Examples of Public Corruption Investigations - Fiscal Year 2011
The following examples of public corruption investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Cleveland Man Sentenced in Connection to Bribery and Investment Scheme
On September 26, 2011, in Cleveland, Ohio, Patrick J. Coyne, a former member of Strongsville City Council, was sentenced to 57 months in prison for a bribery scheme related to a Cuyahoga County public corruption investigation and a separate investment scheme. Coyne previously pleaded guilty to one count each of: bribery concerning programs receiving federal funds, money laundering, conspiracy to commit bribery concerning programs receiving federal funds, structuring and wire fraud. Coyne admitted taking $20,000 in bribes from real estate developer David Terry in 2008 with the intent to be influenced or rewarded for business transactions in connection with City of Strongsville. The money laundering conviction is in connection with a payment Coyne made toward the purchase of a condominium in Marblehead, Ohio, using bribe money obtained from Terry. Terry previously pleaded guilty to bribing Coyne. Regarding the investment scheme, Coynes pleaded guilty to running a fraud from March 2011 through May 3, 2011, in which he invited an investor to invest in a Krispy Kreme doughnut franchise in Brunswick, Ohio. In April 2011, the investor wrote Coyne two checks for a total of $32,000, but Coyne never disclosed to the investor that he had not discussed the franchise plan with Krispy Kreme. On May 5, 2011, the United States Attorney’s Office filed a civil complaint in forfeiture against this condominium, which was valued at approximately $222,200. In the Complaint in Forfeiture, the United States alleges that on or about January 18, 2008, Coyne paid more than $10,000 toward his purchase of the condominium using criminally derived money.
Former Pennsylvania County President Judge Michael Conahan Sentenced to Prison
On September 23, 2011, in Scranton, Pa., Michael Conahan, former President Judge of the Court of Common Pleas for Luzerne County, was sentenced to 210 months in prison and ordered to pay $874,167 in restitution to the Commonwealth of Pennsylvania for his judicial salary and a fine of $20,100. Conahan previously forfeited his right to his state pension. In September 2009 and September 2010, a Grand Jury in Harrisburg returned superseding indictments charging both Conahan and co-defendant Mark Ciavarella with racketeering, honest services mail fraud, money laundering, extortion, bribery, tax violations and conspiracy. Conahan and his co-defendant, Mark Ciavarella, who also served as President Judge of the Court of Common Pleas of Luzerne County, were initially charged in January 2009. The charges were the result of a federal investigation of alleged corruption in the Luzerne County court system. The inquiry began in 2007 and over the next four years expanded to include county government offices, state legislators, school districts and contractors in Northeastern Pennsylvania. The government also sought the forfeiture of approximately $2.8 million in assets allegedly acquired by the defendants through racketeering and money laundering. In response to the United States Supreme Court’s 2010 decision in United States v. Skilling, the 2010 Indictment specifically charged that bribes and kickbacks were paid to the defendants. Ciavarella was sentenced to 336 months in prison on August 11, 2011.
Former County Public Official Sentenced for Tax and Bankruptcy Fraud
On September 14, 2011, in Gainesville, Ga., Becky McCord, of Dawsonville, Georgia, was sentenced to 24 months in prison, three years of supervised release, ordered to pay a $10,000 fine and $51,611 in restitution to the IRS for back taxes. McCord pleaded guilty to tax evasion and bankruptcy fraud on June 17, 2011. According to the charges and other information presented in court, McCord served as the clerk of court for a superior court in Georgia from 1993 to February 2010. Between 2006 and 2009, McCord wrote and signed checks payable to herself from the superior court’s bank account to which she was not entitled. The checks totaled approximately $134,000. McCord subsequently cashed the checks at various banks in Dawsonville, and used the funds for personal expenses such as a car loan and mortgage payments. McCord did not report on her 2009 federal tax return the funds she withdrew from the Superior Court’s bank account for personal use, nor did she report additional legitimate income that she received from collecting passport fees. McCord also failed to report this income on a bankruptcy petition that she filed jointly with her spouse in December 2007, and amended several times through June 2009.
