Pa. judge convicted in juvenile court kickback scheme

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A former juvenile court judge defiantly insisted he never accepted money for sending large numbers of children to detention centers even after he was convicted of racketeering for taking a $1 million kickback from the builder of the for-profit lockups.

Former Luzerne County Judge Mark Ciavarella was allowed to remain free pending sentencing following his conviction Friday in what prosecutors said was a “kids for cash” scheme that ranks among the biggest courtroom frauds in U.S. history.

Ciavarella, 61, left the bench in disgrace two years ago after he and a second judge, Michael Conahan, were accused of using juvenile delinquents as pawns in a plot to get rich. The Pennsylvania Supreme Court has dismissed 4,000 juvenile convictions issued by Ciavarella, saying he sentenced young offenders without regard for their constitutional rights.

Ciavarella maintained the payments were legal and denied that he incarcerated youths for money.

“Never took a dime to send a kid anywhere. … Never happened. Never, ever happened. This case was about extortions and kickbacks, not about ‘kids for cash,'” said Ciavarella, who plans to appeal.

Federal prosecutors accused Ciavarella and Conahan of taking more than $2 million in bribes from the builder of the PA Child Care and Western PA Child Care detention centers and extorting hundreds of thousands of dollars from the facilities’ co-owner.

A federal jury in Scranton convicted Ciavarella of 12 counts, including racketeering, money laundering and conspiracy, but acquitted him of 27 counts, including extortion. He is likely to get a prison sentence of more than 12 years, according to prosecutors — who revealed after the verdicts that a reputed mob boss turned informant helped them make their case.

Parents of juveniles who appeared before Ciavarella were outraged that he was released after the verdicts. Ciavarella often ordered youths he had found delinquent to be immediately shackled, handcuffed and taken away without giving them a chance to say goodbye to their families. Some of the children he ordered locked up were as young as 10.

Sandy Fonzo, whose son was jailed by Ciavarella — and committed suicide last year at age 23 — screamed obscenities at the judge and even poked him as he and his attorneys held a news conference on the courthouse steps.

“My kid’s not here anymore!” yelled Fonzo. “He’s dead! Because of him! He ruined my … life! I’d like him to go to hell and rot there forever!”

Ciavarella glanced at Fonzo, then turned his back.

Fonzo’s son, Edward Kenzakowski, was a 17-year-old all-star wrestler with no prior record when he landed in Ciavarella’s courtroom for possession of drug paraphernalia. She said her son never recovered from the months he served at the detention centers and a wilderness camp.

Tears streaming down her face, Fonzo said she couldn’t believe Ciavarella was allowed to walk out of the courthouse.

“There’s no justice, there’s not. He’s never going to get what he deserves,” she said. “I just wanted to see him handcuffed and taken out. But when I saw him just being released with that stupid smirk on his face …”

The jury found Ciavarella guilty of taking a $997,600 kickback from Robert Mericle, the builder of the juvenile facilities — money he was ordered to forfeit to the federal government after the verdicts were announced. He was also convicted of failing to report the payments on his state-mandated financial disclosure forms and failing to pay taxes on the income. Jurors acquitted him of extorting Robert Powell, the facilities’ developer and co-owner.

The defense declared victory. “We’re amazed. The jury rejected 95 percent of the government’s case,” said attorney Al Flora.

“I find it interesting,” U.S. Attorney Peter Smith said in response, “that a man just convicted of racketeering is claiming any sort of a victory out there today. I wonder what he would consider a defeat.”

Prosecutors alleged that Conahan, who pleaded guilty to racketeering last year, and Ciavarella plotted to shut down the dilapidated county-run juvenile detention center in 2002 and arrange for the construction of the PA Child Care facility outside Wilkes-Barre.

Ciavarella, who presided over juvenile court, sent youths to the center and later to its sister facility in western Pennsylvania while he was taking payments from Mericle, a prominent builder and close friend of Ciavarella, and Powell, a high-powered attorney.

Luzerne County paid Powell’s company more than $30 million between 2003 and 2007 to house juveniles at PA Child Care and Western PA Child Care. The county could have built its own juvenile center for about $9 million, according to testimony.

In dismissing thousands of Ciavarella’s convictions, the state high court said he ran his courtroom with “complete disregard for the constitutional rights of the juveniles,” including the right to legal counsel and the right to intelligently enter a plea.

Hundreds of youths and their families are suing Ciavarella and Conahan in federal court, but Smith said the judges’ handling of juvenile cases did not figure into the federal prosecution for legal and evidentiary reasons.

