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Financial Crimes
05/25/2016

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Former NBA player indicted in Missouri for charity fraud scheme

Kermit Washington faces up to 45 years in federal prison upon conviction
Assistant Special Agent in Charge, Gilbert Trill, HSI Kansas City
Assistant Special Agent in Charge, Gilbert Trill, HSI Kansas City

KANSAS CITY, Mo. — A former professional basketball player, and representative for the National Basketball Players Association, was indicted in federal court Tuesday for his role in a conspiracy to defraud charitable donors and interfere with revenue laws.

This indictment resulted from an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), and the Internal Revenue Service’s (IRS) Criminal Investigation division.

This indictment alleges that Kermit Alan Washington, 64, used a charity he founded and operated, called Project Contact Africa (PCA), to defraud donors, eBay and PayPal, and the IRS. In order to induce individuals, including former professional athletes, to make donations to PCA, Washington falsely represented that 100 percent of the donations would go to Africa. However, Washington diverted charitable donations from PCA to buy gifts and pay personal expenses, including rent, vacations, jewelry and entertainment.

“The federal indictment alleges this former NBA player used his celebrity status to exploit the good intentions of those who donated to a charity he founded, called Project Contact Africa,” said U.S. Attorney Tammy Dickinson. “According to the indictment, Washington profited by diverting hundreds of thousands of dollars in donations that was supposed to benefit a clinic in Africa for needy families and children, but instead bankrolled his own personal spending.”  

Court records allege Washington referred professional athletes to Ron Mix, a former professional football player and an attorney licensed in the state of California, whose practice focused on filing workers’ compensation claims on behalf of former professional athletes. In exchange for these referrals, Mix made payments to PCA and claimed those amounts as charitable deductions on his personal tax returns.  Upon receipt of these payments, Washington diverted the funds for his own personal benefit. Washington filed false individual income tax returns for 2010 through 2013, failing to report the funds he diverted from PCA and false Forms 990-EZ on behalf of PCA. Washington also falsified PCA’s corporate minutes to obstruct the investigation and used the identity of another individual to perpetrate this scheme.

“Individuals who use charitable organizations to defraud donors and evade tax obligations inflict substantial harm on every U.S. taxpayer and cause untold damage to well-intentioned charitable endeavors,” said Acting Assistant Attorney General Ciraolo. “The Department is committed to identifying those engaged in such criminal conduct and holding them accountable.”

“This indictment illustrates HSI’s commitment to protecting American businesses and charitable donors alike,” said Assistant Special Agent in Charge Gilbert Trill, of HSI Kansas City. “HSI and our IRS partners will continue to aggressively pursue those who seek to avoid revenue laws and take advantage of the good nature of charitable donors, in a greedy attempt to line their own pockets.”

It is further alleged that Washington conspired with others to defraud eBay and PayPal, customers and donors of PCA by allowing the co-conspirators to use PCA’s name, tax-exempt status and IRS Employee Identification Number (EIN) with eBay and PayPal so the co-conspirators could avoid substantial listing and registration fees incurred in operating online, for-profit businesses.  Moreover, customers who made purchases falsely believed that 100 percent of the proceeds from the co-conspirators’ online eBay sales benefited PCA.  In exchange for allowing the co-conspirators to use PCA’s tax-exempt status, Washington received payments from the co-conspirators. 

Washington was arrested Tuesday in Los Angeles and had his initial appearance in U.S. District Court in the Central District of California. Washington was ordered to surrender his passport and released on bond and must wear a location-monitoring device. Washington’s next court date is tentatively scheduled for June 16 before U.S. Magistrate Judge John T. Maughmer in Kansas City, Missouri.

If convicted, Washington faces a statutory maximum sentence of three years in prison on the charge of corrupt interference with internal revenue laws, 20 years in prison on the charge of conspiring to commit wire fraud, 20 years in prison on the charge of obstruction, and a mandatory sentence of two years in prison for the charge of aggravated identity theft, which will be in addition to any other term of imprisonment he receives. He also faces supervised release, and a maximum fine of $250,000 on each count and restitution.

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Last Reviewed/Updated: 05/31/2016