Former Louisiana State Senator Sentenced to Prison for Role in Nearly Seven-Year Fraud Scheme

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Published January 12, 2023

Former Louisiana State Senator Sentenced to Prison for Role in Nearly Seven-Year Fraud Scheme

Former Louisiana State Senator and State Political Party Chair Sentenced to 22 Months in Prison for Role in Nearly Seven-Year Defrauding Campaign Entity, Donors, and Political Party Organization

New Orleans, Louisiana – A Former Louisiana State Senator was charged for diverting nearly $150,000 in campaign and state political party funds for her personal use over a 7-year period, using false pretenses and fraudulent representations. She concealed her actions through false and deceptive campaign finance reports and using her position as Chair of the political party, to fraudulently obtain funds from acquaintances’ companies with little or no services rendered.

The United States Attorney’s Office announced that former Louisiana State Senator and Chair of State Political Party “A,” Karen Carter Peterson, age 53, from New Orleans, Louisiana, was sentenced on Wednesday, January 11, 2023, by United States District Judge Sarah S. Vance to 22 months imprisonment after previously pleading guilty to a one-count bill of information charging her with wire fraud, in violation of Title 18, United States Code, Sections 1343 and 2. Additionally, Judge Vance sentenced Peterson to serve a period of 3 years of supervised release, 600 hours of unpaid community service, restitution in the amount of $53,106.93, a fine of $115,000, with $94,250 due immediately, and a mandatory special assessment fee of $100. Peterson was ordered to report to authorities to commence serving her prison sentence on March 6, 2023.

According to court records, Peterson was a Louisiana State Senator for the 5th District from approximately 2010 until approximately April 8, 2022, and the Chair of State Political Party A between approximately 2012 and 2020. As a Louisiana State Senator, Peterson established and ran the “Karen Carter Peterson Campaign Fund (“KCPCF”)” to collect and raise campaign donations from individual and corporate donors. The campaign funds were raised under false pretenses that they would be utilized to help Peterson re-election to the seat of State Senator. Peterson also failed to disclose to potential contributors that she had previously used prior contributions for her personal profit while requesting campaign funds.

For nearly seven (7) years, Peterson diverted and caused her friends and associates to divert campaign funds from the KCPCF to Peterson’s personal use for the purpose of obtaining and using money and property from KCPCF contributors through materially false and fraudulent representations and promises. She accomplished this by writing checks drawn on the KCPCF account to at least four (4) of her friends and acquaintances, instructing them to redeem the checks at financial institutions in the New Orleans, Louisiana area, and then giving the money to Peterson. She occasionally permitted the people cashing the checks to keep a small amount of the money. Peterson used the cash for personal reasons unrelated to her campaign or public office, including gambling-related expenses. Furthermore, Peterson induced the public submission of false and deceptive campaign finance reports that mischaracterized expenditures as being for a lawful campaign or public office objectives when they were, in fact, unrelated to such reasons and were diverted to Peterson’s personal use. Between roughly November 25, 2013, and March 5, 2020, Peterson used the method several times to divert and convert to her own use approximately $94,250 donated by campaign contributors.

In her capacity as Chair of State Political Party A, Peterson controlled Party A’s strategic decision-making, operations, outreach, and direction, as well as its permanent staff, including those with signing authority over State Political Party A’s bank accounts. Peterson used her position to select corporations (“Companies”) run by her acquaintances, ostensibly to offer campaign-related services to State Political Party A, and to determine how much Party A would pay each of the Companies. Peterson told State Political Party A that the payments were for a campaign. In reality, the Companies offered no or limited services to State Political Party A. Peterson then authorized the Companies to pay a portion of the funds given to them by State Political Party A to Peterson via checks drawn on the Companies’ accounts or in cash. Between approximately October 7, 2019, and April 4, 2020, Peterson collected about $53,106.93 from State Political Party A via this fraudulent scam.

“People have the right to expect that their elected leaders will uphold the trust placed in them,” said the United States Attorney’s Office. “Former State Senator Peterson illegally used campaign funds and state political party funds for her personal use during the majority of her tenure as a state senator. She broke the law, deceived contributors, and violated her duty to the voters and the political party with which she was affiliated on dozens of occasions. Such crimes feed public frustration, cynicism, and civic disengagement. This case is proof that our office is committed to holding corrupt public officials accountable.”

“The FBI is committed to aggressively pursuing those who violate the trust placed in them by the public and holding them accountable for their actions. Today’s sentencing sends a clear message that individuals like former Louisiana State Senator Karen Carter Peterson, who stole money to enrich herself, will be held responsible,” said Douglas A. Williams, Jr., FBI New Orleans Special Agent in Charge. “I would like to thank our partners at the United States Attorney’s Office Eastern District of Louisiana, Internal Revenue Service – Criminal Investigation, and Metropolitan Crime Commission for their strong partnerships in helping the FBI disrupt public corruption in Louisiana.”

“As an elected official, Karen Peterson was expected to lead by example and lookout for the best interests of her constituents,” said James E. Dorsey, Special Agent in Charge, IRS Criminal Investigation, Atlanta Field Office. “However, Peterson diverted campaign funds for personal use. Today’s sentencing proves no matter a person’s position or power, when the public’s trust is abused through illegal means, they will be held accountable.”

The United States Attorney’s Office praised the work of the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, and Forensic Accountant Josephine M. Beninati, CPA, CFE in this matter. Assistant United States Attorney Jordan Ginsberg, Chief of the Public Corruption Unit, is in charge of the prosecution.