UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA ) ( JUDGE KOSIK) UNITED STATES STATEMENT OF OFFENSE CONDUCT

Transcription

1 UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA ) CR. NO. v. ) ROBERT J. POWELL ) ) ) ( JUDGE KOSIK) ) ) Defendant ) ( ELECTRONICALLY FILED) UNITED STATES STATEMENT OF OFFENSE CONDUCT MARTIN C. CARLSON 1

2 UNITED STATES ATTORNEY CHRISTIAN A. FISANICK CHIEF, CRIMINAL DIVISION GORDON A. D. ZUBROD WILLIAM S. HOUSER MICHAEL A. CONSIGLIO AMY PHILLIPS ASSISTANT U. S. ATTORNEYS FACTUAL PREDICATE MISPRISION OF A FELONY (18. U.S.C. 4) Judges for the Courts of Common Pleas are required to file financial disclosure reports annually with the Administrative Office of the Pennsylvania Courts, located in Dauphin County, Pennsylvania and within the Middle District of Pennsylvania. Michael T. Conahan was a judge for the Court of Common Pleas for Luzerne County, Pennsylvania. Between January 2002 and January, 2007, Judge Conahan served as the President Judge for Luzerne 2

3 County. Mark A. Ciavarella was a judge for the Court of Common Pleas for Luzerne County, Pennsylvania. Beginning in about 1996 to June of 2008, Judge Ciavarella served as the head of the Juvenile Court for Luzerne County. In January, 2007, Judge Ciavarella was appointed President Judge for Luzerne County. As judges for the Luzerne County Court of Common Pleas and as public officials in the Commonwealth of Pennsylvania, Judge Conahan and Judge Ciavarella owed a duty of honest services to the public and were charged with serving the people of Luzerne County and the Commonwealth of Pennsylvania in a fiduciary capacity, that is, the defendantsõ election to high public and judicial office carried with it the trust and confidence of the citizens of Pennsylvania that the defendants would exercise their judicial functions and duties for the benefit of the 3

4 people, with scrupulous good faith, impartiality, candor and without corruption and self- dealing. Robert J. Powell was an attorney whose principle office was in Luzerne County, Pennsylvania. PowellÕ s firm, known as The Powell Law Group, P. C., specialized in plaintiffõ s tort litigation, among other areas. In about 2001, Robert Powell approached Judge Conahan and Judge Ciavarella to build a youth detention center in Luzerne County. Conahan and Ciavarella agreed to support the project, having concluded that the Luzerne County youth detention center was deteriorating. Ciavarella recommended that Powell use Mericle Construction for the project. Powell ultimately retained Mericle Construction to build the facility. Unbeknownst to Powell, Robert Mericle offered a finderõ s fee to 4

5 Conahan and Ciavarella for steering the new youth detention center to his company. Ciavarella directed Mericle to run the money through Powell, that is, to make it look as if the finderõ s fee had been paid to Powell. Powell was directed to let the money pass through his accounts and on to the judges. Powell felt that the judges had him over a barrel and acceded to the demand, ultimately allowing over $ 2 million in finderõ s fees to pass through his accounts to the judges. 1 On January 16, 2003, Powell was directed to sign a backdated brokerage agreement fee, dated February 19, 2002, with Mericle Construction, the builder of PA Child Care, for the payment, according to the terms of the agreement, to Powell of $ 997,600. PA Child Care was completed in 1 In addition to the Luzerne County facility, Mericle also built another facility for Powell and his partner in Western Pennsylvania and made upgrades to both facilities, each new construction project generating a new finder s fee. 5

6 February, On January 21, 2003, Mericle Construction wire transferred $ 610,000 of the brokerage agreement fee to an attorney in Schuylkill County, Pennsylvania. The remainder of the money of the brokerage agreement fee, $ 387,600, was wire transferred to Powell on or about January 24, The majority of the remainder of the money was subsequently transferred by Powell to Judge Conahan and Judge Ciavarella at their direction. In addition to the finderõ s fees paid by Mericle to the judges and run through PowellÕ s accounts, Judge Conahan and Judge Ciavarella also demanded kickbacks from Robert Powell in exchange for closing the Luzerne County youth detention center and sending the juvenile offenders to the private youth detention center, known as PA Child Care 6

