Examples of Public Corruption Investigations - Fiscal Year 2014
The following examples of public corruption investigations are written from public record documents on file in the courts within the judicial district where the cases were prosecuted.
Former Traffic Court Judge Sentenced for Grant Fund Fraud
On Aug. 6, 2014, in Philadelphia, Pennsylvania, Robert Mulgrew was sentenced to 30 months in prison and three years of supervised release. Mulgrew was also ordered to pay $199,274 in restitution to the Commonwealth of Pennsylvania Department of Community and Economic Development (DCED) and $123,314 as restitution, penalties and interest to the IRS. Mulgrew pleaded guilty on Sept. 19, 2013, to mail fraud and conspiracy to commit mail fraud and filing a false tax return. According to court documents, Mulgrew, and co-defendant Lorraine Dispaldo, engaged in a scheme to fraudulently receive and misuse Pennsylvania state grant funds awarded to non-profit groups. Between 1996 and 2008, the DCED awarded hundreds of thousands of dollars in grants to two community groups with which Mulgrew and Dispaldo were associated. Mulgrew and Dispaldo misrepresented their intentions to DCED and used thousands of grant dollars to pay Mulgrew’s relatives and associates and for Mulgrew’s personal uses. Mulgrew did not report the additional income from the fraud scheme on his tax return and claimed false business deductions which improperly reduced his tax liability. Dispaldo was sentenced in November 2013 to 18 months in prison.
Former Department of Public Works Employee Sentenced for Accepting Bribes
On July 29, 2014, in Miami, Florida, Garfield Perry, of North Miami Beach, was sentenced to 60 months in prison, one year of supervised release and ordered to pay a fine of $12,500. Perry previously pleaded guilty to conspiring to accept bribes in connection with programs receiving federal funds and committing extortion. According to court documents, from at least 2002 through 2009, Perry was the Roadway Lighting Coordinator for the Department of Public Works in Miami-Dade County. In this capacity, Perry was responsible for, among other things, overseeing the maintenance of more than 22,000 street lights in the county’s roadway system. From 2006 through October 2009, Perry accepted bribe payments from a manufacturer’s representative totaling approximately $150,000. Perry regularly directed the manufacturer’s representative to make the bribe payments by paying down debts owed by Perry, including payments on two home mortgages, one car loan, two home insurance policies, two car insurance policies, and eight credit cards. Perry also accepted cruise vacations, domestic and international airline tickets, payments for hotels and theater tickets as bribe payments. Perry regularly directed the manufacturer’s representative to make bribe payments by issuing checks payable to third parties, and, after the checks were cashed, determined the manner in which the proceeds were to be split. Perry falsely certified to Miami-Dade County that he was not engaged in any outside employment and did not receive any gratuities. In return for the bribe payments, Perry helped to ensure that the manufacturer’s representative lighting products were used in Public Works’ projects.
Former Texas Sheriff Sentenced for Money Laundering
On July 17, 2014, in McAllen, Texas, Guadalupe Trevino, aka Lupe Trevino, of McAllen, was sentenced to 60 months in prison, two years of supervised release and ordered to pay a $60,000 fine. Trevino, the former sheriff of Hidalgo County, pleaded guilty on April 14, 2014, to conspiracy to commit money laundering. According to court documents, during 2011 and 2012, Trevino received cash contributions for his election campaign from an alleged drug trafficker. Trevino admitted he accepted the money, knowing it was from illegal activities. Trevino also admitted he accepted the monies directly and through others as donations to assist with his 2012 election campaign. Some of the monies received were subsequently deposited into bank accounts Trevino controlled and were comingled with other funds. During and after the transactions, Trevino and others acted to disguise and conceal the nature, location, source, ownership and control of the currency by filing false Candidate/Officeholder Campaign Finance Reports and producing other documents.
Former School Board Member Sentenced for Bus Contracts Fraud Scheme
On July 16, 2014, in Chicago, Illinois, Gloria Harper was sentenced to 120 months in prison and ordered to pay approximately $7.2 million in restitution. Harper pleaded guilty to wire fraud and filing a false tax return. According to court documents, Harper admitted that between 2001 and 2010 she instigated and orchestrated a fraud scheme with four co-defendants, to funnel kickbacks to her and her co-defendants, Alice Sherrod, Tommie Boddie, Derrick Eubanks and Barrett White, and made more than $9.6 million in profits. Harper, who was a member of the Northern Chicago School District (NCSD) board from 1999 to May 2009, and Sherrod, who was District 187's transportation director from 2001 to July 2010, used their positions to enrich themselves by soliciting and accepting gifts and cash from their three co-defendants in exchange for favorable official action regarding student transportation contracts. Initially, Harper and Sherrod received kickbacks of approximately $4,000 to $5,000 a month but, by 2003, they were collecting approximately $20,000 a month. The four co-defendants have also pleaded guilty and are awaiting sentencing.