Former Chicago Police Officer Sentenced
On September 8, 2011, in Chicago, Ill., Jerome Finnegan, a former Chicago police officer, was sentenced to 144 months in prison and three years of supervised release following his guilty plea in April 2011 to charges of planning the murder-for-hire of a former fellow police officer and filling a false 2004 tax return. Finnegan was charged in a criminal complaint in September 2007 with using a telephone with intent to commit the murder-for-hire of a former Chicago police officer who was a potential witness against him in an ongoing federal investigation as well as a pending state criminal prosecution. According to his plea agreement, Finnigan failed to report on his 2004 income tax return approximately $174,500 in income he received by unlawfully taking money from arrestees for his own benefit. Finnegan, and other Chicago police officers assigned to the Chicago Police Department Special Operations Section, were arrested in 2006 and charged in state court with felonies based on their alleged abuse of their positions as police officers.
Lawyer Involved in Connecticut Treasurer’s Office Scandal Sentenced to Federal Prison
On September 2, 2011, in New Haven, Conn. Charles B. Spadoni, of West Chester, Pennsylvania, formerly of Connecticut, was sentenced to 24 months in prison, followed by five years of supervised release and ordered to pay a $50,000 fine. According to the evidence presented during trial, Spadoni was the General Counsel of Triumph Capital Group Inc. (“Triumph Capital”). In November 1998, shortly after former Connecticut State Treasurer Paul J. Silvester had lost his bid for reelection, Spadoni, Silvester and others engaged in a scheme through which two of Silvester’s close associates received from Triumph Capital sham “consulting contracts” worth $1 million each in return for the investment of $200 million of state pension assets in a Triumph Capital-related investment fund, Triumph Connecticut-II. In 1999, federal investigators began looking into investments that Silvester had handled at the end of his term as Treasurer. After a federal grand jury subpoena was served on a Triumph-related fund looking for documents related to the Connecticut investment, Spadoni used a file-erasing program to delete computer files to prevent them from being obtained by subsequent grand jury subpoenas. On July 16, 2003, a federal jury convicted Spadoni for violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), RICO conspiracy, bribery, wire fraud and obstruction of justice. On October 25, 2006, Spadoni was sentenced to 36 months of imprisonment, five years of supervised release and a $50,000 fine. Spadoni appealed his conviction and, on September 25, 2008, the U.S. Court of Appeals for the Second Circuit upheld the conviction on the obstruction of justice count, but ordered a new trial on the remaining counts of conviction. The government will not retry Spadoni on the remaining counts of conviction.
Fourth Individual in Dynus Investigation Sentenced to Prison for Fraud, Tax Crimes
On August 2, 2011, in Cincinnati, Ohio, James Smith, of Lebanon, was sentenced to 15 months in prison and ordered to pay more than $4 million in restitution. Smith pleaded guilty on February 16, 2007, to bank fraud and failure to file a federal income tax return. Smith was president of Dynus Corporation and conspired with others to help the company fraudulently secure more than $10 million from lenders by signing fraudulent documents and submitting false information to auditors. The owner of Dynus Corporation, Orlando Carter, of Mason, was sentenced on June 9, 2010, to 180 months in prison and ordered to pay of $4,927,085 in restitution. Carter was convicted on August 18, 2009, of bank fraud, mail fraud, conspiracy to commit mail and wire fraud, conspiracy to commit bank fraud, making false statements to the Small Business Administration, bankruptcy fraud, and making false oaths in a bankruptcy proceeding. Former Butler County Auditor Mary Catherine (Kay) Rogers was sentenced on July 26, 2011, to 24 months in prison and ordered to pay $4 million in restitution to National City Bank for conspiracy and filing a false income tax return. Former Dynus executive Karin Verbruggen, of Loveland, was placed on five years of court supervision beginning in October 2009 and ordered to pay $4,079,459 in restitution to Fifth Third Bank.
