Bateman Sentenced To More Than Two Years For Role In Russell Foundation Fraud

Former Indianapolis City-County Councilor Paul Bateman received a 27-month sentence by a federal district court judge today for his admitted role in a scheme to defraud a wealthy Indianapolis physician out of millions of dollars the physician contributed to the Russell Foundation.  Bateman's co-conspirator, Michael Russell, last week received a sentence of four years and nine months. The other co-defendant who refused to plead guilty to the charges brought by U.S. Attorney Joe Hogsett's office, Manuel Gonzalez, was acquitted of the charges for his role in the scheme. The investor was lured to invest nearly $2 million into the Russell Foundation with the understanding the money would be used to develop rail and ethanol-related economic ventures in Indiana. In actuality, the men spent the money on themselves, buying expensive vehicles, clothing and jewelry. Bateman becomes the second Indianapolis City-County Councilor to be convicted on federal charges in recent years that resulted in a federal prison sentence. Lincoln Plowman was convicted of bribery and attempted extortion charges and is currently serving a several year sentence in a federal prison.

More Details On Bateman Indictment

The U.S. Attorney's Office held a press conference this morning and released a statement offering more details on the indictment of City-County Councilor Paul Bateman and two associates for wire fraud and money laundering charges related to their management of the Russell Foundation. According to the press release, five checks totaling $702,000 over a several month period in 2007 were deposited in Bateman's personal bank account and spent on purposes other than what it should have been spent. The Russell Foundation defrauded its chief benefactor, an elderly physician, by claiming that money he gave to the foundation would be invested in an ethanol production company. Instead, Bateman deposited the money into his personal bank account and spent on things other than production and distribution of ethanol.

Bateman, Michael Russell and Manuel Gonzalez are further accused of soliciting a $1 million corporate bond from the victim, which the defendants promptly spent over a 33-day period on some of the following items:

• $74,000 in custom made clothing for foundation members and associates
• 10 vehicles costing more than $265,000 for foundation members and associates
• Payment of Bateman's personal income tax liability
• Payment of Russell's rent
• Various personal expenses, including trips

The press release claims the foundation relied on Bateman's elected position as a city councilor and an unnamed high-ranking IMPD police officer "to provide the appearance of credibility, respectability, and legitimacy to their activities" as part of their "elaborate fraud scheme." U.S. Attorney Joe Hogsett declined to name the high-ranking police officer or indicate if the officer or others may be indicted as the case proceeds.

UPDATE: The elderly physician who Bateman, et al. allegedly defrauded, was not named in the indictment, but the Star today identifies him as Arthur Sumrall, who runs the Longevity Institute of Indiana on the city's northside:

The doctor, Arthur Sumrall, who is in his 70s and runs the Longevity Institute of Indiana on the Far Northside, did not return phone calls Wednesday. The institute provides skin care, weight loss and nutrition programs to customers, according to its website. It offers acupuncture, organic facials, laser hair removals, waxings and deep tissue massages.

City-County Councilor Paul Bateman Indicted For Money Laudering And Wire Fraud

The Indianapolis City-County Council is starting to look more like the Chicago City Council, and it should since some of its occupants engage in the same sort of self-dealing that has sent many Chicago aldermen to prison. The second sitting councilor in as many years has been indicted on charges of bilking a nonprofit foundation he helped oversee. Councilor Paul Bateman (D) and others faces charges of money laundering and wire fraud in connection with their administration of the now bankrupt Russell Foundation. According to a federal indictment handed down in Indianapolis, Bateman, Manuel Gonzalez and a founding member of the foundation, Michael Russell, defrauded an elderly physician out of $1.7 million of his funds that were supposed to be used for charitable purposes. From the Star:

Bateman was charged with eight counts of wire fraud and 10 counts of money laundering, Russell with eight counts of wire fraud and 12 counts of money laundering, and Gonzalez with three counts of wire fraud and two counts of money laundering.

Each count of wire fraud carries a sentence of up to 20 years in prison, and each count of money laundering up to 10 years in prison upon conviction, said Joe Vaughn, lead prosecutor on the case for the U.S. attorney's office . . .

Instead of investing the money, the three men used it for a variety of personal expenses for themselves, family members, friends and others associated with the foundation, according to the indictment.

The purchases included vehicles, entertainment, clothing, jewelry, travel, housing and home furnishings, the indictment states.

The Russell Foundation was created in 2003 ostensibly as a nonprofit, tax-exempt corporation "organized exclusively for charitable, religious (and) educational purposes," according to the indictment.

The indictment alleges the three men used the foundation to lure the physician first to invest about $702,000 in early 2007 in Indiana ethanol production and distribution.
Then, later in the year, the indictment alleges, the three men successfully schemed to obtain a $1 million corporate cash bond from the physician purportedly to invest in the foundation's humanitarian projects, with the physician being told he would get back $1.6 million in about seven months.

The indictment alleges Russell falsely told the physician at the time that he would receive his promised return on his investment "because there were going to be many additional investors in The Russell Foundation, when, in truth and in fact, and as Russell then knew, there were no credible potential investors in The Russell Foundation."

The indictment also alleges that within just a few weeks after each of the physician's two investments, nearly all of the money had been spent by the three men now indicted on a variety of personal items and uses. The foundation went into bankruptcy in May 2008, and a trustee was appointed to oversee the bankruptcy.