Former New Orleans Mayor Sentenced for Conspiracy, Bribery, Honest Services Wire Fraud, Money Laundering and Tax Violations
On July 9, 2014, in New Orleans, Louisiana, C. Ray Nagin, a resident of Frisco, Texas, was sentenced to 120 months in prison, ordered to pay $84,264 in restitution to the Internal Revenue Service and forfeit $501,200. On Feb. 12, 2014, Nagin was found guilty by jury trial of conspiracy, bribery, honest services wire fraud, money laundering and tax violations. According to court documents, beginning around June 2004, and continuing until around Jan. 18, 2013, Nagin, a former mayor of New Orleans, defrauded the City of New Orleans and its citizens of his honest services through a bribery and kickback scheme. Nagin used his public office and his official capacity to provide favorable treatment to businesses and individuals providing him with bribery and kickback payoffs. In addition, Nagin filed income tax returns for the years 2005, 2006, 2007 and 2008, where he knowingly reported false incomes for those tax years.
Former Maine Selectwoman and Husband Sentenced
On June 13, 2014, in Bangor, Maine, Carole J. Swan, of Chelsea, was sentenced to 87 months in prison and three years of supervised release. Carole Swan was also fined $125,000 and ordered to pay over $106,000 in restitution. Carole Swan, an elected member of the Chelsea Board of Selectmen, was previously convicted on charges of extortion, federal tax fraud and federal worker’s compensation fraud. On June 2, 2014, Carole Swan’s husband, Marshall Swan, a former contractor, was sentenced to 33 months in prison, one year of supervised release and fined $40,000 for federal tax fraud. According to court documents, Marshall and Carole Swan filed false federal income returns for tax years 2006 through 2010 in which they under-reported about $650,000 in gross receipts and sales for their business, Marshall Swan Construction. They evaded about $145,000 in income and self-employment taxes. Carole Swan also fraudulently obtained over $75,000 in worker’s compensation benefits, by failing to report, among other things, her ownership of, and work for, Swan Construction and a harness horse racing business, and by under-reporting the hours she worked as a selectman and assessor. In addition, between January 2010 and February 2011, Carole Swan used her position to extort and attempt to extort $20,000 from a local construction company that plowed, salted and sanded Chelsea’s roads.
Former Detroit Chief Administrative Officer Sentenced on Corruption and Tax Offenses
On May 29, 2014, in Detroit, Michigan, Derrick Miller, of Vienna, Virginia, was sentenced to 12 months in a halfway house for corruption and tax offenses. Miller was also ordered to pay restitution and back taxes with penalties to the IRS. According to court records, from 2005 to 2007, Miller, served as chief administrative officer and chief information officer for the City of Detroit. In these capacities, Miller had authority over the lease and sale of properties owned by the City of Detroit. During that period, Miller accepted $115,000 as corrupt rewards from a real estate broker who received commissions in connection with the lease or sale of city properties. In October 2008, Miller filed an individual income tax return for the 2007 tax year in which he willfully made statements that he knew were false regarding the amount of income he received from two of his companies, Atrium Financial LLC and Citivest LLC, with the intent of concealing that income from the IRS. Miller intentionally failed to report on his return the $46,725 bribe he received that year from the real estate broker. Miller also intentionally failed to report on his tax return a total of $568,000 he received in 2007 for his assistance to a real estate company that entered into a purchase and leaseback of a portfolio of properties. The total amount of additional tax due and owing for tax year 2007 was $240,858.
