Atlantic City Mayor Frank Gilliam resigns ‘with heavy heart’ after pleading guilty to stealing $87K from youth basketball nonprofit

Atlantic City Mayor Frank M. Gilliam Jr. resigned late Thursday after admitting to embezzling more than $87,000 from a youth basketball club he cofounded, making him the latest in a long string of the city’s elected leaders to leave his post facing possible prison time.

Even as Gilliam, 49, was raising funds for school supplies and activities for the Atlantic City Starz — a nonprofit he has touted in campaigns and in his official biography — he was spending donors’ money on luxury clothing, expensive meals, and trips that had nothing to do with the underprivileged children the organization was meant to serve, prosecutors said.

“It is with a heavy heart that I tender my resignation as Mayor of the City of Atlantic City, effective immediately,” Gilliam wrote in a letter on mayoral stationery and time-stamped by City Clerk Paula Galetei at 4:39 p.m., minutes after a police officer had locked up City Hall for the day.

“I would like to apologize to the residents of the Great City of Atlantic City who deserve stability and respect,” it read.

City Council President Marty Small Sr. was to be sworn in as acting mayor at noon Friday, sources said.

Gilliam’s decision to step down capped off a whirlwind day, fitting for a mayor whose tenure had been plagued by scandal from even before he was sworn in.

A former city councilman who was elected to lead the cash-strapped casino town in 2017, he left his house, passport in hand, shortly after 7 a.m. Thursday and took that well-worn route from Atlantic City to Camden, where he pleaded guilty to one count of wire fraud in a hearing before U.S. District Judge Joseph Rodriguez.

He did not resign until hours later — and only then amid calls from the state’s top officials for him to step aside. New Jersey Attorney General Gurbir S. Grewal filed an action in Superior Court in Mercer County seeking to remove Gilliam if he did not go willingly.

Gov. Phil Murphy called the charge to which Gilliam pleaded “despicable,” and said, “He must resign," and allow a mayor who would focus on the “betterment of Atlantic City and not themselves.”

“He has squandered the trust and confidence of his community and of his administration to lead that community,” the governor said at midafternoon, even as a spokesperson for Gilliam was at the door of Gilliam’s seventh-floor office saying he was still the mayor.

He now faces a potential prison sentence of up to 20 years. Prosecutors said more than $41,000 in cash seized in an FBI raid of his home would go toward restitution.

» READ MORE: How New Jersey power brokers bankrolled the election of A.C. Mayor Frank Gilliam

Gilliam declined to comment after Thursday’s hearing. His lawyer, Harry H. Rimm, stressed that the mayor’s crimes had no connection to his role as a public official and did not involve taxpayer funds.

Gregory W. Ehrie, special agent in charge of the FBI’s Newark office, saw little difference in that distinction.

“When a scheme depletes charity for children, it’s unconscionable,” Ehrie said in a statement. “But when the fraud is perpetrated by someone the public trusts, it damages the community’s confidence in their public servants. This defendant betrayed the trust of his community and of people who wanted to improve the lives of children.”

In court, Gilliam showed no emotion, responding succinctly to the judge’s questions while his wife, Shawna, sat alone in the front row. She had accompanied Gilliam there from their Atlantic City home.

He was released hours later on a $100,000 unsecured bond pending his Jan. 7 sentencing hearing.

As part of his guilty plea, Gilliam agreed to repay the money he stole from the basketball nonprofit between 2013 and 2018. Gilliam founded the charity along with Atlantic City High basketball alumnus Keith Fader, of Margate, in 2011.

Thursday’s hearing brought to a head speculation that has swirled around Gilliam, a Democrat, since the day he was elected in 2017. But for all the scrutiny he had received since his swearing-in, many were surprised that the crime that brought about his downfall had little to do with the scandals of the past.

In December, FBI and IRS agents raided his home, carting off computers and files. Speculation centered on a dispute over a $10,000 campaign-finance check that came from the Atlantic County Democratic Committee that Gilliam had deposited in his personal account, and on a nonprofit Gilliam founded called “Connecting the Dots.”

» READ MORE: FBI, IRS raid home of Atlantic City Mayor

That search came five days after state prosecutors announced that they had decided not to charge Gilliam and Councilman Jeffree Fauntleroy II for their involvement in a separate incident — a Nov. 11 fight outside the Haven nightclub at the Golden Nugget casino.

Atlantic City Councilman George Tibbitt has said he had been questioned by the FBI as a possible victim of campaign-finance violations. He ran on the same ticket as the mayor, but the two have had a falling-out. Tibbitt said late Thursday he was glad Gilliam was out of office.

“I’m not satisfied," Tibbitt said. “I want to know what happens with the dozen checks he stole from me."

In March 2018, a judge dismissed a citizens’ complaint alleging Gilliam stole the $10,000 campaign check not meant for him.

In the ruling, Superior Court Judge Bernard DeLury said there did not appear to be “even a scintilla of evidence” of wrongdoing by Gilliam or his campaign chair, Rich Winstead.Gilliam said he returned the money to the county Democratic Committee.

Gilliam now joins three other former Atlantic City mayors who were driven from office under a cloud of federal prosecution.

Mayor Michael Matthews was recalled from office in 1983 after being charged with accepting a $10,000 bribe from an undercover federal agent and for accepting money from Philadelphia mob boss Nicodemo “Little Nicky” Scarfo. Matthews pleaded guilty to a single count of extortion.

Mayor James Usry lost his bid for a third term after being indicted in 1989 for taking a $6,500 bribe from a state police informant and later pleaded guilty to extortion.

And in 2007, Mayor Bob Levy resigned before pleading guilty to lying about his military record.

Gilliam’s resignation set off a process in which the city’s Democratic Committee will now submit a list of three potential replacements from which City Council would select a successor to serve the remainder of his term, which ends Dec. 31, 2021. Atlantic City remains under state control, after Gov. Chris Christie’s administration took over management in 2016.

“Hopefully we can get past this and get someone in there who cares about the community,” said Gwen Lewis, who heads the committee, in a phone interview. “It’s going to have a bad mark on the city, and those who want to change the form of government will point to it.”

Bob McDevitt, the head of the UniteHERE Local 54 casino workers union, who is working to change the form of government, said the development was not unexpected.

“It’s not like anyone was surprised, right?” he said by telephone. “It’s part of the natural course of things here.”

But Small, the next man poised to fill the mayor’s chair, noted that Atlantic City has “been through this before.”

”We’re very resilient,” the council president said. “We’ll get through it.”

On Thursday night, Small, who has long sought to be mayor, stood on a damp Kentucky Avenue outside Kelsey’s restaurant, where well-wishers had gathered for a previously scheduled fund-raiser. “Looking forward to the possibilities,” he said.