke with Fina while the investigation was underway.

Once they "flipped" Ali, prosecutors appear to have had wide running room in conducting the investigation.

For starters, they didn't need approval from a judge. Under Pennsylvania law, as with federal law, judicial review is not required when a government operative dons a body wire - and thus gives consent to be taped.

The investigation didn't tap any telephones. Phone taps must first be approved by judges, with prosecutors presenting evidence and reasonable suspicion to record someone.

In fitting their new undercover operative with recording equipment in early 2010, prosecutors gave him simple orders: Go back into the political community, and network.

Though not well-known publicly and only a modest campaign donor, he knew the city's political circuit intimately - particularly the neighborhoods of West Philadelphia.

As Ali made his rounds, his pitch varied. Prosecutors in the case would research coming votes and concoct payments centered around them. He would sometimes link the largesse to a request for government business.

Sources with knowledge of the sting said Ali approached a wide range of officials, from both parties, black and white. In time, the sources said, Ali didn't even have to reach out to elected officials. They called him.

Things were going so well that, in the summer of 2012, prosecutors considered setting Ali up in a fancy lobbying office near the Capitol. The plan was to rig the Harrisburg office with hidden cameras and expand the hunt - a move that supporters of the sting say would likely have produced a larger and more diverse pool of willing elected officials.

Prosecutors had lots of time to bring cases - for some political-corruption charges, the state statute of limitations is an expansive 13 years.

Strains from the start

But after Kane took office in January of last year, she began to take a critical look at the case.

By then, as Kane pointed out in her statement, the case had been dormant since early the year before. Prosecutors were using those months to lobby for an expansion of the probe, sources close to Fina said.

Once Kane took over, Fina, along with other prosecutors and investigators on his public-corruption team, had left the Attorney General's Office. Despite Fina's run of convictions, Kane did not ask him to stay on.

From the start, their relationship could be described as strained at best.

Along with the corruption probes, Fina had led another high-stakes criminal inquiry: the investigation of Jerry Sandusky, the former Penn State assistant football coach. Two years ago, in a case that drew national attention, Sandusky was convicted of multiple charges of child sexual abuse.

Kane, during her 2012 campaign, had run hard on the theme that prosecutors had moved too slowly on the Sandusky case. After her win, she fulfilled a pledge by hiring a former Philadelphia federal prosecutor to, in effect, investigate Fina's investigation.

That inquiry has been underway for a year. Kane recently said it was taking longer than anticipated.

Once she took office, there was visceral mistrust on both sides.

Within hours of Kane's inaugural, technicians on her staff went into Fina's office - after hours - and removed the hard drive from his computer, according to sources. Fina was in his last week on the job when the removal took place. Kane's aides apparently were looking for information related to Fina's work on the Sandusky case.

If nothing else, the clandestine hard-drive seizure demonstrated just how poisonous the relationship had become between the incoming Kane administration and Fina's team.

Even after Fina departed in January 2013, there were points of discord and pettiness.

In February 2013, Kane unsuccessfully sought to block Fina from speaking at a prosecutors' conference, the Legal Intelligencer reported. Kane denied that.

Later in 2013, Kane successfully asked the state Supreme Court to remove Barry F. Feudale as the presiding judge over a statewide investigative grand jury. Fina and Feudale were close, having worked together during the Bonusgate, Computergate, and Sandusky grand jury investigations.

And there was this: Fina, before he left the Attorney General's Office, copied the sting's case file and gave it to federal prosecutors in Philadelphia.

They did not pick up the case. It's not clear if federal prosecutors shared Kane's concerns, were reluctant to adopt an investigation begun by others, or simply didn't want to be seen as taking sides in a dispute roiling a companion law enforcement agency.

Federal prosecutor Richard Barrett, who oversees public-corruption cases for the U.S. Attorney's Office in Philadelphia, declined to comment, as did his boss, Assistant U.S. Attorney Peter F. Schenck, head of the criminal division.

'Straw' donations

State prosecutors sought to transfer the case because of Ali's dealings with a Philadelphia political campaign that unfolded at the same time as his fraud case.

In that investigation - months before he became a cooperating witness - prosecutors had gathered evidence that Ali lined up "straw" donors to make campaign donations to McCaffery. At the time, McCaffery was mounting an unsuccessful bid for the Democratic nomination for Philadelphia district attorney in 2009.

The goal was to evade limits on the size of donations.

Campaign-finance records show that four contributions of $2,500 each were made to McCaffery's campaign by people closely linked to Ali, including his wife. Those donations, just under the $2,600 legal limit, were returned a month later, the records show.

Two people close to the McCaffery campaign who spoke on condition of anonymity gave the following account:

In early 2009, Ali walked into McCaffery's Northeast Philadelphia campaign office, saying he wanted to be "helpful" by raising money.