Former Atlanta Public School Chief Information Officer Sentenced for Taking Kickbacks
On May 29, 2014, in Atlanta, Georgia, Jerome Oberlton, former Atlanta Public Schools (APS) Chief Information Officer, was sentenced to 41 months in prison, three years of supervised release and ordered to pay $735,130 in restitution. Oberlton pleaded guilty to conspiring to receive kickbacks in exchange for awarding a $780,000 contract to a computer vendor. According the charges and other information presented in court, Oberlton had overall management responsibility for the APS information technology program. In January 2007, the school system issued a request for proposal (RFP) for a Data Warehousing (DW) project. The DW project was intended to centralize information relating to APS operations, including student information, so that it was maintained digitally in a secure, easily-accessible manner. From the start of the project in January 2007, co-defendant Mahendra Patel and Oberlton conspired to influence the RFP process and caused the winning bidder to be selected in exchange for kickbacks paid to both. In order to hide the bribes, Oberlton created Global Technology Partners (GTP) and, later, Global Technology Services (GTS), funneling the bribe payments through these shell companies. Oberlton concealed his ownership of GTP and GTS from the school system, even when questions arose in 2007. In contrast, the kickbacks to Patel were disguised as sales commissions for non-existent consulting work he supposedly performed for the shell companies. In reality, Patel acted as an intermediary, helping to negotiate the kickbacks to Oberlton from the vendor. The computer vendor ultimately paid approximately $60,000 in bribes to Oberlton over almost six months and, in return, the company received $780,000 in APS project work.
Former Chief Administrative Officer for City of Bell Sentenced for Cheating IRS to Avoid Taxes on Corrupt Activities
On April 14, 2014, in Los Angeles, Calif., Robert A. Rizzo, the former top administrator in the City of Bell, was sentenced to 33 months in prison and ordered to pay $255,984 in restitution. Rizzo pleaded guilty in January 2014 to conspiracy and filing a false federal income tax return with the IRS. According to his plea agreement, Rizzo created a corporation to fraudulently claim losses on his income tax return, which served to illegally reduce his tax liability on the significant income he was receiving from the City of Bell. Sometime in 2002, Rizzo created an S Corporation that he called R.A. Rizzo Incorporated (RARI). Rizzo used RARI to claim bogus losses in relation to a purported rental property in Auburn, Wash. RARI’s corporate tax return fraudulently deducted more than $571,530 in losses for the years 2006 through 2009. In addition, Rizzo used a RARI account to pay for more than $80,000 in personal expenses in 2009 and $120,000 in construction work on his residence in Huntington Beach in 2010. RARI’s tax returns falsely claimed that these expenses were related to rental property.
Louisiana Man Sentenced for Bribery
On March 12, 2014, in New Orleans, La., Aaron Bennett was sentenced to 15 months in prison, three years of supervised release and ordered to pay a $200 assessment and $10,000 fine. Bennett pleaded guilty on Oct. 14, 2011 to conspiracy to commit bribery and bribery in connection with a program receiving federal funds. According to court documents, on or about October 1, 2007, Bennett, using the company name Benetech, LLC, entered into a contract with the Plaquemines Parish Sheriff’s Office (PPSO). The contract required Bennett to provide project management services relating to specific requirements for recovery from damages due to previous and future disasters. Under the contract between the PPSO and Benetech, Bennett submitted numerous invoices to the PPSO for payment. Starting in January 2008 and through about August 2011, Bennett submitted invoices to Sheriff Hingle, who was in charge of PPSO. Upon approval of the invoices for payment, Bennett corruptly gave Hingle $10,000 cash as a bribe for a total of $30,000. These three payments of $10,000 each were made with the intent to influence and reward Hingle for his approval and payment of Bennett’s invoices on the contract with PPSO.
Former Illinois County Commissioner Sentenced for a Series of Public Corruption Schemes
On Feb. 19, 2014, in Chicago, Ill., Former Cook County Commissioner Joseph Moreno was sentenced to 132 months in prison and ordered to forfeit $100,000 and pay $138,000 in restitution. On July 1, 2013, Moreno pleaded guilty to conspiracy to commit extortion. According to court documents, between 2008 and 2010, Moreno engaged in a series of public and personal corruption schemes which included kickbacks, bribes, perjury and extortion. Moreno also evaded his federal income taxes between 2007 and 2010 by misreporting the income from his law office.
Former County District Attorney Sentenced in Connection with South Texas Bribery Scheme
On Feb. 11, 2014, in Brownsville, Texas, former Cameron County District Attorney Armando R. Villalobos was sentenced to 156 months in prison, three years of supervised release and ordered to pay $339,000 in restitution. In May 2013, a federal jury convicted Villalobos of one count of violating the Racketeer Influenced and Corrupt Organizations (RICO) Act, one count of conspiracy to violate the RICO Act and five counts of extortion. Evidence presented at trial revealed that from Oct. 2, 2006, through May 3, 2012, Villalobos and others were involved in a scheme to illegally generate income for themselves and others through a pattern of bribery and extortion, favoritism, improper influence, personal self-enrichment, self-dealing, concealment and conflict of interest. Jurors found that Villalobos solicited and accepted over $100,000 in bribes and kickbacks in the form of cash and campaign contributions in return for favorable acts of prosecutorial discretion, including minimizing charging decisions, pretrial diversion agreements, agreements on probationary matters and case dismissals. Furthermore, Villalobos solicited and arranged for private counsel to handle civil and forfeiture matters associated with criminal matters pending in the Office of the District and County Attorney of Cameron County.