“We’re very sympathetic to the pain to the community that was caused here … and we’re fully aware of the deep anguish that many parents and many juveniles feel. But the federal criminal courts are not the appropriate venue to resolve that issue fully,” he said.

Ciavarella, who took the stand in his own defense, acknowledged to jurors that he failed to report the payments on his tax returns and hid them from the public, but he denied any plot to take kickbacks or extort money.

Ciavarella told jurors that he thought he was legally entitled to Mericle’s money, calling it a “finder’s fee” for introducing Mericle to Powell.

Ciavarella also denied that he extorted Powell, who had testified for the prosecution that he was forced to pay the judges nearly $600,000 after they agreed to send juvenile delinquents to his new lockup. The payments were disguised as rent on a Florida condominium owned by the judges’ wives.

It was Conahan who made the arrangements with Powell, Ciavarella insisted. He said Conahan told him that Powell had agreed to pay them $15,000 a month for 60 months to lease the waterfront Florida property. Prosecutors scoffed at that explanation, questioning why Powell would pay nearly $1 million in rent on a condo he could have purchased outright for less than $800,000.

Officials disclosed for the first time Friday that they were led to the judges by the reputed boss of a northeastern Pennsylvania Mafia family. William D’Elia — who regularly met for breakfast with Conahan — became a government informant after his 2006 arrest on charges of witness tampering and conspiracy to launder drug money.

“D’Elia led us to Judge Conahan,” said Assistant U.S. Attorney Gordon Zubrod. “From there we began to focus on them, the financial dealings between Judge Conahan, Judge Ciavarella, Mericle, Powell.”

D’Elia won a sentence reduction last year based on his cooperation in another criminal case and could be released as early as next year.

Ciavarella and Conahan initially pleaded guilty in February 2009 to honest services fraud and tax evasion in a deal that called for a sentence of more than seven years in prison. But their plea deals were rejected by Senior U.S. District Judge Edward M. Kosik, who ruled they had failed to accept responsibility for their actions.

A federal grand jury in Harrisburg subsequently indicted the judges on charges of racketeering, fraud, money laundering, bribery, extortion and tax offenses. Conahan pleaded guilty to a single racketeering charge last year and awaits sentencing. Mericle and Powell pleaded guilty to lesser offenses and testified against Ciavarella; both await sentencing.

Ciavarella faces a maximum of 157 years in prison at sentencing, but will more likely receive 12½ years to about 15½ years under federal sentencing guidelines, prosecutors said.

PA Child Care and Western PA Child Care remain open and continue to accept juveniles from many Pennsylvania counties, though Luzerne County no longer sends delinquents to them.

The Associated Press

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Texas officials indicted in Hurricane Ike kickback scheme

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John “Phil” Fitzgerald, 51, a Liberty County judge for 4 years and Herman “Lee” Groce, 62, a Liberty County precinct commissioner for 24 years, were named in a 25-count indictment handed down by a federal grand jury on Jan. 26. Fitzgerald’s brother-in-law, Mark Wayne Miksch, 52, was also charged in the conspiracy.

The indictment charges the men with fraud, kickbacks, bribery and conspiracy, in connection with a fraudulent kickback scheme, using FEMA emergency relief funds obtained by the county after the Sept. 13 2008 Hurricane Ike disaster.

The indictments charge that Fitzgerald and Croce used their political influence to award an inflated $3.2 million debris removal contract to a local business, C & C Lumber, with the understanding that C & C would subcontract approximately $1.6 million of the work to Miksch. From the monies received by Miksch, $611,000 was paid to Fitzgerald in kickbacks, disguised to appear as a legitimate business transactions.

Croce claimed to “audit” the C & C bills for reimbursement by the county, and both Croce and Fitzgerald approved them.

Fitzgerald is also accused of taking a FEMA generator at a critical time when the area had no power, and use it to power his gas station and convenience store in Moss Hill, when most other area businesses were shut down. While others were temporarily out of business, he was able to profit from the disaster.

Joseph C. Hawthorn, an attorney for Fitzgerald released a statement which read, “Judge Fitzgerald has fully cooperated with the investigation, has nothing to hide and has committed no crime. … Had the Government allowed us the opportunity to present our side of the story before seeking an indictment, we are confident there would be no indictment. However, because of their refusal, we will now have to have a trial in this case, at considerable expense to Judge Fitzgerald and the taxpayers, in order for us to tell our side of the story.”

