State Sen. Katrina Robinson, D-Memphis, hugs Nashville activist Justin Jones at the Tennessee General Assembly in April. (Photo: John Partipilo)
In Memphis Thursday, federal Judge Sheryl Lipman debated with prosecutors the merits of the federal government’s fraud case against state Sen. Katrina Robinson.
Lipman dismissed the jury immediately after prosecutors rested their case. Robinson’s attorneys asked the judge to dismiss all charges, citing lack of evidence and fundamental flaws in the prosecution’s financial analysis.
The Democratic senator is facing 17 counts of embezzlement and fraud that allege she misappropriated federal grant money awarded to her business, The Health Institute, which provides postsecondary nursing training.
Thursday’s only testimony came from Jonathan Nyaku, a CPA hired by Robinson in 2015 to oversee THI’s finances. Nyaku and his firm, Memphis Consulting Group, reviewed THI’s finances monthly from 2015 to 2019, maintained its general ledger, and worked with Robinson to classify revenue and expenditures.
In a 2015 email, two months after THI first received government funds, Nyaku cautioned Robinson that “DIY accounting never, ever works” and “stewardship of a federal grant can be a complex undertaking.” Robinson hired him a day later, an engagement that continued for the life of the grant.
Nyaku explained to the jury that THI segregated grant funds from its general operating account and properly managed expenses and revenue. Nyaku clarified the chain of custody of federal funds, explaining that government scholarships, once designated to a student and claimed by THI, became business revenue. Once THI paid its expenses, business revenue became profit, free for the business’s sole owner and shareholder to spend as she saw fit.
Over the course of the trial, most of the evidence offered by U.S. attorneys focused on thousands of dollars of personal purchases made by Robinson, alleging these came from government funds. Nyaku testified that none of these purchases had been expensed to the grant accounts and all had been properly accounted for with direct oversight from his firm. Nyaku relied on Robinson’s full disclosure to make each classification and frequently communicated with her about anything that needed clarification.
On cross examination, the defense took Nyaku through THI’s monthly statements. Lawrence Laurenzi, Robinson’s top lawyer, worked to show that personal purchases drew from THI revenue, not grant funds.
THI’s books held up under a 2019 audit required under the grant and performed for the federal government by an independent accounting firm.
The fuller picture of THIs finances showed Robinson taking steps to properly log, classify, and communicate about expenditures, often deferring to accountants’ oversight. The prosecution’s charges of embezzlement and fraud allege intentional misrepresentation for the purpose of gaining money or property from the federal government.
Without the jury present, Lipman asked federal prosecutors to clarify how Robinson’s expenditures, accounting, and reporting proved embezzlement. “I don’t see how you just can point to: She’s spending lots of money. That just doesn’t compute,” said Lipman.
Nyaku laid out the accounting process in which money started as a grant, paid for scholarships, came into THI as revenue, and ended up as profit, directly contradicting the government’s argument that money spent by Robinson was governed by grant guidelines. After nearly three hours of arguing, U.S. attorney Scott Smith acknowledged this blow to the prosecution’s case. The state is now arguing that expenditures exceeded revenue in certain months, causing THI to “overdip” into grant funds. This argument depends on a thorough understanding of complex accounting principles that Judge Lipman has asked U.S. attorneys to clarify for the court.
Robinson attorney Matthew Jehl argued that embezzlement and fraud are crimes of intent and the state has offered no evidence that Robinson knowingly or intentionally misrepresented herself or her business to gain money or property. When the state brought up mistakes in reporting, Jehl argued that these reports were not tied to funding and no evidence suggests mistakes were intentional.
Lipman seemed to give particular consideration to dismissing fraud charges. “I’m lost in how that could be a scheme to defraud,” she stated.
Lipman asked lawyers for both sides to reconvene Friday at 3 p.m., at which point she has asked the prosecution to clarify its financial analysis for the court. Still unconvinced there is enough evidence to move forward, Lipman plans to reconvene the jury on Monday.
“I have to satisfy myself it’s a case that should go to the jury. I have to hear more,” said Lipman just before the court adjourned.
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