Former Mayor of New Jersey City Sentenced for Evading Income Tax
On January 6, 2014, in Trenton, N.J., Carmine C. Inteso Jr., of Toms River, was sentenced to six months in prison, six months of house arrest and two years of supervised release. Inteso pleaded guilty in December 2012 to one count of tax evasion. According to court documents, from 2002 through 2007, Inteso held the positions of Township Committee member, mayor, deputy mayor, and councilman for the Township of Toms River. Beginning in 2005 and continuing through 2008, Inteso accepted hundreds of thousands of dollars in payments from an insurance broker whose companies provided insurance brokerage services for New Jersey municipal entities. Inteso directed the insurance broker to make the payments to a company Inteso controlled and that had ceased operating by 2007. Inteso used the funds to pay for his personal expenses and withdrew significant amounts of cash. Despite receiving approximately $291,000 in income from the insurance broker during calendar years 2006, 2007 and 2008, Inteso failed to file personal income taxes for those years.
New Jersey Insurance Broker Sentenced
On January 6, 2014, in Trenton, N.J., Frank Cotroneo, of Chester, N.J., was sentenced to 37 months in prison and three years of supervised release. Cotroneo was also ordered to pay $3,275,677 in restitution to the Toms River School District and forfeit $9,126,200. Cotroneo, an insurance broker with an office in Morristown, N.J., previously pleaded guilty to one count each of bribery and tax evasion arising from his participation in a scheme to pay hundreds of thousands of dollars in bribes to the former superintendent for the Toms River Regional School District, in exchange for his official assistance. According to court documents, Cotroneo admitted that from 2002 to April 2009, he and his co-conspirators paid bribes and other benefits to the superintendent of the district. The payments were made to allow Cotroneo and another insurance broker for the school district to obtain and keep the lucrative insurance brokerage contracts with the district. To facilitate the scheme, the former school superintendent approved a workers’ compensation insurance contract, which yielded between $500,000 and $600,000 annually in excess fees. Those proceeds were to be used to make hundreds of thousands of dollars in bribes to the former school superintendent. Cotroneo also admitted that for tax years 2005 to 2007, he evaded the assessment of hundreds of thousands of dollars of federal income taxes by concealing the illegal proceeds he received from his co-conspirator and others during the course of the bribery scheme.
Ohio Man Sentenced for Bribing Public Officials
On December 18, 2013, in Cleveland, Ohio, Daniel Gallagher, of Strongsville, Ohio, was sentenced to 48 months in prison and ordered to pay $87,000 in restitution for a series of bribery conspiracies involving public officials. According to court documents, Gallagher, a former Cuyahoga County Engineer’s Office employee, owned a company, Eagle Consulting. Another company paid Gallagher $143,000 to keep the County Engineer’s Office at it’s complex. Gallagher gave a portion of the money to others involved in the scheme for limousines, gambling trips and personal services. Other bribery schemes included using certain software for the Engineer’s Office, with payments then going to Eagle Consulting, and helping steer another county contract to a business that paid $115,000 to Gallagher. Eagle Consulting was also used as a way to funnel bribes to a member of the Parma School Board, from a company that received a $1.8 million contract from the Parma Schools.
Former Michigan Public Schools Accountant Sentenced on Fraud and Money Laundering Charges
On December 18, 2013, in Detroit, Mich., Sandra Campbell was sentenced to 70 months in prison and ordered to pay $530,091 in restitution to the Detroit Public Schools. Campbell, a former Detroit Public Schools contract accountant and School Board candidate, was sentenced on charges of program fraud against the Detroit Public Schools, money laundering and criminal tax fraud. Co-defendant Domonique Campbell, daughter of Sandra Campbell, is currently awaiting sentencing. According to court documents, between 2004 and 2008, Sandra and Domonique Campbell obtained in excess of $530,000 from the Detroit Public Schools through a fraudulent scheme in which orders were placed with the Campbells’ sham company for books and educational materials never provided to the schools. Sandra and Domonique Campbell conspired to launder the fraud proceeds and to defraud the IRS by failing to report the money they fraudulently obtained from the Detroit Public Schools as income on their tax returns.