Both Fitzgerald and Croce lost their bids for re-election in November, as part of a near sweep by Republicans taking over Liberty County government.

If convicted, the defendants face up to five years in federal prison for the conspiracy charge and from five to 30 years in federal prison for the additional charges.

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City official arrested for taking bribes from developer

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The community development director in East St. Louis has been indicted on charges that he took bribes from a local real estate developer, in connection with a low-income affordable housing project known as Bowman Estates.

Arthur M. Johnson, 61, was arrested on Monday and charged with three criminal counts of accepting bribes using his position as the city’s community development director, in which he oversaw housing and other real estate operations in the community. He was also charged on two counts of aiding and abetting two of the developer’s criminal offenses.

Charged with nine counts of wire fraud was real estate developer Harold N. Rosen, 79, owner of Kully Construction, the firm that developed and was to build the project.

The indictments centered on the $5.6 million development, consisting of 56 apartment units in 14 four-family flats. Court documents claims that one of Johnson’s relatives prepared the business plan for the proposed development, and Johnson was paid by Rosen to secretly rewrite it so that it would be acceptable to the city council.

Rosen applied for $1.9 million in public financing from the city, having submitted bogus financial statements, loan documents and tax returns. When applying for the public funds, Rosen claimed to be a wealthy developer who would obtain $3.6 million in private financing for the project, as a condition of starting the project.

After the project was approved by the city in 2008, Rosen submitted bogus invoices for reimbursement of expenses that had not been incurred, and actually received more than $60,000 of payments.

Prosecutors in the U.S. Attorney’s office said that Johnson allegedly approved a phony $40,000 reimbursement request from the company, even though he knew it to be fraudulent. That reimbursement, and others, were flagged and blocked by the East St. Louis Financial Advisory Authority, a state agency that monitors city spending.

The agency said that discrepancies on paperwork led to their concern that Rosen might be defrauding the city. Conflicting information on six different letters of credit provided by Rosen, including home addresses that were purportedly of financial institutions, caused officials to alert federal investigators.

Authorities said that Rosen promised Johnson a job with his company after he retired from the city, in order to get his cooperation in the scam. Rosen also paid cash bribes to Johnson, according to the indictment.

The indictment also said that once the project moved forward, Rosen intended to purchase cheap pre-fab housing modules from an outfit in Indiana, thus depriving local residents from job opportunities for on-site construction.

“It was a development we were greatly looking forward to that was going to complement what already is a blossoming Emerson Park neighborhood,” said East St. Louis Mayor Alvin Parks. He added that another developer has been engaged on the project, and that the city still intends to see it built, although perhaps in a slightly different form.

Johnson had been working at the city since 2005, but “he will not be employed much longer,” according to Parks.

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Liberty Mutual settles bid-rigging lawsuits

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Insurance giant Liberty Mutual has agreed to pay $5.5 million to New York and $2 million to Connecticut, in a settlement agreement over charges that it had rigged bids and paid contingent commissions to agents who illegally steered business to the insurer’s products.

The charges were part of lawsuits filed by former New York Attorney General Elliot Spitzer and Connecticut Attorney General Richard Blumenthal against a group of insurance companies and brokers in 2006 as part of a nationwide investigation into illegal sales practices in the insurance industry.

The lawsuits alleged that Liberty Mutual paid secret commissions to brokers that steered business to it, even though its quotes were not the lowest available. The practice directly increased the cost of insurance to thousands of customers.

Liberty Mutual was also accused of providing “fake” bids to brokers to insure that other companies, agreed to in advance, would win a contract. The lawsuit said that one such bid allowed American International Group to increase its premium by 20 percent with an existing customer.

Other companies, including Marsh & McLelland, St. Paul Travelers, and Aon Corp. have already reached settlement agreements with authorities.

The company blamed the conduct on two former “rogue” employees. “Unfortunately, two former lower-level employees seriously violated our trust and our standards of conduct in their quotation activity,” the company said. Both employees resigned before the 2006 lawsuit was filed.

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Another contractor snagged in Cleveland corruption scandal

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A neighbor of Jimmy Dimora, the Cuyahoga County Commission at the center of the wide ranging corruption scandal, has been charged with bribing school officials in Maple Heights, a Cleveland suburb.

Steven Tomasone, 53, was charged on Friday in a federal indictment accusing him of conspiracy and honest services fraud.

