Examples of Public Corruption Investigations - Fiscal Year 2012
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.
Former Superintendent of New Jersey Regional School District Sentenced on Federal Charges
On September 14, 2012, in Trenton, N.J., Michael J. Ritacco, of Seaside Park, N.J, was sentenced to 135 months in prison, three years of supervised release and fined $100,000. Ritacco pleaded guilty to a Superseding Indictment charging him with mail fraud and conspiracy to defraud the IRS. According to court documents and statements made in court, from 2002 to April 2010, Ritacco accepted between $1 million and $2 million in bribes and other benefits from co-conspirators Francis X. Gartland, the former insurance broker for the Toms River Regional School District; Frank D’Alonzo, a former administrator at the Toms River Regional School District; and Frank Cotroneo, an insurance broker, and others. The bribes and other benefits were made in return for Ritacco’s official assistance to Gartland and others in obtaining and maintaining insurance business with the Toms River Regional School District. Ritacco also admitted that in 2002, he, Gartland, Cotroneo, and D’Alonzo agreed to have Ritacco approve a workers’ compensation insurance contract between Gartland and the school district, which yielded approximately $500,000 to $600,000 annually in excess fees, with such proceeds to be used to make hundreds of thousands of dollars in bribes to Ritacco. To conceal this fraudulent scheme from the Toms River Regional School District Board, as well as the IRS, Ritacco and his co-conspirators agreed to use middlemen, shell companies, sham consulting contracts, and third-party payments, to secretly pass hundreds of thousands of dollars in cash bribes and other payments to Ritacco. Ritacco also admitted to filing fraudulent tax returns for tax years 2004 through 2006 and to conspiring with Gartland to evade Ritacco’s federal income taxes from approximately 2002 to 2010.
Former Ohio Community Development Director Sentenced on Tax Charges
On August 17, 2012, in Cleveland, Ohio, Sanford A. Prudoff, former Lorain Community Development Director, was sentenced to 24 months in prison for fraud, making false statements and tax charges. Prudoff pleaded guilty to conspiracy to commit mail fraud, false statements to law enforcement and three counts of false statements on a federal income tax return. According to the indictment, in or around 2003, Prudoff began receiving monthly payments from Alternatives Agency, purportedly for consulting work. When an employee informed Anthony Calabrese, who served as legal counsel for Alternatives Agency, that the agency received no work product from Prudoff, Calabrese told the employee that Prudoff was consulting on a Lorain expansion project. When the employee questioned the payoff, Calabrese insisted that the employee continue to pay Prudoff. Calabrese did not inform the Alternatives board about the payments and the board did not approve payments. In or around June 2005, Calabrese told the employee that Prudoff’s monthly payment should be issued to another individual, who was related to Prudoff’s girlfriend. In or around July 2005, Calabrese and Prudoff helped this individual form a business and Alternatives Agency began issuing checks to the business for approximately $4,000 a month. Prudoff provided favorable consideration to Calabrese and his designees on business matters, unrelated to Alternatives Agency, in return and in exchange for the consulting fees Prudoff and the business received from Alternatives. Prudoff received approximately $116,000 from Alternatives Agency between 2004 and 2006, and failed to pay approximately $48,000 in taxes over those three years.
Former County Commissioner Sentenced for Racketeering, Tax, and Other Charges
On July 31, 2012, in Cleveland, Ohio, Jimmy Dimora, former Cuyahoga County Commissioner, was sentenced to 336 months in prison. Dimora was convicted in March 2012 of racketeering, bribery, conspiracy, Hobbs Act conspiracy, tax charges and other crimes. According to court testimony, Dimora took more than $166,000 worth of bribes in the form of cash, home improvements, lavish meals at high-end restaurants, gambling trips to Las Vegas and Canada, and other items. The bribes were paid in exchange for Dimora’s efforts to steer contracts to allies, get jobs and raises for associates, intercede with judges on pending cases, lobby for grants and favorable loans for people who paid him, and other official actions.
