Prosecutors put Kenyatta Johnson’s finances under a microscope at his federal bribery trial

By 2013, Philadelphia City Councilmember Kenyatta Johnson and his wife, Dawn Chavous, were facing more than $40,000 in credit card debt, juggling two mortgages, and routinely overdrawing their bank accounts.

Meanwhile, Universal Companies, the nonprofit federal prosecutors have accused of bribing the couple, was hemorrhaging cash and at risk of losing a $2.25 million state grant it had received to fund a development project at the Royal Theater on South Street that, if successful, offered one of the few ways out of its financial mess.

And as the trial of Johnson, Chavous, and two former Universal executives began its second week on Monday, prosecutors sought to show that the money pressures bearing down on all the defendants created the perfect conditions for a bribery scheme.

» READ MORE: Kenyatta Johnson and Dawn Chavous bribery trial: What you need to know

They’ve accused Johnson, a three-term Democrat, of accepting more than $67,000 in bribes from two Universal executives — then-CEO Rahim Islam and CFO Shahied Dawan — seeking his assistance with its real estate holdings in his district, including the Royal Theater project.

He and his codefendants have denied any wrongdoing.

But with Richard Haag, the FBI’s lead investigator, on the witness stand for a second day, Assistant U.S. Attorney Mark Dubnoff spent hours introducing business records, copies of checks, emails, and expense reports that they say established the motive for the payoff.

“We’re out of cash!!!” Dawan wrote in an April 2013 email to Islam shown to jurors Monday.

Prosecutors have chalked up Universal’s cash crunch to two main factors — a disastrous attempt to open several charter schools in Milwaukee that ultimately failed, and, separately, accusations that, at the same time they were fretting about finances, Islam and Dawan were bleeding the nonprofit dry.

Both men are accused of embezzling more than $463,000 from the nonprofit by granting themselves bonuses without the approval of its board and, in Islam’s case, seeking reimbursement for hundreds of thousands of dollars’ worth of personal expenses between 2011 and 2017.

In 2013 alone — the same year Dawan sent that email predicting financial doom — Islam took home a $35,000 bonus and claimed $160,779 in expenses on top of his $164,000 annual salary, according to records the government introduced Monday.

The Royal Theater project offered a potential way out. In testimony last week, developer Carl Dranoff said he partnered with Universal to transform the once storied property — one of the nation’s most successful Black movie palaces — into a mixed-use development that would be more attractive to potential buyers.

“We can wait to see if we sell the Royal within the next 30 days and easily cover the deficits in Real Estate,” Dawan wrote to Islam in February 2013.

» READ MORE: Philly’s Royal Theater is part of the bribery trial of City Councilmember Kenyatta Johnson. Here’s what you need to know.

But for the project to be a success, a change to the building’s zoning was necessary. He and the Universal executives viewed Johnson as key to that effort and hoped he would back a bill in City Council to make the necessary zoning changes.

At the time, according to financial records Dubnoff showed to jurors Monday, Johnson and Chavous — a consultant and noted charter school expert — also found themselves strapped for cash.

The couple was routinely overdrawing on their bank accounts. Chavous faced a delinquent tax bill for a home she owned in South Philadelphia, and Johnson was forced to make thousands in withdrawals from his state retirement account fund just to stay afloat.

On April 17, 2013 — less than a week after Dawan’s email laying out Universal’s dire cash situation — Islam met with Johnson to discuss the zoning changes needed for the Royal Theater project. And within two days, Universal offered Chavous a consulting contract — even after it had let go almost all of its other consultants and several staffers in an effort to balance its books.

Prosecutors allege that contract was the vessel through which Islam and Dawan hid their bribe payments to Johnson, and they say Chavous did next to nothing to earn the nearly $67,000 the nonprofit paid her over the next 16 months. And in exchange, the government says, Johnson helped push the Royal Theater rezoning bill through Council.

One day after she, Islam, Johnson, and Dranoff met at a June 2013 political fund-raiser for Johnson — where they also discussed the redevelopment of the Royal Theater — Universal approved a $1,000 monthly increase to her contract.

» READ MORE: Councilmanic prerogative in Philadelphia: What you need to know

But even amid the flood of records the government introduced as evidence Monday, some of the documents appeared to cut against that theory.

In emails offering her services in the charter school arena, Chavous discussed setting up meetings between Universal executives and several key figures in the world of school choice and charter school operations.

She wrote in a May 2013 email to Islam that she would like to “build on” the information he’d already provided her about Universal’s campuses and provide it to “key people who I believe might be able to help you with your schools.”

Her lawyer, Barry Gross, has argued that despite how prosecutors have painted his client’s work, Chavous worked tirelessly for the nonprofit, organizing meetings, keeping Islam and Dawan apprised of relevant legislation making its way through Harrisburg, and organizing a 20th-anniversary celebration for Universal companies. That party never happened.

Gross and lawyers for Johnson, Islam, and Dawan say the financial situation sketched out by prosecutors wasn’t nearly as dire for either the councilmember and his wife or the nonprofit as the government is making it seem.

» READ MORE: Wife of indicted Councilmember Kenyatta Johnson: ‘I haven’t done anything wrong’ | Jenice Armstrong

They will get an opportunity to cross-examine Haag on Tuesday.

But as Dubnoff and Haag continued introducing record after record Monday, the document-heavy day began to wear on those watching from the courtroom gallery and some began nodding off during the at-times tedious morning of testimony.

Former City Councilmember Jannie Blackwell sat in the front row, she said, to show her support for Johnson.

“My goodness, I think they’re very thorough,” she said during a break in the trial. “They’re really after him.”

She didn’t return to the court after the lunch break.

Keep up with every development in Kenyatta Johnson’s trial with our day-by-day recaps, live daily coverage, and explainer on everything you need to know about the case.