JACKSONVILLE, Fla. — FRIDAY UPDATE: Governor Scott announced Friday afternoon the suspension of Katrina Brown and Reginald Brown from the Jacksonville City Council.
Jacksonville City Council members Katrina Brown and Reginald Brown have been named in a 38-count federal indictment.
The 38-count indictment includes allegations that Katrina Brown and Reginald Brown used their companies to create bogus invoices, to transfer money back and forth.
They're accused of fraud and money laundering involving tax-funded financial incentives for Katrina Brown's family barbecue sauce business.
Both are charged 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.
The indictment also charges Katrina Brown with two counts of attempted bank fraud and two counts of making false statements to a federally insured financial institution. Reginald Brown is accused of failing to file a tax return.
Katrina Brown and Reginald Brown face hundreds of years in prison. If they are found guilty on all charges and receive the maximum sentences, Katrina Brown would be ordered to serve 720 years in federal prison and Reginald Brown would serve 601 years.
Background of the case
Katrina Brown represents District 8 and was first elected in 2015, she’s currently up for re-election.
Brown, who currently serves on the COJ’s Finance Committee, and her family business have been embroiled in a legal battle after the company defaulted on city-funded loans and grants.
On December 20, 2016 the warehouse for Jerome Brown’s BBQ was raided by agents from the FBI, IRS, HUD, and the Small Business Administration.
City councilwoman Katrina Brown is the co-owner; Jerome Brown is her father.
On May 11, 2018, the city of Jacksonville filed a lawsuit against Katrina Brown over the failed family business. Brown’s company, CoWealth LLC, received $380,000 in 2012 to help open the barbecue-sauce manufacturing plant on the city’s Westside. According to court documents, CoWealth stopped making payments beginning in 2017 and now owes more than $357,000, including interest.
In February 2017, the City of Jacksonville filed a lawsuit against CoWealth LLC and Basic Products LLC. Both are tied to Katrina Brown. According to the suit, the city gave CoWealth a $210,000 grant, but the company never created the 56 jobs it promised.
The company also failed to pay property taxes. CoWealth LLC received an ultimatum letter on Dec. 2, 2017 from the city’s Office of Economic Development, saying it must pay $22,515 in back property taxes from 2015 and nearly $4,000 in loan fees. It goes on to say, if these items were not paid by Dec. 31 the city would seek legal action against Co-wealth LLC. According to reports Brown made the payments.
Next steps for the council members
Action News Jax has reached out to the City of Jacksonville's Office General Counsel to learn if both City Council Members can be removed from office, and the method for their replacement.
City Council President Anna Brosche told News 104.5 WOKV's Stephanie Brown that she is removing Council Members Katrina Brown and Reggie Brown from their committee assignments. Both Katrina Brown and Reggie Brown are on the city Finance Committeee. Brosche said she is standing by for further guidance from the city's General Counsel.
Brosche released a statement and said in part:
"Council Members Katrina Brown and Reggie Brown have served their districts with passion, and it is now time for them to focus on the legal process which they are now entering. I am praying for the community, for the people of District 8 and District 10, for the Jacksonville City Council, and for the children and families of Council Members Katrina Brown and Reggie Brown.
[ CLICK HERE TO READ BROSCHE'S FULL STATEMENT ]
Jacksonville Mayor Lenny Curry released the following statement about the indictments:
"It is a disappointing day for the city of Jacksonville. Any time public servants are accused of violating public trust, we are all impacted. While these allegations are concerning, I have complete confidence in our judicial system and respect the process all citizens are afforded."
Florida Gov. Rick Scott's office issued the following statement:
"These charges are very serious and the Governor, along with the families of our state, expect elected officials to behave ethically and responsibly. We are currently reviewing this."
Katrina Brown's attorney told Action News Jax's Jenna Bourne,"We're shocked at the indictment. She's an innocent lady who did her best to operate a business that ultimately failed through causes beyond her control.
A statement released by Falgatter & Catlin P.A., counsel for Katrina Brown, and M. Alan Ceballos, P.A., counsel for Reginald Brown, said the council members' "innocence is a reality" and that the two have been cooperating with a federal investigation for two years and that "no one took any money they were not entitled to." The statement says in part:
"Katrina Brown and Reginald Brown, both of whom are respected elected public officials, have fully cooperated with the federal investigation, for the last two years,and provided key evidence to the government that no fraud was committed. Unlike cases where true fraud exists, no one took any money they were not entitled to. All funds were properly invested in the business."
[ CLICK HERE TO READ THE FULL STATEMENT FROM THE COUNCIL MEMBERS' ATTORNEYS ]
Both Katrina Brown and Reginald Brown made their initial appearance before a judge on Thursday afternoon.
Katrina Brown & Reggie Brown turned themselves in, but are being allowed out on $50,000 non-secured bond. That means they didn't actually have to put money down.
The U.S. Attorney's Office is asking them to forfeit at least $755,000.
Katrina Brown must come back to court Friday for a second urine test, as the one she gave Thursday was "diluted."
Katrina Brown stayed quiet as she exited the federal courthouse on Thursday afternoon. Her attorney talked about her "badges of innocence" in the federal fraud case, including the fact that she would "plow every penny" into her family's business.
This is a developing story. Refresh this page, follow @ActionNewsJax on Twitter and watch CBS47 Action News Jax at 6 for updates.