Former New York State Senator Sentenced for Filing Fraudulent Tax Returns
On June 18, 2012, in White Plains, N.Y., Nicholas A. Spano, a former New York State Senator, was sentenced to 12 months and one day in prison, one year of supervised release and ordered to pay a $30,000 fine. Spano obstructed the ability of the Internal Revenue Service to assess and collect U.S. income taxes by concealing illegal income and filed fraudulent tax returns. According to court documents and statements made in court, from 1987 until 2006, Spano served as a New York State Senator for the 35th district. In that capacity, he was responsible for voting on and approving the operating budget for New York State. A portion of the budget included funding for the Office of General Services (OGS). In 1993, a White Plains-based insurance company began paying Spano a $1,500 monthly fee to act as an outside consultant. In 1996, after the insurance company was awarded a lucrative contract by OGS to become the broker of record for New York State, the payments increased to $5,000 per month. The payments subsequently increased to $6,000 per month in 1999 and $100,000 per year in 2002. The payments stopped in 2008 when the insurance company ceased to be the OGS broker of record. The insurance company payments were made through various corporate entities controlled by Spano, including ONAPS, Inc., which later changed its name to HVM Corp. ONAPS had no employees or offices and was used almost exclusively to receive the insurance company payments. From 2000 through 2008, Spano filed false federal income tax returns that mischaracterized the income he received from the insurance company and other sources to unlawfully reduce his tax burden. Spano wrote checks for more than $180,000 from HVM to a real estate holding company he owned, 221 Ridge Ave. Corp. These checks were for non-existent rental expenses at a rental property the holding company owned. Spano falsely advised his tax return preparer that HVM conducted business at 221 Ridge Avenue, had an office at that location and paid rent to the holding company. As a result, HVM deducted more than $180,000 in false and fraudulent rental expenses on its tax returns. In 2004, Spano also failed to report to the IRS a $45,000 commission he received from the sale of a building to a White Plains real estate developer. Between 2005 and 2006, he also failed to report cash rental payments he received from residential real estate tenants.
Former Arizona State Representative Sentenced for Wire Fraud and Tax Evasion
On June 4, 2012, in Phoenix, Ariz., Richard David Miranda, a former Arizona State Representative, was sentenced to 27 months in prison and ordered to pay $230,342 in restitution. Miranda, of Tolleson, Ariz., served as a member of the Arizona House of Representatives for the 13th District from 2011 until his resignation on February 20, 2012. Miranda previously served as a member of the Arizona State Senate from 2002 until 2011, and the Arizona House of Representatives from 1999 until 2002. Since July 2002, Miranda also served as executive director of Centro Adelante Campesino Inc., a non-profit charitable organization that provided food, clothing and educational assistance to persons in need in and around Maricopa County, Ariz. On March 14, 2012, Miranda pleaded guilty to a two-count Information charging him with defrauding Centro of more than $140,000 and evading income tax on the unlawfully obtained funds. As part of his plea agreement, Miranda agreed to resign from office. According to court documents, Miranda admitted that in May 2005, he initiated a scheme to wind down Centro, sell Centro’s sole remaining asset (a building), and use the proceeds of the sale for personal expenses. To do so, Miranda removed the charity’s longstanding volunteer accountant as an authorized signer on the charity’s bank and credit union accounts and assumed sole control of the charity’s accounts and financial records. He also told the volunteer accountant that the proceeds of the sale would be used to fund scholarships. In March 2007, the building was sold for $250,000, and on March 7, 2007, a significant portion of the profits of that sale, $144,576, were wired across state lines into Centro’s credit union account. Miranda also admitted that within one week of the wire transfer, he began to withdraw the proceeds from Centro’s credit union account without the authorization or knowledge of Centro’s board of directors. By December 31, 2007, Miranda had withdrawn all of the proceeds using checks, withdrawals and electronic funds transfers and used the funds to pay off personal debts and make numerous purchases for personal travel, services, clothing, food and household items. Miranda also failed to report the proceeds of the sale as income on his IRS Form 1040 for calendar year 2007.
