Charity Fraud Scheme Linked To Former NBA Player, NFL Hall Of Famer
OAKLAND (CBS SF) -- Former pro basketball player Kermit Washington was arrested in Los Angeles Tuesday for allegedly masterminding a charity fraud scheme and using donations made to his charity, Project Contact Africa, to pay rent and purchase jewelry, vacations and entertainment.
Washington's arrest comes just two days after Hall of Fame pro football player Ron Mix, 78, pleaded guilty in Missouri to filing a false tax return and admitted to making $155,000 in "donations" to Washington's charity that were actually payments for professional athlete referrals to Mix's law firm.
Washington's arrest also comes two days after a grand jury filed an indictment against him in Missouri. The indictment states that Washington, 64, used the charity to hide income on his 2010, 2011, 2012, and 2013 U.S. income tax returns and diverted hundreds of thousands of dollars of the charity's funds for personal purchases including, clothing, restaurants, hotels, airefare, home furnishings, groceries, electronics, dental visits and personal training sessions.
Washington faces up to 45 years in prison and $1 million in fines.
Washington's charity claimed to help provide medical care and supplies to needy families in Kenya and was apparently founded back in 1995, according to the Project Contact Africa website, which remains up and running. Project Contact Africa also goes by the names The 6th Man Foundation, or PCA.
The grand jury indictment states that the charity was a registered nonprofit.
Mix, and his San Diego law practice, focus on filing workers' compensation claims on behalf of former professional athletes.
Mix admitted to the U.S. Department of Justice that after receiving the referrals, he agreed to make donations to Project Contact Africa, according to court documents.
He also admitted that from 2010 to 2013 he made about $155,000 in donations to the charity and falsely claimed them on his personal income tax return as charitable deductions.
Mix faces a statutory maximum sentence of up to three years in prison and a maximum fine of $250,000, according to the U.S. Department of Justice.
Washington played for a number of NBA teams during his 10-year career, and played briefly for the Golden State Warriors in 1987 in a failed comeback attempt after being out of the league for five years. He was perhaps best-known for an on-court fight in 1977 in which he punched Rudy Tomjanovich, shattering his face and nearly killing him. Tomjanovich was left with severe medical problems that hastened the end of his playing career.
Mix was a star offensive tackle for San Diego Chargers for a decade, playing the final two seasons of his Hall of Fame career with the Oakland Raiders before retiring in 1972.
Mix and Washington are not the only ones in trouble with the law for their misuse of Project Contact Africa. Their roles were discovered in a much larger investigation, "Operation Software Slashers" led by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations.
In Operation Software Slashers, six people pleaded guilty in 2015 in connection with running a global $100 million software piracy ring, considered be "one of the largest software-piracy schemes ever prosecuted by the U.S. Department of Justice," according to ICE.
"Investigators seized more than $20 million in assets from conspirators who are estimated to have sold in excess of $100 million worth of illicit, unauthorized and counterfeit software products to thousands of online customers," ICE said in 2015.
The suspects, ICE said, sold Microsoft Corporation and Adobe Systems Inc. software product key codes, which are used to obtain full access to unlock licensed versions of various copyrighted software programs, through a charitable organization and several online businesses.
Investigators seized more than $20.6 million in assets, from bank and investment accounts as well as 10 luxury cars and 27 real estate parcels.
Washington's Missouri grand jury indictment states that Reza Davachi, one of the six who pleaded guilty to the massive software piracy ring, was with Washington's consent and approval, operating Project Contact Africa's online eBay and PayPal accounts. He also maintained the charity's website. Casey Lee Ross and Rex Yang also sold items under the the eBay and PayPal accounts for Project Contact Africa, according to the indictment.
Davachi was the owner and operator of Rez Candles, Inc., which engaged in not only the sale of novelty candles, but also the online sales of counterfeit computer software. Project Contact Africa website's blog even has Rez Candles as part of its URL: http://projectcontact-rezcandles.blogspot.com/.
Davachi has admitted to paying a counterfeiter in China over $670,000 for counterfeit software goods and using Project Contact Africa to operate his for-profit, Rez Candles Inc., which sold illicit software. He managed the online presence of Project Contact Africa's PayPal/eBay account since January 2004 and since then had been using the account to facilitate payments for counterfeit software, according to ICE investigators.
Because he sold the items through the eBay charity stores, Davachi avoided paying thousands of dollars in eBay fees each month, according to court documents.
Project Contact Africa's eBay/PayPal accounts took in about $12 million in revenue, according to ICE, while eBay/PayPal sustained losses of $908,231 due to the fees waived for entities deemed charitable organizations.
According to the grand jury indictment, Washington provided Davachi with items, including memorabilia autographed by professional NBA players to sell on eBay "under the guise that all of the online eBay sales benefited PCA's charitable mission." Washington also received payments in exchange for allowing Davachi and others to use his charity's tax-exempt status to make personal profits.
Despite telling donors that 100 percent of proceeds would go to Project Contact Africa, only a portion of proceeds actually went to the needy individuals in Africa, the rest was used to bolster the online counterfeit-selling business.
"The federal indictment alleges this former NBA player used his celebrity status to exploit the good intentions of those who donated to a charity he founded..." said U.S. Attorney Dickinson. "According to the indictment, Washington profited by diverting hundreds of thousands of dollars in donations that was supposed to benefit a clinic in Africa for needy families and children, but instead bankrolled his own personal spending."
Project Contact Africa's website states that its donors included former NBA Commissioner David Stern and former NBA star Ron Artest, who runs Xcel University, among others.
By Hannah Albarazi - Follow her on Twitter: @hannahalbarazi.