The indictment named two school officials, Christopher Krause, the former treasurer at Maple Heights schools, and Santina “Sandy”Klimkowski, a former board member, for soliciting bribes and gifts from Tomasone between 2006 and 2008. “Tomasone, Krause and Klimkowski took steps to hide, conceal and cover up their bribery and kickback activity and the nature and scope of Tomasone’s dealings with Krause and Klimkowski,” the indictment said.

Tomasone was the owner and president of local contractor, Southwest Companies, Inc. In exchange for the bribes, Krause and Klimkowski used their influence with the school system to steer about $250,000 worth of work to Tomasone’s company. Krause and Klimowski have already pleaded guilty to corruption charges and are  awaiting sentencing.

Tomasone turned himself in to authorities on Friday morning. He lives on Forestwood Drive in Independence, just down the street from Dimora, the kingpin in the Cuyohoga County corruption scandal.

The Plain Dealer

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CA mayor arranged secret $500,000 finder’s fee for himself on sale of state buildings

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Update: After the Los Angeles Times ran the story Monday evening on its website, Mayor Miguel Pulido made a quick retraction and said, “I now believe there’s no hope that I will receive any money for this transaction under any circumstances.”

The consortium that is in the lead to buy the buildings, California First LLC, said through a spokesman “”I have spoken to a number of principals, none of whom are aware of this mythical fee that he speaks of. I don’t know what he could have done to earn $10 much less half a million.”

Pulido had contended that he was acting as a “private citizen” in the transaction, and was “proud” of his involvement in the transaction. His attorney, Frank Barbaro, had told state Treasurer Bill Lockyer that Pulido was expecting the $500,000 fee, and Lockyer had disclosed it in a deposition.

Los Angeles Times

The latest troubling news to surface in connection with the proposed sale of 24 state-owned buildings that the State of California is looking to sell is that the mayor of Santa Ana is expecting a $500,000 finder’s fee in connection with the transaction. According to Mayor Miguel Pulido, the prospective buyers came to him for help because, in his words, “I just know a lot of folks.”

It’s not clear who is paying the fee, but Pulido has confirmed its existence and said that he was entitled to it because he introduced some of the parties in the transaction to each other.

This state-owned property, the Ronald Reagan building, is part of the proposed sale, that would cash in long-term assets, to solve immediate budget problems. Critics say the move is shortsighted, and would cause the state to lose money on the deal.

The sale of the properties has been controversial since it was announced earlier this year. The reason for selling off the state buildings, including the one that houses the California Supreme Court, is that the monies would help with the currents year’s budget deficit. Opponents of the plan call it shortsighted, in that over the long run, the state would be much better off owning the buildings. Critics also feel that the buildings are being sold for less than what they are really worth.

Only three days ago was the finder’s fee first publicly disclosed. A lawyer representing Pulido inadvertently told State Treasurer Bill Lockyer about its existence, and Lockyer revealed it in a deposition for a lawsuit seeking to halt the sale. Pulido’s lawyer confided in Lockyer that his client was worried that he might not receive the fee if the deal was derailed.

Information regarding the terms of the sale has been kept secret, and opponents filed the lawsuit in San Francisco Superior Court to compel the state to reveal the transaction details. The sale has been championed by outgoing governor Arnold Schwarzenegger. According the non-partisan state Legislative Analyst’s Office, the net loss to the state over 35 years would be about $1.4 billion.

Robert Stern, president of the Center for Governmental Studies, said the fee was an “inappropriate” payment for a public official. “He shouldn’t be paid for his connections as a public official,” Stern said. “That sounds like an extraordinary fee. For $500,000, he should have done more than introduce people.”

Los Angeles Times

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Pa. state lawmaker snagged in corruption net

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State Sen. Raphael Musto (D-Luzerne) is the latest lawmaker to be charged with corruption, resulting from ongoing federal and state probes in Pa.  The charges stem from a relationship Musto had with a construction company that performed free services on his home, and provided him with gifts, one such gift a cash payment of $25,000 in 2006.

Pa. State Sen. Musto indicted Monday on bribery charges

Musto, 81,reciprocated by writing letters on behalf of the company to state agencies asking that they award construction business to the company. The unnamed company developed properties in Lackawanna and Luzerne counties.

Musto is charged with wire fraud, mail fraud, corrupt receipt of a bribe or reward for official action concerning programs receiving federal funds, and giving false statements to a government agent.

If convicted, he faces up to 10 years in prison and a fine of $250,000.

Pittsburgh Post-Gazette

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