Former District of Columbia Council Member Sentenced for Tax Charges and Theft of Government Funds
On May 3, 2012, in Washington, D.C., Harry L. Thomas, Jr., a former member of the Council of the District of Columbia (D.C.), was sentenced to 38 months in prison and three years of supervised release. Thomas pleaded guilty in January 2012 to federal theft and tax charges stemming from a scheme in which he used more than $350,000 in taxpayers’ money that was earmarked for the arts, youth recreation, and summer programs for his own personal benefit, including vehicles, clothing and trips. As part of the plea agreement, he agreed to resign from the D.C. Council. Thomas is the first sitting member of the D.C. Council to be charged with and convicted of a felony. The amount of restitution will be set at a later time; however, Thomas was ordered to forfeit a 2008 Victory motorcycle and 2008 Chevrolet Tahoe truck, both of which are traceable to proceeds of his crimes. Thomas also must pay all outstanding taxes, interest and penalties. As part of the plea, Thomas admitted that he filed false tax returns that did not declare $25,000 in income from tax year 2007, $278,000 from 2008, and $43,000 from 2009.
New Jersey Department of Labor Senior Investigator Sentenced for Bribery Scheme
On March 28, 2012, in Camden, N.J., Joseph Rivera, a senior investigator with the N.J. Department of Labor and Workforce Development, Division of Wage and Hour Compliance, was sentenced to 60 months in prison, three years of supervised release and ordered to pay $250,000 in restitution to the state Department of Labor and Workforce Development. The sentencing was in connection with a bribery scheme in which he accepted $1.86 million from owners and operators of temporary labor firms in return for his official assistance. According to court documents and statements made in court, Rivera’s responsibilities as a senior investigator included inspecting temporary labor firms working in southern New Jersey to verify compliance with state wage and hour laws and with regulations regarding taxes and workers' compensation insurance coverage. Between 2002 and late 2008, he solicited and accepted corrupt cash payments from at least 20 owners or operators of temporary labor firms. Rivera typically calculated the amount of a bribe payment by multiplying $0.25 by the total number of hours worked by a temporary labor firm’s employees. In exchange for these corrupt payments, Rivera used his position for the benefit of the temporary labor firms. He refrained from inspecting these firms and falsely certified that they were complying with state law. Rivera also recommended these firms to other businesses. Rivera also attempted to evade paying taxes on the income derived from the corrupt scheme. For the 2007 tax year he filed an individual tax return that claimed taxable income of $89,696 when he knew his total taxable income was $499,176, upon which he owed $149, 677 in federal income taxes. Rivera agreed to forfeit monies and property equal to $1.863 million, which represents the proceeds he obtained through the bribery scheme.
Former Lackawanna County Commissioners Sentenced on Corruption Charges
On January 30, 2012, in Scranton, Pa., Robert C. Cordaro and Anthony J. Munchak, former Lackawanna County Commissioners, were sentenced to 132 months and 84 months in prison, respectively. In addition, Cordaro must serve three years of supervised release and was ordered to pay $98,856 in restitution to the IRS and a $1,800 special assessment. Cordaro had previously agreed to forfeit $355,000 to the United States, which represents proceeds from the criminal offenses. Munchak was ordered to serve three years of supervised release and to pay a $5,000 fine and $800 special assessment. Cordaro and Munchak were convicted in June 2011 on multiple felony counts of racketeering, bribery, conspiracy and tax fraud charges during their tenure as County Commissioners.