U.S. Attorney Joe Hogsett told reporters for the Indianapolis Star that Bateman and "an unnamed high-ranking Indianapolis Metropolitan Police Department officer", who was also a member of the foundation, used their positions to lend credibility to the Russell Foundation.  "The allegations in this indictment paint a picture of excessive personal greed," Hogsett said. "Such a violation of trust would be tragic under any circumstances, but the fact that this scheme allegedly involved a repeated violation of the public trust makes this case even more disheartening." It's unclear why the "high-ranking" IMPD officer mentioned by Hogsett in the Star's story has not been charged. It's also my understanding that there may have been more than one high-ranking IMPD officers involved in working for the foundation, which may have violated work rules against off-duty work for high-ranking officers. "At the time, there were reports high ranking Indianapolis Metropolitan Police Department command officers may have been questioned about their involvement with Bateman and the foundation," Fox 59 confirms in its report on Bateman's indictment. Convicted Councilor Lincoln Plowman, a former major in the department, had also worked for a strip club in violation of off-duty work rules for high-ranking officers. Plowman was convicted of soliciting a bribe from and attempted extortion of, an undercover FBI agent posing as a strip club owner in September. He has been sentenced to 40 months in prison.

Two and a half years ago, I painted a picture of what had taken place at the Russell Foundation in a post based upon information I received from a well-placed source. As I reported then,

People knowledgeable with the grand jury investigation of the nonprofit organization in the wake of its recent bankruptcy filing describe a small group of individuals squeezing every last ounce of blood out of the organization for their own personal benefit. There are tales of a California clothier being flown into town to fit the men in charge with the finest in tailored suits. The women had to settle for the best that Nordstroms had to offer. A northside jeweler crafted gold rings with "RF" initials to distinguish the illustrious crew doing God's work. Exotic rugs were purchased and then disappeared without the bill ever being paid. And a high-ranking Indianapolis police department official pulled double-duty as "chief of security" for the group. An IMPD police cruiser couldnt' cut it. He had a Cadillac Escalade to make his important rounds . . .

The source suspects the individuals in charge of the foundation went on the spending spree in anticipation of an $11 million investment from an outside investment firm. There were big plans. Talks with some of the country's wealthiest businessmen in America were supposedly underway--hence the need for a "chief of security". The focus was no longer on helping inner-city poor with housing and other needs. There was big talk of a high speed monorail from Indianapolis to Chicago, tapping a closed down steel mill in Northwest Indiana that would help put many unemployed in Da Region to work. Ethanol production was planned. It all required lots of walking around money we're told. Cash-filled wallets were needed to work the halls at the State House and our nation's capitol to win support for the foundation's projects according to one tale.

For some reason, the investigation seemed to stall after it was presented to a Marion County grand jury. It is unclear why it has taken so long for the criminal indictments to come to fruition and when the investigation got passed to the U.S. Attorney's Office. At the time the investigation was first announced, Bateman stepped down from his position on the council ethics committee but continued to serve on the council, although he did not seek re-election to his seat this year. Bateman, who is very close to former Center Township Trustee Carl Drummer, became a reliable vote for the Ballard administration, even when those positions were at odds with the position of his party's caucus, whenever Drummer lobbied him in his new position as a lobbyist for the Ice Miller law firm. Bateman was the only Democratic councilor to support the controversial parking meter lease privatization deal.

In an earlier post, I detailed here who all was working for the Russell Foundation at the time of its demise according to the foundation's website. In another post, I provided a listing of where the foundation claimed to have spent some of its money.

Bankruptcy Trustee Accuses Councilor Bateman Of Taking Over One Million Dollars From Foundation

WRTV's Jack Rinehart first broke the story more than a year ago about how City-County Councilor Paul Bateman and other may have bilked a local non-profit organization, the Russell Foundation, out of more than one million dollars. Marion Co. Prosecutor Carl Brizzi declined to investigate, saying he had referred the matter to local U.S. Attorney Tim Morrison's office, where the investigation has languished since. A federal banruptcy trustee, however, is taking action to recover $1.3 million missing from the group from Bateman and others according to the Star's Jon Murray. As part of the alleged scam, Bateman and others are accused of cheating Dr. Arthur Sumrall out of $1.7 million, his entire life's savings. Murray writes:

Court filings contend that Paul Bateman, a Northeastside Democrat, was among at least eight people connected with The Russell Foundation who used its money on personal expenses, leading the economic development group into bankruptcy by May 2008.
Bateman, who has denied any financial abuse, is accused of misspending the largest amount. The others, including the foundation's founder, the Rev. Michael Russell, allegedly misspent a combined $600,000, according to complaints filed in U.S. Bankruptcy Court in Indianapolis in recent months.

Bateman, Russell and Manuel Gonzalez, a Carmel business consultant, were named in search warrants served in July 2008 by Marion County grand jury investigators.
Russell sparked the investigation by reporting the missing money to the prosecutor's investigation unit after the bankruptcy was filed, according to his lawyer.

No criminal charges have been filed, but the recent bankruptcy filings mark the first public attempt to assign financial responsibility for the foundation's decline.

So what did Bateman and his alleged co-conspirators do with the money? The bankruptcy trustee offers us a hint:

Court filings show Russell's group spent money on dress clothes and other perks for its volunteers. It purchased more than a dozen vehicles, including a stable of 2007 Dodge Caliber compacts, a 2007 Cadillac Escalade and several pickup trucks.
Another expense: $29,634.45 in dental costs for Russell, which he addressed in a response to the court last week, denying any misuse.

You can find earlier posts on the Russell Foundation here, here and here.