The Times Leader by Terrie Morgan-Besecker - January 27, 2009
The charges stem from a more than two-year investigation by the FBI and IRS that uncovered a “flagrant violation of public trust,” said Leslie DeMarco, special agent in charge of the IRS criminal investigation unit. “They sold their oath of office to the highest bidders and engaged in an ongoing scheme to defraud the public,” Deron Roberts, chief of the FBI’s Scranton office, said at the news conference. The 22-page complaint details an elaborate scheme the judges developed to ensure PA Child Care, then owned by Butler Township attorney Robert Powell and Gregory Zappala, prospered financially. Gregory Zappala is the son of former Pennsylvania Supreme Court Justice Stephen A. Zappala.
According to the complaint:
Conahan removed funding for the county-operated juvenile center on River Street in Wilkes-Barre in 2002, ensuring its closure. The county began sending youths to PA Child Care when it opened in February 2003. Just prior to its opening, Conahan signed a “placement guarantee agreement” with the facility that guaranteed the courts would pay an annual rental installment of $1.3 million. Ciavarella, the county’s longtime juvenile court judge, helped ensure PA Child Care had a high occupancy rate by, at times, ordering children be detained there even when the juvenile probation department felt it was not necessary. Ciavarella did that in part by establishing a “specialty court” that created a potential for an increased number of juveniles to be sent to PA Child Care. The judges’ actions assisted the two juvenile centers in securing agreements with Luzerne County that were worth “tens of million of dollars” for the placement of juvenile offenders, the complaint says.
The complaint also describes how two others involved in the scheme – identified as “participant 1” and “participant 2” – funneled money to the judges by disguising the payments as a “broker fee” or as falsely portraying them as rental payments for a Florida condominium. Carlson would not identify the two participants, but details contained in the complaint indirectly identify them as Powell and Robert Mericle of Mericle Construction, the contractor who built both the PA Child Care and Western PA Child Care facilities. The complaint notes that in June 2000, Ciavarella had a conversation with a Luzerne County attorney “who was interested in constructing a juvenile detention facility” in the county. Ciavarella then introduced that person to a contractor, a friend of Ciavarella who was later hired by that attorney to build the center.
The complaint also notes several transfers of funds that were made by Mericle Construction and Vision Holdings, a company owned by Powell, that prosecutors contend were made to conceal payments to Conahan and Ciavarella. No charges have been filed against Mericle, Powell or Zappala. Asked if any more charges were forthcoming, Carlson would only say the investigation is continuing. Powell could not be reached for comment Monday. In prepared statements, Mericle and Zappala, who bought out Powell’s interest in the centers last June, denied any criminal activity. “At no time did Robert Mericle or Mericle Construction ever make any payment to influence a decision to secure a contract to build any PA Child Care facility,” said Lew Sebia, general counsel for Mericle Construction. “Mr. Mericle has cooperated with authorities with respect to this investigation and will continue to do so in the future without exception.” William Brucker, attorney for PA Child Care, said Zappala did not have “any knowledge whatsoever of the actions” described in the complaint. “I can confirm only that no charges have been brought against the companies or its principal owner, Gregory Zappala, and that none are anticipated,” Brucker said. Ciavarella’s attorney, Al Flora, of Wilkes-Barre, said Ciavarella and Conahan also dispute some of the allegations contained in the complaint.
“The information you have before you constitutes the government’s allegations. It is not an admission to all those allegations,” Flora said. Flora explained the plea agreement is a “conditional plea.” The precise facts that Ciavarella and Conahan will admit to will not be known until they actually appear before a judge to enter their pleas, Flora said. No date has been set for that hearing. At the time the judges appear in court, the U.S. Attorney’s Office will have to recite evidence in support of the various allegations, Flora said. Ciavarella and Conahan would then have to decide whether to admit to those particular facts, he said. Flora said Ciavarella will not admit to all of the information included in the complaint. If the government presents facts in support of each of those allegations, Ciavarella will not agree to enter the plea, he said. “I can tell you, Judge Ciavarella will not admit to every one of those allegations,” Flora said. Flora said he is also speaking on behalf of Conahan, who is represented by attorney Philip Gelso. He said he believes Conahan also will not admit to all of the allegations contained in the complaint.
It was not clear Monday whether the case will be heard by a judge sitting in Scranton, or be transferred to a jurist within another section of the Middle District, such as Harrisburg or Williamsport. The case is being prosecuted by Assistant U.S. Attorney Gordon Zubrod. Conahan and Ciavarella will remain free pending their court appearances. Asked why the judges were not immediately taken into custody, Carlson said it is standard procedure to allow anyone charged with a “white-collar crime” such as this to remain free until they are summoned to enter the plea in court. He stressed that all proceedings involving the judges will be public. “While some might wish for a moment of high drama, that sort of perp walk … justice requires us to deal with these defendants like we would every other defendant in a similar situation,” he said. Stressing the investigation is continuing, Carlson called upon anyone who may have further knowledge relating to the case to contact the FBI or IRS.