Former Maryland County Council Woman Sentenced for Conspiring to Obstruct Federal Corruption Investigation
On December 9, 2011, in Greenbelt, Md., former Prince George’s County Councilwoman Leslie Johnson, of Mitchellville, Md., was sentenced to 12 months and a day in prison and two years of supervised release for conspiring to commit witness and evidence tampering in order to obstruct a federal corruption investigation. Johnson was also ordered to perform 240 hours of community service, pay a $15,000 fine and forfeit $79,600, the amount of cash recovered from Johnson at the time of her arrest. In November 2010, Leslie Johnson was elected to serve as a member of the Prince George’s County Council, and her husband, Jack B. Johnson, had been serving as the elected Prince George’s County Executive for almost eight years. According to her plea agreement, on November 12, 2010, Leslie Johnson was at home in Mitchellville when FBI and IRS agents knocked on the door with a federal search warrant authorizing a search of the house. While the agents were knocking on the door and announcing that they were federal officers with a search warrant, Leslie Johnson, under direction from her husband, tore up and flushed a $100,000 check given to Jack Johnson in return for his help in securing funds for a developer’s projects. Leslie Johnson also stashed $79,600 in cash in her underwear and bra and tried to leave the house, but she was stopped and searched by federal agents.
Former Maryland County Executive Sentenced for Extortion and Bribery
On December 6, 2011, in Greenbelt, Md., former Prince George’s County Executive Jack B. Johnson, of Mitchellville, Md., was sentenced to 87 months in prison and three years of supervised release for his leadership role in an extortion conspiracy where, in exchange for bribes, Johnson corruptly used his public office to steer millions of dollars in federal and local funds to favored developers and tamper with a witness and evidence. Johnson was also ordered to pay a $100,000 fine and forfeit $78,000 and an antique Mercedes Benz. Johnson was the Prince George’s County Executive from 2002 until December 2010. According to Johnson’s guilty plea and court documents, from 2003 through at least November 12, 2010, Johnson orchestrated a conspiracy in which various business persons offered bribes, including money, trip expenses, meals, drinks, hotel rooms, airline tickets, rounds of golf, employment, mortgage payments, and monetary and in-kind campaign contributions to Johnson and other state and local government officials. According to court documents, the amount of bribes extorted by Johnson and his co-conspirators totaled over $1.6 million. Fifteen defendants have been convicted to date in related investigations.
Illinois Man Sentenced for Money Laundering and Other Charges
On November 23, 2011, in Chicago, Ill., Antoin Rezko was sentenced to 126 months in prison, three years of supervised release, fined $1,600 and ordered to forfeit $105,207 for money laundering, mail fraud, wire fraud and aiding and abetting bribery. According to court documents, Rezko, a businessman who owned and operated a fast food restaurant and a real estate development firm, along with others, devised and participated in a scheme to defraud the beneficiaries of the Teachers’ Retirement System (TRS). Rezko and the others used positions of influence over the TRS Board of Trustees and Planning Board to solicit, demand and receive hundreds of thousands of dollars in kickbacks and payments. Rezko used his relationships with certain state officials to ensure he and his co-defendants had the ability to influence the actions of the TRS and the Planning Board. They established a company that would be chosen by the TRS to make hundreds of millions of dollars in real estate investments and then share in the profits.
Former Con Ed Employees and Private Contractors Sentenced for Their Roles in Bribery Schemes
On November 22, 2011, in Brooklyn, N.Y., fourteen former construction inspectors for Consolidated Edison Corporation of New York, Inc. (Con Ed) were sentenced on charges stemming from schemes in which they solicited and accepted millions of dollars in kickbacks from contractors between 2000 and 2009 in connection with construction projects in Manhattan, the Bronx and Westchester County. Also sentenced were two contractors for paying kickbacks and the brother-in-law of one of the inspectors for laundering bribe payments to conceal their true nature and source. According to court documents, following the attacks of September 11, 2001, Con Ed directed or took part in much of the subsurface construction in lower Manhattan and received hundreds of millions of dollars in federal funds, mainly from the United States Department of Housing and Urban Development, to perform the work. In connection with these projects, Con Ed inspectors solicited bribes in exchange for approving contractor invoices that listed phantom pay items, allowing contractors to perform unnecessary additional work on the projects, and expediting Con Ed payments to the contractors. In the aggregate, these schemes cost Con Ed millions of dollars. All but two of the defendants arrested in connection with the investigation pleaded guilty. Contractor John Connelly was tried and convicted in August 2010 of paying bribes in separate schemes with various Con Ed inspectors, and retired Port Authority of New York and New Jersey project contractor, Nathaniel Ham, was tried and convicted in March 2011 of conspiring with his brother-in-law William Shannon and two other Con Ed inspectors to launder their bribe payments through Ham’s credit union accounts.