A few weeks later, he returned bearing the checks. At about the same time, the campaign learned from news stories that Ali had been arrested in the fraud case.

Josh Morrow, then McCaffery's campaign manager, called the donors of the checks and got one to admit that it wasn't really his money - it came from Ali.

McCaffery then reported the matter to the Attorney General's Office, then under the leadership of Tom Corbett. The campaign also returned the money to the donors.

Morrow agreed to again call the donors and, this time, let prosecutors listen as he again elicited an admission that the donations had been subsidized.

Morrow served as McCaffery's campaign manager both in 2009 and in 2012, when McCaffery briefly competed against Kane for the Democratic nomination for state attorney general. After McCaffery withdrew from the 2012 race, Morrow became Kane's director of communications.

Fina and Ali's lawyer said those ties to McCaffery and Morrow posed a conflict for Kane in her dealings with the case involving Ali, according to sources.

Kane rejected the idea there was any conflict. A source close to her said she tapped McCaffery as her master of ceremonies at her inauguration only as a "courtesy" and that she and Morrow weren't close.

In the statement released Friday, Kane's office said McCaffery and Morrow "are, and always have been, mere acquaintances" of hers. The statement did not name the two men, but the context was clear.

The Attorney General's Office said it had seen no evidence that McCaffery or Morrow had done anything wrong. In fact, it said, Morrow had pitched in to help prosecutors unravel the scheme.

It's unclear why Ali would have wanted to play such a role in the McCaffery campaign. The money he put out far exceeded his previous campaign donations. One person close to McCaffery's campaign said Ali disliked Seth Williams, the eventual winner of the Democratic primary.

The fate of the straw-donor investigation is a puzzle. No one was ever charged in connection with the donations. The statute of limitation for prosecution expired 20 months before Kane took office.

For Ali, it was yet another case in which he escaped possible prosecution.

For a source once involved in the McCaffery campaign, it was a shock that Ali later became a government agent.

"Jesus Christ," he said. "Is this a John Grisham novel?"

'New sheriff in town'

In all, Ali quietly gathered evidence over three years under three attorneys general: Corbett; William Ryan, who served as acting attorney general for five months when Corbett resigned to become governor; and Linda Kelly, who completed the final 19 months of Corbett's term.

Kane was sworn into office Jan. 15, 2013, the first Democrat and the first woman to be elected Pennsylvania's top prosecutor. McCaffery told the crowd that he was "one of the earliest converts" to the Kane cause.

"Make no mistake about it, ladies and gentlemen, there's a new sheriff in town," McCaffery announced.

As Kane and her staff delved into the case files and listened to hours after hours of tape, they began questioning whether Ali had been properly supervised.

In addition to concerns about race, a source close to Kane said, the review uncovered troubling aspects that indicated the case could amount to entrapment - using prosecutorial power not to stop crime, but to create it.

"You need things to be done in a certain way to bring charges in court," he said, adding, "People have rights even if they aren't exactly on the up-and-up."

In her statement, Kane referred to the sting as the "Black Caucus corruption investigation." Fina's supporters said this left a false impression of the nature of the investigation.

Supporters of the sting do not dispute that the case amounted to what one law enforcement official briefed by Fina called a political "minefield."

"There were racial concerns," the official said, but he added of the targets: "That was a function of the circles [Ali] moved in, and not a singling out of black legislators."

In each instance, the official said, the public officials had willingly pocketed money. Another law enforcement official supportive of the sting faulted Kane for not pursuing the investigation, saying that in his opinion:

"One of two things happened: Either politically they were watching out for their allies. Or they are incapable of bringing a case like this."

'A cloud'

Kane's aides took a decidedly negative view of Ali. They bristled at the "non-prosecution" deal he struck - signed by Fina, Ali, and Levant on Nov. 30, 2012, after Kane's election but before she took office.

In the statement to The Inquirer, Kane's office complained the agreement was "extraordinarily lenient" - so much so that it would have undermined any prosecutions.

The deal "casts a cloud over the credibility of the confidential informant and the entire investigation," the office said, adding that makes it appear as if prosecutors had "bought and paid for [Ali's] testimony many times over."

Levant, Ali's attorney, pushed to make sure the deal was upheld. He also raised the allegation that Kane faced a conflict in the matter.

A fierce legal fight ensued in a flurry of secret motions filed last September and October, as Levant and the Attorney General's Office thrashed out Ali's fate.

Levant won. In the sealed filings, the Attorney General's Office agreed to nolle prosse - withdraw - the fraud case, dropping all 1,717 charges.

"I've never seen a case nolle prossed under seal," said one state official familiar with the sting. "It is just bizarre."

So, after his four-year odyssey, Ali walked away free of all charges. And the sting was over, too.

acouloumbis@phillynews.com

717-787-5934 @AngelasInk

cmccoy@phillynews.com

215-854-4821 @CraigRMcCoy

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