Charleston-area defendants sentenced in federal court

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Charles “Chuck” Willys Mincey Jr., 65, of Flora, Miss., Karl Henry Zerbst Jr., 62, of Mount Pleasant, and Brian Daniel Herndon, 46, of Summerville, were sentenced in federal court after pleading guilty for their roles in kickback and bribery schemes involving federal housing grant programs in the Charleston area, according to a news release from the U.S. Justice Department.

Evidence presented to the court showed that from December of 2014 until at least March of 2019, Mincey and Zerbst participated in a scheme to unlawfully profit from their work on Affordable Housing Program grants disbursed by the Federal Home Loan Bank of Atlanta to low income households of U.S. military veterans and spouses of veterans for house rehabilitation, the news release said.

In 2014, Mincey approached Zerbst to be an intermediary for grants for which Mincey and his company, Palmettos at Folly, was the designated contractor. As an intermediary, it was Zerbst’s role to locate prospective program participants, hire and manage the contractors conducting the rehabilitative work, and hire and manage third-party inspectors to inspect the work and assess it for cost reasonableness, the release said. As part of their arrangement, Mincey and Zerbst agreed to split the profits they made from the grants 50/50. That agreement was in violation of the rules of the grant program, which prohibit an intermediary from receiving more than 12% of the grant funds, and also prohibited any conflict of interests or appearance of a conflict of interest with any other party to the grant application.

During the relevant time period, the Federal Home Loan Bank of Atlanta sent the grant funds to community member banks, who then disbursed the funds to Zerbst’s company, KHZ. According to the Justice Department, Zerbst retained his intermediary fees and then wrote checks for construction costs to Mincey’s company, Palmetto’s at Folly, and Mincey then funneled grant money back to Zerbst by writing checks from Palmetto’s at Folly to Charleston Strategic Consultants LLC, a company controlled by Zerbst. In total, Mincey funneled at least $246,689.99 in unlawful kickbacks to Zerbst, the release said.

The Justice Department said evidence showed that Mincey also participated in a bribery scheme with city of Charleston employee Brian Herndon in order to win construction bids for housing projects funded by the U.S. Department of Housing and Urban Development. As a project manager for housing rehabilitation at the Charleston Department of Housing and Community Development, Herndon had access to non-public information regarding cost estimates generated for each project grant, which he shared with Mincey in exchange for cash payments between $200 and $500, the release said. In total, Herndon was accused of accepting at least $15,000 in bribe money.

Senior U.S. District Court Judge Margaret B. Seymour sentenced all three individuals. Mincey was sentenced to eight months in federal prison, followed by a three-year term of court-ordered supervision, and ordered to pay $91,990 in restitution. Zerbst was sentenced to five years of probation, and paid $246,689.99 in restitution prior to his sentencing. Herndon was sentenced to six months in prison, followed by a year of court-ordered supervision. Seymour also granted a money judgment against Herndon in the amount of $15,000, equal to the amount of bribe money that Herndon received from Mincey from 2014 to 2020. There is no parole in the federal system.