The Defendants sentenced are:
• Paul Sanabria: 27 months in prison, $15,000 in forfeiture to the government and $102,865 in restitution to Con Ed.
• James Coffin: 30 months in prison, $214,250 in forfeiture to the government and $132,800 in restitution to Con Ed.
• Thomas Fetter: 30 months in prison, $428,520 in forfeiture to the government and $112,708 in restitution to Con Ed.
• Richard Zebler: 24 months in prison, $50,000 in forfeiture to the government and $68,881 in restitution to Con Ed.
• Kevin Cook: 27 months in prison, $80,000 in forfeiture to the government and $239,109 in restitution to Con Ed.
• Rocco Fassacesia: 27 months in prison, $357,320 in forfeiture to the government and $339,149 in restitution to Con Ed.
• Richard Giannetto: one month in prison, $5,000 in forfeiture to the government and $1,978 in restitution to Con Ed.
• Joseph Lioi: one month in prison, $9,000 in forfeiture to the government and $19,582 in restitution to Con Ed.
• Abraham Panagi: 21 months in prison, $13,000 in forfeiture to the government and $54,350 in restitution to Con Ed.
• Brendan Maher: three years supervised release, $10,000 in forfeiture to the government and $70,759 in restitution to Con Ed.
• William Shannon: 36 months in prison, $250,000 in forfeiture to the government and $188,719 in restitution to Con Ed.
• John Connelly: 18 months in prison.
• Jack Palazzo: 12 months and 1 day in prison, $150,000 in forfeiture to the government and $158,445 in restitution to Con Ed.
• Anselmo Saiz: 21 months in prison and a fine of $100,000.
• Nathaniel Ham: 32 months in prison and $1,136,034 in forfeiture to the government.
• Leonard Diroma: one month in prison, $7,000 in forfeiture to the government and $6,677 in restitution to Con Ed.
Pennsylvania Attorney Sentenced in Tax and Honest Services Fraud Scheme
On November 4, 2011, in Scranton, Pa., Robert J. Powell, an attorney formerly from Hazleton, Pa., was sentenced 18 months in prison, one year of supervised release and ordered to pay a total of $60,000 in fines. Powell also agreed to the civil forfeiture of his ownership interest of a 2002 Ocean Yacht 56 Super Sport and a 1981 Sabreliner 65 corporate jet. According to the Criminal Information, between 2003 and 2008, Powell had knowledge of the actual commission of a felony, an honest services wire fraud committed by former Judges Michael Conahan and Mark Ciavarella, and did knowingly and intentionally conceal the crime by: (1) cooperating in the creation of false records designed to hide, disguise and mis-characterize income received by Conahan and Ciavarella; and (2) transferring tens of thousands of dollars in cash to Michael Conahan with the intent that the cash not be traceable as income. Powell, also knowing that the offense of conspiracy to file false income tax returns had been committed by Michael T. Conahan and Mark A. Ciavarella, intentionally assisted the offenders in order to hinder and prevent their arrest and apprehension. Mark Ciavarella and Michael Conahan were originally charged in January 2009. Conahan was sentenced to 210 months in prison in September 2011. In February 2011 Ciavarella was found guilty on twelve counts, including racketeering and tax fraud. Ciavarella was sentenced to 336 months in prison in August 2011.