JACKSONVILLE, Fla. – U.S. District Judge Marcia Morales Howard has sentenced Katrina Brown (40, Jacksonville) to 33 months in federal prison and Reginald Brown (58, Jacksonville) to 18 months in federal prison. The Court also ordered Katrina Brown to pay a forfeiture money judgment of $425,335.68 and Reginald Brown to pay a forfeiture money judgment of $411,752.68, funds which are traceable to the offenses.
On October 2, 2019, a jury found Katrina Brown and Reginald Brown guilty of conspiracy to commit mail and wire fraud, aiding and abetting mail and wire fraud, and aiding and abetting money laundering. The jury also found Katrina Brown guilty of attempted bank fraud and making false statements to a federally insured financial institution. Reginald Brown was also found guilty of failure to file an income tax return with the Internal Revenue Service for tax year 2014.
According to the evidence, in late 2013, Katrina Brown was the primary principal for two businesses (Basic Products, LLC and CoWealth, LLC), which in 2011 obtained a loan in the amount of $2,652,000 from the Small Business Administration (SBA), and both a loan of $380,000 and a grant of approximately $260,000 from the City of Jacksonville (COJ), to fund a small business that specialized in manufacturing, bottling, and selling barbecue sauce. As a member of the Jacksonville City Council, Reginald Brown voted in favor of City Ordinance 2011-290-E, which authorized the COJ loan and grant – proceeds of which he and Katrina Brown would later obtain by fraud.
Katrina Brown’s family had been in the barbecue business in Jacksonville for many years. The $3.2 million in financing was intended to fund an expansion of Basic Products and help create permanent manufacturing jobs in Northwest Jacksonville. Each time Katrina Brown sought money for Basic Products from BizCapital, the SBA-approved lender, she submitted a Loan Reimbursement Form that included the purported business expenses for which Basic Products sought reimbursement.
In late 2013, when the barbecue business was failing, Katrina Brown assisted Jacksonville City Councilman Reginald Brown in incorporating two businesses (A Plus Training and Consultants, LLC and RB Packaging, LLC) with the Florida Division of Corporations. A Plus Training and RB Packaging never performed any legitimate business. Instead of properly notifying BizCapital that Basic Products was in financial distress, Katrina Brown worked with Reginald Brown to submit fake invoices from A Plus Training and RB Packaging to the SBA lender, BizCapital, claiming that his businesses performed work for Basic Products requiring reimbursement, when the businesses did not.
BizCapital sent checks at times, larger than $60,000, to RB Packaging and A Plus Training, which, on paper, were headquartered at Reginald Brown’s home and his mother’s home, respectively. Reginald Brown deposited the checks into the bank accounts for A Plus Training and RB Packaging, then withdrew a significant portion of the money and provided it to Katrina Brown, who either kept the cash or laundered the money by depositing it back into the Basic Products bank account so that she could control the funds.
From late 2013 to early 2015, Reginald Brown, A Plus Training, and RB Packaging served as a conduit to receive $264,419.04 in proceeds from the SBA loan and the COJ grant, then funneled at least $166,500 back to Basic Products. Reginald Brown kept the money not provided to Katrina Brown, despite performing no legitimate work or services for Basic Products, and used the majority of the money for personal expenses. Reginald Brown never filed a tax return for tax year 2014, and he also failed to disclose to the IRS that he had received tens of thousands of dollars from the SBA.
In December 2014, BizCapital sent all loan, including the numerous fraudulent A Plus Training and RB Packaging invoices draw information to the City of Jacksonville. That loan information was relied upon by the COJ to wire $210,549.99 in tax-payer funded grant money to BizCapital for the intended use of Basic Products. Before the money was sent to BizCapital, neither Katrina Brown nor Reginald Brown informed BizCapital or the city that Basic Products had fraudulently obtained loan payments to Reginald Brown’s shell companies (A Plus Training and RB Packaging). Reginald Brown was serving on the Jacksonville City Council when he facilitated fraudulently obtaining the $210,549.99 from the City of Jacksonville. Neither Katrina Brown nor Reginald Brown ever repaid those funds.
After BizCapital informed Katrina Brown that the SBA loan was in default status in January 2015, she then attempted to obtain two bank loans, in 2015 and 2016, by submitting doctored and false bank statements to loan brokers, seeking loans from WebBank to infuse cash into her family’s businesses. Instead of providing the actual bank statements of the businesses, Katrina Brown falsified the businesses’ bank statements in an attempt to make it appear to the lender that the businesses were credit worthy, when in fact they were not.
“The FBI takes our responsibility to investigate and pursue those who commit fraud for personal gain very seriously,” said Rachel L. Rojas, Special Agent in Charge of the FBI Jacksonville Division. “Katrina Brown and Reginald Brown chose to prioritize their greed at the expense of the taxpayers, and the FBI will continue working with our law enforcement partners to hold accountable anyone who uses illegal means and criminal behavior to advance their personal agendas.”
“Left unchecked, greed can be a dangerous motivator. Katrina Brown and Reginald Brown made conscious decisions to deceive and benefit personally at the expense of the citizens of Jacksonville,” stated Special Agent in Charge Brian Payne of IRS Criminal Investigation. “Reginald Brown further exposed his greed by failing to report his ill-gotten gains on his tax returns. We are committed to the collaborative effort to combat fraud and to prosecute those who take advantage of others for personal gain.”
This case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. It was prosecuted by Assistant United States Attorneys Tysen Duva and Michael J. Coolican.