Former Pastor Samuel P. Pettagrue Sentenced for Conspiracy, Mail Fraud, Bribery, and Money Laundering

BIRMINGHAM, AL—SAMUEL P. PETTAGRUE, 66, was sentenced today in U.S. District Court based on his previous convictions for conspiracy, mail fraud, bribery, and money laundering. Judge Karon Bowdre sentenced PETTAGRUE to five years probation, with the first 12 months to be served in home detention, based on PETTAGRUE’s current medical condition. PETTAGRUE was ordered to pay restitution in the amount of $306,909.08, and ordered to forfeit that amount as well. The sentencing is announced today by United States Attorney Alice H. Martin, Acting Alabama Attorney General Richard J. Minor, Charles H. Regan, Acting Special Agent in Charge, Federal Bureau of Investigation and Reginael McDaniel, Special Agent in Charge, Internal Revenue Service.

On January 21, 2009, a jury convicted former State Senator EDWARD B. MCCLAIN and SAMUEL P. PETTAGRUE for charges involving conspiracy, mail fraud, bribery and money laundering. Both were indicted in May, 2008 by a Federal Grand Jury.

"We are disappointed that the Court imposed a sentence which, in the government’s view, fails to adequately punish the defendant or afford deterrence to those who contemplate engaging in similar crimes. I share citizens' concerns that glib comments by McClain about playing golf in a federal prison demonstrate a lack of respect for the law, the Court, and this prosecution. A sentence of home detention for his co-conspirator only serves to further undermine the government's efforts to rid this state of the corruption that has run rampant for far too long," stated United States Attorney Alice H. Martin.

McCLAIN, a State Senator formerly representing the 19th District (Jefferson County) was convicted of conspiring with PETTAGRUE, a former pastor of Sardis Baptist Church who controlled Heritage to Hope Foundation, Inc. (“HTHF”), a nonprofit entity. From April 2001 to November 2006, McCLAIN and PETTAGRUE conspired to defraud the State of Alabama and its citizens of their right to McCLAIN’s honest services. Each man worked to carry out the scheme. McCLAIN used his official position in the Alabama legislature to ensure that “pass through” grants, funded through discretionary funds administered by the Alabama Department of Economic and Community Affairs (“ADECA”), would be awarded to the HTHF. PETTAGRUE made bribe payments to McCLAIN upon receipt of the state funding, fraudulently labeling the payments as “consulting fees” or “wages” in an effort to conceal their true, corrupt nature.

In the Spring of 2001, McCLAIN engaged in official acts—including making official requests in his capacity as a senator—which helped secure a $65,000 grant from ADECA to the Community Resource Center n/k/a HTHF “to provide funds to be used to facilitate senior citizen projects and educational outreach for the Birmingham Metro Area.” The grant was approved in April, and ADECA disbursed the funds on May 17, 2001. The next day, PETTAGRUE caused a check for $8,000 to be written to McCLAIN. Then, from May through August 2001, McCLAIN received an additional $10,500 from HTHF. By 2003, corrupt payments to McCLAIN had risen to the point where he actually received $48,000 of a $65,000 grant awarded to HTHF, supposedly for his services as a “consultant.”

A listing of the public funding secured for HTHF by McCLAIN, and the amount he was corruptly paid by PETTAGRUE through HTHF includes:

• A $65,000 grant disbursed in May 2001 (for which McCLAIN was paid $18,500);
• A $83,245 grant disbursed in August 2001 (for which McCLAIN was paid $13,500);
• A $65,000 grant disbursed in April 2002 (for which McCLAIN was paid $45,000);
• A $100,000 grant disbursed in October 2002 (for which McCLAIN was paid $45,000);
• A $65,000 grant disbursed in January 2003 (for which McCLAIN was paid $48,000).

In February 2003, the Governor of Alabama issued Executive Order No. 05, which placed significant restrictions on the use of “pass through” grants. From that point forward, the conspiracy and scheme shifted from the use of direct grants to the funneling of taxpayer money through various community colleges, via public contracts, to HTHF—and then to McCLAIN. For example, in the Fall of 2003, the Alabama Department of Postsecondary Education (“DPE”) operated an online program to assist students in obtaining a Graduate Equivalency Diploma (“GED”). McCLAIN engaged in official acts to ensure that HTHF received a $100,000 professional services contract, paid through Bessemer State Technical College, to provide “assistance with program marketing, recruiting, retention, and any other appropriate activity related to Bessemer State Technical College’s effort to serve as a state pilot site for the GED On-line program” for a ten-month period. In order to receive the funding, Bessemer Tech was obligated to “form a partnership with a community and/or faith-based organization” to help carry forth the purpose of the program, and McCLAIN engaged in official acts to ensure that HTHF was awarded that contract. McCLAIN secured the following contracts, and received the following bribe payments, in connection with the GED On-line Program:

• A $100,000 contract awarded in December 2003 (for which McCLAIN was paid $40,000);
• A $100,000 contract awarded in October 2004 (for which McCLAIN was paid $37,908.98); and
• A $130,000 contract awarded in October 2005 (for which McCLAIN was paid $40,000).

"There is no acceptable level of corruption. No matter what role a person plays in a scheme, they undermine the public’s trust in non profits,” stated Charles Regan, Acting Special Agent in Charge, Federal Bureau of Investigation.

"Individuals who conspire with corrupt public officials by laundering their dirty money will be held accountable for their actions. Sentences imposed in these cases must serve as a deterrent for those who may consider similar criminal activity," stated Reginael D. McDaniel, Special Agent in Charge, Internal Revenue Service.

McCLAIN repeatedly engaged in official acts and misused his official position in order to secure funds for HTHF and received $306,909.08 in corrupt payments during the scheme. PETTAGRUE labeled the payments as “consulting fees” even though it was never intended that McCLAIN would perform any legitimate consulting services, and he never did so. Rather, that label was applied in order to conceal the scheme and extend its existence.

Efforts to conceal the scheme also included PETTAGRUE’s misrepresentations to the individual who served as HTHF’s Executive Director from October 2002 through May 2004. This individual worked for HTHF to identify needs in the community and develop programs to meet those needs. She performed these services without any compensation after because she was told by PETTAGRUE that not only were no funds for HTHF to fund any such programs, there were no funds to pay her salary to the Executive Director. In fact, as PETTAGRUE well knew, HTHF received grants totaling $165,000 from ADECA and additional money from DPE in connection with the GED during the Executive Director’s tenure.

On May 23, 2008 a State Grand Jury sitting in Jefferson County returned indictments charging McCLAIN and PETTAGRUE with Theft of Property in the First Degree based on their conduct in obtaining and disbursing the proceeds of a $65,000 grant from ADECA to HTHF in 2002. Those charges carry a penalty of two to twenty years imprisonment and a fine of up to $10,000.

The investigation of this matter was conducted by investigators from the Federal Bureau of Investigation, the Internal Revenue Service, and the Alabama Attorney General’s Office. Assistant United States Attorneys William C. Athanas and Tamarra Matthews Johnson prosecuted the matter on behalf of the U.S. Government. Acting Attorney General Richard Minor and Assistant Attorney General William L. Lisenby prosecuted the state case.