Two Plead Guilty to Federal Wire Fraud Connected to Scheme to Defraud The Department of Veteran Affairs
NEW ORLEANS – The United States Attorney’s Office announced that former Louisiana State Senator and Chair of State Political Party “A,” KAREN CARTER PETERSON, age 53, from New Orleans, Louisiana, was sentenced today by United States District Judge Sarah S. Vance to 22 months imprisonment after previously pleading guilty to a one-count bill of information charging her with wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2. Additionally, Judge Vance sentenced Peterson to serve a period of 3 years of supervised release, 600 hours of unpaid community service, restitution in the amount of $53,106.93, a fine of $115,000, with $94,250 due immediately and a mandatory special assessment fee of $100. PETERSON was ordered to report to authorities to commence serving her prison sentence on March 6, 2023.
According to court documents, PETERSON served as a Louisiana State Senator for the 5th District from about 2010 until about April 8, 2022, and as the Chair of State Political Party A between about 2012 and 2020. As a Louisiana State Senator, PETERSON formed and maintained a campaign organization, the “Karen Carter Peterson Campaign Fund (“KCPCF”),” to solicit and raise campaign funds from individual and corporate donors. The campaign funds were solicited based upon false representations that the funds would be used to facilitate PETERSON’S reelection for the position of State Senator. In the course of soliciting campaign donations, PETERSON also failed to disclose to potential contributors that she had already used prior contributions for her personal benefit.
In furtherance of her scheme, PETERSON diverted, and caused her friends and associates to divert, campaign funds from the KCPCF to PETERSON’S personal use for the purpose of obtaining and using money and property from contributors to the KCPCF by means of materially false and fraudulent representations and promises for nearly seven (7) years. She did so by writing checks drawn on the KCPCF account to at least four (4) of her friends and associates and directing them to cash the checks at financial institutions in the New Orleans, Louisiana area and then to give PETERSON the proceeds. Occasionally she allowed the individuals cashing the checks to keep a small portion of the proceeds. PETERSON used the funds to pay for personal expenses unrelated to her campaign or the holding of public office, including to pay gambling-related expenses. Further, PETERSON caused the public filing of false and misleading campaign finance reports that mischaracterized expenditures as being for legitimate purposes related to her campaign or the holding of public office, but were, in fact, unrelated to such purposes and, instead, were diverted to PETERSON’S personal use. In total, between about November 25, 2013, and March 5, 2020, PETERSON fraudulently employed the scheme on numerous occasions to divert and convert to her personal use approximately $94,250 that had been donated by contributors to her campaign.
Additionally, in her role as Chair of State Political Party A, PETERSON oversaw the strategic decision-making, operations, outreach, and direction of Party A and supervised its permanent staff, including individuals who had signatory authority of State Political Party A’s financial accounts. PETERSON exploited her position to choose entities (“Companies”) operated by her associates, purportedly to provide campaign-related services to State Political Party A, and to determine the amount that Party A would pay each of the Companies. PETERSON represented to State Political Party A that the payments were for a campaign purpose. In reality, the Companies provided either no or minimal services for State Political Party A. PETERSON then willfully and wrongfully directed the Companies to remit a portion of the funds paid to them by State Political Party A to PETERSON through either checks drawn on the accounts of the Companies or in cash. In total, between about October 7, 2019, and April 4, 2020, PETERSON received approximately $53,106.93 of funds from State Political Party A through this fraudulent scheme.
“People have the right to expect that their elected leaders will uphold the trust placed in them,” said the United States Attorney’s Office. “Former State Senator Peterson illegally used campaign funds and state political party funds for her personal use during the majority of her tenure as a state senator. She broke the law, deceived contributors, and violated her duty to the voters and the political party with which she was affiliated on dozens of occasions. Such crimes feed public frustration, cynicism, and civic disengagement. This case is proof that our office is committed to holding corrupt public officials accountable.”
“The FBI is committed to aggressively pursuing those who violate the trust placed in them by the public and holding them accountable for their actions. Today’s sentencing sends a clear message that individuals like former Louisiana State Senator Karen Carter Peterson, who stole money to enrich herself, will be held responsible,” said Douglas A. Williams, Jr., FBI New Orleans Special Agent in Charge. “I would like to thank our partners at the United States Attorney’s Office Eastern District of Louisiana, Internal Revenue Service – Criminal Investigation, and Metropolitan Crime Commission for their strong partnerships in helping the FBI disrupt public corruption in Louisiana."
“As an elected official, Karen Peterson was expected to lead by example and lookout for the best interests of her constituents,” said James E. Dorsey, Special Agent in Charge, IRS Criminal Investigation, Atlanta Field Office. “However, Peterson diverted campaign funds for personal use. Today’s sentencing proves no matter a person’s position or power, when the public’s trust is abused through illegal means, they will be held accountable.”
The United States Attorney’s Office praised the work of the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, and Forensic Accountant Josephine M. Beninati, CPA, CFE in this matter. Assistant United States Attorney Jordan Ginsberg, Chief of the Public Corruption Unit, is in charge of the prosecution.
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