7 in Luzerne County and Western PA Child Care in Butler County, both built by Mericle for Powell and his partner. In fact, Ciavarella told Powell that he ( Powell) was making a lot of money from the youth detention center and that he had to pay for the privilege. Implicit in the demand for kickbacks was the understanding that the payments were a quid pro quo for the judgesõ exercise of their judicial authority to send juveniles to PA Child Care and to Western PA Child Care and to take other discretionary acts. Powell played no role in nor was he aware of any impropriety by Judge Ciavarella in selecting juveniles for incarceration. On January 29, 2002, President Judge Michael T. Conahan signed a Placement Guarantee Agreement between Pennsylvania Child Care LLC and the Court of Common Pleas for Luzerne County to house juvenile offenders at PA Child Care. The Placement Guarantee 7

8 Agreement provided that the Court of Common Pleas for Luzerne County would pay PA Child Care the annual Rental Installment sum of $ 1,314,000 and stipulated that [ t] he obligation of the Court to make payment of the Rental Installments shall be absolute and unconditional. Robert Powell advised investigators that he that was made to understand that, had he stopped paying the judges, they would have retaliated against him and no more juveniles would have been sent to PA Child Care and to Western PA Child Care, which would have ruined Powell financially. Aware of the criminal activity, Robert Powell took no steps to notify authorities of the criminal activity until after the commencement of the federal investigation. The judges used straw parties and entities to transfer kickbacks from Powell to them. The judges engaged in the laundering of these 8

9 illegal kickbacks in order to make the transactions appear to be legitimate. All told, Powell paid the judges approximately of $ 772,500, often disguising the payments as rental fees relating to docking his boat at the judgesõ condominium in Jupiter, Florida. At other times, Powell paid the judges in cash. The payments were as follows: 1. On or about January 13, 2004, Robert Powell issued a check in the amount of $ 18,000 to the Pinnacle Group of Jupiter, LLC. 2 On or about January 13, 2004, Robert Powell issued a check in the amount of $ 52,000 to the Pinnacle Group of Jupiter, LLC. 3. On or about February 15, 2004, Robert Powell, through Vision Holdings, Inc. issued a check in the amount of $ 78,000 and identified on the face of the check as Reserving Lease to Pinnacle Group of Jupiter, LLC. 4. On or about February 15, 2004, Robert Powell, through Vision Holdings, Inc. issued a check in the amount of $ 75,000 and 9

10 identified on the face of the check as Rental Feb, Mar, Apr to Pinnacle Group of Jupiter, LLC. 5. On or about February 15, 2004, Robert Powell, through Vision Holdings, Inc. issued a check in the amount of $ 47,000 and identified on the face of the check as Slip Rental Fees to Pinnacle Group of Jupiter, LLC. 6. On or about April 30, 2004, Robert Powell, through Vision Holdings, Inc. issued a check in the amount of $ 75,000 and identified on the face of the check as Lease Expenses April, May, June to Pinnacle Group of Jupiter, LLC. 7. On or about April 30, 2004, Robert Powell, through Vision Holdings, Inc. issued a check in the amount of $ 25,000 and identified on the face of the check as Dock Expenses Related April, May, June to Pinnacle Group of Jupiter, LLC. 8. On or about July 12, 2004, in Luzerne County, Robert Powell, through Vision Holdings, Inc. wire transferred $ 120,000 to Pinnacle Group of Jupiter, LLC. 9. On or about September 23, 2004, in Luzerne County, Robert Powell, through Vision Holdings, Inc. wire transferred $ 100,000 to Pinnacle Group of Jupiter, LLC. 10

11 10. On or about August 16, 2006 Powell causes a series of checks for $ 42,000 to be cashed and gave the proceeds to the judges. 11. On or about October 13,2006 Powell causes a series of checks for $ 30,000 to be cashed and gave the proceeds to the judges. 12. On or about November 1, 2006 Powell causes a series of checks for $ 20,000 to be cashed and gave the proceeds to the judges. 13. On or about November 20, 2006 Powell causes a series of checks for $ 50,000 to be cashed and gave the proceeds to the judges. 14. On or about December 18, 2006 Powell causes a series of checks for $ 31,500 to be cashed and gave the proceeds to the judges. 15. On or about December 1, 2006, Robert Powell paid Judge Conahan $ 9,000 in cash from a check that was cashed as a referral fee for a case that was settled. 11