Former Alabama Mayor Sentenced for Filing False Tax Returns
On July 15, 2011, in Montgomery, Ala., John Jackson, the former mayor of White Hall, Alabama, was sentenced to 24 months in prison, followed by one year of supervised release, and ordered to pay a $25,000 fine and $11,065 in restitution. According to court documents, Jackson filed false joint 2004, 2005 and 2006 U.S. Individual Income Tax Returns (IRS Forms 1040) that did not report all of the total income earned by Jackson and his spouse. Jackson did not report as income money he took from the city of White Hall and money he diverted from non-profit companies who handled the gaming license for White Hall.
Florida Physician Sentenced for Fraudulent Lobbying and Fund Raising Conspiracy
On June 1, 2011, in Fort Lauderdale, Fla., Alan D. Mendelsohn, of Broward County, Fla., was sentenced to 48 months in prison followed by two years of supervised release for his role in a fraud scheme involving lobbying and fund raising for political candidates and organizations. According to court documents, Mendelsohn, a Florida physician, created political entities for the purpose of raising money in support of political parties and candidates for political office in Florida. In pleading guilty, Mendelsohn admitted to various criminal activities including an agreement with a co-conspirator to siphon approximately $330,000 for Mendelsohn’s benefit and agreements with certain lobbyists and clients to make contributions totaling $50,000 to a private school, used to pay tuition for his children, and $75,000 to a car dealer to purchase a car for Mendelsohn’s personal use. Mendelsohn admitted that none of this income was reported to the Internal Revenue Service (IRS) as required. From 2003 through mid-2006, Mendelsohn also admitted that he knowingly mischaracterized personal expenses as business deductions of his medical practice. In total, Mendelsohn underreported his taxable income by more than $600,000 based on the various schemes. Moreover, Mendelsohn admitted that he caused the political entities, as well as certain corporations used to facilitate the conspiracy, to file false federal tax returns and information, and required state disclosure reports that mischaracterized these payments.
Former New York State Senator and Putnam County Executive-Elect Sentenced to Prison for Obstruction of Justice and Tax Charges
On May 13, 2011, in White Plains, N.Y., Vincent L. Leibell, III, former New York State Senator and resident of Putman County, New York, was sentenced to 21 months in prison, followed by three years supervised release and fined $4,000 for obstructing a federal grand jury investigation into his extortion of cash payments from lawyers working in Putman County, and for failing to report on his income tax returns cash payments he had received from those lawyers. According to the Information filed in federal court and information revealed during the plea proceeding and the sentencing: The investigation focused on whether Leibell demanded and received cash payments from an attorney who provided legal services to the Putman County-based not-for-profit organization that received millions of dollars in New York State Senate member items grants that Leibell sponsored as a State Senator. Leibell became aware of the investigation and met with the attorney repeatedly, directing the attorney to lie to federal investigators. Leibell also failed to report at least $43,000 in cash he received during the tax years 2003 through 2006.
Former Chairman of the Soboba Band of Luiseno Indians Sentenced on Bribery and Tax Charges
On April 18, 2011, in Los Angeles, Calif., Robert Salgado, Sr., former chairman of the Soboba Band of Luiseno Indians, was sentenced to 41 months in prison for taking approximately $875,000 in bribes from tribal vendors and concealing that income from the Internal Revenue Service (IRS). In addition to the prison term, Salgado was ordered to pay $226,187 in back taxes to the IRS. Salgado, who lives on the Soboba Reservation near San Jacinto, pleaded guilty in October 2010 to bribery and subscribing to a false tax return. According to court documents, Salgado admitted that he accepted a total of $874,995 in bribe payments from five vendors who did business with the Soboba Band. The payments to Salgado, which were made by vendors hoping to obtain or keep contracts with the tribe, were given to Salgado in the form of cash, payments made to his creditors and checks payable to an entity controlled by Salgado. Additionally, Salgado admitted that he filed a 2001 tax return that claimed he and his wife earned $146,114, but in reality earned substantially more. In the plea agreement, Salgado admitted he also did not accurately report his income for tax years 2002 through 2006, failing to pay a total of $226,187 in taxes.
