NOLA.com --- Longtime former state Sen. Karen Carter Peterson on Wednesday paid $50,000 in restitution to the state Democratic Party she once chaired and is likely to plead guilty in the coming days to federal charges of taking campaign and party funds to feed her gambling habit, according to a source with knowledge of the investigation.
Two sources said the FBI has zeroed in payments made by the Democratic Party during Peterson’s eight-year tenure to the Jaelyn Group, a political consulting outfit owned by Gralen Banks. In addition to running a consultancy, Banks is a WBOK-AM radio host and the brother of Jay Banks, a former member of the New Orleans City Council and a political ally of Peterson’s.
Peterson's lawyer, Brian Capitelli, issued a statement Wednesday saying that the resolution “marks an important step in Ms. Peterson‘s recovery as she continues to address her gambling addiction.”
The statement added: “She is sincerely remorseful for her compulsive behavior resulting from this addiction and has made full repayment of funds used as a result of her addiction. She has been forthright, honest, and cooperative with the U.S. Attorney’s Office in their investigation.”
Gralen Banks did not return numerous phone messages left over recent days.
Campaign finance reports indicate that the Louisiana Democratic Party cut checks totaling $327,700 to the Jaelyn Group between 2015 and 2019. Most of it was for spending related to the 2019 re-election of Gov. John Bel Edwards, according to the reports, including a $100,000 payment in October of that year for what is described as a “radio buy.”
The party also sent $1,942 in 2015 to Ashcorp Holdings LLC, another firm owned by Gralen Banks, records show.
It wasn’t immediately clear Wednesday whether federal prosecutors intend to allege that the Jaelyn Group or Banks colluded with Peterson to misuse the money, or whether they are alleging that Peterson acted alone.
The focus of the federal investigation is believed to be on how Peterson spent money during her 2019 re-election campaign to the state Senate.
Peterson, an outspoken champion of liberal causes, had been a state senator for 12 years before her resignation earlier this year, and before that she spent a decade in the House. She lost a 2021 congressional race to U.S. Rep. Troy Carter.
If Peterson acknowledges steering money intended for the struggling Louisiana Democratic Party to her own use, it will add considerably to the controversy around her eight-year tenure as party chair, from 2012 to 2020.
She was replaced by Katie Bernhardt, a businesswoman in Lafayette, who was elected by pledging to move the party in a different direction than Peterson. Bernhardt has received credit for, among other things, improving the party’s internal financial controls.
Critics carped that Peterson did little to stem the party’s steady decline, especially among rural Whites. In particular, she came under fire for trying to talk Edwards, then a state representative from Amite, out of running for governor back in 2015, on the grounds that a Democrat couldn’t win the state’s top office.
Edwards didn’t listen, and pulled off a remarkable upset over then-U.S. Sen. David Vitter, a Republican. Edwards is now well into his second term as governor.
While Peterson’s strategy as party chair came in for plenty of second-guessing, the Democrats’ sagging fortunes in Louisiana are hardly unusual. Indeed, across the Deep South, the party has suffered a wave of defections of White voters that began in the 1990s and accelerated after the election of Barack Obama as president.
Peterson wore several hats at the same time, besides serving as party chair.
In the Senate, Peterson represented the Central Business District, Central City, Broadmoor and much of Uptown. She served as a vice chair of the Democratic National Committee from 2017 through 2021 and also handled public bond deals and contracts for law firms that had government contracts.
Peterson’s gambling problem burst into public view three years ago, when WWL-TV reported that she had received a misdemeanor summons for violating a self-imposed ban on entering casinos.
Peterson unexpectedly resigned in April, saying she was doing so to overcome personal problems. In those remarks, she said she had “participated in and successfully received inpatient and outpatient treatment for depression and addiction,” and that she had avoided gambling for “a long time.”
She added: “I want you to know that this addiction and this disease is insidious. Many people suffer from it. It’s the highest rate of suicide of all addictions.”
The next day, The Times-Picayune | The Advocate reported that she was under federal investigation.