12 As Robert Powell made the demanded payments to the judges, Judge Ciavarella, being the juvenile court judge, commenced sending juveniles to PA Child Care and to Western PA Child Care. Unbeknownst to Powell, some of these juveniles had not been recommended for confinement by the Juvenile Probation Office. Nevertheless, they were sent to PA Child Care in order to keep all of the beds at PA Child Care occupied for the purpose of maximizing profits for PA Child Care. Even after the judges became aware of the federal grand jury investigation into their finances, they continued to demand payments from Powell for the privilege of doing business with Luzerne County. Ultimately, Powell commenced cooperating with federal investigators, met with the judges and recorded incriminating 12

13 conversations with them. These recorded conversations were instrumental in developing the case against the judges. Robert PowellÕs cooperation was a key factor in obtaining guilty pleas from Michael Conahan and Mark Ciavarella. ACCESSORY AFTER THE FACT (18 USC... 3) Count Two of the Information alleges that Mr. Powell, by allowing MericleÕ s findersõ fee payments to Conahan and Ciavarella to be passed through his business accounts, by paying cash to the judges and by disguising payments by check to the judges as rental and leasing fees, acted as an accessory after the fact to the judgesõ conspiracy between themselves to file false tax returns. In other words, aware that the payments were being disguised as legitimate transactions, Robert Powell, as an attorney, was implicitly aware that the judges would of necessity 13

14 have intended ( a) to falsely characterize the nature of their income on their tax returns, and ( b) not to disclose the cash payments from Mr. Powell in their statement of income. For example, to conceal the payments to the judges, the judges directed that false entries be made in the books and records of Pinnacle Group of Jupiter, LLC. These false entries were made by the judges not only as part of the honest services fraud scheme but also to defraud the Internal Revenue Service by, for example, falsely characterizing some of the income as rental income in order to receive favorable tax treatment. The cash payments were not mentioned on their tax returns. Federal income tax returns relating to tax years 2003 through 2006 were filed with the Internal Revenue Service and signed by Judges Conahan and Ciavarella which were materially false to the extent that 14

15 they mischaracterized income the judges received from Robert Powell and Robert Mericle. For tax years 2003 through 2006, the tax loss to the government for Judge ConahanÕ s part in the scheme was in excess of $ 200,000. For tax years 2003 through 2006, the tax loss to the government for Judge CiavarellaÕ s part in the scheme was in excess of $200,000. THE PLEA AGREEMENT The plea agreement calls for Mr. Powell to waive indictment by a grand jury and to plead guilty to a two-count felony information which will be filed against the defendant by the United States Attorney for the Middle District of Pennsylvania. Count One of that information will charge the defendant with a violation of Title 18, United States Code, Section 4, misprision of a felony (wire fraud). The maximum penalty for that offense is imprisonment for a period of 3 years, a fine of $250,000, a maximum term of supervised release of up to 1 year, to be determined by the court, which shall be served at the conclusion of and in addition to any term of imprisonment, the costs of prosecution, denial of certain federal benefits as well as an assessment in the amount of $ Count Two of the information will charge the defendant with a violation of Title 18 U.S.C. Section 3, accessory after the fact 15

16 (conspiracy to file false tax returns). The maximum penalty for that offense is imprisonment for a period of 2.5 years, a fine of $250,000, a maximum term of supervised release of up to 1 year, and a special assessment in the amount of $ Mr. Powell further agrees to cooperate in the ongoing prosecution of others, to pay restituion as determined by the District Court and to forfeit the following assets: (a) a 2002 Ocean Yacht 56 Super Sport, HIN XYU05656D202S, named Reel Justice and owned by Fishin For a Good Time, LLC, 3852 Main Street, Tiverton, Rhode Island; (b) a 1981 Sabreliner 5, Serial Number , Registration N69WU with (2) Garrett TFE-731-3R-1D engines, Serial Nos. P93209 (left) and P83208 (right). The United States agrees that it will not bring any other criminal charges against the defendant directly arising out of the operative facts of the investigation into PA Child Care and Western PA Child Care and will further recommend that Mr. Powell receive a three-level departure for acceptance of responsibility. Should Mr. Powell provide substantial assistance in the prosecution of all other related parties, the United States will seek a downward departure from the applicable sentencing guideline range. 16

17 At time of sentencing, the United States will submit a memorandum to the District Court detailing the precise nature and extent of Mr. Powell s cooperation. MARTIN C. CARLSON UNITED STATES ATTORNEY CHRISTIAN A. FISANICK CHIEF, CRIMINAL DIVISION GORDON A. D. ZUBROD WILLIAM S. HOUSER MICHAEL A. CONSIGLIO AMY PHILLIPS ASSISTANT U. S. ATTORNEYS

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