New Jersey Real Estate Investor Sentenced for Conspiring to Launder Money for Pay to Play Contributions
On April 14, 2011, in Newark, N.J., Itzhak Friedlander was sentenced to 24 months in prison, followed by two years of supervised release, after pleading guilty to an Information charging him with conspiracy to launder money to conceal and disguise unlawful activity. According to documents filed in this case and statements made in court, Friedlander admitted that from June 2007 to August 2008, he conspired with other co-conspirators to launder money through his account at a purported charitable entity called Gmach Shefa Chaim. The funds were proceeds of unlawful activities – namely, bank fraud, trafficking in counterfeit goods, and concealment of property from a federal bankruptcy court and trustee. The conspirators planned to funnel the money through Gmach Shefa Chaim to public officials in Union City in exchange for approvals to develop a Union City property. Friedlander admitted that the value of funds he conspired to launder was approximately $175,000. Two of Friedlander’s co-conspirators have been sentenced to prison terms ranging from 5 months to 41 months.
Former Kentucky County Election Commissioner Sentenced to 20 Years for Racketeering and Voter Fraud Conspiracies
On March 8, 2011, in Frankfort, Ky., Charles Wayne Jones, a former democratic election commissioner in Clay County, was sentenced to 240 months in prison for conspiring with a former circuit court judge, a school superintendent and other county officials in schemes that involved racketeering, money laundering and voter fraud. In March 2010 a jury convicted Jones and seven others for their role in helping a criminal enterprise make millions of dollars and obtain power and authority in the county The jury also found that the eight men were jointly liable for $3.4 million that represented the salaries and contracts they were able to get as a result of the conspiracies. According to information presented in court, as an election commissioner, Jones helped the Clay County board of elections control the outcome of the primary and general elections during 2002, 2004 and 2006. Evidence at the trial proved that during elections, Jones picked election officers who assisted in corrupting the voting process at Jones’ direction. Jones also gave specific instructions to the officers on how to manipulate the voting machines to steal votes. This was done so that the enterprise could ensure victory for the slate of candidates they wanted in county offices. Jones intentionally prepared false election reports to be sent to Frankfort that inaccurately reported voting totals to help conceal the conspiracy. In addition, he and co-defendant William Stivers boasted on recorded conversations how they helped pick certain juries and could influence the outcome of court cases that co-conspirator Cletus Maricle presided over as circuit court judge. Court documents cite two civil cases in which the corrupted jurors helped render verdicts that involved multi-million dollar pay outs. On March 8, 2011, Stivers was sentenced to 292 months in prison.
Ex-MetroHealth Hospital Official Sentenced in Corruption Probe
On February 9, 2011, in Cleveland, Ohio, Thomas J. Greco, Jr. was sentenced to 112 months in prison for his role in a bribery scheme involving construction contracts for the MetroHealth System. Greco was found guilty by a jury on June 8, 2010, of conspiracy to commit bribery concerning Ppograms receiving federal funds; bribery concerning programs receiving federal funds; Hobbs Act conspiracy, extortion under color of official right; making and subscribing to a false tax return; and conspiracy to commit mail fraud. According to court documents, Greco previously worked as the construction manager for the MetroHealth System, a hospital system supported by Cuyahoga County taxpayers. In that role, Greco and former MetroHealth Vice President John Carroll helped East-West Construction Co. get contracts at MetroHealth. In return, East-West executive Nilesh Patel provided things of value to Carroll and Greco. Carroll was provided trips abroad while Greco received gift cards, among other things. Carroll, Patel and Greco funded the bribes by causing MetroHealth to pay inflated costs to East-West Construction.