Former President of Union Sentenced for Accepting Kickbacks and Tax Evasion
On November 21, 2013, in Brooklyn, N.Y., Hector Lopez was sentenced to 48 months in prison, ordered to pay $800,371 in restitution and forfeit an additional $371,517 to the federal government. Lopez was the former president of the Metal Polishers Union (Local 8A-28A) and Chairman of the Board of Trustees of the Local 8A-28A welfare fund. On April 9, 2013, Lopez pleaded guilty to conspiracy to commit mail and wire fraud and tax evasion. According to court documents, Lopez accepted kickbacks from multiple sources. Additionally, Lopez failed to report over $300,000 in income from his fraudulent schemes, resulting in a tax loss to the United States of over $100,000. Finally, Lopez criminally violated the Taft-Hartley Act by living rent-free with his family in a New Jersey home owned by the employer trustee, whose company had a collective bargaining agreement with the Union. Lopez also illegally structured over $82,000 in cash deposits at local banks to evade federal currency reporting requirements.
Former Congressman and Real Estate Investor Sentenced on Federal Charges
On October 28, 2013, in Tucson, Ariz., former U.S. Congressman Rick Renzi was sentenced to 36 months in prison. James Sandlin was sentenced to 18 months in prison. Renzi, of Burke, Va., and Sandlin, of Sherman, Texas, were convicted on June 11, 2013. Renzi was found guilty of 17 felony offenses including conspiracy, honest services wire fraud, extortion under color of official right, racketeering, money laundering and making false statements to insurance regulators. Sandlin was convicted of 13 felony offenses including conspiracy, honest services wire fraud, extortion under color of official right and money laundering. According to evidence at trial, Renzi, then a member of Congress from Arizona’s 1st Congressional District, promised in 2005 to use his legislative influence to profit from a federal land exchange that involved property owned by Sandlin, a real-estate investor. At the time, Sandlin owed Renzi $700,000 in future payments from their business dealings, and Renzi threatened proponents of the land exchange that he would not support it unless they purchased Sandlin’s property in Cochise County, Ariz. When they refused, Renzi promised a second proponent of a land exchange that he would support the exchange if they purchased Sandlin’s property. According to an agreement reached in May 2005, Sandlin was paid $1 million in earnest money, out of which he paid $200,000 to Renzi. Just before Sandlin received the $1.6 million balance owed on the exchange, he paid an additional $533,000 to Renzi. Evidence at trial further showed that from 2001 to 2003, Renzi engaged in insurance fraud by diverting his clients’ insurance premiums to fund his first campaign for Congress, and he subsequently sent false letters to his insurance customers and provided false statements to various state regulators who were investigating his activities.
Former County Worker and School Board Member Sentenced for Accepting Bribes
On October 28, 2013, in Cleveland, Ohio, Santina “Sandy” Klimkowski was sentenced to 48 months in prison and ordered to pay $270,302 in restitution. Klimkowski previously pleaded guilty to Hobbs Act conspiracy, bribery, conspiracy to commit mail fraud, making false statements, tax charges and other crimes. According to court documents, Klimkowski, a Maple Heights school board member, participated in a scheme where contracts for commercial appraisal work went to a company that paid bribes to a co-conspirator; a portion of which went to Klimkowski. She also got cash and home repairs in exchange for using her position on the school board to steer construction contracts to contractors who paid bribes to her.
Former Detroit Mayor and Others Sentenced in Racketeering Conspiracy
On October 10, 2013, in Detroit, Mich., Former Detroit Mayor Kwame M. Kilpatrick was sentenced to 336 months in prison and three years of supervised release. Bobby Ferguson was sentenced to 252 months in prison. On October 17, 2013, Bernard Kilpatrick was sentenced to 15 months and one year of supervised release. In March 2013, Kwame Kilpatrick was convicted by a jury of 24 counts of extortion, mail fraud, tax violations and racketeering. According to court documents, Kwame M. Kilpatrick used his position as Mayor of Detroit and Michigan State House Representative to execute a wide ranging racketeering conspiracy involving extortion, bribery and fraud. The conspiracy was a scheme to use the power and authority of Kwame Kilpatrick’s office as Mayor of Detroit to extort municipal contractors by coercing them to include Ferguson in public contracts and to rig the awarding of public contracts to ensure that Ferguson obtained a portion of the revenue from those contracts. Bobby Ferguson obtained at least $73 million in revenues from municipal contracts through the scheme, a portion of which he shared with his co-conspirators. Bernard Kilpatrick was sentenced for filing false tax returns.