CHINATOWN — Gene Lee, a former aide to Mayor Richard M. Daley and a longtime community leader, pleaded guilty Tuesday to charges of embezzlement and tax fraud.
Lee, 65, was arrested last summer after federal prosecutors said he stole money donated from a community group — money earmarked for basketball tournaments and cultural outreach programs — and spent the cash on himself and didn’t pay taxes on it, court papers show.
He appeared before U.S. District Judge John Darrah on Tuesday and admitted to spending more than $5,000 in charity funds.
Prosecutors alleged Lee took more than $90,000 over a four-year period but Lee's attorney Anthony Masciopinto said "we believe the number is lower and we're going to try to prove that at sentencing."
Prosecutors said Lee stole funds donated from the Chinese Consolidated Benevolent Fund — a federally funded nonprofit that helps acclimate Chinese immigrants and offers social services to senior citizens — that were supposed to pay for activities hosted by the Chinatown Dragons Athletic Association and for the Chinatown Summer Fair block party, both of which Lee leads.
Prosecutors said the swindle was made possible when Lee created and sent two different invoices to sponsors of and donors to the Chinatown Summer Fair, which has been organized by the Dragons since 2009.
Aided by a check-cashing arrangement at a local restaurant, donation checks made to the Dragons allowed Lee to “convert donations to the Summer Fair for his own personal use," court papers show.
From 2007 to 2010, Lee cashed more than 160 checks totaling about $132,000 at the restaurant and used some of the cash for his own personal use, prosecutors said. The rest was used for legitimate expenses, court papers show.
Among the donations was a $5,000 check from Comcast made out to the Chinese Consolidated Benevolent Fund in 2008, which prosecutors said Lee deposited into the restaurant’s checking account and later pocketed a portion of.
To hide the thefts, Lee lied on an donation expense summary, prosecutors said. He also took portions of donations from corporate sponsors like The Home Depot, McDonald's and ComEd.
Lee believed the spending, which reportedly includes a business suit, gasoline and other personal expenses, was justified because they were related to charity, his lawyer said.
"I think had he used a little forethought and was a little more rigorous in his operation of the charity, all of this could’ve been avoided with good counsel," Masciopinto said.
He also failed to report the money on his tax returns, according to the charges.
All told, the feds allege Lee misappropriated approximately $92,841 and failed to report that amount as income on federal income tax returns for 2007 through 2010 — a loss of about $21,177 in taxes, but Lee disputes that amount.
Lee served for years as former Mayor Richard M. Daley’s deputy chief of staff. He’s also been a community mainstay who has helped promote the neighborhood’s culture and boost tourism.
Since his arrest, he's remained in the community spotlight, appearing at ceremonial ribbon-cuttings and news conferences in Chinatown and has appeared alongside Mayor Rahm Emanuel at cultural celebrations.
"My understanding is that [Lee] has started the process of accepting responsibility for his mistake and has every intention of continuing his good deeds for the community," Masciopinto said.
At Tuesday's court hearing, Lee was sullen and respectful in front of Darrah. He spoke infrequently, only agreeing that he understands the charges against him and the consequence of his guilty pleas.
He remains free on his own recognizance until Aug. 28, when he's expected to appear before Darrah in a sentencing hearing.
Though he faces a maximum sentence of 10 years in prison on the theft count and three years on the tax count, the plea agreement provides for a lesser sentence. Masciopinto said Lee will seek probation.