Former Field Investigator with New Jersey Department of Labor Sentenced in Bribery Scheme
On January 21, 2011, in Camden, N.J., James Peyton was sentenced to 42 months in prison in connection with a bribery scheme. Peyton previously pleaded guilty to an Information charging him with acceptance of a bribe and subscribing to a false tax return. Peyton’s responsibilities as a field investigator included conducting audits of employer books and records, reviewing quarterly payroll tax filings, and taking other investigative steps to ensure employer compliance with various payroll tax laws. According to court documents and statements made in court, Peyton admitted that from 2006 to 2009, he solicited and accepted corrupt cash payments from owners or operators of temporary labor firms that were in the scope of his inspection activities with the intent to be influenced in the performance of his official duties as an employee of the Department of Labor. According to the Complaint, Peyton took as much as $8,000 in cash bribes per quarter. Peyton admitted that in exchange for corrupt payments, he prepared tax forms that intentionally understated the amount of tax owed to the state by temporary labor firms. Peyton also admitted that he filed a 2007 U.S. Individual Income Tax Return that contained false information. He falsely claimed total taxable income of $65,728 for the calendar year 2007, which failed to claim his income gained through the bribery scheme.
Former Ohio County Auditor Sentenced to Nearly 22 Years in Prison
On December 15, 2010, in Cleveland, Ohio, Frank P. Russo, former Cuyahoga County Auditor, was sentenced to 262 months in prison and ordered to pay $6,970,905 in restitution. According to court documents, between March 1998 and May 2009, when he was employed as the Cuyahoga County Auditor, Russo participated in schemes involving more than $1.2 million in bribes in the form of cash, home improvements and travel to Las Vegas, Nevada, in exchange for county contracts, jobs, raises, reductions in tax valuations and other official favors. Russo took more than $1.2 million in bribes in exchange for giving more than $21.4 million in commercial real estate contracts to VAS Enterprises, according to court documents. In addition, Russo gave Joseph Gallucci a job and cash in exchange for running a sham campaign against him. Russo also filed false tax returns for the years 2004 through 2008 and he obstructed justice. Russo met with a friend at a religious shrine in suburban Cleveland in 2009. He asked the friend to tell investigators that a $10,000 bribe payment Russo accepted was actually a donation made when Russo’s son died in 1995.
Former Bureau of Prisons Employee Sentenced For Fraud, Conflict Of Interest
On December 14, 2010, in Pensacola, Fla., former federal Bureau of Prisons employee James Lee Bailey was sentenced to 27 months in prison and three years of supervised release on charges that he conspired to manipulate the sale of surplus equipment from the UNICOR factory at the Marianna, Florida federal prison facility. Bailey, of Marianna, had earlier entered guilty pleas to charges of conspiracy to violate the laws of the United States, conflict of interest, deprivation of honest services, money laundering, and making a false statement. As part of his sentence, Bailey is required to pay a $5,000 fine, to forfeit $25,000, and to pay $1,900 in special monetary assessments. The superseding indictment alleged that between 2004 and 2007, Bailey and Marianna business man Lee J. Temples maintained an undisclosed business relationship involving Fast-Lane Computers and E-Surplus Solutions. In Bailey’s position as the factory manager and industrial specialist at the UNICOR computer recycling factory in Marianna, he was responsible for selling on eBay surplus computer equipment that had been refurbished by BOP inmates. Temples, his cousin, became the exclusive eBay contractor for UNICOR. UNICOR is a wholly-owned, self-sustaining Government corporation operated by the Bureau of Prisons (BOP). The superseding indictment alleged that Bailey directed the highest quality equipment to Temples and took steps to eliminate potential competition from other UNICOR contractors. Profits from these arranged sales were split between Bailey and Temples, with Bailey receiving $253,252 over the course of three years.
Former Two-Year College System Chancellor Sentenced to Over 6 Years in Prison
On November 18, 2010, in Birmingham, Ala., Roy W. Johnson, Jr., the former Alabama two-year college system Chancellor, was sentenced to 78 months and ordered to forfeit $18,206,485 and his Opelika house. Johnson pleaded guilty in March 2008 to a 15-count Information that charged him in connection with bribery and kickback schemes with several contractors who sought work with the Alabama Department of Postsecondary Education and its subordinate institutions – more than 25 two-year and technical colleges across the state. According to court documents, from 2002 through 2006, Johnson used his position as Chancellor to corruptly enrich himself and members of his family. He solicited and received money and services from contractors and, in return, helped those contractors get business within the postsecondary department. After learning he was under investigation, Johnson tried to hide his crimes and obstruct the investigation through the use of false invoices, fraudulent loans and fictitious entities to move money from the state to himself and his family members. As part of his plea agreement, Johnson agreed to cooperate with the government in its investigation of corruption in the two-year college system.
