July 6, 2018
By Bob Coleman
Editor, Fraud Friday
Fraud Friday — Two Jacksonville City Council Members Indicted for SBA Loan Fraud
In 2011, Katrina Brown obtained an SBA loan for $2.6 million, as well as a loan of $380,000 and grant of $260,000 from the City of Jacksonville to fund a BBQ sauce company, Basic Products.
Katrina Brown’s family had been in the barbecue sauce business in Jacksonville for many years. The loan/grant money was supposed to fund an expansion of Basic Products and create 56 permanent manufacturing jobs in Northwest Jacksonville.
The Feds allege the rest of the story in their indictment.
The business repeatedly was late in making loan payments and paying taxes. It failed to create any of the jobs it pledged in the development agreement.
In late 2013, when the barbecue sauce business was not meeting financial projections, Katrina Brown recruited Reginald Brown to create two shell companies, A Plus Training and Consultants and RB Packaging.
Katrina Brown worked together with Reginald Brown to submit fake invoices from A Plus Training and RB Packaging to BizCapital claiming that the businesses performed work for Basic Products requiring reimbursement, when the businesses had not.
During this process, from late 2013 to early 2015, Reginald Brown and RB Packaging served as a conduit to receive $252,000 in SBA loan proceeds from BizCapital, and then funneled at least $166,500 back to Basic Products. Reginald Brown used the majority of the balance of the money for personal expenses.
Reginald Brown never filed a tax return for tax year 2014, and he failed to disclose to the IRS that he had received tens of thousands of dollars from the SBA loan.
In December 2014, BizCapital sent all of the loan draw information to the City of Jacksonville, which included the numerous fraudulent A Plus Training and RB Packaging invoices. This information induced the City of Jacksonville to send $211,000 in grant money to BizCapital for the intended use of Basic Products.
Ironically, the fundings indirectly helped launch the political career of Katrina Brown, who successfully ran for City Council in 2015 in a campaign that portrayed her as a savvy business executive who secured city funding for the sauce plant.
After BizCapital informed Katrina Brown that the SBA loan was in default status in January 2015, she attempted to obtain two bank loans by submitting doctored and false bank statements to loan brokers seeking loans to infuse cash into her and her family’s businesses. She falsified the statements in an attempt to make it appear that the businesses were creditworthy, when in fact they were not.
Katrina and Reginald are charged with with one count of conspiracy to commit mail and wire fraud, twenty-six counts of aiding and abetting mail and wire fraud, and six counts of aiding and abetting money laundering.
Katrina, 37, is also charged with two counts of attempted bank fraud and two counts of making false statements to a federally insured financial institution.
Reginald, 56, is charged with failure to file a tax return.
Governor Rick Scott suspended both from the Jacksonville city council without pay of their $49,000 annual salary.