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Ex-White House military aide, partner convicted on 9 counts of post-Katrina fraud

U.S. Atty. Peter Strasser's office said it hopes Friday's verdict drives home the message that "any attempt ... to conduct fraudulent schemes (will) not be tolerated
Credit: WWL-TV

NEW ORLEANS — Federal jurors convicted a former top military aide to three U.S. presidents and his business partner for scamming $15 million out of foreign nationals who believed they’d become permanent American residents if they invested in New Orleans’ recovery from Hurricane Katrina.

The decision Friday capped off retired Air Force Col. Timothy Milbrath and William “Bart” Hungerford’s three-week trial on charges of mail fraud, wire fraud, immigration fraud and money laundering. Both were found guilty on all nine counts they faced.

One of the defense attorneys on the case, Eddie Castaing, said that his side was "very disappointed with the verdict." 

“It was unexpected, and we truly believed there was reasonable doubt on all of the counts, but the jury disagreed," Castaing said. “We will continue to fight, with post-trial motions and appeals.”

Read the original story from 2013 here

U.S. Attorney Peter Strasser's office said it hopes Friday's verdict drives home the message that "any attempt ... to conduct fraudulent schemes (will) not be tolerated." 

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“In the end, it ultimately all comes down to greed," Strasser's said. "This scheme to defraud our community, taxpayers and those lawfully seeking permanent residency in the United States, occurred in the wake of one of the most turbulent times in our city’s history.”

Milbrath served as the White House Military Office’s chief of staff under Presidents Ronald Reagan, George H.W. Bush and Bill Clinton. He and Hungerford solicited millions of dollars for job-creating projects in New Orleans from 31 immigrant investors hoping to earn green cards in return for their investments.

However, to secure permanent residency, the investors — who arrived in the U.S. on visas — had to prove their money was creating jobs.

The investments did appear to create jobs, but not ones that were in projects approved by the U.S. Citizenship and Immigration Services, which administers the EB-5 visa program for foreign investors.

WWL-TV first reported on the investigation that ensnared Milbrath and Hungerford in 2013. 

Prosecutors said Milbrath, 63, and Hungerford, 58, diverted the money to their own company and salaries for themselves and their wives; PJ’s coffee shops that were already running and profitable; and a proposed hotel in Algiers that remains a vacant lot.

Milbrath and Hungerford touted the plans to build an extended-stay hotel, conference center and Wow! Café and Wingery on General de Gaulle Drive as a boon for Algiers and a way to diversify projects and minimize risk for investors. It did neither because they never moved past the demolition stage.

Meanwhile, the duo each pocketed $4.7 million that they spent on cars, a vacation home, country-club property and tuition for their children. Milbrath alone spent $300,000 on vintage postcards, prosecutors said.

They also paid their wives salaries, arguing at trial that they needed them to run the business if they couldn’t.

“I was in charge of the continuity of the president,” Milbrath said from the witness stand on Tuesday. “If something happened to the president and there was a change in leadership I was in charge of making sure that worked smoothly. So, if anything happened to us, I chose my wife and Mrs. Hungerford because they knew what we were doing.”

Though they were granted temporary green cards, none of the investors at the center of the case became permanent residents.

Castaing and the other defense attorney, Jacob Weixler, argued that Milbrath and Hungerford made it clear to the investors that the partners had the right to keep millions in management fees, tax distributions, deferred salary and outside capital.

They also said the investors knew they ran the risk of both losing their money and being rejected for permanent green cards.

“It’s not fraud for a business to fail … or not produce enough jobs,” Castaing said early in the trial.

During one of the trial’s most dramatic moments, Milbrath denied defrauding anyone and suggested he and Hungerford were retaliated against because they argued that President Barack Obama’s USCIS director, Alejandro Mayorkas, was undermining the EB-5 visa program.

“I lived by the creed I’ve always lived by, and that the military teaches you, that you do not lie, cheat or steal,” Milbrath said from the witness stand Tuesday.

Assistant U.S. Attorneys Matthew Payne, Shirin Hakimzadeh, Maria Carboni and Andre Lagarde countered that the enormous fees collected from the investors were not allowed under the EB-5 program. They contended that Milbrath and Hungerford lied to investors by convincing them all their money would go toward providing new jobs.

And, the government said, Milbrath and Hungerford also lied to USCIS and the administration of then-New Orleans Mayor Ray Nagin, who in 2006 gave the pair’s company — NobleOutReach — exclusive rights to link EB-5 program participants with local projects in which to invest following the devastation of Katrina.

Affected investors came from countries such as China, Turkey, Jamaica, Iraq, Singapore, the United Arab Emirates and the United Kingdom.

Suzette Lopez of Jamaica testified during the trial’s first week. She said her $560,000 investment with Milbrath and Hungerford was for naught — without permanent residency, she must apply annually for a temporary reprieve from deportation and separation from her three American-born children.

“I’m in limbo right now,” Lopez said.

Eight of the nine charges carry prison terms of up to 20 years, while the remaining charge has a maximum punishment of five years. Milbrath and Hungerford are set to be sentenced Dec. 17.