"This defendant not only defrauded his own family, he subjected his own church and a charitable organization to his scheme," U.S. Attorney Laurie Magid said in a statement.
The indictment charges that Karoly gave $500,000 to the nonprofit Lehigh Valley Community Foundation in 2005 but later asked that it be transferred to a group he created called The Urban Wilderness Foundation, which did not have tax-exempt status. When the community group declined, he instead had $433,000 sent to his church, which then sent $384,000 back to Karoly, the indictment charged.
Karoly's lawyer attributes the initial charge to a family dispute over the will and said the government cannot prove the new charges. The lawyer, Robert Goldman, questioned whether Karoly is being targeted for prosecution because of his success suing police departments. Karoly has won more than $10 million in related jury verdicts.
"He rubs some law enforcement the wrong way because he's a very good and aggressive and successful criminal defense lawyer. And also being a successful civil rights lawyer, suing police departments," Goldman told The Associated Press.
Assistant U.S. Attorney Seth Weber, in response, said the indictment "speaks for itself."
The superseding indictment returned Thursday also charges Karoly with failing to report $3.7 million in income from 2002 to 2005. He reported no income in 2002 despite earning $834,000; reported $881,000 in 2004 when he earned $3.3 million; and reported $565,000 in 2005 when he earned more than $1 million, authorities charged.
Karoly and his brother, Peter, disbanded their law practice in what authorities have called an acrimonious 1986 split. A year earlier, Peter Karoly and his wife, Allentown dentist Lauren Angstadt, had signed wills leaving their estate to various siblings - except John, authorities said.
The couple, who had no children, died in a Feb. 2, 2007, crash in New Bedford, Mass.
A September 2008 indictment charges that Karoly, along with his son, John "J.P." Karoly III, 28, of Orefield, and a family friend, conspired to create phony wills that included Karoly, the son and other relatives as heirs. They have pleaded not guilty in that case.