Former General Counsel of the Northeast Ohio Regional Sewer District Sentenced on Bribery and Tax Charges
On October 19, 2010, in Cleveland, Ohio, William B. Schatz was sentenced to 70 months in prison, followed by two years of supervised release and ordered to pay $849,070 in restitution. Schatz, of Moreland Hills, Ohio, pleaded guilty to charges of bribery in federally funded programs, theft and embezzlement in federally funded programs, and filing false tax returns for corruptly soliciting and accepting bribes while he served as general counsel of the Northeast Ohio Regional Sewer District (NEORSD). According to court documents, from 1979 until August 2007, Schatz was the general counsel of the NEORSD. During his tenure, the NEORSD had major sewage tunnel contracts including the Mill Creek Tunnel Contract, Phases 2 and 3. Schatz admitted that from in or about 2000, through on or about April 26, 2007, he corruptly solicited and accepted approximately $682,130, from a contractor, Robert J. Kassouf, whose company, The Kassouf Company, was part of a Joint Venture working on the Mill Creek Tunnel Contracts. Schatz received the payments through an intermediary company, Harvard Refuse, Inc. and its president, Stanley Lojek.
Schatz also admitted that from in or about 2002, through on or about December 15, 2005, he embezzled, stole, and obtained by fraud, NEORSD property by, among other things, depositing checks made payable to NEORSD (including insurance premium returns and NEORSD tenant payments) totaling approximately $166,940 into accounts he controlled using a fraudulent deposit stamp he had obtained for this purpose. Schatz further admitted that he failed to report approximately $822,322 income from his private law practice, as well as his bribery and embezzlement income, on his tax returns for calendar years 2003 through 2007.
Former North Carolina County Sheriff Sentenced for Misappropriating County Funds
On October 13, 2010, in New Bern, N.C., Ralph Thomas, former Carteret Sheriff, was sentenced to 14 months in prison, to be followed by three years of supervised release and ordered to pay $84,880 in restitution. Thomas, of Beaufort, North Carolina, pleaded guilty in May 2010 to conspiring to commit an offense against the United States for misappropriating county funds. According to court documents, from 1997 to 2006, Thomas stole funds that were designated for the use of covert drug investigations. After drug funds were cashed, Thomas would take a portion of the funds (between 25-50 percent) for his own use.
U.S. Army Major Sentenced to 21 Months in Prison for False Statements Charge Related to Attempt to Smuggle Currency from Iraq to the United States
On October 8, 2010, in Memphis, Tenn., U.S. Army Major Charles Sublett was sentenced to 21 months in prison, two years of supervised release and ordered to forfeit $107,900 and 17,120,000 Iraqi dinar for smuggling more than $100,000 in currency from Iraq. According to court documents, Sublett was deployed to Balad Regional Contracting Center on Logistical Support Area (LSA) Anaconda in Iraq from August 2004 through February 2005. LSA Anaconda is a U.S. military installation that was established in 2003 to support U.S. military operations in Iraq. According to the indictment, Sublett served as a contracting officer while deployed to LSA Anaconda. As a contracting officer, Sublett was responsible for, among other things, evaluating and supervising contracts with companies that provide goods and services to the U.S. Army. Sublett admitted that, on January 11, 2005, he sent a package from Balad, Iraq, to Killeen, Texas, which was seized by U.S. Customs and Border Protection officers in Memphis. Sublett admitted that, on the international air waybill, he falsely described the contents of the package as books, papers, a jewelry box and clothes with a total declared customs value of $140 when, in fact, Sublett knew the package contained $107,900 in U.S. currency and 17,120,000 in Iraqi dinar. Sublett also admitted that he failed to file a currency or monetary instruments transaction report (CMIR) as required by federal law when transporting currency in amounts of more than $10,000 into or out of the United States. During the plea hearing, Sublett admitted to making false claims to investigators regarding his attempt to bring the currency into the United States in an effort to impede their investigation.